CODE OF ETHICS AND CONDUCT
DUNCAN HURST CAPITAL MANAGEMENT INC.
(NOVEMBER 1999)
As an investment adviser, Duncan Hurst Capital Management Inc. ("DHCM" or the
"Firm") is a fiduciary. We owe our clients the highest duty of loyalty. It is
crucial that the Firm and each employee avoid conduct that is or may be
inconsistent with that duty and avoid actions that, while they may not actually
involve a conflict of interest or an abuse of a client's trust, may have the
appearance of impropriety.
Because our clients include portfolios of a registered investment company (
"Fund Clients"), we are required to adopt a code of ethics setting forth
policies and procedures reasonably necessary to prevent certain violations of
rules under the Investment Company Act of 1940. This Code of Ethics and Conduct
(the "Code") is intended to do so and, beyond that, to state DHCM's broader
policies regarding DHCM's and its employees' discharge of their duty of loyalty
to clients.
I. GENERAL
Basic Principles. This Code is based on a few basic principles: (i) our clients'
interests come before the Firm's or employees' interests; (ii) each employee
must avoid any actual or potential conflict between his or her or the Firm's
interests and the interests of our clients - both in the employee's professional
activities and in his or her personal investment activities; (iii) employees
must avoid any abuse of their positions of trust with and responsibility to DHCM
and its clients, including taking inappropriate advantage of those positions.
The area most vulnerable to conflict of interest and abuse of an employee's
position in the Firm is personal securities trading. While the Firm does not
prohibit personal trading, we do discourage it. Generally, employees' attention
to the securities markets should be focused to the maximum extent possible on
serving our clients' interest. Personal participation in the markets is best
accomplished by ownership of mutual funds and other collective investment
vehicles managed by the Firm or others. Active trading has the potential to
distract from an employee's attention to client needs and to create conflict of
interest; it is strongly discouraged for all employees and, in many
circumstances, prohibited for Investment-level employees.
Categories of employees. This Code recognizes that different employees have
different responsibilities, different levels of control over investment decision
making for client accounts, and different access to information about investment
decisionmaking and implementation. In general, the greater an employee's control
and access, the greater the potentials for conflicts of interest in his or her
personal investment activities. Recognizing that, employees are divided into two
groups:
Investment Employees All employees who (i) in the course of their
regular functions or duties, make (i.e., portfolio
managers) or participate in making investment decisions
or recommendations, including providing information and
advice to portfolio managers (e.g., analysts) and (ii)
all employees who execute a portfolio manager's
decisions (i.e., traders).
Access Persons All employees1 who, in the course of their
normal functions or duties, make, participate in, or
obtain information regarding clients' purchases or
sales of securities. Because of DHCM's size and the
range of duties that employees may have, all employees
are considered "Access Persons."
Other Important Concepts and Terms. This Code uses certain terms that have a
very specific meaning. Specially defined terms are capitalized. Some of them are
defined in the context which they are used. Others, that are used throughout
this Code, are described below.
Beneficial Interest The concept of "beneficial ownership" of
securities is used throughout this Code. It is a broad
concept and includes many diverse situations. An
employee has a "beneficial interest" in not only
securities he or she owns directly, and not only
securities owned by others specifically for his or her
benefit, but also (i) securities held by the employee's
spouse, minor children and relatives who live full time
in the employee's home, (ii) securities held by another
person if by reason of any contract, understanding,
relationship, agreement or other arrangement the
employee obtains benefits substantially equivalent to
ownership and (iii) securities held by certain types of
entities that the employee controls or in which he or
she has an equity interest. Examples of some of the
most common of those arrangements are set forth in
Appendix 1. It is very important to review Appendix 1
in determining compliance with reporting requirements
and trading restrictions.2
Contact Person Many of the specific procedures, standards, and
restrictions described in this Code involve
consultation with the "Contact Person." Mike DeMayo is
the Contact Person.
Covered Accounts Many of the procedures, standards and
restrictions in this Code govern activities in "Covered
Accounts." This term refers to the following accounts3:
o Securities accounts of which DHCM is the beneficial
owner;
o Any securities account registered in an employee's
name; and
o Any account or security in which an employee has any
direct or indirect "beneficial ownership interest."
