CODE OF ETHICS
ALBEMARLE INVESTMENT TRUST
BOYS, ARNOLD & COMPANY
OCTOBER 16, 2000
A. INTRODUCTION
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Rule 17j-1 under the Investment Company Act of 1940 (the "Act") requires
registered investment companies and their investment Advisors to adopt
codes of ethics and reporting requirements to prevent fraudulent, deceptive
or manipulative practices. Albemarle Investment Trust (the "Trust") is
registered as an open-end management investment company under the Act.
Boys, Arnold & Company, Inc. ("the Advisor") is the investment Advisor of
the Trust. Except as otherwise specified herein, this Code of Ethics (the
"Code") applies to all employees, members, officers, directors and trustees
of the Advisor and the Trust.
This Code is based on the principle that the officers, directors, trustees,
members and employees of the Advisor and the Trust have a fiduciary duty to
place the interests of the Trust before their own interests, to conduct all
personal securities transactions consistently with this Code and to do so
in a manner which does not interfere with the portfolio transactions of the
Trust, or otherwise take unfair advantage of their relationship to the
Trust. Persons covered by this Code must adhere to this general principle
as well as comply with the specific provisions of this Code. Technical
compliance with this Code will not insulate from scrutiny trades which
indicate an abuse of an individual's fiduciary duties to the Trust.
B. DEFINITIONS
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1. "Access Person" means (i) any employee, member, director, principal,
trustee or officer of the Trust or the Advisor, (ii) any employee of
any company in a control relationship to the Trust or the Advisor who,
in the ordinary course of his or her business, makes, participates in
or obtains information regarding the purchase or sale of securities or
a security being considered for purchase or sale for the Trust or
whose principal function or duties relate to the making of any
recommendation to the Trust regarding the purchase or sale of
Securities or (iii) any natural person in a Control relationship to
the Trust or the Advisor who obtains information concerning
recommendations made to the Trust with regard to the purchase or sale
of a Security. A natural person in a Control relationship or an
employee of a company in a Control relationship does not become an
"Access Person" simply by virtue of the following: normally assisting
in the preparation of public reports, but not receiving information
about current recommendations or trading; a single
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instance of obtaining knowledge of current recommendations or trading
activity; or, infrequently and inadvertently obtaining such knowledge.
The Compliance Officer(s) for the Trust and the Advisor are
responsible for determining who are access persons.
2. A Security is "being considered for purchase or sale" when the order
to purchase or sell such Security has been given, or prior thereto
when, in the opinion of an Investment Manager, a decision, whether or
not conditional, has been made (even though not yet implemented) to
make the purchase or sale, or when the decision-making process has
reached a point where such a decision is imminent.
3. "Beneficial Ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that the determination of direct or
indirect Beneficial Ownership shall apply to all Securities which an
Access Person has or acquires. (See Appendix A for a more complete
description.)
4. "Compliance Officer" means John Kuhns or, in his absence, an
alternative Compliance Officer (Stanley Cocke), or their respective
successors in such positions.
5. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.
6. "Disinterested Trustee" means a trustee who is not an "interested
person" within the meaning of Section 2(a)(19) of the Act.
7. "Equivalent Security" means any Security issued by the same entity as
the issuer or an entity under the common Control of the issuer, of a
subject Security, including options, rights, warrants, preferred
stock, restricted stock, phantom stock, bonds and other obligations of
that company, or a security convertible into another Security.
8. "Immediate Family" of an individual means any of the following persons
who reside in the same household as the individual:
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
step-parent father-in-law
Immediate Family includes adoptive relationships and any other
relationship (whether or not recognized by law) which the applicable
Compliance Officer determines could lead to possible conflicts of
interest, diversions of corporate opportunity, or appearances of
impropriety which this Code is intended to prevent.
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9. "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately
before the registration, was not subject to the reporting requirements
of Sections 13 or 15(d) of the Securities Exchange Act of 1934.
10. "Investment Personnel" means those employees who, in connection with
their regular functions or duties, provide information and advice to
an Investment Manager or who help execute the Investment Manager's
decisions.
