CODE OF ETHICS AND STATEMENT OF POLICIES
ADOPTED BY BERGER LLC
Last Revised April 18, 2000
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I. STATEMENT OF GENERAL PRINCIPLES
The success of Berger LLC (the "Adviser") as an investment adviser depends upon
its reputation for excellence and integrity in the investment marketplace. All
Directors, officers and employees of the Adviser must therefore act in
accordance with the highest ethical standards.
A relationship of trust and confidence exists between the Adviser and its
clients. As a result, the interests of the Adviser's clients must always come
first. This means that all actions by Directors, officers and employees of the
Adviser which are detrimental, or potentially detrimental, to the Adviser's
clients must be avoided. While this principle extends to a broad range of
actions and practices, it is of particular relevance to any decision relating to
the personal investment activities of all Directors, officers and employees of
the Adviser since such activities may involve potential conflicts of interest.
In order to fulfill their fiduciary duties, all Directors, officers and
employees of the Adviser must conduct their personal securities transactions in
a manner which does not operate adversely to the interests of the Adviser's
clients and must otherwise avoid serving their own personal interests ahead of
such clients.
In order to ensure that Directors, officers and employees of the Adviser comply
with their fiduciary duties and other standards imposed by federal securities
law upon their personal investment activities, the Adviser has adopted this Code
of Ethics and Statement of Policies (the "Code"). The Code includes specific
provisions with which all covered persons must comply. However, compliance with
these technical provisions alone will not be sufficient to insulate from
scrutiny trades which show a pattern of abuse of the individual's fiduciary
relationships. All Directors, officers and employees are expected to abide by
the spirit of the Code and the principles articulated herein. Upon assuming
their position with the Adviser, each Director, officer or employee of the
Adviser is required to certify in writing that they have read and understand the
Code and that they recognize they are subject to the Code and will comply with
its requirements.
In the course of fulfilling the responsibilities of their position, Directors,
officers, and employees of the Adviser may deal with issuers of securities,
broker/dealers and business associates of the Adviser and its clients. Such
relationships can result in the individual being offered or given investment
opportunities, perquisites, or gifts from persons doing or seeking business with
the Adviser or its clients. All such offers and gifts which are more than de
minimis in value (see Section III.(c) of the Code) should be declined or
returned in order to prevent a situation which might compromise or appear to
compromise a Director's, officer's or employee's exercise of independent and
objective judgment on behalf of the Adviser's clients.
This Code establishes policies and procedures which govern certain types of
personal securities transaction by individuals deemed "Access Persons" of the
Adviser. In addition, the Code establishes policies and procedures applicable to
all Directors, officers and employees of the Adviser which have been designed to
detect and prevent the misuse of material, nonpublic information in securities
transactions and to provide guidance in other legal and regulatory matters.
Compliance with the Code is a condition of employment and willful or repeated
violation of its provisions may be cause for termination of employment.
II. DEFINITIONS
(a) "Access Person" means (i) any Director or officer of the Adviser,
(ii) any employee of the Adviser (or any employee of any company
in a Control relationship to the Adviser) who, in connection with
his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of a
Security by an Investment Company/Account, or whose functions
relate to the making of any recommendations with respect to such
purchases or sales and (iii) any natural person in a Control
relationship to the Adviser who obtains information concerning
recommendations made to an Investment Company/Account, with
regard to the purchase or sale of a Security.
(b) "Beneficial Ownership" shall be interpreted in the same manner as
it would be under Rule 16a-1(a)(2) under the Securities Exchange
Act of 1934 in determining whether a person is subject to the
provisions of Section 16 and the rules and regulations
thereunder, except that the determination of direct or indirect
beneficial ownership shall apply to all Securities which an
Access Person has or acquires. Application of this definition is
explained in more detail in Appendix A attached hereto.
(c) "Investment Personnel" shall mean (i) any employee of the Adviser
(or any employee of any company in a Control relationship to the
Adviser) who, in connection with his or her regular functions or
duties, makes or participates in making recommendations regarding
the purchase or sale of a Security by an Investment
Company/Account and (ii) any natural person who controls the
Adviser and who obtains information concerning recommendations
made to the Fund regarding the purchase or sale of a Security by
an Investment Company/Account. Investment Personnel shall include
all persons employed by the Adviser as portfolio managers,
security analysts and security traders.
(d) "Security" shall have the same meaning as that set forth in
Section 2(a)(36) of the Investment Company Act of 1940
(generally, all securities) except that it shall not include
shares of registered open-end investment companies (i.e., mutual
funds), direct obligations of the Government of the United States
(e.g., U.S. Treasury securities), banker's acceptances, bank
certificates of deposit, commercial paper and high quality
short-term debt instruments, including repurchase agreements.
(e) "Purchase or sale of a Security", or phrases of similar import,
shall include, among other things, the purchase, writing or sale
of an option to purchase or sell that Security, the purchase or
sale of any derivative Security whose value is derived from that
Security, such as a Security convertible into or exchangeable for
that Security, and the purchase or sale of any other Security
which has a substantial economic relationship to that Security
being purchased or sold by an Investment Company/Account (e.g., a
Security issued by a partnership which has a substantial portion
of its assets invested in the Security being purchased or sold).
(f) A Security is "being considered for purchase or sale" when a
portfolio manager is seriously considering the purchase or sale
of a Security for an Investment Company/Account, or, with respect
to a security analyst who makes a recommendation to purchase or
sell a Security for an Investment Company/Account, when such
person seriously considers making such a recommendation.