Covered Security This Code (and our Insider Trading Policy,
attached) refers to transactions in "Covered
Securities." That term includes not only common stocks,
but also options, rights, warrants, futures contracts,
convertible securities or other securities. It does not
include: (i) money market fund shares; (ii) shares of
any mutual fund other than one for which DHCM serves as
an investment adviser (including as subadviser); and
(iii) direct obligations of the U.S. Government. Thus,
none of the reporting, preclearance, or specific
trading limitations in this Code (other than the
general prohibition on insider trading) apply to those
securities.
Designated Account Certain types of accounts in which the Firm
(and through the Firm, the Firm's owners) have a
Beneficial Interest are technically covered by
regulatory reporting and preclearance requirements but,
because activities in those accounts are subject to
supervision and scrutiny, the Firm may determine that
they should not be subject to some of the other
substantive provisions of this Code. Those accounts may
include investment partnerships of which the Firm is a
general partner and certain accounts established to
"seed" a new investment product (including newly
established mutual funds). An account will be
considered a Designated Account only if it has been
specifically identified as such by the Contact Person,
in consultation with senior management.
Exempted Securities For purposes of this Code, bonds and other
debt instruments that are not convertible into any
equity security are considered "Exempted Securities"
and are not subject to the preclearance, "blackout
period," and other specific trading limitations imposed
by this Code. Note: The quarterly reporting obligations
described in this Code are imposed by law and apply
even to Exempted Securities. Thus, even though you need
not comply with the substantive limitations of this
Code in effecting transactions in Exempted Securities,
you still must report your transactions to the Contact
Person.
It is each employee's responsibility to determine
whether he or she must report a transaction or
investment and whether or not the substantive
limitations apply to a transaction. If you are in doubt
as to whether a security is an Exempted Security,
contact the Contact Person.
Specific Rules are not Exclusive. This Code's procedures, standards, and
restrictions do not and cannot address each potential conflict of interest.
Rather, they attempt to prevent some of the more common types of problems.
Ethics and faithful discharge of our fiduciary duties require adherence to the
spirit of this Code and an awareness that activities other than personal
securities transactions could involve conflicts of interest. (For example,
accepting favors from broker-dealers could involve an abuse of an employee's
position.) If there is any doubt about a transaction for a reportable account or
for an employee's personal account, the Contact Person should be consulted.
II. RULES APPLICABLE TO ALL EMPLOYEES
All employees must comply with the following policies.
Illegal Activities. As a matter of policy and the terms of each employee's
employment with DHCM, the following types of activities are strictly prohibited:
(1) Using any device, scheme or artifice to defraud any client or prospective
client or any party to any securities transaction in which DHCM or any of
its clients is a participant;
(2) Making to any person, particularly a client or prospective client, any
untrue statement of a material fact or omitting to state to any person a
material fact necessary in order to make the statements DHCM has made to
such person, in light of the circumstances under which they are made, not
misleading;
(3) Engaging in any act, practice, or course of conduct that operates or would
operate as a fraud or deceit upon any client or prospective client or upon
any person in connection with any transaction in securities;
(4) Engaging in any act, practice, or course of business that is fraudulent,
deceptive, or manipulative, particularly with respect to a client or
prospective client; and
(5) Causing DHCM, acting as principal for its own account or for any account
beneficially owned by DHCM or any person associated with DHCM (within the
meaning of the Investment Advisers Act) to sell any security to or purchase
any security from a client in violation of any applicable law, rule or
regulation of a governmental agency.
"Insider Trading." No employee may engage in what is commonly known as "insider
trading" or "tipping" of "inside" information. DHCM has adopted an "Insider
Trading Policy" that describes more fully what constitutes "insider trading" and
the legal penalties for engaging in it. Each employee must review the Insider
Trading Policy annually and sign an acknowledgment that he or she has done so.
Employees should refer to the Insider Trading Policy (as well as this Code)
whenever any question arises regarding what to do if an employee believes he or
she may have material nonpublic information.
Frontrunning and Scalping. No employee may engage in what is commonly known as
"frontrunning" or "scalping" - causing a Covered Account to buy or sell Covered
Securities prior to clients in order to benefit from price movement that may be
caused by client transactions.4 To prevent frontrunning or scalping, no employee
may cause a Covered Account to buy or sell a Covered Security (other than an
Exempted Security) when he or she knows DHCM is actively considering the
security for purchase or sale (as applicable) in client accounts.5 In
determining whether or not to "preclear" a proposed transaction, as described
below, the Contact Person will consider, among other things, whether any
research, analysis, or investment decisionmaking is in process that could
reasonably be expected to lead to a buy or sell decision for clients.
