Kala Investment Corp.
Ethics Policy
1. Statement of Purpose
This Policy is specifically designed to establish procedures that comply
with the requirements imposed on Kala Investment Corp. (ACompany=) under
the Investment Company Act of 1940(A1940 Act=) and, in particular, the
requirements of Rule 17j-1 under that Act.<FN1> The reporting and review
procedures prescribed by this Policy, as it may be amended from time to
time, are also designed to comply with the requirements of the Insider
Trading and Securities Fraud Enforcement Act of 1988.
The provisions of this Policy apply to all persons who are designated as
AAccess Persons= as defined below. Access Persons should be aware that
the reporting Requirement apply to securities transactions effected by an
Access Person for his or her own account (APersonal Securities Account=)
and to transactions effected in any securities account (ARelated Account=)
in which such Access Person has a Beneficial Ownership Interest.
Access Persons are required to read and to be familiar with this Policy
and to certify, at least annually, that he or she understands the Policy
and has complied with it. In reviewing this Policy, Access Persons should
pay particular attention to the precise meaning of the following terms:
Access Person, Beneficial Interest, Covered Security, Personal Securities
Account, and Related Account. These terms are defined below. The Policy
also requires the Company to establish and maintain certain records relating
to information submitted pursuant to this Policy.
The imposition of sanctions for violations of these Polices shall be at the
discretion of the Company=s Board of Directors. At minimum, a written
record of each incident shall be prepared and maintained for review in
connection with the preparation of the Company=s required filings with the
SEC and presentations to the Company=s Board. Under certain circumstances,
violations of this Policy may subject individual Access Persons, or the
Company itself, to enforcement action by the Securities and Exchange
Commission (ASEC=) or other regulatory authorities. All matters relating
to this Policy should be referred to Mr. Arthur Udell, who shall serve as
the officer (ACode Officer=) responsible for compliance with this Policy
or counsel to the Company.
2. Definitions.
An individual is an AAccess Person= of the Company if he or she is an
officer or director of the Company or an individual who is in a control
relationship to the Company and obtains information concerning
recommendations made to the Company with regard to the purchase or sale
of Covered Securities. Note: Although exempt from certain reporting
requirements, Independent Directors of the Company are AAccess Persons.=
A person has a ABeneficial Interest= in a security if he or she is the
owner of the security or if the security is owned by his or her spouse,
minor children or a relative who shares his or her home. A person may
also be considered to have a beneficial interest in a security if, by
reason of any contract, understanding, relationship, agreement or other
arrangement, he or she enjoys benefits that are substantially the equivalent
of direct ownership of the securities or if he or she can acquire or
reacquire title to such securities in the future.
A security is a ACovered Security= unless it is a direct obligation of the
U. S. Government, issued by a mutual fund or one of the following: bankers=
acceptance, bank certificate of deposit, commercial paper or high quality
short-term debt instrument (including repurchase agreements).
APersonal Securities Account= means any brokerage or bank trading account
held in the name, or for the benefit of, an Access Person.
ARelated Account= means any account in which an Access Person has a
Beneficial Interest or has direct, indirect or shared influence or control.
3. Reporting Requirements
Five Point Summary
_ Each Access Person (except Independent Directors) must submit to the
Company a quarterly report on every transactions involving a Covered
Security effected in any Personal Securities Account or Related Account
during the preceding quarter.
_ Each Access Person (except Independent Directors) must submit to Company
a list of all Personal Securities Accounts and Related Accounts in which
any Access Person has a Beneficial Interest.
_ Each Access Person (except Independt Directors) must submit to the
Company an initial statement of his or her holdings of Covered Securities.
_ Each Access Person (except Independent Directors) must submit to the
Company an annual statement of his or her holdings of Covered Securities.
_ No Access Person (except Independent Directors) may acquire an interest
in an offering of securities that are exempt from registration under the
Securities Act of 1933 (APrivate Placements= or ALimited Offering
Securities=) or any initial public offering unless approval of such
acquisition is requested and approved in writing by the Code Officer in
advance of the purchase.
_ Every Access Person (including Independent Directors) will be required
annually to certify that he or she has complied with those reporting
requirements to which he or she is subject under this Policy.
