Exhibit (p)(3)
H. M. PAYSON & CO.
Code of Ethics
Effective March 1, 2000
(as amended August 1, 2000)
1. INTRODUCTION
The Board of Directors of H.M. Payson & Co. (Payson) have approved and
adopted the AIMR Code of Ethics. Additionally, the Board has adopted this Code
of Ethics ("Code").
This Code establishes standards and procedures for the detection and
prevention of activities by which persons having knowledge of the investments
and investment intentions of the firm and its clients may abuse their fiduciary
duties to the clients.
2. POLICY STATEMENT
The firm recognizes its fiduciary duties to (1) place the interests of its
clients first; (2) require that all personal securities transactions be
conducted consistent with the Code and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of an individual's position of
trust and responsibility; and (3) uphold fundamental standards that investment
company personnel should not take inappropriate advantage of their positions.
Payson forbids any Access Person or Investment Person from engaging in any
conduct that is contrary to this Code.
3. DEFINITIONS
(a) Access Person means each Managing Director or Portfolio Manager of
Payson, and any other employee who in connection with his or her regular duties,
makes or participates in making investment recommendations to any client or
obtains information concerning recommendations on Covered Securities being made
by Payson to any client.
(b) Act means the Investment Company Act of 1940, as amended. ---
(c) Investment Person means
(i) any employee who makes or participates in making investment
recommendations for use by portfolio managers in client accounts;
or ------
(ii) any individual who controls Payson and who obtains information
concerning recommendations made to any client regarding the
purchase or sale of securities by the client.
(d) being considered for purchase or sale means, with respect to a
security, when a recommendation to purchase or sell that security has been
communicated and, with respect to the person making the recommendation, when
that person seriously considers making the recommendation.
(e) beneficial owner shall have the same meaning as that set forth in Rule
16a-1(a) under the Securities Exchange Act of 1934, as amended, except that the
determination of direct or indirect beneficial ownership shall apply to all
covered securities which an access person owns or has acquired. A beneficial
owner of a security is any person who, directly or indirectly,
(i) through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (including the power to
direct voting) or investment power (including the power to direct
a disposition) in the security or
(ii) through any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary interest
(the opportunity, directly or indirectly, to profit or share in
any profit derived from a transaction in the subject securities)
in a security.
(f) client shall mean any individual, trust, investment company,
corporation, or other organization to which Payson, or its Investment Persons or
Access Persons, serve as either investment adviser or trustee.
(g) control shall mean the power to exercise a controlling influence over
the management or policies of a company, unless this power is solely the result
of an official position with the company. Ownership of 25% or more of a
company's outstanding voting securities is presumed to give the holder thereof
control over the company. This presumption may be rebutted by the Review Officer
based upon the facts and circumstances of a given situation.
(h) Covered Security shall mean a "security" as defined in Section
2(a)(36) of the Act; provided, however, that the term security shall not
include:
(i) direct obligations of the Government of the United States;
(ii) bankers' acceptances and bank certificates of deposit;
(iii)commercial paper and debt instruments with a maturity at issuance
of less than 366 days and that are rated in one of the two
highest rating categories by a nationally recognized statistical
rating organization;
(iv) repurchase agreements covering any of the foregoing; and
(v) shares of registered open-end investment companies.
(i) purchase or sale includes, among other things, the writing of an option
to purchase or sell a covered security. ----------------
(j) security held or to be acquired means: --------------------------------
(i) any Covered Security which, within the most recent 15 days
is or has been held by any mutual fund to which Payson
serves as investment adviser or is being or has been
considered by the applicable mutual fund or Payson for
purchase by the applicable mutual fund or its other clients;
and
(ii) any option to purchase or sell, and any security convertible
into or exchangeable for, a Covered Security.
4. WHO IS COVERED BY THIS CODE
All Access Persons and Investment Persons as listed on Appendix A.
-------------- ------------------
5. PROHIBITED TRANSACTIONS
(a) Prohibition Against Fraudulent Conduct. It is unlawful for Access
Persons and Investment Persons to use any information concerning a security
held or to be acquired, or their ability to influence any investment
decisions, for personal gain or in a manner detrimental to the interests of
a client. In addition, they shall not, directly or indirectly:
(i) employ any device, scheme or artifice to defraud a client or
engage in any manipulative practice with respect to a ------
client; ------
(ii) make to a client, any untrue statement of a material fact or
omit to state to a client a material fact necessary in order
to make the statements made, in light of the circumstances
under which they are made, not misleading; or
(iii)engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon a
client.