(g) "Control", which shall have the same meaning as that set forth in
Section 2(a)(9) of the Investment Company Act of 1940, generally
means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely
the result of an official position with such company.
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(h) "Compliance Officer" shall mean the employee of the Adviser
designated by the Adviser to receive reports and take certain
actions as provided in this Code of Ethics and Statement of
Policies. The Compliance Officer may appoint designees to carry
out his/her functions pursuant to the Code.
(i) "Investment Company/Account" means a company registered as such
under the Investment Company Act of 1940 and for which the
Adviser or an entity controlled by the Adviser is the investment
adviser or sub-adviser, or any pension or profit-sharing plan or
any institutional or private account managed by the Adviser.
(j) "Director" of the Adviser shall mean a member of the Board of
Directors of the Adviser's member-manager, Stilwell Management,
Inc.
(k) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not subject to the
reporting requirements of sections 13 or 15(d) of the Securities
Exchange Act of 1934.
(l) "Limited Offering" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to section
4(2) or section 4(6) or pursuant to rule 504, rule 505, or rule
506 thereunder.
Any Director, officer or employee of the Adviser who has any questions regarding
these definitions should consult with the Adviser's Compliance Officer.
III. PROHIBITIONS
NOTE: Subject to a final decision by Adviser management after having reviewed
all of the facts and circumstances relevant to the particular transaction,
individuals covered by the following prohibitions may be required to disgorge
all or a portion of any profits gained or losses avoided as a result of
participating in any of the prohibited personal securities transactions
discussed below. See Section VII. SANCTIONS of the Code for a more detailed
discussion of this matter.
Prohibitions Applicable To All Access Persons
(a) No Access Person shall purchase or sell, directly or indirectly,
any Security in which he or she has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership
and which he or she knows or should have known at the time of such
purchase or sale:
(1) is being purchased or sold by an Investment Company/ Account;
(2) is being considered for purchase or sale by an Investment
Company/Account; or
(3) has been purchased or sold by an Investment Company/Account
within the previous 7 calendar days.
Although explained more fully in the definition of "purchase or
sale of a Security" in Section II. of the Code, it bears emphasis
here that included for purposes of this prohibition is any
personal securities transaction involving a derivative Security or
other Security which has a substantial economic relationship to
the Security being considered for purchase or sale or that is
being, or that within the previous 7 calendar days has been,
purchased or sold by an Investment Company/Account.
(b) All Access Persons are prohibited from the purchase or sale of
Securities without prior approval from the Compliance Officer,
unless such purchase or sale is an exempted transaction as defined
in Section IV. of the Code. The preclearance process shall include
the Compliance Officer presenting each requested personal
securities transaction to the Adviser's portfolio manager(s) (or,
for Investment Companies/Accounts for which the Adviser has
contracted with another investment adviser, to such sub-adviser)
for the purpose of determining whether the provisions of Sections
III.(a)(1) and III.(a)(2) prevent its current approval. If
granted, such approval will normally be given in writing (see
Appendix B). In circumstances that require approval of the
transaction to be granted verbally, the Compliance Officer shall
document for the Adviser's records all information pertinent to
the approved purchase or sale. Any approval for a personal
securities transaction will be effective for 3 business days
following the date of approval (unless otherwise specified in the
written approval). Any transaction not completed within the 3 day
(or other specified) time period will require reapproval by the
Compliance Officer prior to engaging in any further purchases or
sales.
When requesting approval for a personal securities transaction,
all Access Persons should be careful to identify for the
Compliance Officer any factors potentially relevant to a conflict
of interest. This is especially true when an Access Person
requests approval to purchase or sell a Security with a
complicated investment structure, since the Security may be
substantially economically related to a separate Security which is
being considered for purchase or sale or being purchased or sold
by an Investment Company/Account.
A portfolio manager may not preclear his/her own personal
securities transactions. Any personal securities transaction
requested by a portfolio manager shall, in addition to the
standard preclearance process, be presented to the President of
the Adviser for his/her approval. In addition, because the
Compliance Officer may not preclear his/her own personal
securities transactions, the Compliance Officer shall request
approval for his or her personal securities transactions from
his/her supervisor, the Vice President-Legal.
(c) All Access Persons are prohibited from receiving on an annual
basis any gifts or other things of value from any person or entity
that does business with or on behalf of the Adviser or the
Investment Companies/Accounts which in total could reasonably be
valued above $100. However, this policy does not apply to
customary business meals or entertainment, or promotional items
(e.g., pens, mugs, caps, T-shirts, etc.) which are consistent with
customary business practices in the industry.
(d) All Access Persons must immediately notify the Compliance Officer
upon becoming a member of a board of directors of a publicly
traded company. As a condition of being given approval to engage
in any personal securities transaction involving the securities of
such company(s), the Access Person will be required to obtain
documented approval to trade from the company's management, in
light of their procedures designed to prevent the misuse of
material, nonpublic information by company insiders (For a
description of each Director's, officer's and employee's
responsibilities in the event that they come into the possession
of material, nonpublic information, see Section VIII. of the
Code). Notwithstanding this provision, those Access Persons that
are also Investment Personnel are generally prohibited from
serving on the board of directors of publicly traded companies
(See Section III.(i) of the Code).