Information about such research, analysis, and pending decisionmaking is
referred to in this Code as "Client Investment Information." Notwithstanding the
foregoing, nothing in this paragraph will prevent the aggregation of orders for
Designated Accounts with orders for other client accounts, even though those
orders may be part of a purchase or sale program that may be implemented over a
number of days.
Preclearance. No employee may buy, sell, or pledge any security (other than an
Exempted Security) for any Covered Account (other than a Designated Account)
without obtaining written clearance from the Contact Person before the
transaction. The written clearance must specify the securities involved and the
type of transaction proposed, and must be dated and signed by the Contact
Person. It is each employee's responsibility to bring proposed transactions to
the Contact Person's attention and to obtain written clearance from the Contact
Person. Transactions effected without preclearance are subject, in the Contact
Person's discretion (after consultation with other members of management, if
appropriate), to being reversed or, if the employee made profits on the
transaction, to disgorgement of such profits. A form of request and approval is
attached to this Code as Appendix 2-A.
The Contact Person need not specify the reasons for any decision to clear or
deny clearance for any proposed transaction. As a general matter, due to the
difficulty of showing that an employee did not know of client trading activity
or Client Investment Information, the Contact Person should not be expected to
clear transactions in securities in which clients are currently invested or as
to which the Firm has Client Investment Information. Generally, only where the
Contact Person determines that a particular transaction in such a security does
not, under the circumstances, create even the appearance of impropriety will he
or she permit it, and quite likely not even then. In addition, as a general
matter, the Contact Person will not approve a proposed employee purchase if
accounts managed by DHCM own in the aggregate 5% or more of any class of the
issuer's equity securities.
Transaction orders must be filled within three trading days after the day
approval is granted. If precleared transactions are not completed in that time
frame, a new clearance must be obtained.
"Blackout" Periods. No employee may buy a Covered Security (other than an
Exempted Security) for a Covered Account (other than a Designated Account)
within five trading days before a client account buys the same security or sell
such a security for a Covered Account (other than a Designated Account) within
five trading days before a client account sells that security. Nor may an
employee sell a Covered Security (other than an Exempted Security) for a Covered
Account (other than a Designated Account) within five trading days after a
client account buys that security or buy the security for a Covered Account
(other than a Designated Account) within five trading days after a client
account sells that security.
The Firm recognizes that in unusual circumstances, transactions may be effected
in Covered Accounts shortly before new developments result in decisions being
made for client accounts. If the "blackout" policy described above were applied
too rigidly, such transactions could have the effect of preventing purchases or
sales for client accounts for a portion of a "blackout" period when those
transactions would otherwise be advantageous to clients.6 To prevent such a
result, the Contact Person, in consultation with senior management, may, on an
exception basis, permit transactions in client accounts before any applicable
"blackout" period has expired.
In addition to the "blackout" period restrictions, no employee may execute any
transaction for a Covered Account (other than a Designated Account) on any day
during which there is pending for any client a "buy" or "sell" order in that
same security until the client's order is executed or withdrawn. This rule
applies whether or not the Contact Person has cleared the transaction (e.g.
earlier in the day than the time at which an order was first placed for a
client). It also applies to transactions in convertible, derivative, or
otherwise related securities, such as options, that have the same effect as the
transactions described in the first sentence of this paragraph. Thus, for
example, an employee may not buy a call option or write a put option on a stock
(other than an Exempted Security) within five trading calendar days before a
client account buys the underlying stock or buy a put option or write a call
option on a stock (other than an Exempted Security) within five trading days
before a client account sells the underlying stock.
If an employee completes a transaction in a Covered Account during a "blackout"
period or otherwise in violation of this policy, he or she may be required to
turn over any profits realized on the transaction to DHCM, in most cases for
crediting to appropriate client accounts.
Commissions. Employees may negotiate with broker-dealers regarding the
commissions charged for their personal transactions, but may not enter into any
arrangement for a Covered Account to pay commissions at a rate that is better
than the rate available to clients through similar negotiations.
Gifts. No employee may receive any gift or other thing of more than nominal
value from any person or entity that does business with or on behalf of the Firm
or any client.