11. "Investment Manager" means any employee entrusted with the direct
responsibility and authority to make investment decisions affecting
the Trust. The Compliance Officer will maintain a current list of all
Investment Managers.
12. "Limited Offering" means an offering that is exempt from registration
under the Securities Act of 1933 pursuant to Section 4(2) or Section
4(6) or pursuant to Rule 504, Rule 505, or Rule 506 under the
Securities Act of 1933.
13. "Purchase or sale of a Security" means the purchase or sale or any
action to accomplish the purchase or sale of a Security for the
account of an Access Person, and includes, without limitation, the
writing, purchase or exercise of an option to purchase or sell a
Security, conversions of convertible securities and short sales.
14. "Security" has the same meaning as set forth in Section 2(a)(36) of
the Investment Company Act, except that it does not include the
following securities (the "Excluded Securities"):
(a) shares of registered open-end investment companies
(b) shares of registered closed-end investment companies with a
market cap in excess of $1 billion
(c) securities issued by the United States government
(d) short-term debt securities that are "government securities"
within the meaning of Section 2(a)(16) of the Investment Company
Act
(e) bankers' acceptances
(f) bank certificates of deposit
(g) commercial paper
(h) any security not eligible for purchase by the Fund.
Security does not include futures contracts or options on futures
contracts
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(provided these instruments are not used to indirectly acquire an
interest which would be prohibited under this Code).
C. NOTIFICATION OF SUBJECT PERSONS
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The Compliance Officer shall notify each "Access Person" of the Trust that
may be required to make reports pursuant to this Code that such person is
subject to this Code and its reporting requirements and shall deliver a
copy of this Code to each such person.
D. PRE-CLEARANCE REQUIREMENTS
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All Access Persons shall clear in advance of execution through the
applicable Compliance Officer, or in the case of a request by the
Compliance Officer, through the alternative Compliance Officer, any
purchase or sale, direct or indirect, of any Security in which such Access
Person has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership interest, including any acquisition of any
direct or indirect Beneficial Ownership interest in any Securities in an
Initial Public Offering or in a Limited Offering. The applicable Compliance
Officer shall retain written records of such clearance requests.
The applicable Compliance Officer will not grant clearance for any purchase
or sale if the Security is currently being considered for purchase or sale
or being purchased or sold by the Trust. If the Security proposed to be
purchased or sold by the access person is an option, clearance will not be
granted if the Securities subject to the option are being considered for
purchase or sale as indicated above. If the Security proposed to be
purchased or sold is a convertible security, clearance will not be granted
if either that security or the securities into which it is convertible are
being considered for purchase or sale as indicated above.
The applicable Compliance Officer may refuse to preclear a transaction if
he or she deems the transaction to involve a conflict of interest, possible
diversion of corporate opportunity, or an appearance of impropriety.
Clearance is effective, unless earlier revoked, until the earlier of (1)
the close of business on the fifth trading day, beginning on and including
the day on which such clearance was granted, or (2) the Access Person
learns that the information provided to the Compliance Officer in such
Access Person's request for clearance is not accurate. Clearance may be
revoked at any time and is deemed revoked if, subsequent to receipt of
clearance, the access person has knowledge that a Security to which the
clearance relates is being considered for purchase or sale.
E. EXEMPTED TRANSACTIONS
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The pre-clearance requirements in Section D of this Code shall not apply
to:
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1. Purchases or sales which are non-volitional on the part of either the
Access Person or the Trust.
2. Purchases or sales which are part of an automatic dividend
reinvestment plan, systematic cash purchase plan or systematic
withdrawal plan.
3. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
4. Purchases or sales by a Disinterested Trustee or a member of his or
her Immediate Family.
5. A purchase or sale of Securities effected in any account over which
the Access Person has no direct or indirect influence, control, or
beneficial interest.
6. Purchases or sales of Excluded Securities
7. Purchases or sales of securities involving less than $20,000 of a
security included in the Standard & Poor's 500 Index
8. Purchases or sales of securities involving less than $20,000 of a
security of a company with a market capitalization in excess of $1
billion.
Access Persons must remember that regardless of the transaction's status as
exempt or not exempt, the Access Person's fiduciary obligations remain
unchanged.