1. Applicability.
The reporting requirement set forth in B and C of this Section III must be
satisfied by each Access Person of the Company except those directors
(AIndependent Directors=) who are not Ainterested persons= of the company
within the meaning of Section 2(a)(19) of the 1940 Act. This exception is
more fully discussed in Appendix B-1.
2. Identification of Securities Accounts
Every Access Person must submit a list of all accounts held with any broker,
bank or investment adviser in which he or she has a Beneficial Interest.
The first such report shall be made on or before January 10, 2001 or within
10 days of the date of hire. Such report shall be substantially in the form
Appendix A-1 to this Policy. Each listing must include (i) the name of the
broker, dealer or bank with whom the Access Person who established the
account; (ii) the date the account was established; and (iii) the date
that the report is submitted by the Access Person.
B. Submission of Quarterly Reports
Within 10 days of the end of each calendar quarter, every Access Person
shall submit to the Code Officer a report of every transaction in a
Covered Security effected in any Personal Securities Account or any
Related Account during such quarter. Thus, reports are due on the 10th
day of January, April, July and October. The report shall be substantially
in the form of Appendix A-2 to this Policy. Each Quarterly Report must
include: (i) 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 Covered Security involved; (ii) the nature of the
transaction (i.e., purchase, sale or any other type of acquisition or
disposition); (iii) the price of the Covered Security at which the
transaction was effected; (iv) the name of the broker, dealer or bank
with or through which the transaction was effected; and (v) the date that
the report is submitted by the Access Person.
C. Additional Reports To be Submitted by Access Persons
(i) Identity of Access Persons.
An individual will be deemed an "Access Person" for purposes of this
Policy in accordance with the analysis set forth in such Appendix .
Those individuals who have been deemed Access Persons are listed in
Appendix B-1; individuals who become Access Persons in the future will be
notified of their status by the Company.
(ii) Initial Holdings Statement.
Every Access Person shall submit to the Company an initial statement of
his or her holdings of Covered Securities ("Initial Holdings Statement").
This statement must be submitted within 10 days of the date on which such
person becomes an Access Person, except that, in the case of individuals
who were Access Person on February 29, 2000, no such initial statement must
be submitted. The Initial Holdings Statement shall be substantially in the
form of Appendix A-3 to this Policy. Each Initial Holdings
Statement must include: (a) the title, number of shares and principal
amount of each Covered Security in which the Access Person had any direct
or indirect beneficial ownership when the person became an Access Person;
(b) the name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the direct or
indirect benefit of the Access Person as of the date the person became an
Access Person; and (c) the date that the report is submitted by the Access
Person.
(iii) Annual Holdings Statement.
On or before January 30 of each year, every Access Persons must submit an
Annual Holdings Statement, which Annual Holdings Statement must be current
as of December 31 of the immediately preceding year. The Annual Holdings
Statement shall be substantially in the form of Appendix A-3 to this Policy.
Each Annual Holdings Statement must include: (a) the title, number of shares
and principal amount of each Covered Security in which the Access Person had
any direct or indirect beneficial ownership when the person became an Access
Person; (b) the name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date the person
became an Access Person; and (c) the date that the report is submitted by
the Access Person.
D. Annual Certification
Every Access Person must certify, in substantially the form of Appendix A-5
that he or she is familiar with the provisions of this Policy and has
complied with such Policy during the preceding calendar year. This
certification shall be submitted on or before January 10th of each calendar
year.
E. Exempted Accounts/Exempted Transactions
With the approval of the Code Officer, Access Persons may arrange for the
Company to receive duplicate confirmations of transactions involving Covered
Securities in lieu of filing Quarterly Reports. Duplicate confirmation must
contain all information required to be included in a quarterly report and
must be received by the Code Officer within five (5) dates of the
transaction involved. [Note: Initial Holdings Reports and Annual Holdings
Reports would still be required to be filed by Access Persons.]
Neither the quarterly Reporting requirement or Holdings Statements are
required with respect to transactions affected for, or Covered Securities
held in, any account over which the Access Person has no direct or indirect
influence or control. A determination as to whether any securities account
or transaction may be within the scope of this exception must be made, in
writing, by the Code Officer or by the Company's Board of Directors. If in
doubt as to whether an Access Person has a Beneficial Interest in any
securities account, the Access Person may state on any form required to be
completed under the provisions of this Code that he/she disclaims
any beneficial ownership in the securities involved.