Duties of Confidentiality. All Client Investment Information and all information
relating to clients' portfolios and activities is strictly confidential.
Consideration of a particular purchase or sale for a client account may not be
disclosed except to authorized persons.
III. RULES APPLICABLE TO INVESTMENT EMPLOYEES
In addition to the policies described in Section II, all Investment Employees
must comply with the following policies.
New Issue Securities. No Investment Employee may purchase new publicly offered
issues of any securities other than Exempted Securities ("New Issue Securities")
for any Covered Account in the public offering of those securities without the
express approval of the Contact Person. Investment Employees generally should
not expect the Contact Person to approve Covered Account purchases of Covered
Securities that are the subject of a public offering until at least one day
after the public offering has been completed.7
Private Placements. As with all transactions in Covered Accounts, purchases of
securities in private placements8 must be cleared in advance by the Contact
Person. "Private placements" present special issues for preclearance decisions.
In determining whether to approve any such transaction for an Investment
Employee, the Contact Person will consider, among other factors, whether the
investment opportunity should be reserved for client accounts and whether the
investment opportunity is being offered to the Covered Account by virtue of the
employee's position with DHCM.9 An Investment Employee who has acquired a
Beneficial Interest in securities in a private placement must notify the Contact
Person if he or she is to participate in subsequent consideration of an
investment by client accounts in securities of the same issuer. In such
circumstances, a decision to acquire securities of that issuer for client
accounts must be reviewed independently by an Investment Employee with no
personal interest in that issuer prior to placing an order. If no such
Investment Employee exists, the transaction should not be effected for client
accounts without specific client approval.
Limitation on Short-Term Trading. No Investment Employee may buy and then sell,
or sell and then buy, any Covered Security (other than an Exempted Security) for
a Covered Account (other than a Designated Account) within any period of 60 days
if, at any time while that Covered Account holds the security, (i) any client
also owns the security or a related security or instrument or (ii) DHCM has any
Client Investment Information relating to that security or a related security or
instrument. This rule also applies to transactions in convertible, derivative,
or otherwise related securities, such as options, that have the same effect as
the transactions described in the first sentence of this paragraph. Thus, for
example, an Investment Employee may not buy a stock (other than an Exempted
Security) and, within 60 days, buy a put option on that stock if, at any time he
or she owns the stock, any client also owns either the underlying stock or any
option on the stock or the firm has Client Investment Information about the
stock. As a practical matter, if an Investment Employee has bought or sold a
Covered Security (other than an Exempted Security) for a Covered Account (other
than a Designated Account) and the firm subsequently buys or sells the security
for client accounts or develops Client Investment Information about the
security, the employee must refrain from effecting any contrary transaction for
the balance of the 60-day period.
If an employee completes a transaction in violation of this policy, the
applicable Covered Account may be required to turn over any profits realized on
the transaction either as a penalty or for the benefit of clients.
Service as a Director. No Investment Employee may serve as a director of a
publicly-held company without prior approval by the Contact Person (or another
Investment employee, if the Contact Person is the proposed board member) based
upon a determination that service as a director would be in the best interests
of any Fund Client and its shareholders. In the limited instances in which such
service is authorized, Investment Personnel serving as directors will be
isolated from other Investment Personnel who are involved in making decisions as
to the securities of that company through procedures determined by the Contact
Person to be appropriate in the circumstances.
IV. EMPLOYEE REPORTING
Initial Holdings Report. Each employee must, within ten (10) days after
commencement of employment, disclose in writing to the Contact Person the
identities, amounts, and locations of all Covered Securities owned in all
Covered Accounts in which such employee has a Beneficial Interest. That
disclosure must include the date as of which the information is provided. These
reports may be made on the form attached as Appendix 2-B.
Annual Holdings Report. Each employee must disclose in writing to the Contact
Person within thirty (30) days after the end of each calendar year while
employed by DHCM the same type of information that is required to be provided in
an Initial Holdings Report as of a date within thirty (30) days before the date
of the report. These reports may be made on the form attached as Appendix 2-B.