Prohibitions Applicable Only To Investment Personnel
(e) Prior to recommending a Security for purchase or sale by an
Investment Company/Account, Investment Personnel are required to
provide disclosure, if applicable, of any ownership/Security
position they have in the issuer, or any present or proposed
business relationship between such issuer and such person, to the
Chief Investment Officer and the Compliance Officer. In the event
that such disclosure is required of the Chief Investment Officer,
it should be made to the Compliance Officer. The Investment
Personnel's holdings/relationship will then be reviewed to
determine whether it presents a conflict of interest that should
be addressed prior to the Adviser acting on their purchase or sale
recommendation for the Investment Company/Account.
(f) All Investment Personnel are prohibited from profiting in the
purchase and sale, or sale and purchase, of the same (or
equivalent) Security within 60 calendar days. This prohibition
shall not apply to exchange-traded stock options that are
purchased for the purpose of establishing a bona fide position
hedge on Securities held in excess of 60 calendar days, or to
options on stock indices which are composed of 100 or more
Securities. However, any transaction which is exempt from this
prohibition shall be subject to all otherwise applicable
provisions of the Code, including but not limited to the
preclearance requirements of Section III(b).
(g) All Investment Personnel are prohibited from acquiring any Security
in an Initial Public Offering.
(h) All Investment Personnel are prohibited from acquiring any
Security in a Limited Offering without prior written approval.
Request for such approval should be made via a memorandum directed
to the Chief Investment Officer and the Compliance Officer.
Limited Offerings for which the Chief Investment Officer is
seeking approval will be reviewed by the President and the
Compliance Officer. The memo shall state the name of the company,
the number of shares/units being offered and the offering price
per share/unit, a description of the company's history and
operations, and a discussion of whether the company's current
business plan anticipates a future Initial Public Offering of its
Securities. No approval will be granted for the acquisition of
Securities in a Limited Offering if the company currently has any
publicly traded equity Securities (or other publicly traded
Securities convertible into equity Securities) issued and
outstanding. A copy of the Limited Offering agreement or the
purchase contract should be attached to the memo.
Subsequent to Investment Personnel obtaining shares/units of a
company in a Limited Offering, the company may issue and have
outstanding publicly traded Securities. If in the course of
performing their job responsibilities any Investment Personnel who
acquired shares/units in a Limited Offering transaction becomes
involved in the consideration of an investment in the issuer by an
Investment Company /Account, they will disclose the existence of
their personal ownership in the company to the Chief Investment
Officer. The Adviser will then excuse such employee from the
investment decision making process for the Security.
(i) All Investment Personnel are prohibited from serving on the boards
of directors of publicly traded companies, absent prior
authorization based upon a determination by Adviser management
that the board service would be consistent with the interests of
the Investment Companies/Accounts. In instances where Adviser
management determines that board service for a company is merited,
such Investment Personnel will be subject to the same restrictions
that are imposed on all other Access Persons with respect to their
personal securities transactions which involve Securities of the
company for which they are a director, as described in Section
III. (d) of the Code.
(j) All Investment Personnel must make disclosure with respect to any
family member(s) employed in the securities business who might be
in a position to benefit as a result of the trading activity of
the Investment Companies/Accounts. It is prohibited for Investment
Personnel to influence the allocation of brokerage for direct or
indirect personal or familial benefit. However, such disclosure
shall not be deemed evidence that any benefit has been conferred,
directly or indirectly, by Investment Personnel on such family
member(s).
Prohibition Applicable Only To Portfolio Managers
(k) All portfolio managers are prohibited from purchasing or selling
any Security (or equivalent Security) within at least 7 calendar
days before or after an Investment Company/Account that he or she
manages purchases or sells that Security.
IV. EXEMPTED TRANSACTIONS
The prohibitions of Section III. of the Code shall not apply to:
(a) purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;
(b) purchases or sales which are non-volitional on the part of the
Access Person, such as Securities acquired as a result of a
spin-off of an entity from a company whose Securities are owned by
an Access Person, or the involuntary sale of Securities due to a
merger or as the result of a company exercising a call provision
on its outstanding debt;
(c) purchases which are part of an automatic dividend reinvestment
plan or a company sponsored stock purchase plan;
(d) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the
extent such rights were acquired from such issuer, and sales of
such rights so acquired; and
(e) any Securities transaction, or series of related transactions,
involving 500 shares or less in the aggregate, if the issuer has a
market capitalization (outstanding shares multiplied by the
current price per share) greater than $10 billion. This exemption
(e) is not available to Investment Personnel.
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V. REPORTING
(a) Within 10 days of their commencement of employment with the
Adviser (or if not an employee, of their otherwise becoming an
Access Person to the Adviser), all Access Persons shall disclose
in writing to the Compliance Officer all of their Security
holdings in which they have any direct or indirect Beneficial
Ownership at such time as the person became an Access Person (see
Appendix E).
Thereafter, when requested by the Compliance Officer all Access
Persons shall on an annual basis disclose in writing to the
Compliance Officer all of their Security holdings in which they
have any direct or indirect Beneficial Ownership. This information
must be current as of a date no more than 30 days before the
report is submitted.
Both the Initial and the Annual Holdings Report shall contain the
following information:
(1) the title, number of shares and the principal amount of each
Security;
(2) the name of any broker, dealer or bank with whom the Access
Person maintained an account in which any Securities were held;
and
(3) the date that the report is submitted by the Access Person.