4. Insider Trading Policy
Five Point Summary
_ The making of investment decisions based on Amaterial= Ainside information=
is prohibited;
_ Communicating Amaterial= Ainside information= to others is prohibited.
_ Information is Ainside information= if it is not generally known to the
marketplace.
_ Information is considered Amaterial= if is likely to be considered
important by a reasonable investor in making an investment decision.
_ Violation of the Company=s Insider Trading Policy can result in
violations of Federal law that may carry civil and/or criminal penalties.
1. Prohibition.
The Company forbids any Access Person from trading, either personally or on
behalf of others, 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 Company
prohibits any employee from trading, either personally or on behalf of
others (including any funds and private accounts managed by the Company) on
material inside information and prohibits communication or dissemination of
material inside information to others (Atipping=) in violation of the law.
The Company=s policy applies to every officer, director and employee and
extends to activities within and outside their duties at the Company.
2. What is Insider Trading?
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
communications of material nonpublic information to others. While the law
concerning insider trading is not static, it is generally understood that
the law prohibits: trading by an insider, while in possession of material
nonpublic information, or 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 communicating material nonpublic information to
others.
3. Identifying Inside Information.
Before trading for yourself or others in the securities of a company about
which you may have potential inside information, ask yourself the following
questions:
Is this information that an investor would consider important in making
his or her investment decisions?
Is this information that would substantially affect the market price of
the securities if generally disclosed?
What is the source of the information?
Has the information been effectively communicated to the marketplace? <FN2>
If, after consideration of the above, you believe that the information is
material and nonpublic, or if you have questions as to whether the
information is material and nonpublic, you should report the matter to the
Board of Directors or Code Officer and refrain from trading with respect to
the security involved and refrain from communicating the information in
question to any one other than the Board of Directors or Code Officer,
either inside or outside of the Company until you have received
instructions on the matter from the Board of Directors or Code Officer.
The elements of insider trading and the penalties for such unlawful conduct
are discussed below.
1. 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. In addition, The Company 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
individual to keep the disclosed nonpublic information confidential and
the relationship must at least imply such a duty before the individual will
be considered an insider.
2. What is Material Information?
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 making his or her investment
decisions, or information that is reasonably certain to have a substantial
effect on the price of a company's securities. <FN3>
3. 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 Reuters Economic Services, The
Wall Street Journal or other publications of general circulation would be
considered public.
4. What are the Penalties for Insider Trading?
Penalties for trading on or communicating material nonpublic information
are severe, both for individuals involved in such unlawful conduct and
their employers. A person can be subject to some or all of the penalties
below even if he or she does not personally benefit from the violation.
Penalties include civil injunctions, treble damages, disgorgement of
parties, 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 benefitted, 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 policy statement can be expected to result in serious sanctions by
The Company, including dismissal of the persons involved.
5. Company Responsibilities: Review and Record Keeping
Five Point Summary
_ All Access Persons will be reminded each quarter of their reporting
obligations under this Policy
_ The determination of who shall be deemed an Access Person shall be made
by the Company?s Board of Directors. A current list of such Access
Persons shall be maintained as Appendix B to this Policy.
_ The Code Officer shall review all Quarterly Reports with a view to
determining whether any reported transactions may have violated this
Policy.
_ The Code Officer shall be responsible for assuring that all records
required to be maintained under Rule 204-2 of the Advisers Act and Rule
17j-1 of the 1940 Act are maintained in the manner prescribed.
_ The Code Officer shall at least annually certify to the Board of Directors
the Company this Policy remains in effect and is adequate to assure that
Access Persons do not violated its provisions.
C. Review Procedures; Procedures to be Followed in the Event of a Violation.
The Code Officer shall, following receipt of the various reports required to
be made under the policy, consider (i) whether any personal securities
transaction evidences an apparent violation of this policy; and (ii) whether
any apparent violation of the reporting requirement has occurred. Upon
making a determination that a violation of this Code, including its
reporting requirements, has occurred, the Code Officer shall report such
violations to the Firm's Board of Directors, which shall determine what
actions, if any, should be taken. The Code Officer shall prepare quarterly
reports with respect to any material trading violation under this Policy;
any such reports shall be provided to the Board of Directors, as appropriate.