(b) Blackout Period. Access Persons and Investment Persons shall not
purchase or sell a Covered Security in an account over which they have
direct or indirect influence or control on a day during which they know or
should have known that any client has a pending "buy" or "sell" order in
that same security until that order is executed or withdrawn.
Existing client orders which are placed at limit prices which are more
than $1.00 per share away from the current market price will not be
considered as pending client orders for purposes of this blackout period,
provided that the purchase or sale by the Access Person or Investment
Person is in the amount of $15,000 or less in any common stock having a
market capitalization of $1 billion or more; or is in the amount of $5,000
or less in any common stock having a market capitalization between $500
million and $1 billion. The Review Officer may grant an exception from this
section to permit an Access Person or Investment Person whose proposed
trade exceeds the dollar limits set forth in the previous sentence to trade
in securities that are the subject of a client limit order that is more
than $1.00 away from the current market price if the Review Officer
determines that the proposed trade would not adversely affect the client's
order. The Review Officer shall make a written record of any exception
granted under this Section.
(c) Investment Personnel Blackout Period. No Investment Person shall
purchase or sell a Covered Security within five calendar days before or
five calendar days after he or she changes the rating on the security to
either a buy or a sell recommendation. Additionally, any Investment Person
who is primarily responsible for the management of any mutual fund to which
Payson serves as investment adviser, shall not purchase or sell any Covered
Security within five calendar days before or five calendar days after the
day in which the mutual fund trades the security. Any profits realized on
trades within this proscribed period shall be disgorged.
(d) Restricted List. Payson shall maintain a restricted securities
list. Upon the issuance of a purchase or sale recommendation of a
particular security by the Payson research department, the security will be
added to the restricted list. The security shall remain on the restricted
list for a period of five days following the recommendation. All Payson
employees, including all Access Persons and Investment Persons, are
prohibited from trading in securities on the restricted list in their own
accounts or in those in which they have a beneficial interest.
(e) Blackout Period and Restricted List Exclusions and Definitions.
The following transactions shall not be prohibited by this Code and are not
subject to the limitations of Sections 5(b), (c), and (d):
(i) purchases or sales over which you have no direct or indirect
influence or control (for this purpose, you are deemed to
have direct or indirect influence or control over the
accounts of a spouse, minor children and relatives residing
in your home);
(ii) purchases that are part of an automatic dividend
reinvestment plan;
(iii)purchases or sales which are non-volitional on your part;
and
(iv) 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.
(v) purchases or sales in the amount of $15,000 or less in any
common stock having a market capitalization of $1 billion or
more; or purchases or sales in the amount of $5,000 or less
in any common stock having a market capitalization between
$500 million and $1 billion.
For purposes of Sections 5(b), (c), and (d), and subject to Section
5(g) below, the (i) common stock and any fixed income security of an
issuer shall not be deemed to be the same security and (ii)
non-convertible preferred stock of an issuer shall be deemed to be the
same security as the fixed income securities of that issuer; and (iii)
convertible preferred stock shall be deemed to be the same security as
both the common stock and fixed income securities of that issuer.
(f) Requirement for Pre-clearance. Access Persons and Investment
Persons must obtain prior written approval from the designated Review
Officer before:
(i) directly or indirectly acquiring securities in purchasing an
initial public offering for which no public market in the
same or similar securities of the issue has previously
existed; and
(ii) directly or indirectly acquiring securities in a private
placement. In determining whether to pre-clear the
transaction, the Review Officer designated under Section 7
shall consider, among other factors, whether the investment
opportunity should be reserved for a client, and whether
such opportunity is being offered to the Investment
Personnel by virtue of their position with the client or any
mutual fund.
Any Access Person or Investment Person who has taken a personal
position through a private placement will be under an affirmative
obligation to disclose that position in writing to the Review Officer
if they play a material role in ant client's subsequent investment
decision regarding the same issuer; this separate disclosure must be
made even though the Investment Person has previously disclosed the
ownership of the privately placed security in compliance with the
Pre-clearance requirements of this section. Once disclosure is given,
an independent review of the client's investment decision will be made.