The above notwithstanding, an Access Person shall not be required
to make a report with respect to any Security held in any account
over which he or she does not have any direct or indirect
influence or control. Each such report may contain a statement
that the report shall not be construed as an admission by the
Access Person that he or she has any direct or indirect Beneficial
Ownership in the Security to which the report relates.
(b) All Access Persons shall direct their brokers to supply the
Compliance Officer, on a timely basis, duplicate copies of
confirmations of all personal securities transactions and copies
of all statements for all Securities accounts. Please note that
even if the Access Person does not currently intend to purchase or
sell Securities (as defined at Section II.(d) above) in the
account, the Access Person must direct their brokers to send the
Compliance Officer duplicate confirmations and statements on the
account if the account allows any trading in such Securities.
(c) Whether or not one of the exemptions listed in Section IV. of the
Code applies, each Access Person shall file with the Compliance
Officer a written report (see Appendix C) containing the
information described in Section V.(d) of the Code with respect to
each transaction in any Security in which such Access Person by
reason of such transaction acquires or disposes of any direct or
indirect Beneficial Ownership in the Security; provided, however,
that an Access Person shall not be required to make a report with
respect to any transaction effected for any account over which he
or she does not have any direct or indirect influence or control.
Each such report may contain a statement that the report shall not
be construed as an admission by the Access Person that he or she
has any direct or indirect Beneficial Ownership in the Security to
which the report relates.
(d) Such report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report
relates was effected, and shall contain the following information:
(1) the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(3) the price at which the Security transaction was effected;
(4) the name of the broker, dealer or bank with or through whom the
transaction was effected; and
(5) the date that the report is submitted by the Access Person.
For any report concerning a purchase or sale in which the Access
Person relied upon one of the exemptions provided in Section IV. of
the Code, the Access Person will provide a brief statement of the
exemption relied upon and the circumstances of the transaction if
requested by the Compliance Officer.
In addition to such report, within 10 days after the end of the
calendar quarter in which an Access Person opens any brokerage
account, the Access Person provide the Compliance Officer with the
following information:
(1) the name of the broker, dealer or bank with whom the Access
Person established the account;
(2) the date the account was established; and
(3) the date that the report is submitted by the Access Person.
(e) The Securities transaction reporting requirements of Sections V.
(c) and V.(d) of the Code may be satisfied by the Compliance
Officer receiving all confirmations of Security transactions
and/or periodic statements for each Access Person's Securities
accounts. Confirmations of Security transactions and/or Security
account statements received by the Compliance Officer will be
distributed quarterly to Access Persons for their review to ensure
that such confirmations/statements include all Security
transactions required to be reported under this Code.
(f) An Access Person will be deemed to have participated in, and must
report under this Code, any Securities transactions participated
in by:
(1) The person's spouse;
(2) The person's minor children;
(3) Any other relatives sharing the person's household;
(4) A trust in which the person has a beneficial interest, unless
such person has no direct or indirect control over the trust;
(5) A trust as to which the person is a trustee;
(6) A revocable trust as to which the person is a settler; or
(7) A partnership of which the person is a partner (including most
investment clubs) unless the person has no direct or indirect
control over the partnership.
(g) The Compliance Officer shall identify all Access Persons who are
required to make the reports required by Section V. of the Code
and shall inform them of their reporting obligations hereunder.
VI. REVIEW
The Compliance Officer shall review or supervise the review of the personal
securities transactions and the holdings reported pursuant to Section V. of the
Code. Personal securities transactions and holdings reported by the Compliance
Officer shall be reviewed by the Vice President-Legal. As part of this review,
each such reported personal securities transaction shall be compared against the
trading activity of the Investment Companies/Accounts to determine whether a
violation of Section III. of the Code may have occurred. If the Compliance
Officer or Vice President-Legal determines that a violation may have occurred,
he or she shall promptly submit the pertinent information regarding the
transaction to Adviser management, who shall evaluate whether a violation of the
Code has occurred, taking into account all the exemptions provided under Section
IV. of the Code, and if so, whether such violation is material. The Adviser will
consider all relevant facts and circumstances surrounding the transaction prior
to making its determination. In addition, before making any determination that a
material violation has occurred, Adviser management shall give the person
involved an opportunity to supply additional information regarding the
transaction in question.
VII. SANCTIONS
If a final determination is made that a material violation of this Code has
occurred, the Adviser's management may require the Access Person to disgorge to
the affected Investment Company/Account or, if not related to a particular
Investment Company/Account, a charitable organization, all or a portion of the
profits gained or losses avoided as a result of the prohibited transaction. The
Compliance Officer or Vice President-Legal shall provide a written report of
management's determination to the Board of Directors of the member-manager for
such further action and sanctions as said Board deems appropriate, which
sanctions may in the Board's discretion include, among other things, imposition
of a monetary penalty and/or censure, suspension or termination of the Access
Person. A copy of the report shall also be provided to the Board of
directors/trustees of each investment company for which the Adviser is the
investment adviser or sub-adviser.
VIII. PROCEDURES FOR PREVENTING THE TRADING ON MATERIAL, NONPUBLIC INFORMATION
(a) In addition to the prohibitions set forth in Section III. of the
Code which are applicable only to Access Persons of the Adviser,
the Adviser forbids any Director, officer or employee (including
spouses, minor children and adults living in the same household as
the Director, officer or employee), either personally or on behalf
of others (such as Investment Companies/Accounts managed by the
Adviser) from trading on material, nonpublic information or
communicating material, nonpublic information to others in
violation of the securities laws. This conduct is frequently
referred to as "insider trading." The Adviser's policy against
insider trading applies to every Director, officer and employee
and extends to activities within and outside their duties at the
Adviser. Any questions regarding the Adviser's policies and
procedures should be referred to the Compliance Officer.