D. Required Records.
The Company will maintain records relating to this Policy in the manner and
to the extent et out below, and will make these records available to the SEC
or any representative of the SEC at any time and from time to time for
reasonable periodic, special or other examination:
(i) A copy of this policy and the Firm's prior policy shall be maintained
in an easily accessible place;
(ii) A record of any violation of the Policy, and of any action taken as a
result of the violation, must be maintained in an easily accessible
place for at lease five years after the end of the fiscal year in which
the violation occurs;
(iii) A copy of each report made by an Access Person as required by this
section must be maintained for at lease five years after the end of
the fiscal year in which the report is made or the information is
provided, the first two years in an easily accessible place;
(iv) A record of Access Persons who are or, within the past five years, were,
required to make reports under this Policy or who are or were
responsible for reviewing these reports, must be maintained in an
easily accessible place; and
(v) A copy of each report prepared by the Code Officer required by this
section must be maintained for at lease five years after the end of
the fiscal yea in which it is made, the first two years in an easily
accessible place.
(vi) A record of any decision, and the reasons supporting the decision, to
approve the acquisition by investment personnel of IPO or Limited
Offering Securities for at least five years after the end of the
fiscal year in which the approval is granted
E. Certification to the Company.
The Code Officer shall annually prepare a written report to be presented to
the Board of Directors detailing (i) any issues arising under this Policy
since the preceding report, including information about material violations
of this Policy and sanction imposed in response to such material violations;
and (ii) a certification, in the form of Appendix A-4 hereto, that this
Policy as currently in effect is designed to be reasonably necessary to
prevent Access Persons from violating this Policy.
Appendices
Appendix A-1 Securities Account Identification Form
Appendix A-2 Quarterly Report Form
Appendix A-3 Initial/Annual Holdings Report Form
Appendix A-4 Form of Certification to the Company
Appendix B-1 List of Access Persons
Appendix B-2 Access Person/Access Person Certification
A-1: Securities Account Identification Form
This report is being submitted pursuant to the Policy established by Kala
Investment Corp. ("Company") The undersigned certifies that the following
is an accurate and complete listing of all securities accounts in which I
have a Beneficial Interest <FN4> and that I will inform the Company, in writing,
of any additional such account that may be established not later than 10
after the calendar quarter in which such additional account is established:
Date Name of the Account/ Name of Broker/
Established Account No. Bank Adviser
___________________ ______________________ _____________________
___________________ ______________________ _____________________
Name of Reporting Person (Print): _________________________________
Signature of Reporting Person: _________________________________
Date of Submission _________________________________
Note: Report must be filed within ten days of the end of the calendar quarter
to which the report relates.
A-2: Quarterly Report Form
Kala Investment Corp.
Quarterly Securities Transaction Report for the quarter ended:
FROM:
1. This report is being submitted pursuant to the Policy established by
Kala Investment Corp. The undersigned certifies that the transactions
described below were purchased or sold in reliance upon public information
lawfully obtained and were not based upon information obtained as a result
of any affiliation with Kala Investment Corp.
2. Please Check One:
_ The undersigned had no reportable securities transactions during the
above-referenced quarterly period. OR
_ Please see attached confirmation/statement relating to reportable securities
transactions during the above referenced period, which statement includes
all of the information indicated in the table below. OR
_ The undersigned had the following reportable securities transactions during
the above referenced period:
Date Transaction Security Amount Price/ Broker Total
(interest (principal Share Commission
rate/mat- amount, if
urity applicable)
date, if
applicable)
Example:
1/3/00 Sold IBM Common 100 Shares $48 1/2 Paine $148
Webber
1/25/00 Buy NYC $5000 - - N/A
Housing
Bond
7.25%,
12/31/08
___________________________________________________________________________
3. _ The undersigned certifies that an accurate listing of all securities
accounts in which I have a Beneficial Interest is on file with the
Company. OR
_ During the above-referenced quarterly period, the following account(s)
in which I have a Beneficial Interest was established:
Date Name of the Account/ Name/Address of
Established Account No. Broker/Bank/Adviser
_________________ ____________________ ___________________
I certify that the information I am providing in this report is accurate and
includes all transactions pursuant to which, and account in which, I
acquired direct or indirect beneficial ownership of a security, other than
transactions in U.S. Government securities, transactions in mutual fund
shares or transactions in accounts over which I have no direct or indirect
influence or control in accordance with a determination to that effect under
the Policy. This report shall not be construed as an admission that I have
or have had any direct or indirect beneficial ownership in the securities
listed.
Signature of Reporting Person: _________________________________
Date of Submission _________________________________
Note: Report must be filed within ten days of the end of the calendar quarter
to which the report relates.
A-3: Initial/Annual Holdings Report Form
This report is being submitted pursuant to the Policy established by Kala
Investment Corp. ("Company") The undersigned certifies that the following
is an accurate and complete listing of all Covered Securities in which I
have a Beneficial Interest,<FN5>
_ As of the date on which I became an "Access Person" under the Policy. OR
_ As of December 31, 200__.
Broker Account Security No. of Shares Amount
Name and No. (include
Address CUSIP, if
Account No. available)
__________ __________ ___________ ____________ ___________
Name of Reporting Person (Print): _________________________________
Signature of Reporting Person: _________________________________
Date of Submission _________________________________
Note: Report must be filed within ten days of the end of the calendar quarter
to which the report relates.
Appendix B-1: Access Persons Identified as AAccess Persons=
Standard for Identifying Access Persons who are AAccess Persons= under this
Policy.
A. All directors and officers of the Company, except those directors
(AIndependent Directors=) who are not Ainterested persons= of the
Company within the meaning of Section 2(a)(19) of the 1940 Act.
Analysis: As of March 1, 2000, the Company=s officer and directors were
(*denotes Aindependent directors):
Name Position with the Company
Arthur Udell Director, Treasurer and Secretary
Morvin Leibowitz Director and President
Susan Barone* Independent Director
Stanley Drachman* Independent Director
Madeline Gardner** Director and Assistant Treasurer
B. Any Access Person, who, in connection with his or her regular functions
or duties: (1) makes or participates in the making of recommendations
regarding the purchase or sale of Covered Securities, or obtains information
regarding the purchase or sale of Covered Securities by the Company; or (2)
whose functions relate to the making of any recommendations with respect to
the purchases or sales of securities by the Company.
Analysis: Day-to-day portfolio management is the responsibility
of Messrs. Udell and Leibowitz, in their capacity as President
and Vice President, respectively. These officers are the only
Access Persons who, in the ordinary course of their duties may
obtain information about the purchase or sale of Covered Securities
by the Company.
C. Any natural person in a control relationship to the Company who obtains
information concerning recommendations made to the Company with regard to
the purchase or sale of Covered Securities by the Company.
Analysis: The Company is controlled by Mr. Udell, Mrs. Arthur
Udell and Mr. Leibowitz, who together hold all of the Company=s
outstanding voting securities. As noted above, Messrs. Udell
and Leibowitz are Access Persons of the Company. Mrs. Udell,
however, does not obtain information regarding the purchase or
sale of Covered Securities by the Company and thus is not an
Access Person subject to the reporting requirements of this
Policy.
Based on the foregoing, certain Access Persons have been identified AAccess
Persons= within the meaning of Rule 17j-1 and for purposes of this Policy.
Their names and the date on which each became an AAccess Person= are as
follows:
Access Person Date
Arthur Udell [before February 29, 2000]
Morvin Leibowitz [before February 29, 2000]
Madeline Gardner** [before February 29, 2000]
** Ms. Gardner resigned, effective July 5, 2000
<FN1> Rule 17j-l makes it unlawful for certain persons associated with
investment companies to engage in conduct which is deceitful, fraudulent,
or manipulative, or which involves false or misleading statements, in
connection with the purchase or sale of a security held or proposed to be
acquired by an investment company.
<FN2> For example, information that has been published in a newspaper or
magazine of general publication, such as Reuters or The Wall Street Journal
would be deemed to have been effectively communicated to the public.
<FN3> Examples of information that should be presumed ?material? include
but are not limited to information relevant to dividend changes, earnings
estimates, significant changes in relationships with clients, suppliers and
key personnel, mergers or acquisitions, major litigation or significant new
products or discoveries. This list is not exhaustive.
<FN4> If in doubt as to whether an Access Person has a Beneficial Interest
in any securities account, the Access Person may state on any form required
to be completed under the provisions of this Code that he/she disclaims any
beneficial ownership in the securities involved.
<FN5> If in doubt as to whether an Access Person has a Beneficial Interest
in any securities account, the Access Person may state on any form required
to be completed under the provisions of this Code that he/she disclaims any
beneficial ownership in the securities involved.
Effective with repsect to periods ended after March 31, 2000_
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