Quarterly Reports. Each employee must report to the Contact Person by the tenth
day of each quarter (i) all securities transactions in all of the employee's
Covered Accounts during the preceding quarter and (ii) each new Covered Account
in which the employee has or acquired a Beneficial Interest during the quarter
(including the name of the institution that maintains the account, the name in
which the account is maintained, and the date it was established or, if later,
the date the employee acquired his or her Beneficial Interest). In addition,
each employee must report all transactions for the account of each person or
entity (i) that is not a client of DHCM and (ii) for whom the employee manages
provides investment management services or to whom the employee gives investment
or voting advice. Those transactions may be reported on the form attached as
Appendix 2-C.10 To provide verification of this reporting with respect to
Investment Employees and employees designated by the Contact Person, in
consultation with senior management, as "Management Employees,"11 such employees
must direct each brokerage firm, bank, or other institutions that maintains a
Covered Account to which he or she is related to provide duplicate confirmation
and account statements to DHCM.12 Notwithstanding the foregoing, employees need
not report transactions in Designated Accounts in which they have a Beneficial
Interest; the Firm will have records of such transactions as a result of its
management activities for those accounts.
In filing Quarterly Reports, employees must note that:
o Each employee must file a report every quarter whether or not there were
any reportable transactions.
o Reports must show all sales, purchases, or other acquisitions or
dispositions, including gifts, the rounding out of fractional shares,
exercises of conversion rights, exercises or sales of subscription rights
and receipts of stock dividends or stock splits.
o Quarterly reports as to family and other Covered Accounts that are
fee-paying clients of DHCM, need merely list the account number;
transactions need not be itemized.
o Direct obligations of the U.S. Government, money market fund shares, or
shares of registered open-end investment companies (other than Fund
Clients) are not Covered Securities and transactions in than need not be
reported. However, employees must report transactions in Exempted
Securities (including bonds and other debt securities, and all stocks),
even though the substantive restrictions imposed by this Code do not apply.
Confidentiality. All statements of holdings, duplicate trade confirmations,
duplicate account statements, and Quarterly Reports will generally be held in
confidence by the Contact Person. However, the Contact Person may provide access
to any of those materials to other members of DHCM's management or compliance
personnel of a Fund Client in order to resolve questions regarding compliance
with this Code and regarding potential purchases or sales for client accounts.
DHCM may also provide regulatory authorities with access to those materials
where required to do so under applicable laws, regulations, or orders of such
authorities.
V. PROCEDURES; SANCTIONS
Identification of Investment Employees and Other Access Persons. The Contact
Person will maintain a current list of all Access Persons and will identify on
that list which such persons are Investment Employees (including the date on
which each became an Investment Employee, as well as the date on which any
Access Person ceased to be an Investment Employee). Whenever an employee becomes
or ceases to be an Investment Employee, the Contact Person will notify the
employee of that fact.
Transaction Monitoring. To determine whether employees have complied with the
rules described above (and to detect possible insider trading), the Contact
Person will review duplicate trade confirmations provided pursuant to those
rules within 10 days after their receipt. The Contact Person will compare
Quarterly Reports and records of preclearance activities to determine whether
employees are complying with the preclearance and reporting requirements. The
Contact Person will also compare transactions in Covered Accounts with
transactions in client accounts for transactions or trading patterns that
suggest potential frontrunning, scalping, or other practices that constitute or
could appear to involve abuses of employees' positions.
Certification of Compliance. By January 30 of each year, each employee must
certify that he or she has read and understands this Code, that he or she
recognizes that this Code applies to him or her, and that he or she has complied
with all of the rules and requirements of this Code, including reporting all
securities transactions required to be reported. A form of such certification is
attached to this Code as Appendix 2-D.
Retention or Reports and Other Records. The Contact Person will maintain at
DHCM's principal office for at least five years a confidential (subject to
inspection by regulatory authorities) record of each reported violation of this
Code and of any action taken as a result of such violation. The Contact Person
will also cause to be maintained in appropriate places all other records
relating to this Code that are required to be maintained by Rule 17j-1 under the
Investment Company Act of 1940 and Rule 204-2 under the Investment Advisers Act
of 1940, as well as under applicable state laws, including copies of this Code,
as it may be amended from time to time, copies of the lists of Access Persons
and Investment Employees described above, copies of employees' Initial Holdings
Reports, Annual Holdings Reports, and Quarterly Reports, and each decision to
approve an investment by a Covered Account in which an Investment Employee has a
Beneficial Interest . In a New Issue or a private placement.
Reports of Violations. Any employee who learns of any violation, apparent
violation, or potential violation of this Code is required to advise the Contact
Person as soon as practicable. The Contact Person will then take such action as
may be appropriate under the circumstances.