F. PROHIBITED ACTIONS AND TRANSACTIONS
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Notwithstanding a grant of clearance under Section D hereof, the following
actions and transactions are prohibited and will result in sanctions
including but not limited to the sanctions expressly provided for in this
Section.
1. Access Persons shall not execute a securities transaction on a day
during which the Trust has a pending buy or sell order in that same
Security or an Equivalent Security until that order is executed or
withdrawn. An Access Person shall disgorge any profits realized on
trades within such period. This prohibition does not apply to
Disinterested Trustees and their immediate families.
2. An Investment Manager shall not buy or sell a Security within three
(1) calendar day before or after the Trust trades in that Security
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or an Equivalent Security unless the Trust's entire position in that
Security or Equivalent Securities has been sold prior to the
Investment Manager's transaction and the Investment Manager is also
selling the Security. An Investment Manager shall disgorge any profits
realized on trades within such period.
3. Investment Personnel and Investment Managers shall not profit in the
purchase and sale, or sale and purchase, of the same (or equivalent)
securities within sixty (60) calendar days ("short-term trade"). This
restriction does not apply to the following short-term trades:
(a) a short-term trade involving Excluded Securities
(b) a short-term trade for which express prior approval has been
received from the Compliance Officer by Investment Personnel and
Investment Managers
(c) a short-term trade involving no more than 100 shares of a
security included in the Standard & Poor's 500 Index
(d) a short-term trade involving no more than 100 shares of a
security of a company with a market capitalization in excess of
$1 billion
(e) a short-term trade in any account over which the Investment
Manager and Investment Personnel have no direct or indirect
influence or control
(f) a short-term trade that is nonvolitional on the part of the
Investment Personnel and Investment Manager
(g) a short-term trade resulting from an automatic dividend
reinvestment plan
4. Investment Personnel and Investment Managers shall not accept from any
person or entity that does or proposes to do business with or on
behalf of the Trust a gift or other thing of more than de minimis
value or any other form of advantage. The solicitation or giving of
such gifts by Investment Personnel and Investment Managers is also
prohibited. For purposes of this subparagraph, "de minimis" means $100
or less if received in the normal course of business. If a question
arises with respect to the receipt of a gift, gratuity or
compensation, the issue should be reviewed by the Compliance Officer.
5. Investment Personnel and Investment Managers shall not serve on the
board of trustees of publicly traded companies, absent prior
authorization from the applicable Compliance Officer provided,
however, that any trusteeships held by such Investment Personnel or
Investment Managers as of the date of the adoption of this Code of
Ethics shall be deemed to be authorized. The applicable Compliance
Officer will grant authorization only if it is determined that the
board service would be consistent with the interests of the Trust. In
the event board service is authorized, such individuals serving as
trustees shall be isolated from those making investment decisions
through procedures designed to safeguard against potential conflicts
of interest, such as a Chinese Wall policy or investment restrictions.
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6. Investment Personnel and Investment Managers shall not acquire a
security in a Limited Offering or an Initial Public Offering, absent
prior authorization from the applicable Compliance Officer. The
applicable Compliance Officer will not grant clearance for the
acquisition of a Security in a Limited Offering or Initial Public
Offering if it is determined that the investment opportunity should be
reserved for the Trust or that the opportunity to acquire the Security
is being offered to the individual requesting clearance by virtue of
such individual's position with the Advisor or the Trust (as
applicable). An individual who has been granted clearance to acquire
Securities in a Limited Offering or an Initial Public Offering shall
disclose such investment when participating in a subsequent
consideration by the Trust of an investment in the issuer. A
subsequent decision by the Trust to purchase such a Security shall be
subject to independent review by Investment Personnel with no personal
interest in the issuer.
7. Investment Personnel and Investment Managers shall not purchase during
the underwriting of the Security any Security which would be contrary
to the Conduct Rules of National Association of Securities Dealers.
8. An Access Person shall not execute a securities transaction while in
possession of material non-public information regarding the security
or its issuer.
9. An Access Person shall not execute a securities transaction which is
intended to raise, lower, or maintain the price of any Security or to
create false appearance of active trading (anti-market manipulation).
10. An Access Person shall not execute a securities transaction involving
the purchase or sale of a Security at a time when such access person
intends, or knows of another's intention, to purchase or sell that
Security (or an equivalent security) on behalf of the Trust. This
prohibition would apply whether the transaction is in the same (e.g.,
two purchases) or the opposite (a purchase and sale) direction as the
transaction of the Trust. This prohibition shall be eliminated, as to
such Security, after such Security is (i) no longer being considered
for purchase or sale by the Trust, or (ii) actually purchased or sold
by the Trust, as the case may be.
11. An Access Person shall not cause or attempt to cause the Trust to
purchase, sell, or hold any Security in a manner calculated to create
any personal benefit to such Access Person or his or her Immediate
Family. If an Access Person or his or her Immediate Family stands to
materially benefit from an investment decision for the Trust that the
Access Person is recommending or in which the Access Person is
participating, the Access Person shall disclose to the persons with
authority to
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make investment decisions for the Trust, any Beneficial Ownership
interest that the Access Person or his or her Immediate Family has in
such Security or an Equivalent Security, or in the issuer thereof,
where the decision could create a material benefit to the Access
Person or his or her Immediate Family or the appearance of
impropriety.
G. REPORTING
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1. Each Access Person, except a Disinterested Trustee, shall arrange for
the applicable Compliance Officer to receive directly from the
broker-dealer effecting a transaction in any Security in which such
Access Person has, or by reason of such transaction acquires, any
direct or indirect Beneficial Ownership interest, duplicate copies of
each confirmation for each securities transaction and periodic account
statements for each brokerage account in which such Access Person has
any Beneficial Ownership interest, unless such information is provided
pursuant to paragraph 2 of this Section.
2. In the event an Access Person, other than a Disinterested Trustee,
does not arrange for the provision of information by broker-dealers as
required in the preceding paragraph 1, the Access Person shall report
to the applicable Compliance Officer no later than ten (10) days after
the end of each calendar quarter the information described below with
respect to transactions in any Security in which such Access Person
has, or by reason of such transaction acquires, any direct or indirect
Beneficial Ownership interest in the Security and certify that he or
she has reported all transactions required to be disclosed pursuant to
the requirements of this Code, provided, however, that an Access
Person shall not be required to make a report with respect to
transactions effected for any account over which such Access Person
does not have any direct or indirect influence:
a. The date of the transaction, the title the interest rate and
maturity date (if applicable) and number of shares, and the
principal amount of each Security involved;
b. The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
c. The price of the Security at which the transaction was effected;
d. The name of the broker, dealer or bank with or through which the
transaction was effected; and
e. The date that the report is submitted by the Access Person.
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Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or
she has any direct or indirect Beneficial Ownership in the Security to
which the report relates.
Each Access Person, except a Disinterested Trustee, shall upon
commencement of employment and annually thereafter verify in writing
that all transactions in any Security in which such Access Person has,
or by reason of such transaction has acquired, any direct or indirect
Beneficial Ownership in the Security have been reported to the
applicable Compliance Officer. If an Access Person had no transactions
during the year, such Access Person shall so advise the applicable
Compliance Officer.
Each Access Person, except a Disinterested Trustee, shall upon
commencement of employment, and annually thereafter, disclose to the
Compliance Officer in writing his or her current personal Securities
holdings. The Holdings Report shall contain information current as of
a date no more than 30 days before the Report is submitted.
A Disinterested Trustee need only report a transaction in a Security
if such trustee, at the time of that transaction, knew or, in the
ordinary course of fulfilling his or her official duties as a trustee,
should have known that, during the 15-day period immediately preceding
or the 15-day period immediately after the date of the transaction by
the trustee, such Security was purchased or sold by the Trust or was
being considered for purchase or sale by the Trust.
The Advisor or the Trust may, in its discretion, require an Access
Person to disclose in connection with a report, recommendation or
decision of such Access Person to purchase or sell a Security any
direct or indirect Beneficial Ownership by such person of such
Security.
H. CONFIDENTIALITY OF TRANSACTIONS AND INFORMATION
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1. Every Access Person shall treat as confidential information the fact
that a Security is being considered for purchase or sale by the Trust,
the contents of any research report, recommendation or decision,
whether at the preliminary or final level, and the holdings of the
Trust and shall not disclose any such confidential information without
prior consent from the applicable Compliance Officer. Notwithstanding
the foregoing, the holdings of the Trust shall not be considered
confidential after such holdings by the Trust have been disclosed in a
public report to shareholders or to the Securities and Exchange
Commission.
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2. Access Persons shall not disclose any such confidential information to
any person except those employees and trustees who need such
information to carry out the duties of their position with the Advisor
or the Trust (as applicable).
I. SANCTIONS
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Upon discovering a violation of this Code, the Advisor or the Board of
Trustees of the Trust (as applicable) may impose such sanctions as it deems
appropriate, including, without limitation, a letter of censure or
suspension or termination of the employment of the violator. All material
violations of this Code and any sanctions imposed with respect thereto
shall be reported periodically to the Board of Trustees of the Trust.
J. CERTIFICATION OF COMPLIANCE
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Each Access Person, except a Disinterested Trustee, shall, annually certify
that he or she has read and understands this Code and recognizes that he or
she is subject hereto.
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APPENDIX A TO THE CODE OF ETHICS
"BENEFICIAL OWNERSHIP"
For purposes of this Code, "beneficial ownership" is interpreted in the same
manner as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
and regulations thereunder, except that the determination of direct or indirect
beneficial ownership applies to all securities which an access person has or
acquires. The Advisor and the Trust will interpret beneficial ownership in a
broad sense.
A person is deemed to have "beneficial ownership" of securities over which such
person, directly or indirectly through any contract, arrangement, understanding,
relationship or otherwise, has or shares (a) voting power (which includes the
power to vote or to direct the voting of such securities), or (b) investment
power (which includes the power to dispose or direct the disposition of such
securities).
A person is also deemed to be the beneficial owner of securities:
(i) the beneficial ownership of which such person has the right, at
any time within 60 days to acquire, including, without limitation, any
right to acquire through the exercise of options, warrants or rights, the
conversion of a convertible security or the revocation or automatic
termination of a trust or discretionary account or similar arrangement;
(ii) the beneficial ownership of which such person has the right to
acquire (as specified in (i)) at any time, where such right is acquired for
the purpose, or with the effect, of changing or influencing control of a
fund, or in connection with or as a participant in any transaction having
such purpose or effect; and
(iii) with respect to which such person, directly or indirectly,
through the creation or use of a trust, a proxy, power of attorney, pooling
arrangement or any other contract, arrangement or device purports to have
divested himself of beneficial ownership or to have prevented the vested of
beneficial ownership as part of a scheme to evade the reporting
requirements of Section 13(d) of the Securities Exchange Act of 1934.
In interpreting the provisions described above, the Securities and Exchange
Commission has taken the position that a person has indirect beneficial
ownership of securities where such person controls the person who has the power
to direct the voting or investment of such securities.
The existence of beneficial ownership is clear in certain situations, such as:
securities held in
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street name by brokers for an access person's account, bearer securities held by
an access person, securities held by custodians, pledged securities, and
securities held by relatives or others for an access person. An access person is
also considered the beneficial owner of securities held by certain family
members. The SEC has indicated that an individual is considered the beneficial
owner of securities owned by such individual's immediate family. The relative's
ownership of the securities may be direct (i.e., in the name of the relative) or
indirect.
An access person is deemed to have beneficial ownership of securities owned by a
trust of which the access person is the settlor, trustee or beneficiary,
securities owned by an estate of which the access person is the executor or
administrator, legatee or beneficiary, and securities owned by a partnership of
which the access person is a partner.
An access person must comply with the provisions of this Code with respect to
all securities in which such access person has a beneficial ownership interest.
If an access person is in doubt as to whether she or he has a beneficial
ownership interest in a security, the access person should report the ownership
interest to the applicable Compliance Officer. An access person may disclaim
beneficial ownership as to any security on required reports.