The term "insider trading" is not defined in the federal securities
laws, but generally is used to refer to the use of material,
nonpublic information to trade in securities (whether or not one is
an "insider") or to the communication of material, nonpublic
information to others.
While the law concerning insider trading is not static, it is
generally understood that the law prohibits:
o trading by an insider, while in possession of material,
nonpublic information, or
o trading by a non-insider, while in possession of material,
nonpublic information, where the information either was
disclosed to the non-insider in violation of an insider's duty
to keep it confidential or was misappropriated, or
o communicating material, nonpublic information to others.
The elements of insider trading and the penalties for such
unlawful conduct are discussed below. If, after reviewing this
policy statement, you have any questions, you should consult the
Compliance Officer.
1. Who is an insider?
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The concept of "insider" is broad. It includes directors,
officers and employees of a company. In addition, a person can
be a "temporary insider" if he or she enters into a special
confidential relationship with a company and as a result is
given access to information solely for such company's
purposes. A temporary insider can include, among others, a
company's attorneys, accountants, consultants and bank lending
officers, and the employees and associates of such persons. In
addition, the Adviser may become a temporary insider of a
company it advises or for which it performs other services.
According to the Supreme Court, the company must expect the
outsider to keep the nonpublic information confidential, and
the relationship must at least imply such a duty before the
outsider will be considered a temporary insider. In addition,
one who receives material, nonpublic information (a "tippee")
or one who gives material, nonpublic information to another
person (a "tipper") may become an insider and therefore incur
liability for insider trading. Finally, and perhaps most
relevant for the Code, a Director, officer or employee of the
Adviser may become an insider if material, nonpublic
information is received from an insider of a company whose
securities are held or being considered for purchase by an
Investment Company/Account.
2. What is Material Information?
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Trading on inside information is not a basis for liability
unless the information is material. "Material information"
generally is defined as information for which there is a
substantial likelihood that a reasonable investor would
consider it important in a decision to buy, hold or sell
stock, or information that is reasonably certain to have a
substantial effect on the price of a company's securities.
Information that Directors, officers or employees should
consider material includes, but is not limited to: dividend
changes, earnings estimates, changes in previously released
earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation
problems, and extraordinary management developments.
Material information does not have to relate to a company's
business. For example, in Carpenter v. U.S., 108 U.S. 316
(1987), the U.S. Supreme Court considered material certain
information about the contents of a forthcoming newspaper
column that was expected to affect the market price of a
security. In that case, a Wall Street Journal reporter was
found criminally liable for disclosing to others the dates
that reports on various companies would appear in the Journal
and whether those reports would be favorable.
3. What is Nonpublic Information?
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Information is nonpublic until it has been effectively
communicated to the marketplace. One must be able to point to
some fact to show that the information is generally public.
For example, information found in a report filed with the U.S.
Securities and Exchange Commission or appearing in Dow Jones,
Reuters Economic Services, The Wall Street Journal or other
publications would be considered public.
4. Penalties for Insider Trading
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Penalties for trading on or communicating material, nonpublic
information are severe, both for the individuals involved in
such unlawful conduct and their employers. A person can be
subjected to some or all of the penalties below even if he or
she does not personally benefit from the violation. Penalties
include:
o Civil injunctions,
o treble damages,
o jail sentences of up to ten years,
o civil penalties for the person who committed the violation
of up to three times the profit gained or loss avoided,
whether or not the person actually benefited,
o criminal fines (no matter how small the profit) of up to
$1 million, civil penalties for the employer or other
controlling person of up to the greater of $1 million or
three times the profit gained or loss avoided.
Because of the serious potential penalties against employers
as well as violators, any violation of this Code of Ethics and
Statement of Policies which involves insider trading can be
expected to result in serious sanctions by the Adviser,
including dismissal of the persons involved for cause.
(b) The following procedures have been established to aid the
Directors, officers and employees of the Adviser in avoiding
insider trading, and to aid the Adviser in preventing, detecting
and imposing sanctions against insider trading. Every Director,
officer and employee of the Adviser must follow these procedures
or risk serious sanctions by the Adviser, including dismissal for
cause, substantial personal liability and criminal penalties. If
you have any questions about these procedures, you should consult
the Compliance Officer.
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Identifying Inside Information in the Context of Personal
Securities Trading
Before trading for yourself or others, including Investment
Companies/Accounts managed by the Adviser, in the securities of a
company about which you may have potential inside information,
whether obtained through the Advisers activities or not, ask
yourself the following questions:
(a) Is the information material? Is there a substantial
likelihood that a reasonable investor would consider this
information important in making his or her decision to
buy, hold or sell stock? Is it reasonably certain that
this information would substantially affect the market
price of the securities if it were generally disclosed?
(b) Is the information nonpublic? To whom has this information
been provided? Has the information been effectively
communicated to the marketplace by being filed with the
U.S. Securities and Exchange Commission or published in
Reuters, The Wall Street Journal or other such
publications?
(c) If your securities transactions became the subject of
scrutiny, how would they be viewed after-the-fact with the
benefit of hindsight? As a result, before engaging in any
transaction, you should carefully consider how regulators
and others might view your transaction in hindsight.
If, after consideration of the above, you believe that the
information is material and nonpublic, or if you have any doubt as
to whether the information is material and nonpublic, you must
take the following steps:
(1) Report the matter immediately to the Compliance Officer,
(2) Refrain from purchasing or selling the securities on
behalf of yourself or others, including Investment
Companies/Accounts managed by the Adviser,
(3) Refrain from communicating the information inside or
outside of the Adviser, other than to the Compliance
Officer, and
(4) After the Compliance Officer has reviewed the issue, you
will be instructed to continue the prohibitions against
trading and communication, or you will be allowed to trade
and communicate the information.
Restricting Access to Material, Nonpublic Information
(a) General Procedures
Material, nonpublic information in the possession of a
Director, officer or employee of the Adviser may not be
communicated to anyone, including persons within the Adviser
except to the Compliance Officer as provided in Section VIII.
(b) of the Code or as is necessary for individuals to perform
their duties at the Adviser. In addition, care should be taken
so that such information is secure. For example, files
containing material, nonpublic information should be
maintained in a secure manner; access to computer files
containing material, nonpublic information should be
restricted.
(b) Contacts With Public Companies
For the Adviser, contacts with public companies represent an
important part of its research efforts. The Adviser may make
investment decisions on the basis of the firm's conclusions
formed through such contacts and analysis of
publicly-available information. Difficult legal issues arise,
however, when, in the course of these contacts, a Director,
officer or employee of the Adviser becomes aware of material,
nonpublic information. This could happen, for example, if a
company's Chief Financial Officer prematurely discloses
quarterly results to an analyst or an investor relations
representative makes a selective disclosure of adverse news to
a handful of investors. In such situations, the Adviser must
make a judgment as to its further conduct. To protect the
Adviser and its Investment Companies/Accounts, all Directors,
officers and employees of the Adviser should contact the
Compliance Officer immediately if they believe that they may
have received material, nonpublic information.
(c)Tender Offers
Tender offers represent a particular concern in the law of
insider trading for two reasons. First, tender offer activity
often produces extraordinary gyrations in the price of the
target company's securities. Trading during this time period
is more likely to attract regulatory attention (and produces a
disproportionate percentage of insider trading cases). Second,
the U.S. Securities and Exchange Commission has adopted a rule
which expressly forbids trading and "tipping" while in
possession of material, nonpublic information regarding a
tender offer received from the tender offeror, the target
company or anyone acting on behalf of either. Directors,
officers and employees of the Adviser should exercise
particular caution any time they become aware of nonpublic
information relating to a tender offer.
Procedures Designed to Prevent and Detect Insider Trading
The following procedures are designed to prevent and detect
insider trading within the Adviser or by the Adviser's Directors,
officers and employees. To prevent and detect insider trading the
Compliance Officer should:
(a) Provide, on an annual basis, an educational program designed
to familiarize Directors, officers and employees of the
Adviser with the Adviser's policies and procedures on insider
trading, misuse of material, nonpublic information, reporting
requirements for personal securities transactions and related
matters.
(b) Answer questions from Directors, officers and employees of the
Adviser relating to the Adviser's policies and procedures.
(c) Resolve issues of whether information received by Directors,
officers and employees of the Adviser is material and
nonpublic.
(d) Review on an annual basis and update as necessary the
Adviser's policies and procedures to reflect changes in rules,
regulations and case law.
(e) When it has been determined that a Director, officer or
employee of the Adviser has material, nonpublic information on
a company, the Compliance Officer will take reasonable steps
to (i) ensure that such information is not disseminated, and
(ii) restrict Directors, officers and employees from trading
in securities to which the information relates, either for
their own accounts or for Investment Companies/Accounts
managed by the Adviser. These objectives will be served by
placing the company on a "Restricted List" that will be
maintained by the Compliance Officer.
While each such company is on the Restricted List, no
portfolio manager shall initiate or recommend any transaction
in the company's securities in any Investment
Companies/Accounts managed by the Adviser. The Compliance
Officer will be responsible for removing a particular company
from the Restricted List after having received permission for
such action from Adviser management, and will be responsible
for making available the Restricted List and any updates to it
to all Investment Personnel. The Restricted List is highly
confidential and shall, under no circumstances, be discussed
with or disseminated to anyone outside of the Adviser.
Special Restricted List Procedures
(1) Purchase and Sale of Securities Issued by the Adviser's
Parent Company
More than 80% of the Adviser's stock is indirectly owned
by a publicly traded company. As a result, the Company is
considered to be in a position of Control with respect to
the Adviser. Federal securities law prohibits any
Investment Company for which the Adviser acts as
investment adviser or sub-adviser from investing in the
securities of such a company. The Company has been placed
on the Adviser's Restricted List indefinitely, and
therefore no Investment Company/Account may invest in any
of its securities. Personal security transactions by
Directors, officers and employees of the Adviser in the
securities of this Company will be allowed pursuant to
policies and procedures as in effect from time to time
that will be provided to you by the Compliance Officer.
(2) Publicly Traded Companies for Which a Director, Officer or
Employee of the Adviser Serves as a Director or Officer
Subject to the requirement that they disclose their
position to the Compliance Officer (and, in the case of
Investment Personnel, that they obtain prior approval from
Adviser management), Directors, officers and employees of
the Adviser may serve on the boards of directors of
publicly traded companies. In addition, Directors,
officers and employees of the Adviser may be officers of
publicly traded companies. To preclude the possibility of
trades of such companies' securities occurring in
Investment Companies/Accounts while the Adviser may be in
possession of material, nonpublic information, any
publicly traded company for which a Director, officer or
employee of the Adviser is a director or officer shall be
placed on the Restricted List and shall remain on the list
until their directorship or officership is terminated and
the Director, officer or employee of the Adviser ceases to
be an insider to the company.
While a company is on the Restricted List, each of the
Adviser's Directors, officers and employees who are a
member of the board of directors of a publicly traded
company or an officer of a publicly traded company may
engage in personal securities transactions involving the
securities of such company, subject to preclearance that
will be conditioned upon obtaining documented approval to
trade from such company's management, in light of their
procedures designed to prevent the misuse of material,
nonpublic information by company insiders.
(f) Promptly, upon learning of a potential violation of the
Adviser's policies and procedures on insider trading, prepare
a written report to Adviser management with full details about
the potential violation and recommendations for further
action.
IX. ANNUAL REPORTING AND CERTIFICATION
(a) On an annual basis, the Compliance Officer shall prepare a written
report to the President of the Adviser and the Board of Directors
of the member-manager setting forth the following:
(1) A summary of existing procedures to detect and prevent
violations of the Code,
(2) Full details of any investigation, either internal or by a
regulatory agency, of any violations of the Code, the
resolution of such investigations and the steps taken to
prevent further violations,
(3) An evaluation of the current compliance procedures and any
recommendations for improvement, and
(4) A description of the Adviser's continuing efforts to educate
all Directors, officers and employees of the Adviser regarding
the Code, including the dates of any such educational programs
presented since the last report.
A report setting forth the above shall also be made annually to
the board of directors/trustees of each Investment Company for
which the Adviser acts as investment adviser or sub-adviser,
except that any information about violations of the Code may be
limited to only material violations. In addition, the Adviser
shall certify to each such Investment Company annually that it has
adopted procedures reasonably necessary to prevent Access Persons
from violating the Code.
After September 1, 2000, before being approved as an investment
adviser or sub-adviser for any Investment Company, the Adviser is
required to provide the Code to the Investment Company's
directors/trustees for approval along with a certification that
the Adviser has adopted procedures reasonably necessary to prevent
Access Persons from violating the Code.
Any material changes to the Code must be approved by each
Investment Company's directors/trustees within 6 months after
adoption of the material change.
(b) On an annual basis, all Directors, officers and employees of the
Adviser are required to certify in writing that they have read and
understand the Code of Ethics and Statement of Policies and
recognize that they are subject thereto. In addition, all such
persons are required to certify annually that they have complied
with the requirements of the Code and, as for Access Persons, that
they have reported all personal securities transactions and
holdings required to be reported pursuant to the Code (see
Appendix D).
In conjunction with such certification, the Compliance Officer
will provide all Access Persons with an educational program
designed to familiarize them with their responsibilities under the
Code. If a Director, officer or employee of the Adviser has any
questions pertaining to these responsibilities or about the
policies or procedures contained in the Code , they should discuss
them with the Compliance Officer prior to completing their annual
certification statement.
X. OTHER LEGAL AND REGULATORY MATTERS
(a) Confidentiality. All account information concerning the Adviser's
clients (e. g., name, account size, specific securities held,
securities trades, etc.) is absolutely confidential. Therefore,
access to Investment Company/Account information is limited to
those individuals who must have such access to perform their
duties, and such information shall not be communicated to any
other person either within or outside the Adviser. The
confidentiality of all Investment Company/Account information is
critical to the Adviser's reputation for excellence and integrity
and maintenance of the Adviser's competitive position, and any
disclosure of confidential information can be expected to result
in serious sanctions by the Adviser, including possible dismissal
for cause.
(b) Bankruptcy/Criminal Offenses. The Adviser is required to notify
regulatory organizations when certain events occur regarding its
Directors, officers and/or employees. Accordingly the Vice
President-Legal must be notified if any of the following occur
with respect to a Director, officer or employee:
o Personal bankruptcy.
o The bankruptcy of a corporation in which any Director, officer
or employee owns 10% or more of the securities.
o Arrest, arraignment, indictment or conviction for, or the
entry of a guilty or no contest plea for, any criminal offense
(other than minor traffic violations).
(c) Receipt of Legal Documents. On occasion, employees are served with
legal documents (e.g., a subpoena) for the Adviser. Upon receipt
of legal documents, the Adviser's Vice President-Legal is to be
notified immediately.
(d) Retention of Outside Counsel. Directors, officers and employees
may not retain the services of outside counsel under circumstances
such that the Adviser would be obligated to pay legal fees unless
the Adviser's Vice President-Legal has granted approval for
retention of such counsel in advance.
(e) Contact with Industry Regulators. In the event of an inquiry from
an industry regulator--whether via the telephone, mail or personal
visit--Directors, officers and employees must contact the
Adviser's Vice President-Legal as soon as possible for
instructions.
(f) Political Contributions. The use of funds or assets of the Adviser
for any unlawful or improper purpose is prohibited. This
prohibition includes any contribution to any public official,
political candidate or political entity, except as may be
expressly permitted by law. This shall also preclude unlawful
contributions through consultants, customers or other third
parties, including payments where Directors, officers or employees
of the Adviser know or have reason to believe that payments made
to such other third parties will be used as unlawful
contributions.
The above prohibitions relate only to the use of corporate funds
and in no way are intended to discourage Directors, officers or
employees from making personal contributions to political
candidates or parties of their choice. No such individual
contribution will be reimbursed by the Adviser in any manner,
directly or indirectly.
(g) Business Conduct. It is the policy of the Adviser to conduct
business in accordance with the applicable laws and regulations of
the United States and all other individual states and countries in
which the Adviser operates or has any significant contacts.
Unethical business practices will subject Directors, officers and
employees to appropriate disciplinary action, including dismissal
for cause if warranted, and may result in prosecution for
violating federal, state or foreign laws.
No payment (cash or otherwise) can be made (directly or
indirectly) to any employee, official or representative of any
domestic or foreign governmental agency, instrumentality, party,
or candidate thereof, for the purpose of influencing any act,
omission or decision.
The Adviser's books, records and accounts must be maintained in
sufficient detail as to accurately reflect the transactions and
dispositions of its assets. No undisclosed or unrecorded fund or
asset of the Adviser may be established for any purpose.
Any Director, officer or employee with questions about or
knowledge of violations of these policies must contact the
Adviser's Vice President-Legal.
XI. MISCELLANEOUS PROVISIONS
(a) The Adviser shall maintain records in the manner and to the extent
set forth below, and make such records available for examination
by representatives of the U.S. Securities and Exchange Commission:
(1) A copy of this Code and any other code of ethics which is, or
at any time within the past five years has been, in effect
shall be preserved in an easily accessible place;
(2) A record of any violation of the Code and of any action taken
as a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs;
(3) A copy of each report made by an Access Person pursuant to the
Code shall be preserved for a period of not less than five
years from the end of the fiscal year in which it is made, the
first two years in an easily accessible place;
(4) A list of all persons who are, or within the past five years
have been, required to make reports pursuant to the Code, and
who are, or within the past five years have been, responsible
for reviewing these reports, shall be maintained in an easily
accessible place; and
(5) A record of any decision, and the reasons supporting the
decision, to approve the acquisition by any Investment
Personnel of a Security pursuant to a Limited Offering shall
be preserved for a period of not less than five years from the
end of the fiscal year in which the approval was granted.
(b) All reports of Securities transactions and any other information
filed with the Adviser or furnished to any person pursuant to the
Code shall be treated as confidential, but are subject to review
as provided herein and by representatives of the U.S. Securities
and Exchange Commission or any other regulatory or self-regulatory
organization to the extent required by law or regulation.
(c) The Board of Directors of the member-manager may from time to time
adopt such interpretations of the Code and such exceptions to
provisions of the Code as they deem appropriate.
<PAGE>
APPENDIX A
For purposes of the attached Code of Ethics and Statement of Policies, a
"beneficial owner" shall mean any Director, officer or employee who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect opportunity to profit or share in
any profit derived from a transaction in the subject securities. The term
"Beneficial Ownership" of securities would include not only ownership of
securities held by a Director, officer or employee for his or her own benefit,
whether in bearer form or registered in their name or otherwise, but also
ownership of securities held for his or her benefit by others (regardless of
whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees (including trusts in which he or she has only a
remainder interest), and securities held for his or her account by pledgees,
securities owned by a partnership in which he or she is a member if they may
exercise a controlling influence over the purchase, sale or voting of such
securities, and securities owned by any corporation that he or she should regard
as a personal holding corporation. Correspondingly, this term would exclude
securities held by a Director, officer or employee for the benefit of someone
else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which a Director, officer or employee is a legatee
or beneficiary unless there is a specific legacy to such person of such
securities or such person is the sole legatee or beneficiary and there are other
assets in the estate sufficient to pay debts ranking ahead of such legacy, or
the securities are held in the estate more than a year after the decedent's
death.
Securities held in the name of another should be considered as "beneficially"
owned by a Director, officer or employee where such person enjoys "benefits
substantially equivalent to ownership". The U.S. Securities and Exchange
Commission has said that although the final determination of Beneficial
Ownership is a question to be determined in the light of the facts of the
particular case, generally a person is regarded as the beneficial owner of
securities held in the name of his or her spouse and their minor children.
Absent special circumstances such relationship ordinarily results in such person
obtaining benefits substantially equivalent to ownership, e.g., application of
the income derived from such securities to maintain a common home, to meet
expenses that such person otherwise would meet from other sources, or the
ability to exercise a controlling influence over the purchase, sale or voting of
such securities.
A Director, officer, or employee also may be regarded as the beneficial owner of
securities held in the name of another person, if by reason of any contract,
understanding, relationship, agreement, or other arrangement, he or she obtains
therefrom benefits substantially equivalent to those of ownership. Moreover, the
fact that the holder is a relative or relative of a spouse and sharing the same
home as a Director, officer or employee may in itself indicate that the
Director, officer or employee would obtain benefits substantially equivalent to
those of ownership from securities held in the name of such relative. Thus,
absent countervailing facts, it is expected that securities held by relatives of
the Director, officer or employee or his or her spouse who share the same home
as the Director, officer or employee will be treated as being beneficially owned
by the Director, officer or employee.
A Director, officer or employee also is regarded as the beneficial owner of
securities held in the name of a spouse, minor children or other person, even
though he or she does not obtain therefrom the aforementioned benefits of
ownership, if they can vest or revest title in themselves at once or at some
future time.