Sanctions. Each employee acknowledges that, as a term of his or her employment
with DHCM, upon discovering that any employee has failed to comply with the
requirements of this Code, DHCM may impose on that employee whatever sanctions
management considers appropriate under the circumstances, including censure,
suspension, disgorgement of trading profits, limitations on permitted
activities, or termination of employment.
VI. ACKNOWLEDGMENT OF RECEIPT AND CERTIFICATION
I have read, understand, acknowledge that I am subject to and agree to abide by
the guidelines set forth in this Code of Ethics and Conduct. I further certify
that I have disclosed or reported all personal securities holdings and
transactions required to be disclosed or reported pursuant to the requirements
of the Code. I understand that any violation of the Code may lead to sanctions,
including my dismissal for cause.
Name__________________________ Date__________________________
APPENDIX 1
BENEFICIAL OWNERSHIP
An employee has a "beneficial ownership" interest in Covered Securities in all
cases where he or she is considered to have a direct or indirect pecuniary
interest in those securities within the meaning of Rule 16a-1(2) under the
Securities Exchange Act of 1934, as amended. Examples of such pecuniary
interests include (but are not limited to) cases where Covered Securities are
owned:
1. By an employee for his/her own benefit, whether bearer, registered in
his/her own name, or otherwise;
2. By others for the employee's benefit (regardless of whether or how
registered), such as securities held for the employee by custodians,
brokers, relatives, executors or administrators;
3. For an employee's account by a pledgee;
4. By a trust in which an employee has an income or remainder interest unless
the employee's only interest is to receive principal if (a) some other
remainderman dies before distribution or (b) if some other person can
direct by will a distribution of trust property or income to the employee;
5. By an employee as trustee or co-trustee, where either the employee or any
member of his/her immediate family (i.e., spouse, children and their
descendants, stepchildren, parents and their ancestors, and stepparents, in
each case treating a legal adoption as blood relationship) has an income or
remainder interest in the trust.
6. By a trust of which the employee is the settlor, if the employee has the
power to revoke the trust without obtaining the consent of all the
beneficiaries;
7. By any partnership in which the employee or a company the employee controls
(alone or jointly with others) is a general partner;
8. By a corporation or similar entity controlled by the employee alone or
jointly with others;
9. In the name of the employee's spouse (unless legally separated);
10. In the name of minor children of the employee or in the name of any
relative of the employee or of his/her spouse (including an adult child)
who is presently sharing the employee's home. This applies even if the
securities were not received from the employee and dividends are not
actually used for the maintenance of the employee's home;
11. In the name of any person other than the employee and those listed in (9)
and (10) above, if by reason of any contract, understanding, relationship,
agreement, or other arrangement the employee obtains benefits substantially
equivalent to those of ownership;
12. In the name of any person other than the employee, even though the employee
does not obtain benefits substantially equivalent to those of ownership (as
described in (11) above), if the employee can vest or revest title in
himself/herself.
APPENDIX 2-A
PERSONAL SECURITY TRANSACTION AUTHORIZATION
(valid only for proposed trade date and two trading days thereafter)
Employee Name:
Account Title:
Proposed Trade Date: __________________
Security:
Number of Shares: ____________________
Buy: __________ or Sell: __________
AUTHORIZATION
1. Has the security been approved for purchase or sale for client accounts
within the last five business days, or is currently being considered for
trading in client accounts?
Yes __________ No __________
2. Are there currently any open orders for client accounts, or have their
been any purchases or sales for client accounts within the last five
business days?
Yes __________ No __________
Request Approved __________ Request Denied __________
This form must be initialed by the Contact Person PRIOR to entering into
personal securities transactions.
Comments:
APPENDIX 2-B
INITIAL OR ANNUAL HOLDINGS REPORT
I hereby certify that the following is a complete list of (i) all accounts with
any brokerage firm or other financial institution through which any securities
covered by this Code of Ethics may be purchased or sold in accordance with the
Code of Ethics of Duncan Hurst Capital Management Inc., and (ii) all securities
held in those accounts as of the date indicated below.
I understand that you require this list to monitor my compliance with Duncan
Hurst Capital Management Inc.'s Code of Ethics. I agree to notify DHCM and
obtain its consent before opening any new account that falls within the Code of
Ethics.
Broker _____________________________________
Account Name _____________________________________
Account # _____________________________________
Name of Security Amount of Shares @ 12/31/99
---------------- ---------------------------
_________________________________
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Signed: __________________________________________________
Name (printed): __________________________________________________
Date: __________________________________________________
Date as of which Information Presented: ______________________________
APPENDIX 2-C
QUARTERLY REPORT OF PERSONAL SECURITIES TRANSACTIONS
Name: ____________________________________
For the quarter October 1, 1999 through December 31, 1999
--------------- -----------------
Buy/ No. of
Date Sell Name of Security Shares Price Broker
---- ---- ---------------- ------ ----- ------
Duncan-Hurst mutual fund ownership, outside of the DHCM 401k plan, as of
quarter-end:
Fund Number of Shares
------------------------------------ ---------------------------
------------------------------------ ---------------------------
------------------------------------ ---------------------------
------------------------------------ ---------------------------
New Covered Accounts
Broker Account Name Account #
------ ------------ ---------
-------------------------- ------------------------- -----------------------
-------------------------- ------------------------- -----------------------
-------------------------- ------------------------- -----------------------
-------------------------- ------------------------- -----------------------
Signed: __________________________________________________
Date: __________________________________________________
APPENDIX 2-D
ANNUAL CERTIFICATE OF COMPLIANCE
I have read, understand, acknowledge that I am subject to and agree to abide by
the guidelines set forth in the Code of Ethics and Conduct of Duncan Hurst
Capital Management Inc. ("DHCM"). I further certify that I have complied with
that Code and with the Policy to Detect and Prevent Insider Trading attached to
that Code since the last date of my certification, and that I have disclosed or
reported all personal securities holdings and transactions required to be
disclosed or reported pursuant to the requirements of the Code. I understand
that any violation of the Code may lead to sanctions, including my dismissal for
cause.
Signed: ______________________________
Name (printed): ______________________________
Date: ______________________________
POLICY TO DETECT AND PREVENT INSIDER TRADING
DUNCAN HURST CAPITAL MANAGEMENT INC.
(Revised January 1999)
Duncan Hurst Capital Management Inc. forbids you to trade, either personally or
on behalf of others, including accounts managed by DHCM, on material nonpublic
information, or communicating material nonpublic information to others in
violation of the law. This conduct is frequently referred to as "insider
trading." The Firm's policy extends to activities within and outside your duties
at DHCM.
The term "insider trading" in 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:
1. trading by an insider while in possession of material nonpublic
information,
2. 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
3. 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 Contact Person identified in the Firm's Code of
Ethics.
Who is an Insider?
The concept of "insider" is broad. It includes officers, directors and employees
of a company. In addition, a person can be a "temporary insider" if he or she
enters into a special confidential relationship in the conduct of a company's
affairs and as a result is given access to information solely for the company's
purposes. A temporary insider can include, among others, a company's attorneys,
accountants, consultants, bank lending officers, and the employees of such
organizations. According to the Supreme Court, the company must expect the
outsider to keep the disclosed nonpublic information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
What is Material Information?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" is generally defined as
information that there is a substantial likelihood a reasonable investor would
consider important to make his or her investment decisions, or information that
is reasonably certain to have a substantial effect on the price of a company's
securities. Information you 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 Supreme Court considered
as 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 or not.
What is Nonpublic Information?
Information is nonpublic until it has been effectively communicated to the
market place. 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 SEC, or appearing in Dow Jones, Reuters Economic Services, the
Wall Street Journal or other publications of general circulation would be
considered public.
Penalties for Insider Trading
Penalties for trading on, or communicating, material nonpublic information are
severe, for both the individuals involved in the unlawful conduct and their
employers. Persons can be subject to some or all of the penalties below, even if
they do not personally benefit from the violation.
- civil injunctions,
- treble damages,
- disgorgement of profits,
- jail sentences,
- fines 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, and
- fines for the employer or other controlling person of up to the
greater of $1,000,000 or three times the amount of the profit gained
or loss avoided.
In addition, any violation of this Insider Trading Policy (or other provisions
of the Code of Ethics and Conduct of which this Insider Trading Policy is a
part) can be expected to result in serious sanctions by DHCM, including
dismissal of the persons involved.
Procedures To Implement Insider Trading Policy
Before trading for yourself or others, including accounts managed by DHCM, in
the securities of a company about which you may have potential inside
information, ask yourself the following questions:
1. Is the information material? Would an investor consider it important in
making their investment decisions? Would it substantially effect the market
price of the securities if generally disclosed?