(g) Other Prohibited Transactions. Access Persons and Investment
Persons shall not: -------------- ------------------
(i) induce or cause a client to take action or to fail to take
action, for the personal benefit of the Access Person or
Investment Person rather than for the benefit of the client;
(ii) accept anything other than of de minimis value or any other
preferential treatment from any broker-dealer or other
entity with which a client does business;
(iii)establish or maintain an account at a broker-dealer, bank
or other entity through which securities transactions may be
effected without written notice to the designated Review
Officer prior to establishing such an account;
(iv) use knowledge of portfolio transactions of a client for the
personal benefit of the Access Person or Investment ------
------------- ---------- Person or persons other than the
client; ------ ------
(v) violate the anti-fraud provisions of the federal or state
securities laws; (vi) serve on the boards of directors of
publicly traded companies, absent prior authorization based
upon a determination by the Review Officer that the board
service would be consistent with the interests of all
clients including any mutual funds to which Payson serves as
investment adviser and its shareholders.
(h) Undue Influence. Access Persons and Investment Persons shall not
cause or attempt to cause any client to purchase, sell or hold any security
in a manner calculated to create any personal benefit to the Access Person
or Investment Person. They shall not recommend any securities transactions
for a client without having disclosed (through reports in accordance with
Section 6, Pre-clearance in accordance with Section 5(e), or otherwise)
their interest, if any, in such securities or the issuer thereof,
including, without limitation, (i) their beneficial ownership of any
securities of such issuer, (ii) any position with such issuer or its
affiliates and (iii) any present or proposed business relationship between
them (or any party in which they have a significant interest) and such
issuer or its affiliates.
(i) Corporate Opportunities. Access Persons and Investment Persons
shall not take personal advantage of any opportunity --------------
------------------ properly belonging to a client. ------
(j) Confidentiality. Except as required in the normal course of
carrying out their business responsibilities, Access Persons and Investment
Persons shall not reveal information relating to the investment intentions
or activities of any client, or securities that are being considered for
purchase or sale on behalf of any client.
6. REPORTING REQUIREMENTS
(a) Reporting. Access Persons and Investment Persons must report the
information described in this Section with respect to transactions in any
Covered Security in which they have, or by reason of such transaction
acquire, any direct or indirect beneficial ownership. They must report to
the designated Review Officer, and may also be required by a mutual fund,
pursuant to a Code of Ethics adopted by the mutual fund, to report to the
mutual fund or another person.
(b) Exclusions from Reporting. Purchases or sales in Covered
Securities in an account in which an Access Person or Investment Person has
no direct or indirect influence or control are not subject to the reporting
requirements of this Section.
(c) Form of Reporting. Each Access Person and Investment Person shall
have directed to the Review Officer duplicate broker trade confirmations on
all security transactions and duplicate monthly statements for all
securities accounts in which they have a beneficial interest. For accounts
that are carried by Payson, duplicate trade confirmations are required, but
duplicate monthly statements are not required. The Review Officer may use
the internal systems of Payson to determine holdings of any Access Person
or Investment Personnel.
(d) Initial Holding Reports. No later than ten (10) days after you
become subject to this Code as set forth in Section 4, you must report the
following information:
(i) the title, number of shares and principal amount of each
Covered Security (whether or not publicly traded) in which
you have any direct or indirect beneficial ownership as of
the date you became subject to this Code;
(ii) the name of any broker, dealer or bank with whom you
maintained an account in which any securities were held for
your direct or indirect benefit as of the date you became
subject to this Code; and
(iii) the date that the report is submitted.
(e) Annual Reports. At least once each year, each Access Person and
Investment Person will be asked to verify the firm's listing of accounts in
which the person has a beneficial interest. The verification must include
the name of any broker, dealer or bank with whom you maintain an account in
which any securities are held for your direct or indirect benefit; and the
account number.
(f) Certification of Compliance. You are required to certify annually
that you have read and understood the Code and recognize that you are
subject to the Code. Further, you are required to certify annually that you
have complied with all the requirements of the Code and you have disclosed
or reported all personal securities transactions pursuant to the
requirements of the Code.
(g) Account Opening Procedures. You shall provide written notice to
the Review Officer prior to opening any account with any entity through
which a Covered Securities transaction may be effected. In addition, you
will promptly:
(i) provide full access to a mutual fund, its agents and
attorneys to any and all records and documents which a
mutual fund considers relevant to any securities
transactions or other matters subject to the Code;
(ii) cooperate with a mutual fund, or its agents and attorneys,
in investigating any securities transactions or other matter
subject to the Code;
(iii)provide a mutual fund, its agents and attorneys with an
explanation (in writing if requested) of the facts and
circumstances surrounding any securities transaction or
other matter subject to the Code; and
(iv) promptly notify the Review Officer or such other individual
as a mutual fund may direct, in writing, from time to time,
of any incident of noncompliance with the Code by anyone
subject to this Code.