2. Is the information nonpublic? To whom has this information been provided?
Has the information been effectively communicated to the marketplace by
being published in Reuters, the Wall Street Journal, or other publications
of general circulation?
If, after considering the above, you believe the information may be material and
nonpublic:
1. Report the matter immediately to the Contact Person.
2. Do not purchase or sell the securities on behalf of yourself or others,
including accounts managed by DHCM.
3. Do not communicate the information inside or outside DHCM, other than to
the Contact Person. In addition, you should take care that the information
is secure. For example, you should seal files and restrict access to
computer files containing material nonpublic information.
4. The Contact Person will instruct you to continue the prohibitions against
trading and communication, or will allow you to trade and communicate the
information. Any questions about whether information is material or
nonpublic, the applicability or interpretation of these procedures, or the
propriety of any action, must be discussed with the Contact Person before
you trade or communicate the information to anyone.
These procedures have been established to help you avoid insider trading, and to
help DHCM prevent, detect and impose sanctions against insider trading. You must
follow these procedures or risk serious sanctions, including dismissal,
substantial personal liability and criminal penalties. If you have any questions
about these procedures consult the Contact Person.
FOOTNOTES
1 The Firm may, from time to time, engage temporary personnel, such as
clerical personnel provided by an agency or independent contractors. We
generally expect that the nature of such personnel's engagements and
activities will not be such that they would be "Access Persons" if they
were "employees." The Firm will make a determination on a case-by-case
basis regarding status of such personnel.
2 This broad definition of "beneficial ownership" is for purposes of this
Code only; it does not necessarily apply for purposes of other securities
laws or for purposes of estate or income tax reporting or liability. To
accommodate potential differences in concepts of ownership for other
purposes, an employee may include in his or her Quarterly Report a
statement declaring that the reporting or recording of any securities
transaction shall not be construed as an admission that the employee has
any direct or indirect beneficial ownership in the security. For example,
if a parent or custodian sold securities owned by a minor child under a
Uniform Gifts to Minors Act, the other parent would report such
transaction, but could disclaim beneficial ownership by checking the
appropriate box on the Quarterly Report. Whether or not an employee's
Quarterly Report should carry such a disclaimer is a personal decision on
which DHCM will make no recommendation. Employees may wish to consult their
own advisers on this issue.
3 Covered Accounts do not include accounts over which an employee does not
have "any direct or indirect influence or control." The most common example
of this is where securities are held in a trust of which an employee is a
beneficiary but is not the trustee and has no control or influence over the
trustee. The "no influence or control" exception is very limited and will
be construed narrowly. Questions about "influence or control" or otherwise
about beneficial ownership or reporting responsibilities should be directed
to the Contact Person.
4 These practices may also constitute illegal "insider trading."
5 Some of the other, more specific trading rules described below are also
intended, in part, to prevent frontrunning and scalping.
6 For example, if, on day one, a Covered Account sells a security that client
accounts also hold, then under this Code client accounts ordinarily would
not also sell for the balance of the five-trading-day period. However, if
extraordinary news on the security were announced on day two, the client
accounts could be disadvantaged by waiting for the balance of the blackout
period
7 Exceptions to this general rule may include, for example, where an
employee's spouse has an opportunity to participate in a directed share
program in connection with a public offering by his or her employer.
Designated Accounts may also be granted exceptions on a regular basis.
8 Defined as offerings that are exempt from registration under the Securities
Act of 1933 pursuant to section 4(2) or section 4(6) of that Act and, or
pursuant to Rule 504,505, or 506 under that Act.
9 In making this determination, the Contact Person will often be expected to
consult with the portfolio managers. The Contact Person must make a written
record of his or rationale for approving an investment in a private
placement and retain that record in the Firm's compliance files.
10 If possible, all reportable transactions should be listed on a single form.
If necessary, because of the number of transactions, attach a second form
and mark it "continuation." All information called for in each column must
be completed for every security listed on the report.
11 These employees will generally include the Contact Person and personnel who
have supervisory responsibility over areas of the Firm's operations that
involve access to Client Investment Information.
12 To facilitate the orderly collection and review of these statements, the
Contact Person may direct that they be sent to a specific post office box,
rather than to the Firm's general address.