7. REVIEW OFFICER
(a) Duties of Review Officer. The Compliance Officer of Payson is
designated as the Review Officer and he or his designee must:
(i) review all securities transaction confirmations and monthly
statements and shall maintain the names of persons
responsible for reviewing these reports;
(ii) identify all persons subject to this Code who are required
to make these reports and promptly inform each person of the
requirements of this Code;
(iii)maintain a signed acknowledgment by each person who is then
subject to this Code, in the form of Attachment A;
(b) Potential Trade Conflict. When there appears to be a transaction
that conflicts with the Code, the Review Officer shall request a written
explanation of the person's transaction. If after post-trade review, it is
determined that there has been a violation of the Code, a report will be
made by the designated Review Officer to the Board of Directors of Payson
and any mutual fund's Board of Trustees (or Directors).
(c) Required Records. The Review Officer shall maintain and cause to
be maintained:
(i) a copy of any code of ethics adopted by Payson which has
been in effect during the previous five (5) years in an
easily accessible place;
(ii) a record of any violation of any code of ethics, and of any
action taken as a result of such violation, in an easily
accessible place for at least five (5) years after the end
of the fiscal year in which the violation occurs;
(iii)a copy of each report made by anyone subject to this Code
as required by Section 6 for at least five (5) years after
the end of the fiscal year in which the report is made, the
first two (2) years in an easily accessible place;
(iv) a list of all persons who are, or within the past five years
have been, required to make reports or who were responsible
for reviewing these reports pursuant to any code of ethics
adopted by Payson, in an easily accessible place;
(v) a copy of each written report and certification required
pursuant to Section 7(e) of this Code for at least five (5)
years after the end of the fiscal year in which it is made,
the first two (2) years in an easily accessible place; and
(vi) a record of any decision, and the reasons supporting the
decision, approving the acquisition by any Access Person or
Investment Person of securities under Sections 5(b) or 5(f)
of this Code, for at least five (5) years after the end of
the fiscal year in which the approval is granted.
(d) Post-Trade Review Process. Following receipt of trade
confirmations and statements, all transactions will be reviewed for the
following potential violations:
(i) mutual fund trade related violations: transactions by
Investment Personnel who directly manage a mutual fund
portfolio to which Payson serves as investment adviser and
occurring within five calendar days before or five calendar
days after any mutual fund, for which the Investment
Personnel initiates or participates in initiating the
transaction, trades in that security.
(ii) restricted list violations: transactions by Access Persons
or Investment Personnel involving a security on the
-------------- -------------------- Payson restricted list.
(iii)research department violations: transactions by research
analysts (Investment Personnel) within five days before or
five days after their rating on a security is changed to buy
or sell.
(iv) blackout period violations: transactions by Access Persons
or Investment Persons in violation of the blackout period
-------------- ------------------ provision of section 5(b).
(v) other activities: transactions which may give the appearance
that an Access Person or Investment Personnel has executed
transactions not in accordance with this Code, particularly
those that give any appearance of front running.
(e) Submission to the mutual fund Board and Payson Board of Directors.
The Review Officer shall annually prepare a written report to the Board of
Trustees (or Directors) of any mutual fund to which Payson serves as
investment adviser and to the Payson Board of Directors that:
(i) describes any issues under this Code or its procedures since
the last report to the Board, including, but not limited to,
information about material violations of the Code or
procedures and sanctions imposed in response to the material
violations; and
(ii) certifies that the firm has adopted procedures reasonably
necessary to prevent Access Persons and Investment Personnel
from violating this Code.
<PAGE>
H.M. PAYSON & CO.
Code of Ethics
ATTACHMENT B
ACKNOWLEDGMENT
I understand that I am subject to H.M. Payson & Co.'s Code of Ethics. I have
read and I understand the H.M. Payson & Co. Code of Ethics, as adopted by H.M.
Payson & Co. [DATE] and will comply with it in all respects. In addition, I
certify that I have complied with the requirements of the Code of Ethics and I
have disclosed or reported all personal securities transactions required to be
disclosed or reported pursuant to the requirements of the Code.
Signature Date
Printed Name
This form must be completed and returned to
H.M. Payson & Co.'s Compliance Officer, John C. Downing:
