<PAGE>
Filed Pursuant to Rule 485(b)
Registration No. 33-18030
811-5371
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 8 [X]
----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12
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RUSSELL INSURANCE FUNDS
(Exact Name of Registrant as Specified in Charter)
909 A STREET, TACOMA, WASHINGTON 98402
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (253) 627-7001
--------------
Karl J. Ege, Esq.
Russell Insurance Funds
909 A Street
Tacoma, Washington 98402
(Name and Address of Agent for Service)
Approximate date of commencement of proposed sale to the public:
As soon as practical after the effective date of the Registration Statement.
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate
box)
( ) immediately upon filing pursuant to paragraph (b)
( ) on April 30, 1999 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) on ( date) pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2)
( X ) on April 28, 2000 pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
RUSSELL INSURANCE FUNDS
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL INSURANCE FUNDS
PROSPECTUS
MULTI-STYLE EQUITY FUND
AGGRESSIVE EQUITY FUND
NON-U.S. FUND
REAL ESTATE SECURITIES FUND
CORE BOND FUND
APRIL 28, 2000
909 A STREET, TACOMA, WA 98402 . 800-787-7343 . 253-627-7001
As with all mutual funds, the Securities and Exchange Commission has neither
determined that the information in this Prospectus is accurate or complete,
nor approved or disapproved of these securities. It is a criminal offense to
state otherwise.
[RUSSELL LOGO]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary......................................... 3
Investment Objective, Principal Investment Strategies
and Principal Risks.................................... 3
Performance............................................. 7
Fees and Expenses....................................... 12
Summary Comparison of the Funds............................. 14
The Purpose of RIF.......................................... 14
Frank Russell Company--Consultant to RIF.................... 14
Multi-Style, Multi-Manager Diversification.................. 15
Investment Objective and Principal Investment Strategies.... 16
Risks....................................................... 24
Management of the Funds..................................... 29
The Money Managers.......................................... 30
Portfolio Turnover.......................................... 31
Dividends and Distributions................................. 31
Taxes....................................................... 32
How Net Asset Value Is Determined........................... 32
Purchase of Fund Shares..................................... 33
Redemption of Fund Shares................................... 33
Financial Highlights........................................ 34
Money Manager Information................................... 39
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISKS
MULTI-STYLE EQUITY FUND
- ----------------------------
<TABLE>
<S> <C>
INVESTMENT To provide income and capital growth by investing
OBJECTIVE principally in equity securities.
PRINCIPAL The Multi-Style Equity Fund invests primarily in common
INVESTMENT stocks of medium and large capitalization companies. These
STRATEGIES companies are predominately US based.
The Fund employs a "multi-style, multi-manager" approach
whereby portions of the Fund are allocated to different
money managers who employ distinct investment styles. The
Fund uses three principal investment styles intended to
complement one another: a Growth Style, a Value Style and a
Market-Oriented Style. The Fund intends to be fully invested
at all times.
PRINCIPAL RISKS An investment in the Multi-Style Equity Fund, like any
investment, has risks. The value of the Fund fluctuates, and
you could lose money. The principal risks of investing in
the Fund are those associated with investing in equity
securities, using a multi-manager approach, securities
lending and exposing liquidity reserves to equity markets.
Please refer to the "Risks" section later in this Prospectus
for further details.
</TABLE>
AGGRESSIVE EQUITY FUND
- ---------------------------
<TABLE>
<S> <C>
INVESTMENT To provide capital appreciation by assuming a higher level
OBJECTIVE of volatility than is ordinarily expected from the
Multi-Style Equity Fund by investing in equity securities.
PRINCIPAL The Aggressive Equity Fund invests primarily in common
INVESTMENT stocks of small and medium capitalization companies. These
STRATEGIES companies are predominately US based. The Fund's investments
may include companies that have been publicly traded for
less than five years and smaller companies, such as
companies not listed in the Russell 2000-Registered
Trademark- Index.
The Fund employs a "multi-style, multi-manager" approach
whereby portions of the Fund are allocated to different
money managers who employ distinct investment styles. The
Fund uses three principal investment styles intended to
complement one another: a Growth Style, a Value Style and a
Market-Oriented Style. The Fund intends to be fully invested
at all times. A portion of the Fund's investments may be
"illiquid" securities (i.e., securities that do not have a
readily available market or that are subject to resale
restrictions).
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
PRINCIPAL RISKS An investment in the Aggressive Equity Fund, like any
investment, has risks. The value of the Fund fluctuates, and
you could lose money. The principal risks of investing in
the Fund are those associated with investing in equity
securities, particularly securities of small capitalization
companies, using a multi-manager approach, securities
lending and exposing liquidity reserves to equity markets.
Please refer to the "Risks" section later in this Prospectus
for further details.
</TABLE>
NON-U.S. FUND
- --------------
<TABLE>
<S> <C>
INVESTMENT To provide favorable total return and additional
OBJECTIVE diversification for US investors by investing primarily in
equity and fixed-income securities of non-US companies, and
securities issued by non-US governments.
PRINCIPAL The Non-U.S. Fund invests primarily in equity securities
INVESTMENT issued by companies domiciled outside the US and in
STRATEGIES depository receipts, which represent ownership of securities
of non-US companies. The Fund's investments span most of the
developed nations of the world (particularly Europe and the
Far East) to maintain a high degree of diversification among
countries and currencies. This Fund may be appropriate for
investors who want to reduce their investment portfolio's
overall volatility by combining an investment in this Fund
with investments in US equities.
The Fund employs a "multi-style, multi-manager" approach
whereby portions of the Fund are allocated to different
money managers who employ distinct investment styles. The
Fund uses three principal investment styles intended to
complement one another: a Growth Style, a Value Style and a
Market-Oriented Style. The Fund intends to be fully invested
at all times. A portion of the Fund's investments may be
"illiquid" securities (i.e., securities that do not have a
readily available market or that are subject to resale
restrictions).
PRINCIPAL RISKS An investment in the Non-U.S. Fund, like any investment, has
risks. The value of the Fund fluctuates, and you could lose
money. The principal risks of investing in the Fund are
those associated with investing in equity securities,
particularly in international securities, using a
multi-manager approach, securities lending and exposing
liquidity reserves to equity markets. Please refer to the
"Risks" section later in this Prospectus for further
details.
</TABLE>
4
<PAGE>
REAL ESTATE SECURITIES FUND
- --------------------------------
<TABLE>
<S> <C>
INVESTMENT To generate a high level of total return through above
OBJECTIVE average current income, while maintaining the potential for
capital appreciation.
PRINCIPAL The Real Estate Securities Fund seeks to achieve its
INVESTMENT objective by concentrating its investments in equity
STRATEGIES securities of issuers whose value is derived primarily from
development, management and market pricing of underlying
real estate properties. The Fund invests primarily in
securities of companies known as real estate investment
trusts (REITs) that own and/or manage properties. REITs may
be composed of anywhere from two to over 1,000 properties.
The Fund may also invest in equity and debt securities of
other types of real estate-related companies. The Fund
invests in companies which are predominantly US based.
The Fund employs a multi-manager approach whereby portions
of the Fund are allocated to different money managers whose
approaches are intended to complement one another.
The Fund intends to be fully invested at all times. A
portion of the Fund's investments may be "illiquid"
securities (i.e., securities that do not have a readily
available market or that are subject to resale
restrictions).
PRINCIPAL RISKS An investment in the Real Estate Securities Fund, like any
investment, has risks. The value of the Fund fluctuates, and
you could lose money. The principal risks of investing in
the Fund are those associated with investing in equity
securities, including in securities of companies
concentrated in the real estate market, using a
multi-manager approach, securities lending and exposing
liquidity reserves to equity markets. Please refer to the
"Risks" section later in this Prospectus for further
details.
</TABLE>
CORE BOND FUND
- ------------------
<TABLE>
<S> <C>
INVESTMENT To maximize total return, through capital appreciation and
OBJECTIVE income by assuming a level of volatility consistent with the
broad fixed-income market, by investing in fixed-income
securities.
PRINCIPAL The Core Bond Fund invests primarily in fixed-income
INVESTMENT securities. In particular, the Fund holds debt securities
STRATEGIES issued or guaranteed by the US government and, to a lesser
extent by non-US governments, or by their respective
agencies and instrumentalities. It also holds
mortgage-backed securities, including collateralized
mortgage obligations. The Fund also invests in corporate
debt securities and dollar-denominated obligations issued in
the US by non-US banks and corporations (Yankee Bonds). The
Fund may invest up to 25% of its assets in debt securities
that are rated
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
below investment grade. These securities are commonly
referred to as "junk bonds."
The average weighted duration of the Fund's portfolio
typically ranges within 10% of the average weighted duration
of the Lehman Brothers Aggregate Bond Index, which was 5.0
years as of December 31, 1999, but may vary up to 25% from
the Index's duration. The Fund has no restrictions on
individual security duration.
The Fund invests in securities of issuers in a variety of
sectors of the fixed income market. The Fund employs
multiple money managers, each with complementary expertise
in the fixed income markets.
PRINCIPAL RISKS An investment in the Core Bond Fund, like any investment,
has risks. The value of the Fund fluctuates, and you could
lose money. The principal risks of investing in the Fund are
those associated with investing in fixed-income securities
(including non-investment grade fixed-income securities),
municipal obligations, repurchase agreements and
international securities, employing derivatives and using a
multi-manager approach. Please refer to the "Risks" section
later in this Prospectus for further details.
</TABLE>
6
<PAGE>
PERFORMANCE
The following bar charts illustrate the risks of investing in each of the
Funds by showing how the performance of each Fund varies from year to year. The
highest and lowest quarterly returns during the period shown in the bar charts
for each of the Funds is set forth below the bar charts. The performance results
shown in this section do not reflect any Insurance Company Separate Account or
Policy charges. Those charges, if included, would have reduced the performance
results shown in this section.
The tables accompanying the bar charts further illustrate the risks of
investing in the Funds by showing how each Fund's average annual returns for the
periods shown compare with the returns of certain indexes that measure broad
market performance.
Past performance is no indication of future results.
- --------------------------------------------------------------------------------
MULTI-STYLE EQUITY FUND
ANNUAL TOTAL RETURNS
(FOR THE YEARS ENDED DECEMBER 31)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1997 28.53%
1998 28.71%
1999 17.17%
</TABLE>
BEST QUARTER: 23.04% (4Q/98)
WORST QUARTER: (13.05)% (3Q/98)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
SINCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 1 YEAR INCEPTION*
-------------------------------------------------------------------- ------ ----------
<S> <C> <C>
Multi-Style Equity Fund......................................... 17.17% 24.73%
Russell 1000-Registered Trademark- Index........................ 20.91 26.84
-------------------------------------------------------------------------------------------
</TABLE>
----------------------------
* For the period January 2, 1997 (commencement of sales) to December 31,
1999.
-----------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND
ANNUAL TOTAL RETURNS
(FOR THE YEARS ENDED DECEMBER 31)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1997 35.07%
1998 1.02%
1999 6.08%
</TABLE>
BEST QUARTER: 16.99% (2Q/97)
WORST QUARTER: (18.05)% (3Q/98)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
SINCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 1 YEAR INCEPTION*
-------------------------------------------------------------------- ------ ----------
<S> <C> <C>
Aggressive Equity Fund.......................................... 6.08% 13.14%
Russell 2500-TM- Index.......................................... 24.15 15.72
-------------------------------------------------------------------------------------------
</TABLE>
----------------------------
* For the period January 2, 1997 (commencement of sales) to December 31,
1999.
-----------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
NON-US FUND
ANNUAL TOTAL RETURNS
(FOR THE YEARS ENDED DECEMBER 31)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1997 0.30%
1998 12.96%
1999 33.36%
</TABLE>
BEST QUARTER: 19.89% (4Q/99)
WORST QUARTER: (16.44)% (3Q/98)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
SINCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 1 YEAR INCEPTION*
-------------------------------------------------------------------- ------ ----------
<S> <C> <C>
Non-US Fund..................................................... 33.36% 14.78%
Salomon Smith Barney Broad Market Index (BMI) World ex-US....... 28.73 15.70
-------------------------------------------------------------------------------------------
</TABLE>
----------------------------
* For the period January 2, 1997 (commencement of sales) to December 31,
1999.
-----------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
ANNUAL TOTAL RETURNS
(FOR THE YEARS ENDED DECEMBER 31)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1999 -7.26%
</TABLE>
BEST QUARTER: 2.60% (4Q/99)
WORST QUARTER: (8.23)% (3Q/99)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
SINCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 INCEPTION*
-------------------------------------------------------------------- ----------
<S> <C>
Real Estate Securities Fund..................................... (7.26) %
NAREIT Equity REIT Index........................................ (8.47) %
--------------------------------------------------------------------------------
</TABLE>
----------------------------
* For the period May 1, 1999 (commencement of sales) to December 31,
1999.
-----------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
CORE BOND FUND
ANNUAL TOTAL RETURNS
(FOR THE YEARS ENDED DECEMBER 31)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1997 9.73%
1998 7.38%
1999 -0.61%
</TABLE>
BEST QUARTER: 4.04% (2Q/97)
WORST QUARTER: (0.86)% (2Q/99)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
SINCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 1 YEAR INCEPTION*
-------------------------------------------------------------------- ------ ----------
<S> <C> <C>
Core Bond Fund.................................................. (0.61)% 5.42%
Lehman Brothers Aggregate Bond Index............................ (0.82) 5.73
<CAPTION>
30-DAY YIELDS FOR THE YEAR ENDED DECEMBER 31, 1999 CURRENT
-------------------------------------------------- --------
Core Bond Fund. 6.57%
<S> <C> <C>
-------------------------------------------------------------------------------------------
</TABLE>
----------------------------
* For the period January 2, 1997 (commencement of sales) to December 31,
1999.
-----------------------------------------------------------------------
To obtain current 30-day yield information, please call 1-800-787-7354.
11
<PAGE>
FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you
buy and hold Shares of the Funds.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
MAXIMUM SALES
MAXIMUM SALES CHARGE (LOAD)
CHARGE (LOAD) IMPOSED ON MAXIMUM
IMPOSED ON REINVESTED DEFERRED SALES REDEMPTION EXCHANGE
PURCHASES DIVIDENDS CHARGE (LOAD) FEES FEES
--------- --------- ------------- ---- ----
<S> <C> <C> <C> <C> <C>
All Funds.............................. None None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
(% OF NET ASSETS)
<TABLE>
<CAPTION>
TOTAL NET
TOTAL ANNUAL EXPENSE WAIVERS ANNUAL FUND
ADVISORY FUND OPERATING AND OPERATING
FEE OTHER EXPENSES EXPENSES REIMBURSEMENTS* EXPENSES*
--- -------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Multi-Style Equity Fund............. 0.78% 0.15% 0.93% (0.01)% 0.92%
Aggressive Equity Fund.............. 0.95% 0.39% 1.34% (0.09)% 1.25%
Non-U.S. Fund....................... 0.95% 0.55% 1.50% (0.20)% 1.30%
Real Estate Securities Fund......... 0.85% 0.30% 1.15% 0.00% 1.15%
Core Bond Fund...................... 0.60% 0.26% 0.86% (0.06)% 0.80%
</TABLE>
- ------------------------------
* MULTI-STYLE EQUITY FUND--The Fund's Manager, Frank Russell Investment
Management Company (FRIMCo) has contractually agreed to waive, at least
until April 30, 2001, a portion of its 0.78% management fee, up to the full
amount of that fee, equal to the total operating expenses that exceed 0.92%
of the average net assets on annual basis and to reimburse the Fund for all
remaining expenses, after fee waivers, that exceed 0.92% of the average
daily net assets on an annual basis.
AGGRESSIVE EQUITY FUND--FRIMCo has contractually agreed to waive, at least
until April 30, 2001, a portion of its 0.95% management fee, up to the full
amount of that fee, equal to the operating expenses exceed 1.25% of the
Fund's average daily net assets on an annual basis and to reimburse the Fund
for all remaining expenses, after fee waivers, that exceed 1.25% of the
average daily net assets on an annual basis.
NON-U.S. FUND--FRIMCo has contractually agreed to waive, at least until
April 30, 2001, a portion of its 0.95% management fee, up to the full amount
of that fee, equal to total operating expenses exceed 1.30% of the Fund's
average daily net assets on an annual basis and to reimburse the Fund for
all remaining expenses, after fee waivers, that exceed 1.30% of the average
daily net assets on an annual basis.
REAL ESTATE SECURITIES FUND--FRIMCo has contractually agreed to waive, at
least until April 30, 2001, a portion of its 0.85% management fee, up to the
full amount of that fee, equal to the total operating expenses exceed 1.15%
of the Fund's average daily net assets on an annual basis and to reimburse
the Fund for all remaining expenses, after fee waivers, that exceed 1.15% of
the average daily net assets on an annual basis.
CORE BOND FUND--FRIMCo has contractually agreed to waive, at least until
April 30, 2001, a portion of its 0.60% management fee, up to the full amount
of that fee, equal to the total operating expenses exceed 0.80% of the
Fund's average daily net assets on an annual basis and to reimburse the Fund
for all remaining expenses, after fee waivers, that exceed 0.80% of the
average daily net assets on an annual basis.
12
<PAGE>
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN EACH
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of the period. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. This example does not reflect any Insurance
Company Separate Account or Policy charges. If it did, the costs shown would be
higher.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Multi-Style Equity Fund..................................... $ 94 $ 296 $ 514 $1,143
Aggressive Equity Fund...................................... 127 416 726 1,605
Non-U.S. Fund............................................... 132 454 800 1,774
Real Estate Securities Fund................................. 117 365 632 1,398
Core Bond Fund.............................................. 82 268 470 1,056
</TABLE>
13
<PAGE>
SUMMARY COMPARISON OF THE FUNDS
<TABLE>
<CAPTION>
ANTICIPATED MAXIMUM
EQUITY DEBT
FUND INVESTMENTS INVESTMENTS FOCUS
- ---------------------------------------- ----------- ----------- -------------------------------
<S> <C> <C> <C>
Multi-Style Equity Fund................. 65-100% 35% Income and capital growth
Aggressive Equity Fund.................. 65-100% 35% Maximum total return
Non-U.S. Fund........................... 65-100% 35% Total return
Real Estate Securities Fund............. 65-100% 35% Total return
Core Bond Fund.......................... 0% 100% Income and capital appreciation
</TABLE>
THE PURPOSE OF RIF
Russell Insurance Funds (RIF) has been organized to provide the investment
base for one or more variable insurance products (Policies) to be issued by one
or more insurance companies (each referred to herein as an "Insurance Company").
Additionally, Insurance Companies may invest their own general account assets in
RIF. Each Insurance Company holds the interests of each Policy owner in a
separate account (Separate Account). Accordingly, the interest of a Policy owner
in RIF's shares is subject to the terms of the Policy described in the
accompanying prospectus for the Policy, which should be reviewed carefully by a
person considering the purchase of a Policy. That prospectus describes the
relationship between increases or decreases in the net asset value of Fund
Shares and any distributions on such Shares, and the benefits provided under the
Policy. The rights of an Insurance Company as a shareholder of a Fund should be
distinguished from the rights of a Policy owner which are described in the
Policies. As long as Shares of the Funds are sold only to the Insurance Company,
the term "shareholder" or "shareholders" in this Prospectus shall refer to an
Insurance Company owning shares of RIF.
FRANK RUSSELL COMPANY
CONSULTANT TO RIF
Frank Russell Company (Russell), founded in 1936, has been providing
comprehensive asset management consulting services for over 30 years to
institutional investors, principally large corporate employee benefit plans.
Russell provides the Funds and Frank Russell Investment Management Company
(FRIMCo), the Funds' advisor, with the asset management consulting services that
it provides to its other consulting clients. The Funds do not compensate Russell
for these services.
Three functions form the core of Russell's consulting services:
- OBJECTIVE SETTING: Defining appropriate investment objectives and desired
investment returns, based on a client's unique situation and risk
tolerance.
- ASSET ALLOCATION: Allocating a client's assets among different asset
classes--such as common stocks, fixed-income securities, international
securities, temporary cash investments and real estate--in a way most
likely to achieve the client's objectives and desired returns.
14
<PAGE>
- MONEY MANAGER RESEARCH: Evaluating and recommending professional
investment advisory and management organizations ("money managers") to
make specific portfolio investments for each asset class, according to
designated investment objectives, styles and strategies.
When this process is completed, a client's assets are invested using a
"multi-style, multi-manager diversification" technique. The goals of this
process are to reduce risk and to increase returns.
MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION
The Funds believe investors should seek to hold fully diversified portfolios
that reflect both their own individual investment time horizons and their
ability to accept risk. The Funds believe that for many, this can be
accomplished through strategically purchasing shares in one or more of the Funds
which have been structured to provide access to specific asset classes employing
a multi-style, multi-manager approach.
Capital market history shows that asset classes with greater risk will
generally outperform lower risk asset classes over time. For instance, corporate
equities, over the past 50 years, have outperformed corporate debt in absolute
terms. However, what is generally true of performance over extended periods will
not necessarily be true at any given time during a market cycle, and from time
to time asset classes with greater risk may also underperform lower risk asset
classes, on either a risk adjusted or absolute basis. Investors should select a
mix of asset classes that reflects their overall ability to withstand market
fluctuations over their investment horizons.
Studies have shown that no one investment style within an asset class will
consistently outperform competing styles. For instance, investment styles
favoring securities with growth characteristics may outperform styles favoring
income producing securities, and vice versa. For this reason, no single manager
has consistently outperformed the market over extended periods. Although
performance cycles tend to repeat themselves, they do not do so predictably.
The Funds believe, however, that it is possible to select managers who have
shown a consistent ability to achieve superior results within subsets or styles
of specific asset classes and investment styles by employing a unique
combination of qualitative and quantitative measurements. The Funds combine
these select managers with other managers within the same asset class who employ
complementary styles. By combining complementary investment styles within an
asset class, investors are better able to reduce their exposure to the risk of
any one investment style going out of favor.
By strategically selecting from among a variety of investments by asset
class, each of which has been constructed using these multi-style, multi-manager
principles, investors are able to design portfolios that meet their specific
investment needs.
15
<PAGE>
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
MULTI-STYLE EQUITY FUND
- ----------------------------
<TABLE>
<S> <C>
INVESTMENT To provide income and capital growth by investing
OBJECTIVE principally in equity securities.
PRINCIPAL The Multi-Style Equity Fund invests primarily in common
INVESTMENT stocks of medium and large capitalization companies. These
STRATEGIES companies are predominately US based, although the Fund may
invest a limited portion of its assets in non-US firms from
time to time.
The Fund employs a "multi-style, multi-manager" approach
whereby portions of the Fund are allocated to different
money managers who employ distinct investment styles. The
Fund uses three principal investment styles intended to
complement one another:
- GROWTH STYLE emphasizes investments in equity
securities of companies with above-average earnings
growth prospects. These companies are generally found
in the technology, health care, consumer and service
sectors.
- VALUE STYLE emphasizes investments in equity
securities of companies that appear to be undervalued
relative to their corporate worth, based on earnings,
book or asset value, revenues or cash flow. These
companies are generally found among industrial,
financial and utilities sectors.
- MARKET-ORIENTED STYLE emphasizes investments in
companies that appear to be undervalued relative to
their growth prospects. This style may encompass
elements of both the growth and value styles. These
companies may be found in any industry sector.
Additionally, the Fund is diversified by equity substyle.
For example, within the Growth Style, the Fund expects to
employ both an Earnings Momentum substyle (concentrating on
companies with more volatile and accelerating growth rates)
and a Consistent Growth substyle (concentrating on companies
with stable earnings growth over an economic cycle).
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
When determining how to allocate its assets among money
managers, the Fund considers a variety of factors. These
factors include a money manager's investment style and
substyle and its performance record, as well as the
characteristics of the money manager's typical portfolio
investments. These characteristics include capitalization
size, growth and profitability measures, valuation ratios,
economic sector weightings and earnings and price volatility
statistics. The Fund also considers the manner in which
money managers' historical and expected investment returns
correlate with one another.
The Fund intends to be fully invested at all times. Although
the Fund, like any mutual fund, maintains liquidity reserves
(i.e., cash awaiting investment or held to meet redemption
requests), the Fund exposes these reserves to the
performance of appropriate equity markets by investing in
stock index futures contracts. This causes the Fund to
perform as though its cash reserves were actually invested
in those markets. Additionally, the Fund invests its
liquidity reserves in one or more money market funds of
Frank Russell Investment Company ("FRIC"), a registered
investment company that employs the same investment adviser
as Russell Insurance Funds.
From time to time, the Fund may take temporary defensive
positions that may be inconsistent with its principal
investment policies in an attempt to respond to adverse
market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective
during such times.
</TABLE>
AGGRESSIVE EQUITY FUND
- ---------------------------
<TABLE>
<S> <C>
INVESTMENT To provide capital appreciation by assuming a higher level
OBJECTIVE of volatility than is ordinarily expected from the
Multi-Style Equity Fund by investing in equity securities.
PRINCIPAL The Aggressive Equity Fund invests primarily in common
INVESTMENT stocks of small and medium capitalization companies. These
STRATEGIES companies are predominately US based, although the Fund may
invest in non-US firms from time to time. The Fund's
investments may include companies that have been publicly
traded for less than five years and smaller companies, such
as companies not listed in the Russell
2000-Registered Trademark- Index.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
The Fund employs a "multi-style, multi-manager" approach
whereby portions of the Fund are allocated to different
money managers who employ distinct investment styles. The
Fund uses three principal investment styles intended to
complement one another:
- GROWTH STYLE emphasizes investments in equity
securities of companies with above-average earnings
growth prospects. These companies are generally found
in the technology, health care, consumer and service
sectors.
- VALUE STYLE emphasizes investments in equity
securities of companies that appear to be undervalued
relative to their corporate worth, based on earnings,
book or asset value, revenues or cash flow. These
companies are generally found among industrial,
financial and utilities sectors.
- MARKET-ORIENTED STYLE emphasizes investments in
companies that appear to be undervalued relative to
their growth prospects. This style may encompass
elements of both the growth and value styles. These
companies may be found in any industry sector.
When determining how to allocate its assets among money
managers, the Fund considers a variety of factors. These
factors include a money manager's investment style and
performance record, as well as the characteristics of the
money manager's typical portfolio investments. These
characteristics include capitalization size, growth and
profitability measures, valuation ratios, economic sector
weightings and earnings and price volatility statistics. The
Fund also considers the manner in which money managers'
historical and expected investment returns correlate with
one another.
The Fund intends to be fully invested at all times. Although
the Fund, like any mutual fund, maintains liquidity reserves
(i.e., cash awaiting investment or held to meet redemption
requests), the Fund exposes these reserves to the
performance of appropriate equity markets by investing in
stock index futures contracts. This causes the Fund to
perform as though its cash reserves were actually invested
in those markets. Additionally, the Fund invests its
liquidity reserves in one or more money market funds of
FRIC.
A portion of a Fund's investments may be "illiquid"
securities (i.e., securities that do not have a readily
available market or that are subject to resale
restrictions).
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
From time to time, the Fund may take temporary defensive
positions that may be inconsistent with its principal
investment policies in an attempt to respond to adverse
market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective
during such times.
</TABLE>
NON-U.S. FUND
- --------------
<TABLE>
<S> <C>
INVESTMENT To provide favorable total return and additional
OBJECTIVE diversification for US investors by investing primarily in
equity and fixed-income securities of non-US companies, and
securities issued by non-US governments.
PRINCIPAL The Non-U.S. Fund invests primarily in equity securities
INVESTMENT issued by companies domiciled outside the US and in
STRATEGIES depository receipts which represent ownership of securities
of non-US companies. The Fund's investments span most of the
developed nations of the world (particularly Europe and the
Far East) to maintain a high degree of diversification among
countries and currencies. Because international equity
investment performance has a reasonably low correlation to
US equity performance, this Fund may be appropriate for
investors who want to reduce their investment portfolio's
overall volatility by combining an investment in this Fund
with investments in US equities.
The Fund may seek to protect its investments against adverse
currency exchange rate changes by purchasing forward
currency contracts. These contracts enable the Fund to "lock
in" the US dollar price of a security that it plans to buy
or sell. The Fund may not accurately predict currency
movements.
The Fund employs a "multi-style, multi-manager" approach
whereby portions of the Fund are allocated to different
money managers who employ distinct investment styles. The
Fund uses three principal investment styles intended to
complement one another:
- GROWTH STYLE emphasizes investments in equity
securities of companies with above-average earnings
growth prospects. These companies are generally found
in the technology, health care, consumer and service
sectors.
- VALUE STYLE emphasizes investments in equity
securities of companies that appear to be undervalued
relative to their corporate worth, based on earnings,
book or asset value, revenues or cash flow. These
companies are generally found among industrial,
financial and utilities sectors
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
- MARKET-ORIENTED STYLE emphasizes investments in
companies that appear to be undervalued relative to
their growth prospects. This style may encompass
elements of both the growth and value styles. These
companies may be found in any industry sector. A
variation of this style maintains investments that
replicate country and sector weightings of a broad
international market index.
When determining how to allocate its assets among money
managers, the Fund considers a variety of factors. These
factors include a money manager's investment style and
performance record as well as the characteristics of the
money manager's typical portfolio investments. These
characteristics include capitalization size, growth and
profitability measures, valuation ratios, economic sector
weightings and earnings and price volatility statistics. The
Fund also considers the manner in which money managers'
historical and expected investment returns correlate with
one another.
The Fund intends to be fully invested at all times. Although
the Fund, like any mutual fund, maintains liquidity reserves
(i.e., cash awaiting investment or held to meet redemption
requests), the Fund exposes these reserves to the
performance of appropriate equity markets by investing in
stock index futures contracts. This causes the Fund to
perform as though its cash reserves were actually invested
in those markets. Additionally, the Fund invests its
liquidity reserves in one or more money market funds of
FRIC.
A portion of the Fund's investments may be "illiquid"
securities (i.e., securities that do not have a readily
available market or that are subject to resale
restrictions).
From time to time, the Fund may take temporary defensive
positions that may be inconsistent with its principal
investment policies in an attempt to respond to adverse
market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective
during such times.
</TABLE>
REAL ESTATE SECURITIES FUND
- --------------------------------
<TABLE>
<S> <C>
INVESTMENT To generate a high level of total return through above
OBJECTIVE average current income, while maintaining the potential for
capital appreciation.
PRINCIPAL The Real Estate Securities Fund seeks to achieve its
INVESTMENT objective by concentrating its investments in equity
STRATEGIES securities of issuers whose value is derived primarily from
development, management and market pricing of underlying
real estate properties.
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
The Fund invests primarily in securities of companies, known
as real estate investment trusts (REITs), that own and/or
manage properties. REITs may be composed of anywhere from
two to over 1,000 properties. The Fund may also invest in
equity and debt securities of other types of real estate-
related companies. The Fund invests in companies which are
predominately US based, although the Fund may invest a
limited portion of its assets in non-US firms from time to
time.
The Fund employs a multi-manager approach whereby portions
of the Fund are allocated to different money managers whose
approaches are intended to complement one another.
When determining how to allocate its assets among money
managers, the Fund considers a variety of factors. These
factors include a money manager's investment style and
performance record as well as the characteristics of the
money manager's typical portfolio investments. These
characteristics include capitalization size, growth and
profitability measures, valuation ratios, property type and
geographic weightings and earnings and price volatility
statistics. The Fund also considers the manner in which
money managers' historical and expected investment returns
correlate with one another.
The Fund intends to be fully invested at all times. Although
the Fund, like any mutual fund, maintains liquidity reserves
(i.e., cash awaiting investment or held to meet redemption
requests), the Fund may expose these reserves to the
performance of appropriate equity markets by investing in
stock index futures contracts. This causes the Fund to
perform as though its cash reserves were actually invested
in those markets. Additionally, the Fund invests its
liquidity reserves in one or more FRIC money market funds.
A portion of the Fund's investments may be "illiquid"
securities (i.e., securities that do not have a readily
available market or that are subject to resale
restrictions).
From time to time, the Fund may take temporary defensive
positions that may be inconsistent with its principal
investment policies in an attempt to respond to adverse
market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective
during such times.
</TABLE>
21
<PAGE>
CORE BOND FUND
- ------------------
<TABLE>
<S> <C>
INVESTMENT To maximize total return, through capital appreciation and
OBJECTIVE income by assuming a level of volatility consistent with the
broad fixed-income market, by investing in fixed-income
securities.
PRINCIPAL The Core Bond Fund invests primarily in fixed-income
INVESTMENT securities. In particular, the Fund holds debt securities
STRATEGIES issued or guaranteed by the US government and, to a lesser
extent by non-US governments, or by their respective
agencies and instrumentalities. It also holds
mortgage-backed securities, including collateralized
mortgage obligations. The Fund also invests in corporate
debt securities and dollar-denominated obligations issued in
the US by non-US banks and corporations (Yankee Bonds). A
majority of the Fund's holdings are US dollar denominated.
From time to time the Fund may invest in municipal debt
obligations.
The Fund may invest up to 25% of its assets in debt
securities that are rated below investment grade as
determined by one or more nationally recognized securities
rating organizations or in unrated securities judged by the
Fund to be of comparable quality. These securities are
commonly referred to as "junk bonds."
The average weighted duration of the Fund's portfolio
typically ranges within 10% of the average weighted duration
of the Lehman Brothers Aggregate Bond Index, which was 5.0
years as of December 31, 1999, but may vary up to 25% from
the Index's duration. The Fund has no restrictions on
individual security duration.
The Fund invests in securities of issuers in a variety of
sectors of the fixed income market. The Fund's money
managers identify sectors of the fixed income market that
they believe are undervalued and concentrate the Fund's
investments in those sectors. These sectors will differ over
time. To a lesser extent, the Fund may attempt to anticipate
shifts in interest rates and hold securities that the Fund
expects to perform well in relation to market indexes, as a
result of such shifts. Additionally, the Fund typically
holds proportionately fewer US Treasury obligations than are
represented in the Lehman Brothers Aggregate Bond Index.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
The Fund employs multiple money managers, each with
complementary expertise in the fixed income markets. When
determining how to allocate its assets among money managers,
the Fund considers a variety of factors. These factors
include a money manager's investment style and performance
record as well as the characteristics of the money manager's
typical portfolio investments. These characteristics include
portfolio biases, magnitude of sector shifts and duration
movements. The Fund also considers the manner in which money
managers' historical and expected investment returns
correlate with one another.
The Fund invests its liquidity reserves in one or more FRIC
money market funds.
The Fund may enter into interest rate futures contracts,
options on such futures contracts and interest rate swaps
(i.e., agreements to exchange the Fund's rights to receive
certain interest payments) as a substitute for holding
physical securities or to facilitate the implementation of
its investment strategy but not for leverage purposes.
From time to time, the Fund may take temporary defensive
positions that may be inconsistent with its principal
investment policies in an attempt to respond to adverse
market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective
during such times.
</TABLE>
23
<PAGE>
RISKS
An investment in the Funds, like any investment, has risks. The value of
each Fund fluctuates, and you could lose money. The following table describes
principal types of risks that the Funds are subject to and lists next to each
description those Funds most likely to be affected by the risk. Other Funds that
are not listed may hold portfolio investments that are subject to one or more of
the risks, but will not do so in a way that is expected to principally affect
the performance of the Fund as a whole. Please refer to the Funds' Statement of
Additional Information for a discussion of risks associated with types of
securities held by the Funds and the investment practices employed by the
individual Funds.
<TABLE>
<CAPTION>
RISK ASSOCIATED WITH: DESCRIPTION RELEVANT FUND
--------------------- ----------- -------------
<S> <C> <C>
MULTI-MANAGER APPROACH The investment styles employed by a Fund's All Funds
money managers may not be complementary. The
interplay of the various strategies employed
by a Fund's multiple money managers may
result in a Fund's holding a concentration
of certain types of securities. This
concentration may be beneficial or
detrimental to a Fund's performance
depending upon the performance of those
securities and the overall economic
environment. The multi-manager approach
could result in a high level of portfolio
turnover, resulting in higher Fund brokerage
expenses and increased tax liability from a
Fund's realization of capital gains.
EQUITY SECURITIES The value of equity securities will rise and Multi-Style Equity
fall in response to the activities of the Aggressive Equity
company that issued the stock, general Non-U.S.
market conditions and/ or economic Real Estate Securities
conditions.
- Value Stocks Investments in value stocks are subject to Multi-Style Equity
risks that (i) their intrinsic values may Aggressive Equity
never be realized by the market or (ii) such Non-U.S.
stock may turn out not to have been
undervalued.
- Growth Stocks Growth company stocks may provide minimal Multi-Style Equity
dividends which could otherwise cushion Aggressive Equity
stock prices in a market decline. The value Non-U.S.
of growth company stocks may rise and fall
significantly based, in part, on investors'
perceptions of the company, rather than on
fundamental analysis of the stocks.
- Market-Oriented Market-oriented investments are generally Multi-Style Equity
subject to the risks that are associated Aggressive Equity
with growth and value stocks. Non-U.S.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
RISK ASSOCIATED WITH: DESCRIPTION RELEVANT FUND
--------------------- ----------- -------------
<S> <C> <C>
- Securities of Investments in smaller companies may involve Aggressive Equity
Small greater risks because these companies Real Estate Securities
Capitalization generally have a limited track record.
Companies Smaller companies often have narrower
markets and more limited managerial and
financial resources than larger, more
established companies. As a result, their
performance can be more volatile, which may
increase the volatility of a Fund's
portfolio.
FIXED-INCOME SECURITIES Prices of fixed income securities rise and Core Bond
fall in response to interest rate changes.
Generally, when interest rates rise, prices
of fixed income securities fall.
The longer the duration of the security, the
more sensitive the security is to this risk.
A 1% increase in interest rates would reduce
the value of a $100 note by approximately
one dollar if it had a one-year duration,
but would reduce its value by approximately
$15 if it had a 15-year duration. There is
also a risk that one or more of the
securities will be downgraded in credit
rating or go into default. Lower-rated bonds
generally have higher credit risks.
- Non-investment Although lower rated debt securities Core Bond
Grade generally offer a higher yield than higher
Fixed-income rated debt securities, they involve higher
risks. They are especially subject to:
- adverse changes in general economic
conditions and in the industries in
which their issuers are engaged,
- changes in the financial condition of
their issuers and
- price fluctuations in response to
changes in interest rates.
As a result, issuers of lower rated debt
securities are more likely than other
issuers to miss principal and interest
payments or to default which could result in
a loss to a Fund.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
RISK ASSOCIATED WITH: DESCRIPTION RELEVANT FUND
--------------------- ----------- -------------
<S> <C> <C>
INTERNATIONAL The Funds' returns and net asset value may Non-U.S.
SECURITIES be significantly affected by political or Core Bond
economic conditions and regulatory
requirements in a particular country.
Foreign markets, economies and political
systems may be less stable than US markets,
and changes in exchange rates of foreign
currencies can affect the value of a Fund's
foreign assets. Foreign laws and accounting
standards typically are not as strict as
they are in the US and there may be less
public information available about foreign
companies. Foreign securities markets may be
less liquid and have fewer transactions than
US securities markets. Additionally,
international markets may experience delays
and disruptions in securities settlement
procedures for a Fund's portfolio
securities.
- Non-US Debt A Fund's foreign debt securities are
Securities typically obligations of sovereign
governments and corporations. These
securities are particularly subject to a
risk of default from political instability.
- Instruments of US Non-US corporations and banks issuing dollar Core Bond
and Foreign Banks denominated instruments in the US are not
and Branches necessarily subject to the same regulatory
and Foreign requirements that apply to US corporations
Corporations, and banks, such as accounting, auditing and
Including Yankee recordkeeping standards, the public
Bonds availability of information and, for banks,
reserve requirements, loan limitations and
examinations. This increases the possibility
that a non-US corporation or bank may become
insolvent or otherwise unable to fulfill its
obligations on these instruments.
DERIVATIVES (E.G. Price movements of a futures contract, Core Bond
FUTURES CONTRACTS, option or structured note may not be
OPTIONS ON FUTURES, identical to price movements of portfolio
INTEREST RATE securities or a securities index resulting
SWAPS) in the risk that, when a Fund buys a futures
contract or option as a hedge, the hedge may
not be completely effective.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
RISK ASSOCIATED WITH: DESCRIPTION RELEVANT FUND
--------------------- ----------- -------------
<S> <C> <C>
REAL ESTATE SECURITIES Just as real estate values go up and down, Real Estate Securities
the value of the securities of companies
involved in the industry, and in which a
Fund invests, also fluctuates. A Fund that
invests in real estate securities is also
subject to the risks associated with direct
ownership of real estate. Additional risks
include declines in the value of real
estate, changes in general and local
economic conditions, increases in property
taxes and changes in tax laws and interest
rates. The value of securities of companies
that service the real estate industry may
also be affected by such risks.
- REITs REITs may be affected by changes in the Real Estate Securities
value of the underlying properties owned by
the REITs and by the quality of any credit
extended. Moreover, the underlying
portfolios of REITs may not be diversified,
and therefore are subject to the risk of
financing a single or a limited number of
projects. REITs are also dependent upon
management skills and are subject to heavy
cash flow dependency, defaults by borrowers,
self-liquidation and the possibility of
failing either to qualify for tax-free pass
through of income under federal tax laws or
to maintain their exemption from certain
federal securities laws.
MUNICIPAL OBLIGATIONS Municipal obligations are affected by Core Bond
economic, business or political
developments. These securities may be
subject to provisions of litigation,
bankruptcy and other laws affecting the
rights and remedies of creditors, or may
become subject to future laws extending the
time for payment of principal and/or
interest, or limiting the rights of
municipalities to levy taxes.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
RISK ASSOCIATED WITH: DESCRIPTION RELEVANT FUND
--------------------- ----------- -------------
<S> <C> <C>
REPURCHASE AGREEMENTS Under a repurchase agreement, a bank or Core Bond
broker sells securities to a Fund and agrees
to repurchase them at the Fund's cost plus
interest. If the value of the securities
declines and the bank or broker defaults on
its repurchase obligation, a Fund would
incur a loss.
EXPOSING LIQUIDITY By exposing its liquidity reserves to the Multi-Style Equity
RESERVES TO EQUITY equity market principally by use of equity Aggressive Equity
MARKETS securities, a Fund's performance tends to Non-U.S.
correlate more closely to the performance of Real Estate Securities
the market as a whole. Although this
increases a Fund's performance if equity
markets rise, it reduces a Fund's
performance if equity markets decline.
</TABLE>
AN INVESTMENT IN ANY OF THE FUNDS IS NOT A BANK DEPOSIT AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
28
<PAGE>
MANAGEMENT OF THE FUNDS
The Funds' investment adviser is FRIMCo, 909 A Street, Tacoma, Washington
98402. FRIMCo pioneered the "multi-style multi-manager" investment approach in
mutual funds and manages over $17 billion in more than 30 mutual fund
portfolios. FRIMCo was established in 1982 to serve as the investment management
arm of Frank Russell Company.
Russell, which acts as consultant to the Funds, was founded in 1936 and has
been providing comprehensive asset management consulting services for over 30
years to institutional investors, principally large corporate employee benefit
plans. Russell provides the Funds and FRIMCo with the asset management
consulting services that it provides to its other consulting clients. The Funds
do not compensate Russell for these services. Russell and its affiliates have
offices around the world, in Tacoma, New York, Toronto, London, Paris, Sydney,
Auckland, Singapore and Tokyo.
Russell is a subsidiary of The Northwestern Mutual Life Insurance Company.
Founded in 1857, Northwestern Mutual is a mutual life insurance corporation
headquartered in Milwaukee, Wisconsin. It leads the US in both individual life
insurance sold annually and individual life insurance in force.
FRIMCo recommends money managers to the Funds, allocates Fund assets among
them, oversees them and evaluates their results. FRIMCo also oversees the
management of the Funds' liquidity reserves. The Funds' money managers select
the individual portfolio securities for the assets assigned to them.
FRIMCo's officers and employees who oversee the money managers are:
- Randall P. Lert, who has been Chief Investment Officer of FRIMCo since
June 1989.
- Mark D. Amberson, who has been a Portfolio Manager of FRIMCo since January
1998. From 1991 to 1997, Mr. Amberson was a Portfolio Manager in Russell's
Money Market Trading Group. Mr. Amberson has, jointly with Mr. Burge,
primary responsibility for management of the Core Bond Fund.
- Randal C. Burge, who has been Director of Global Fixed Income since
January 2000. From 1995 to 1999, Mr. Burge was a Portfolio Manager of
FRIMCo. From 1990 to 1995, Mr. Burge was a Client Executive for Frank
Russell Australia. Mr. Burge has, jointly with Mr. Amberson, primary
responsibility for management of the Core Bond Fund.
- Jean Carter, who has been Director of Global Equities since January 2000.
From 1994 to 1999, Ms. Carter was a Portfolio Manager of FRIMCo.
- Ann Duncan, who has been a Portfolio Manager of FRIMCo since January 1998.
From 1996 to 1997, Ms. Duncan was a Senior Equity Research Analyst with
Russell. From 1992 to 1995, Ms. Duncan was an equity analyst and portfolio
manager with Avatar Associates. Ms. Duncan has, jointly with Mr. Jornlin,
primary responsibility for management of the Non-U.S. Fund.
- James M. Imhof, Director of FRIMCo's Portfolio Trading, manages the Funds'
liquidity portfolios on a day to day basis and has been responsible for
ongoing analysis and monitoring of the money managers since 1989.
- James A. Jornlin, who has been a Portfolio Manager of FRIMCo since
January 2000. From 1995 to 1999, Mr. Jornlin was a Senior Investment
Officer of FRIMCo. From 1991 to 1995, Mr. Jornlin was a Senior Research
Analyst with Russell. Mr. Jornlin has, jointly with Mr. Ogard,
29
<PAGE>
primary responsibility for management of the Real Estate Securities Fund
and has, jointly with Ms. Duncan, primary responsibility for the
management of the Non-U.S. Fund.
- Eric W. Ogard, who has been a Portfolio Manager of FRIMCo since
March 2000. Mr. Ogard was a Research Analyst for FRIMCo from 1995 to 1997
and a Senior Research Analyst from FRIMCo from 1997 to 2000. Mr. Ogard
has, jointly with Mr. Trittin and Mr. Tipple, primary responsibility for
the management of the Multi-Style Equity and Aggressive Equity Funds and
has, jointly with Mr. Jornlin, primary responsibility for the management
of the Real Estate Securities Fund.
- Brian C. Tipple, who has been a Portfolio Manager of FRIMCo since July
1999. From 1991 to 1999, Mr. Tipple was a Client Executive with Frank
Russell Trust Company. Mr. Tipple has, jointly with Mr. Ogard and
Mr. Trittin, primary responsibility for management of the Multi-Style
Equity and Aggressive Equity Funds.
- Dennis J. Trittin, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1988 to 1996, Mr. Trittin was director of US Equity
Manager Research Department with Russell. Mr. Trittin has, jointly with
Mr. Ogard and Mr. Tipple, primary responsibility for management of the
Multi-Style Equity and Aggressive Equity Funds.
The annual rate of advisory fees, payable to FRIMCo monthly on a pro rata
basis, are the following percentages of each Fund's average daily net assets:
Multi-Style Equity Fund, 0.78%; Aggressive Equity Fund, 0.95%; Non-U.S. Fund,
0.95%; Real Estate Securities Fund, 0.85%; and Core Bond Fund, 0.60%.
THE MONEY MANAGERS
Each Fund allocates its assets among the money managers listed under "Money
Manager Information" in this Prospectus. FRIMCo, as the Funds' advisor, may
change the allocation of a Fund's assets among money managers at any time. The
Funds received an exemptive order from the Securities and Exchange Commission
(SEC) that permits a Fund to engage or terminate a money manager at any time,
subject to the approval by the Fund's Board of Trustees (Board), without a
shareholder vote. A Fund notifies its shareholders within 60 days of when a
money manager begins providing services. The Funds select money managers based
primarily upon the research and recommendations of FRIMCo and Russell. FRIMCo
and Russell evaluate quantitatively and qualitatively the money manager's skills
and results in managing assets for specific asset classes, investment styles and
strategies. Short-term investment performance, by itself, is not a controlling
factor in any Fund's selection or termination of a money manager.
Each money manager has complete discretion to purchase and sell portfolio
securities for its segment of a Fund. At the same time, however, each money
manager must operate within the Fund's investment objectives, restrictions and
policies, and the more specific strategies developed by FRIMCo. FRIMCo develops
such constraints for each manager based on FRIMCo's assessment of the manager's
expertise and investment style. By assigning more specific constraints to each
money manager, FRIMCo intends to capitalize on the strengths of each money
manager and to combine their investment activities in a complementary fashion.
Although the money managers' activities are subject to general oversight by the
Board and the Funds' officers, neither the Board, the officers, FRIMCo nor
Russell evaluate the investment merits of the money managers' individual
security selections.
30
<PAGE>
PORTFOLIO TURNOVER
The portfolio turnover rates for certain Funds are likely to be somewhat
higher than the rates for comparable mutual funds with a single money manager.
Each of the Funds' money managers makes decisions to buy or sell securities
independently from other managers. Thus, one money manager for a Fund may be
selling a security when another money manager for the Fund (or for another Fund)
is purchasing the same security. Also, when a Fund replaces a money manager, the
new money manager may significantly restructure the investment portfolio. These
practices may increase the Funds' portfolio turnover rates, realization of gains
or losses, brokerage commissions and other transaction costs. The annual
portfolio turnover rates for each of the Funds are shown in the Financial
Highlights tables in this Prospectus.
DIVIDENDS AND DISTRIBUTIONS
INCOME DIVIDENDS
Each Fund distributes substantially all of its net investment income and net
capital gains to shareholders each year. The amount and frequency of
distributions are not guaranteed, all distributions are at the Board's
discretion. Currently, the Board intends to declare dividends from net
investment income according to the following schedule:
<TABLE>
<CAPTION>
DECLARED PAYABLE FUNDS
- -------- ------- -----
<S> <C> <C>
Quarterly............... Mid: April, July, October and December Multi-Style Equity, Aggressive Equity,
Core Bond and Real Estate Securities
Funds
Annually................ Mid-February Non-U.S. Fund
</TABLE>
CAPITAL GAINS DISTRIBUTIONS
The Board intends that distributions will be declared annually, generally in
mid-February from capital gains realized through December 31 (excess of capital
gains over capital losses). In addition, in order to satisfy certain
distribution requirements, a Fund may declare special year-end dividend and
capital gains distributions. Such distributions, if received by shareholders by
January 31, are deemed to have been paid by a Fund and received by shareholders
on December 31 of the prior year.
AUTOMATIC REINVESTMENT
Dividends and other distributions are automatically reinvested at the
closing net asset value on the record date, in additional Shares of the
appropriate Fund, unless your Insurance Company elects to have the dividends or
distributions paid in cash or invested in another Fund.
31
<PAGE>
TAXES
Fund shares are offered to Separate Accounts of Insurance Companies to fund
the Policies they issue. Additionally, Insurance Companies may invest their own
general account assets in RIF. For a discussion of the taxation of life
insurance companies and the separate accounts, as well as the tax treatment of
the Policies and the holders thereof, see the discussion regarding "Federal Tax
Considerations" included in the prospectus for the Policies.
Each Fund intends to comply with the diversification requirements imposed by
Section 817(h) of the Internal Revenue Code of 1986, as amended (Code) and the
regulations thereunder. These requirements place certain limitations on the
assets of each separate account that may be invested in securities of a single
issuer, and, because Section 817(h) and the regulations thereunder treat a
Fund's assets as assets of the related separate account, these limitations also
apply to the Fund's assets that may be invested in securities of a single
issuer. Generally, the regulations provide that, as of the end of each calendar
quarter, or within 30 days thereafter, no more than 55% of a Fund's total assets
may be represented by any one investment, no more than 70% by any two
investments, no more than 80% by any three investments, and no more than 90% by
any four investments. For purposes of Section 817(h), all securities of the same
issuer, all interests in the same real property project, and all interests in
the same commodity are treated as a single investment. A government security
includes any security issued or guaranteed or insured by the United States or an
instrumentality of the United States. Failure of a Fund to satisfy the Section
817(h) requirements could result in adverse tax consequences to the Insurance
Company and holders of Policies, other than as described in the prospectus for
the Policies.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Funds and their shareholders; see the
Statement of Additional Information and Policy prospectus for a more detailed
discussion. You are urged to consult with your tax adviser.
HOW NET ASSET VALUE IS DETERMINED
NET ASSET VALUE PER SHARE
The net asset value per Share is calculated for each Fund on each business
day on which shares are offered or redemption orders are tendered. For all
Funds, a business day is one on which the New York Stock Exchange (NYSE) is open
for trading. All Funds determine net asset value at 4:00 pm Eastern Time or as
of the close of the NYSE, whichever is earlier.
VALUATION OF PORTFOLIO SECURITIES
Securities held by the Funds are typically priced using market quotations or
pricing services when the prices are believed to be reliable, that is, when the
prices reflect the fair market value of the securities. The Funds value
securities for which market quotations are not readily available at "fair
value," as determined in good faith and in accordance with procedures
established by the Board. If you hold Shares in a Fund, such as the Non-U.S.
Fund, that holds portfolio securities that are listed primarily on foreign
exchanges, the net asset value of that Fund's Shares may change on a day when
you will not be able to purchase or redeem that Fund's Shares. This is because
the value of those portfolio securities may change on weekends or other days
when the Fund does not price its Shares.
32
<PAGE>
PURCHASE OF FUND SHARES
Insurance Companies place orders for their Separate Accounts based on, among
other things, the amount of premium payments to be invested pursuant to
Policies. Insurance Companies may also place orders for their general accounts.
Individuals may not place orders directly with RIF. See the prospectus of the
Separate Account and Policies of the Insurance Company for more information on
the purchase of Fund Shares and with respect to the availability for investment
in specific Funds. The Funds do not issue share certificates.
Orders to purchase and redeem Fund Shares are based on premiums and
transaction requests received by each Insurance Company on a given business day.
Each Insurance Company then submits purchase and redemption orders in accordance
with procedures established by the Insurance Company. All orders will be
effected at the net asset value of the applicable Fund determined on the
business day the order is received if RIF receives the order in proper form and
in accordance with applicable requirements on the next business day before 8:00
am, Pacific time. Federal funds (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank) in the net
amount of such orders shall be received by RIF on such next business day in
accordance with applicable requirements by 11:00 am, Pacific time. It is each
Insurance Company's responsibility to properly transmit purchase orders and
Federal funds in accordance with applicable requirements. Policy owners should
refer to the prospectus for their Policy and Separate Account in this regard.
REDEMPTION OF FUND SHARES
Fund Shares may be redeemed at any time by Insurance Companies on behalf of
their Separate Accounts or their general accounts. Individuals may not place
redemption orders directly with the Fund. Redemption requests for Separate
Accounts based on premiums and transaction requests received by the Insurance
Company will be effected at the net asset value of the applicable Fund
determined on such business day if RIF receives the requests in proper form and
in accordance with applicable requirements. It is each Insurance Company's
responsibility to properly transmit redemption requests in accordance with
applicable requirements. Policy owners should consult their Insurance Company in
this regard. The value of the Shares redeemed may be more or less than their
original cost, depending on the Fund's then-current net asset value. The Funds
do not impose charges for share redemption.
RIF ordinarily will make payment for all Shares redeemed within seven days
after RIF receives a redemption request in proper form.
Should any conflict between variable annuity Policy owners and variable life
insurance Policy owners arise which would require that a substantial amount of
net assets be withdrawn from a Fund, orderly Fund management could be disrupted
to the potential detriment of affected Policy owners.
33
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years (or, if a Fund has not been in
operation for 5 years, since the beginning of operations for that Fund). Certain
information reflects financial results for a single Fund share throughout each
year or period ended December 31. The total returns in the table represent how
much your investment in the Fund would have increased (or decreased) during each
period, assuming reinvestment of all dividends and distributions. This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Funds' financial statements, are included in the annual report, which
is available upon request.
MULTI-STYLE EQUITY FUND:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 16.02 $ 12.78 $ 10.00
-------- ------- -------
INCOME FROM OPERATIONS:
Net investment income (a)................................. .12 .10 .09
Net realized and unrealized gain (loss)................... 2.41 3.49 2.75
-------- ------- -------
Total income from operations............................ 2.53 3.59 2.84
-------- ------- -------
DISTRIBUTIONS
From net investment income................................ (.12) (.08) (.06)
From net realized gain.................................... (1.64) (.27) --
-------- ------- -------
Total distributions..................................... (1.76) (.35) (.06)
-------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 16.79 $ 16.02 $ 12.78
======== ======= =======
TOTAL RETURN (%)(b)......................................... 17.17 28.71 28.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).................. 285,877 73,998 23,639
Ratios to average net assets (%)(c):
Operating expenses, net................................. .92 .92 .92
Operating expenses, gross............................... .93 1.21 1.61
Net investment income................................... .74 .70 .76
Portfolio turnover rate (%)............................... 67.67 78.89 64.95
</TABLE>
- --------------------------
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
34
<PAGE>
AGGRESSIVE EQUITY FUND:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 12.70 $ 13.45 $ 10.00
------- ------- -------
INCOME FROM OPERATIONS
Net investment income (a)................................. .05 .02 .04
Net realized and unrealized gain (loss)................... .71 .13 3.45
------- ------- -------
Total income from operations............................ .76 .15 3.49
------- ------- -------
DISTRIBUTIONS
From net investment income................................ (.04) (.02) (.04)
From net realized gain.................................... (.06) (.88) --
------- ------- -------
Total distributions..................................... (.10) (.90) (.04)
------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 13.36 $ 12.70 $ 13.45
======= ======= =======
TOTAL RETURN (%)(b)......................................... 6.08 1.02 35.07
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).................. 99,150 24,607 15,372
Ratios to average net assets (%)(c):
Operating expenses, net................................. 1.25 1.25 1.25
Operating expenses, gross............................... 1.34 1.67 2.22
Net investment income................................... .37 .19 .39
Portfolio turnover rate (%)............................... 111.46 79.88 91.56
</TABLE>
- --------------------------
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
35
<PAGE>
NON-U.S. FUND:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 11.09 $ 10.03 $10.00
-------- ------- ------
INCOME FROM OPERATIONS
Net investment income (a)................................. .10 .08 .09
Net realized and unrealized gain (loss)................... 3.53 1.21 (.06)
-------- ------- ------
Total income from operations............................ 3.63 1.29 .03
-------- ------- ------
DISTRIBUTIONS
From net investment income................................ (.23) (.18) --
From net realized gain.................................... (.30) (.05) --
-------- ------- ------
Total distributions..................................... (.53) (.23) --
-------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $ 14.19 $ 11.09 $10.03
======== ======= ======
TOTAL RETURN (%)(b)......................................... 33.36 12.96 .30
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).................. 195,519 21,420 6,876
Ratios to average net assets (%)(c):
Operating expenses, net................................. 1.30 1.30 1.30
Operating expenses, gross............................... 1.50 2.37 3.60
Net investment income................................... .80 .77 .98
Portfolio turnover rate (%)............................... 83.45 50.36 68.54
</TABLE>
- --------------------------
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
36
<PAGE>
REAL ESTATE SECURITIES FUND:
<TABLE>
<CAPTION>
1999*
--------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00
-------
INCOME FROM OPERATIONS
Net investment income (a)................................. .35
Net realized and unrealized gain (loss)................... (1.08)
-------
Total income from operations............................ (.73)
-------
DISTRIBUTIONS
From net investment income................................ (.34)
Tax return of capital..................................... (.12)
-------
Total distributions..................................... (.46)
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 8.81
=======
TOTAL RETURN (%)(b)......................................... (7.26)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).................. 55,318
Ratios to average net assets (%)(c):
Operating expenses...................................... 1.15
Net investment income................................... 5.84
Portfolio turnover rate (%)............................... 23.98
</TABLE>
- --------------------------
* For the period April 30, 1999 (commencement of operations) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
37
<PAGE>
CORE BOND FUND:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.68 $ 10.45 $ 10.00
------- ------- -------
INCOME FROM OPERATIONS
Net investment income (a)................................. .59 .56 .64
Net realized and unrealized gain (loss)................... (.65) .19 .30
------- ------- -------
Total income from Operations............................ (.06) .75 .94
------- ------- -------
DISTRIBUTIONS
From net investment income................................ (.61) (.47) (.49)
From net realized gain.................................... (.16) (.05) --
Tax return of capital..................................... (.21) -- --
------- ------- -------
Total distributions..................................... (.98) (.52) (.49)
------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.64 $ 10.68 $ 10.45
======= ======= =======
TOTAL RETURN (%)(b)......................................... (.61) 7.38 9.73
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).................. 83,620 32,305 8,523
Ratios to average net assets (%)(c):
Operating expenses, net................................. .80 .80 .80
Operating expenses, gross............................... .86 1.28 2.20
Net investment income................................... 5.77 5.34 6.38
Portfolio turnover rate (%)............................... 139.06 75.95 53.86
</TABLE>
- --------------------------
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
38
<PAGE>
MONEY MANAGER INFORMATION
The money managers have no affiliations with the Funds or the Funds' service
providers other than their management of Fund assets. Each money manager has
been in business for at least three years, and is principally engaged in
managing institutional investment accounts. These managers may also serve as
managers or advisers to other Funds in RIF, or to other clients of FRIMCo or of
Frank Russell Company, including Frank Russell Company's wholly owned
subsidiary, Frank Russell Trust Company.
MULTI-STYLE EQUITY FUND
ALLIANCE CAPITAL MANAGEMENT L.P., US Bank Place, 601 2nd Ave. South, Suite
5000, Minneapolis, MN 55402-4322.
BARCLAY'S GLOBAL FUND ADVISORS, 45 Fremont Street, 17th Floor, San
Francisco, CA 94105.
PEACHTREE ASSET MANAGEMENT, One Peachtree Center, Suite 4500, 303 Peachtree
Street N.E., Atlanta, GA 30308.
SANFORD C. BERNSTEIN & CO., INC., 767 Fifth Avenue, New York, NY 10153-0185.
STRONG CAPITAL MANAGEMENT, INC., 100 Heritage Reserve, Menomonee Falls, WI
53051.
TURNER INVESTMENT PARTNERS, INC., 1235 Westlakes Drive, Suite 350, Berwyn,
PA 19312.
WESTPEAK INVESTMENT ADVISORS, L.P., 1011 Walnut Street, Suite 400, Boulder,
CO 80302.
AGGRESSIVE EQUITY FUND
CAPITALWORKS INVESTMENT PARTNERS, LLC, 401 West "A" Street, Suite 1675, San
Diego, CA 92101.
GEEWAX, TERKER & COMPANY, 99 Starr Street, Phoenixville, PA 19460.
JACOBS LEVY EQUITY MANAGEMENT, INC., 280 Corporate Center, 3 ADP Boulevard,
Roseland, NJ 07068.
WESTPEAK INVESTMENT ADVISORS, L.P. See: Multi-Style Equity Fund.
NON-U.S. FUND
J.P. MORGAN INVESTMENT MANAGEMENT, INC., 522 Fifth Ave., 6th Floor, New
York, NY 10036.
MONTGOMERY ASSET MANAGEMENT, LLC, 101 California Street, 35th Floor, San
Francisco, CA 94111.
OECHSLE INTERNATIONAL ADVISORS, One International Place, 23rd Floor, Boston,
MA 02110.
THE BOSTON COMPANY ASSET MANAGEMENT, INC., One Boston Place, 14th Floor,
Boston, MA 02108-4402.
REAL ESTATE SECURITIES FUND
AEW CAPITAL MANAGEMENT, L.P., 225 Franklin Street, Boston, MA 02110-2803.
39
<PAGE>
COHEN & STEERS CAPITAL MANAGEMENT, 757 Third Avenue, New York, NY 10017.
SECURITY CAPITAL GLOBAL CAPITAL MANAGEMENT GROUP INCORPORATED, 11 South
LaSalle Street, 2nd Floor, Chicago, IL 60603.
CORE BOND FUND
PACIFIC INVESTMENT MANAGEMENT COMPANY, 840 Newport Center Drive, Suite 360,
P.O. Box 6430, Newport Beach, CA 92658-6430.
STANDISH, AYER & WOOD, INC., One Financial Center, Boston, MA 02110.
WHEN CONSIDERING AN INVESTMENT IN THE FUNDS, DO NOT RELY ON ANY INFORMATION
UNLESS IT IS CONTAINED IN THIS PROSPECTUS OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION. THE FUNDS HAVE NOT AUTHORIZED ANYONE TO ADD ANY
INFORMATION OR TO MAKE ANY ADDITIONAL STATEMENTS ABOUT THE FUNDS. THE FUNDS MAY
NOT BE AVAILABLE IN SOME JURISDICTIONS OR TO SOME PERSONS. THE FACT THAT YOU
HAVE RECEIVED THIS PROSPECTUS SHOULD NOT, IN ITSELF, BE TREATED AS AN OFFER TO
SELL FUND SHARES TO YOU. CHANGES IN THE AFFAIRS OF THE FUNDS OR IN THE FUNDS'
MONEY MANAGERS MAY OCCUR AFTER THE DATE ON THE COVER PAGE OF THIS PROSPECTUS.
THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED TO REFLECT ANY MATERIAL CHANGES
TO THE INFORMATION IT CONTAINS.
40
<PAGE>
For more information about the Funds, the following documents are available
without charge:
ANNUAL/SEMIANNUAL REPORTS: Additional information about the Funds'
investments is available in the Funds' annual and semiannual reports to
shareholders. In each Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds.
The annual report for each Fund and the SAI are incorporated into this
Prospectus by reference. You may obtain free copies of the reports and
the SAI, and may request other information, by contacting the Funds at:
Russell Insurance Funds
909 A Street
Tacoma, WA 98402
800-787-7354
Fax: 253-591-4395
Website: russell.com
You can review and copy information about the Funds (including the SAI) at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. You can obtain information on the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330. You can obtain copies of
this information upon paying a duplicating fee by writing to the Public
Reference Section of the Commission, Washington, D.C. 20549-6009. Reports
and other information about the Funds are also available on the Commission's
Internet website at sec.gov.
RUSSELL INSURANCE FUNDS
Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Real Estate Securities Fund
Core Bond Fund
[RUSSELL LOGO] Distributor: Russell Fund Distributors, Inc.
SEC File No. 811-5371
36-08-061 (05/00)
<PAGE>
RUSSELL INSURANCE FUNDS
909 A STREET
TACOMA, WASHINGTON 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001
STATEMENT OF ADDITIONAL INFORMATION
APRIL 28, 2000
Russell Insurance Funds ("RIF") is a single legal entity organized as a business
trust under the laws of the Commonwealth of Massachusetts. RIF operates five
investment portfolios, each referred to as a "Fund":
As of the date of this Statement of Additional Information, RIF is comprised of
the following investment portfolios, each of which commenced operations on the
date set forth opposite the Fund's name.
<TABLE>
<CAPTION>
FUND FUND INCEPTION DATE PROSPECTUS DATE
---- ------------------- ---------------
<S> <C> <C>
Multi-Style Equity Fund January 2, 1997 April 28, 2000
Aggressive Equity Fund January 2, 1997 April 28, 2000
Non-U.S. Fund January 2, 1997 April 28, 2000
Real Estate Securities Fund May 1, 1999 April 28, 2000
Core Bond Fund January 2, 1997 April 28, 2000
</TABLE>
The Funds serve as the investment base for a variety of insurance products (the
"Policies") to be issued by one or more insurance companies (each referred to
herein as an "Insurance Company").
This Statement of Additional Information supplements or describes in greater
detail information concerning RIF and the Funds contained in the Prospectus
of the Funds dated April 28, 2000. This Statement is not a Prospectus; the
Statement should be read in conjunction with the Funds' Prospectus.
Prospectuses may be obtained without charge by telephoning or writing RIF at
the number or address shown above. You should retain this Statement of
Additional Information for future reference.
Capitalized terms not otherwise defined in this Statement shall have the
meanings assigned to them in the Prospectuses.
This statement incorporates by reference the Funds' Annual Reports to
shareholders for the year ended December 31, 1999. Copies of the Funds' Annual
Report accompany this statement.
<PAGE>
CERTAIN TERMS USED IN THIS STATEMENT OF ADDITIONAL INFORMATION ARE
DEFINED IN THE
GLOSSARY, WHICH BEGINS ON PAGE 48
TABLE OF CONTENTS
PAGE
STRUCTURE AND GOVERNANCE..................................................... 1
Organization and Business History....................................... 1
Shareholder Meetings.................................................... 1
Controlling Shareholders................................................ 1
Trustees and Officers................................................... 2
OPERATION OF RIF............................................................. 6
Service Providers....................................................... 6
Consultant.............................................................. 6
Manager................................................................. 7
Money Managers.......................................................... 8
Distributor............................................................. 9
Custodian and Portfolio Accountant...................................... 9
Transfer and Dividend Disbursing Agent.................................. 9
Independent Accountants.................................................10
Codes of Ethics.........................................................10
Fund Expenses...........................................................10
Valuation of Fund Shares................................................10
Valuation of Portfolio Securities.......................................10
Portfolio Transaction Policies..........................................11
Portfolio Turnover Rate.................................................11
Brokerage Allocations...................................................11
Brokerage Commissions...................................................13
Yield and Total Return Quotations.......................................14
INVESTMENT RESTRICTIONS, POLICIES AND CERTAIN INVESTMENTS....................15
Investment Restrictions.................................................15
Investment Policies.....................................................16
Certain Investments.....................................................19
TAXES........................................................................36
MONEY MANAGER INFORMATION....................................................39
RATINGS OF DEBT INSTRUMENTS..................................................40
FINANCIAL STATEMENTS.........................................................47
GLOSSARY.....................................................................48
<PAGE>
STRUCTURE AND GOVERNANCE
ORGANIZATION AND BUSINESS HISTORY. RIF was originally organized as a Maryland
corporation, and on July 11, 1996, was reorganized as a Massachusetts business
trust.
RIF is currently organized and operates under a Master Trust Agreement dated
July 11, 1996, and the provisions of Massachusetts law governing the operation
of a Massachusetts business trust. The Board of Trustees ("Board" or the
"Trustees") may amend the Master Trust Agreement from time to time; provided,
however, that any amendment which would materially and adversely affect
shareholders of RIF as a whole, or shareholders of a particular Fund, must be
approved by the holders of a majority of the Shares of RIF or the Fund,
respectively. RIF is a registered open-end management investment company of the
diversified type.
RIF is authorized to issue Shares of beneficial interest ("Shares"), and may
divide the Shares into two or more series, each of which evidences a pro rata
ownership interest in a different investment portfolio -- a "Fund." Each Fund is
a separate trust under Massachusetts law. The Trustees may, without seeking
shareholder approval, create additional Funds at any time. The Master Trust
Agreement provides that a shareholder may be required to redeem Shares in a Fund
under circumstances set forth in the Master Trust Agreement.
Under the Master Trust Agreement, RIF's Funds are authorized to issue Shares of
beneficial interest in one or more classes. The Funds do not presently offer
Shares in multiple classes, although they may do so in the future.
Under certain unlikely circumstances, as is the case with any Massachusetts
business trust, a shareholder of a Fund may be held personally liable for the
obligations of the Fund. The Master Trust Agreement provides that shareholders
shall not be subject to any personal liability for the acts or obligations of a
Fund and that every written agreement, obligation or other undertaking of the
Funds shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Master Trust Agreement also provides that RIF
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of a Fund and satisfy any judgment
thereon. Thus, the risk of any shareholder incurring financial loss beyond his
investment on account of shareholder liability is limited to circumstances in
which a Fund itself would be unable to meet its obligations.
Under the terms of an exemptive order received by RIF from the SEC, Shares of a
Fund may be sold to separate accounts of more than one Insurance Company to fund
variable life and variable annuity Policies. RIF's Board of Trustees will
monitor events in order to identify and material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto. An irreconcilable conflict that is not resolved might result
in the withdrawal of a substantial amount of assets, causing a negative impact
on net asset value.
Frank Russell Company has the right to grant (and withdraw) the nonexclusive use
of the name "Frank Russell" or any variation.
SHAREHOLDER MEETINGS. RIF will not have an annual meeting of shareholders, but
special meetings may be held. Special meetings may be convened (i) by the Board
of Trustees, (ii) upon written request to the Board by shareholders holding at
least 10% of the outstanding Shares, or (iii) upon the Board's failure to honor
the shareholders' request described above, by shareholders holding at least 10%
of the outstanding Shares by giving notice of the special meeting to
shareholders. On any matter which affects only a particular Fund, only Shares of
that Fund are entitled to vote. There are no cumulative voting rights.
In connection with an exemptive order which RIF received from the SEC, it has
committed to a "pass-through" voting procedure which will generally require
an Insurance Company to cast votes at RIF meetings as directed by
policyholders, and to case votes for which it has not received voting
instructions from policyholders in the same proportion as those for which
instructions have been received. Policyholders
1
<PAGE>
should review their prospectus for their Policies to determine their rights
and responsibilities, and to ascertain when the Insurance Company may
disregard voting instructions.
CONTROLLING SHAREHOLDERS. The Trustees have the authority and responsibility to
manage the business of RIF, and hold office for life unless they resign or are
removed by, in substance, a vote of two-thirds of RIF's Shares outstanding.
Insurance Companies that are shareholders of RIF pass through any proxies to be
voted to holders of their insurance policies. Under these circumstances, no one
person, entity or shareholder "controls" RIF.
The following shareholders owned 5% or more of the voting Shares of the
following Funds at March 31, 2000:
AGGRESSIVE EQUITY FUND - Northwestern Mutual Life Insurance Company NML
Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee,
WI 53202-4797, 39.23%, record; Northwestern Mutual Life Insurance Company
Account B, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue,
Milwaukee, WI 53202-4797, 21.86%, record; Security Equity Life Insurance
Co., c/o Conning Asset Management Co., Attn: Bonnie Harris Mail Code H3-1,
700 Market Street, Saint Louis, MO 63101-1829, 11.32%, record; Cova
Financial Services Life Insurance Co., D/B/A Cova Variable Annuity Account
One, One Tower Lane, Suite 3000, Oakbrook Terrace, IL 60181-4644, 8.98%,
record; Northwestern Mutual Life Insurance Company Variable Life Account,
Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee, WI
53202-4797, 7.93%, record.
CORE BOND FUND - Cova Financial Services Life Insurance Co., D/B/A Cova
Variable Annuity Account One, One Tower Lane, Suite 3000, Oakbrook
Terrace, IL 60181-4644, 32.06%, record; Northwestern Mutual Life Insurance
Company NML Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin
Avenue, Milwaukee, WI 53202-4797, 22.23%, record; Northwestern Mutual Life
Insurance Company Account B, Attn: Mutual Fund Accounting, 720 E.
Wisconsin Avenue, Milwaukee, WI 53202-4797, 20.01%, record; General
American Life Insurance, 700 Market Street, St. Louis, MO 63101-1887,
10.76%, record; Security Equity Life Insurance Co., c/o Conning Asset
Management Co., Attn: Bonnie Harris Mail Code H3-1, 700 Market Street,
Saint Louis, MO 63101-1829, 5.18%, record.
MULTI-STYLE EQUITY FUND - Northwestern Mutual Life Insurance Company NML
Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee,
WI 53202-4797, 31.94%, record; Northwestern Mutual Life Insurance Company
Account B, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue,
Milwaukee, WI 53202-4797, 21.70%, record; Cova Financial Services Life
Insurance Co., D/B/A Cova Variable Annuity Account One, One Tower Lane,
Suite 3000, Oakbrook Terrace, IL 60181-4644, 19.01%, record; Security
Equity Life Insurance Co., c/o Conning Asset Management Co., Attn: Bonnie
Harris Mail Code H3-1, 700 Market Street, Saint Louis, MO 63101-1829,
8.66%, record; Northwestern Mutual Life Insurance Company Variable Life
Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee,
WI 53202-4797, 6.70%, record; General American Life Insurance, 700 Market
Street, St. Louis, MO 63101-1887, 5.21%, record.
NON-US FUND - Northwestern Mutual Life Insurance Company NML Account,
Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee, WI
53202-4797, 57.06%, record; Northwestern Mutual Life Insurance Company
Account B, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue,
Milwaukee, WI 53202-4797, 17.36%, record; Cova Financial Services Life
Insurance Company, D/B/A Cova Variable Annuity Account One, One Tower
Lane, Suite 3000, Oakbrook Terrace, IL 60181-4644, 11.12%, record;
Northwestern Mutual Life Insurance Company Variable Life Account, Attn:
Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee, WI 53202-4797,
5.43%, record.
REAL ESTATE SECURITIES FUND - Northwestern Mutual Life Insurance Company
NML Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue,
Milwaukee, WI 53202-4797, 79.39%, record; Northwestern Mutual Life
Insurance Company Account B, Attn: Mutual Fund Accounting, 720 E.
Wisconsin Avenue, Milwaukee, WI 53202-4797, 14.35%, record.
2
<PAGE>
The following shareholders could be deemed to "control" the following Funds
because such shareholders owned 5% or more of the voting Shares of the indicated
Funds at March 31, 2000:
AGGRESSIVE EQUITY FUND - Northwestern Mutual Life Insurance Company NML
Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee,
WI 53202-4797, 39.23%, record.
CORE BOND FUND - Cova Financial Services Life Insurance Co., D/B/A Cova
Variable Annuity Account One, One Tower Lane, Suite 3000, Oakbrook
Terrace, IL 60181-4644, 32.06%, record.
MULTI-STYLE EQUITY FUND - Northwestern Mutual Life Insurance Company NML
Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee,
WI 53202-4797, 31.94%, record.
NON-US FUND - Northwestern Mutual Life Insurance Company NML Account,
Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue, Milwaukee, WI
53202-4797, 57.06%, record.
REAL ESTATE SECURITIES FUND - Northwestern Mutual Life Insurance Company
NML Account, Attn: Mutual Fund Accounting, 720 E. Wisconsin Avenue,
Milwaukee, WI 53202-4797, 79.39%, record.
The Trustees and officers of RIF as a group own less than 1% of any Fund.
TRUSTEES AND OFFICERS. The Board of Trustees is responsible for overseeing
generally the operations of RIF, including reviewing and approving the Funds'
contracts with Frank Russell Investment Management Company ("FRIMCo"), the
Funds' advisor, Frank Russell Company and the money managers. A Trustee may be
removed at any time by, in substance, a vote of two-thirds of RIF Shares. A
vacancy in the Board shall be filled by a vote of a majority of the remaining
Trustees so long as, in substance, two-thirds of the Trustees have been elected
by shareholders. The officers, all of whom are employed by FRIMCo or its
affiliates, are responsible for the day-to-day management and administration of
RIF's operations. RIF paid in aggregate $40,000 for the year ended December
31, 1999 to the Trustees who are not officers or employees of FRIMCo or its
affiliates. Trustees are paid an annual fee plus travel and other expenses
incurred in attending Board meetings. RIF's officers and employees are paid by
FRIMCo or its affiliates.
The following list contains the Trustees and officers and their positions with
RIF, their present and principal occupations during the past five years, and the
mailing addresses of Trustees who are not affiliated with RIF. The mailing
address for all Trustees and officers affiliated with RIF is Russell Insurance
Funds, 909 A Street, Tacoma, WA 98402.
An asterisk (*) indicates that the Trustee or officer is an "interested person"
of RIF as defined in the Investment Company Act of 1940, as amended (the "1940
Act"). As used in the table, "Frank Russell Company" includes its corporate
predecessor, Frank Russell Co., Inc.
3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME, AGE, POSITION(S) HELD PRINCIPAL OCCUPATION(S)
ADDRESS WITH FUND DURING THE PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*George F. Russell, Jr., Trustee Emeritus and Also currently: Trustee Emeritus and Chairman Emeritus,
Born July 3, 1932 Chairman Emeritus Frank Russell Investment Company; Director, Chairman of the
since 1998. Board and Chief Executive Officer, Russell Building
Management Company, Inc.; Director and Chairman of the
909 A Street Board, Frank Russell Company; Director and Chairman of the
Tacoma, Washington Board, Frank Russell Investments (Delaware), Inc.; Chairman
98402-1616 Emeritus/Director Emeritus, Frank Russell Trust Company;
Chairman Emeritus, Frank Russell Securities, Inc.; Director
Emeritus, Frank Russell Investment Management Company;
Director, Chairman of the Board and President, Russell 20/20
Association. From 1984 to December 1998, Trustee and Chairman
of the Board of FRIC. From August 1996 to December 1998,
Trustee and Chairman of the Board of Russell Insurance Funds.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
*Lynn L. Anderson, Trustee, President Also currently: Trustee, President and Chief Executive
Born April 22, 1939 and Chief Executive Officer, Frank Russell Investment Company; Director, Chief
Officer since 1987. Executive Officer and Chairman of the Board, Russell Fund
Distributors, Inc.; Trustee, Chairman of the Board,
909 A Street President, The SSgA Funds (investment company); Director and
Tacoma, Washington Chairman of the Board, Frank Russell Investment Management
98402-1616 Company; Chairman of the Board, Frank Russell Trust Company;
Director and Chairman of the Board, Frank Russell Investment
Company PLC; Director, Frank Russell Investments (Ireland)
Limited, Frank Russell Investments (Cayman) Ltd., and Frank
Russell Investments (UK) Ltd.; March 1997 to December 1998,
Director, Frank Russell Company; June 1993 to November 1995,
Director, Frank Russell Company. Until September 1994,
Director and President, The Laurel Funds, Inc. (investment
company).
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since 1984. Also currently: Trustee, Frank Russell Investment Company.
Born October 15, 1931 1996 to present, President, Anderson Management Group LLC
(architectural design and manufacturing). 1984 to 1996,
President, Vancouver Door Company, Inc.
23 Forest Glen Lane
Tacoma, Washington 98409
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee since 1985. Also currently: Trustee, Frank Russell Investment Company.
Born December 1, 1919 President, Paul Anton and Associates (Marketing Consultant
on emerging international markets for small corporations).
1991-1994, Adjunct Professor, International Marketing,
University of Washington, Tacoma, Washington.
PO Box 212
Gig Harbor,
Washington 98335
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME, AGE, POSITION(S) HELD PRINCIPAL OCCUPATION(S)
ADDRESS WITH FUND DURING THE PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
William E. Baxter, Trustee since 1984. Trustee, Frank Russell Investment Company.
Born June 8, 1925 Retired.
800 North C Street
Tacoma, Washington 98403
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Kristianne Blake Trustee since 2000. Also currently: Trustee, Frank Russell Investment Company;
Born January 22, 1954 President, Kristianne Gates Blake, P.S.; Trustee, WM Group
of Funds; Trustee, William H. & Mary M. Gates Charitable
Remainder Annuity Trust.
P.O. Box 28338
Spokane, Washington
99228
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee since 1984. Also currently: Trustee, Frank Russell Investment Company
Born October 6, 1930 and President, Gingrich Enterprises, Inc. (Business and
Property Management).
1730 North Jackson
Tacoma, Washington 98406
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee since 1984. Also currently: Trustee, Frank Russell Investment Company
Born May 5, 1926 and Director of Frank Russell Trust Company. Retired.
2025 Narrows View Circle
#232-D, P.O. Box 1057
Gig Harbor, Washington
98335
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Raymond P. Tennison, Jr. Trustee since 2000. Also currently: Trustee, Frank Russell Investment Company and
Born December 21, 1955 President, Simpson Investment Company and several additional
subsidiary companies, including Simpson Timber Company,
1301 Fifth Avenue Simpson Paper Company and Simpson Tacoma Kraft Company.
Suite 2800 Prior to July 1997, President and Board member, Simpson Paper
Seattle, Washington 98101 Company. Trustee, Simpson Employee Retirement Fund.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME, AGE, POSITION(S) HELD PRINCIPAL OCCUPATION(S)
ADDRESS WITH FUND DURING THE PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Mark E. Swanson, Treasurer and Chief Also currently: Treasurer and Chief Accounting
Born November 26, 1963 Accounting Officer Officer, Frank Russell Investment Company; Director,
since 1998. Fund Administration Frank Russell Trust Company;
Treasurer, Assistant Secretary and Principal Accounting
909 A Street Officer, SSgA Funds (investment company); Director of
Tacoma, Washington Fund Administration, Frank Russell Investment Management
98402-1616 Company; Manager, Funds Accounting and Taxes, Russell Fund
Distributors, Inc. April 1996 to August 1998,
Assistant Treasurer, Frank Russell Investment Company;
August 1996 to August 1998, Assistant Treasurer, Russell
Insurance Funds; November 1995 to July 1998, Assistant
Secretary, SSgA Funds; February 1997 to July 1998,
Manager, Funds Accounting and Taxes, Frank Russell
Investment Management Company.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
*Randall P. Lert, Director of Also currently: Director of Investments, Frank Russell
Born October 3, 1953 Investments since Investment Company; Chief Investment Officer, Frank Russell
1991. Trust Company; Director and Chief Investment Officer, Frank
Russell Investment Management Company; Director and Chief
909 A Street Investment Officer, Russell Fund Distributors, Inc.;
Tacoma, Washington Director-Futures Trading, Frank Russell Investments (Ireland)
98402-1616 Limited and Frank Russell Investments (Cayman) Ltd.; Senior
Vice President and Director of Portfolio Trading, Frank
Russell Canada Limited/Limitee. April 1990 to November 1995,
Director of Investments of Frank Russell Investment Management
Company.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
*Karl J. Ege, Secretary and Also currently: Secretary and General Counsel of Frank
Born October 8, 1941 General Counsel Russell Investment Company; Director, Secretary and General
since 1994. Counsel, Russell Real Estate Advisors, Inc. and Frank
Russell Capital, Inc.; Secretary, General Counsel and
909 A Street Managing Director--Law and Government Affairs of Frank
Tacoma, Washington Russell Company; Secretary and General Counsel of Frank
98402-1616 Russell Investment Management Company, Frank Russell Trust
Company and Russell Fund Distributors, Inc.; Director and
Secretary of Russell Insurance Agency, Inc., Frank Russell
Investments (Delaware), Inc., A Street Investment Associates,
Inc., Russell International Services Co., Inc. and Russell
20-20 Association; Director and Assistant Secretary of Frank
Russell Company Limited (London) and Russell Systems Ltd.;
Director of Frank Russell Investment Company LLC, Frank
Russell Securities, Inc., Frank Russell Company PTY, Limited,
Frank Russell Institutional Funds plc, Frank Russell
Qualifying Investor Fund, Russell Investment Management
Ltd., Frank Russell Investment Company PLC, Frank Russell
Investments (Ireland) Limited, Frank Russell Investment
(Japan), Ltd., Frank Russell Company, S.A., Frank Russell
Japan Co., Ltd., Frank Russell Company (NZ) Limited,
Russell Investment Nominee Co PTY Ltd and Frank Russell
Investments (UK) Ltd. April 1992 to December, 1998,
Director, Frank Russell Company.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME, AGE, POSITION(S) HELD PRINCIPAL OCCUPATION(S)
ADDRESS WITH FUND DURING THE PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Peter F. Apanovitch, Manager of Also currently: Manager of Short-Term Investment Funds,
Born May 3, 1945 Short-Term Frank Russell Investment Company, Frank Russell Investment
Investment Funds. Management Company and Frank Russell Trust Company.
909 A Street
Tacoma, Washington
98402-1616
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Aggregate Pension or Estimated Annual Total Compensation
Trustee Compensation from Retirement Benefits Upon from RIF Paid to
RIF Benefits Accrued as Retirement Trustees
part of RIF Expenses
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lynn L. Anderson $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------
Paul E. Anderson $8,000 $0 $0 $38,000*
- --------------------------------------------------------------------------------------------------------------------
Paul Anton, PhD. $8,000 $0 $0 $38,000*
- --------------------------------------------------------------------------------------------------------------------
William E. Baxter $8,000 $0 $0 $38,000*
- --------------------------------------------------------------------------------------------------------------------
Kristianne Blake $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich $8,000 $0 $0 $38,000*
- --------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer $8,000 $0 $0 $38,000*
- --------------------------------------------------------------------------------------------------------------------
Raymond P. Tennison, Jr. $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Received $30,000 each for service on the Frank Russell Investment Company
Board.
OPERATION OF RIF
SERVICE PROVIDERS. Most of RIF's necessary day-to-day operations are performed
by separate business organizations under contract to RIF. The principal service
providers are:
Consultant Frank Russell Company
Manager, Transfer and Dividend Frank Russell Investment Management Company
Disbursing Agent
Money Managers Multiple professional discretionary
investment management organizations
Custodian and Portfolio State Street Bank and Trust Company
Accountant
Distributor Russell Fund Distributors, Inc.
CONSULTANT. Frank Russell Company, the corporate parent of FRIMCo, was
responsible for organizing and reorganizing RIF and provides ongoing consulting
services, described in the Prospectus, to RIF and FRIMCo. FRIMCo does not pay
Frank Russell Company an annual fee for consulting services.
7
<PAGE>
Frank Russell Company provides comprehensive consulting and money manager
evaluation services to institutional clients, including FRIMCo and Frank Russell
Trust Company, and to high net worth individuals and families ($100 million)
through its Russell Private Investment Division. Frank Russell Company also
provides: (i) consulting services for international investment to these and
other clients through its International Division and its wholly owned
subsidiaries, Frank Russell Company London (Frank Russell Company Limited),
Frank Russell Canada (Frank Russell Canada Limited/Limitee), Frank Russell
Australia (Frank Russell Company Pty., Limited), Frank Russell Japan, Frank
Russell AG (Zurich), Frank Russell Company S.A. (Paris), Frank Russell Company
(N.Z.) Limited (New Zealand) and Frank Russell Investments (Delaware), and (ii)
investment account and portfolio evaluation services to corporate pension plan
sponsors and institutional money managers, through its Russell Data Services
Division. Frank Russell Securities, Inc., a wholly owned subsidiary of Frank
Russell Company, carries on an institutional brokerage business as a member of
the New York Stock Exchange. Frank Russell Capital Inc., a wholly owned
subsidiary of Frank Russell Company, carries on an investment banking business
as a registered broker-dealer. Frank Russell Trust Company, a wholly-owned
subsidiary of Frank Russell Company, provides comprehensive trust and investment
management services to corporate pension and profit-sharing plans. Frank Russell
Investment (Cayman) Ltd., a wholly owned subsidiary of Frank Russell Company,
provides investment advice and other services. Frank Russell Investment
(Ireland) Ltd., a wholly owned subsidiary of Frank Russell Company, provides
investment advice and other services. Frank Russell International Services Co.,
Inc., a wholly owned subsidiary of Frank Russell Company, provides services to
U.S. personnel seconded to overseas enterprises. Russell Fiduciary Services
Company, a wholly owned subsidiary of Frank Russell Company, provides fiduciary
services to pension and welfare benefit plans and other institutional investors.
The mailing address of Frank Russell Company is 909 A Street, Tacoma, WA 98402.
As affiliates, Frank Russell Company and FRIMCo may establish certain
intercompany cost allocations that reflect the consulting services supplied to
FRIMCo. George F. Russell, Jr., Trustee Emeritus and Chairman of RIF, is the
Chairman of the Board of Russell. FRIMCo is a wholly owned subsidiary of Frank
Russell Company.
Frank Russell Company is a subsidiary of The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual"). Founded in 1857, Northwestern Mutual is a
mutual insurance corporation organized under the laws of Wisconsin. Northwestern
Mutual's products consist of a full range of permanent and term life insurance,
disability income insurance, long-term care insurance, mutual funds and
annuities for personal, estate, retirement, business, and benefits planning.
Northwestern Mutual provides its insurance products and services through an
exclusive network of approximately 7,200 agents associated with over 100 general
agencies nationwide. Northwestern Mutual leads the U.S. in both individual life
insurance sold annually and total individual life insurance in force.
MANAGER. FRIMCo provides or oversees the provision of all general management and
administration, investment advisory and portfolio management, and distribution
services for the Funds. FRIMCo provides the Funds with office space, equipment
and the personnel necessary to operate and administer the Funds' business and to
supervise the provision of services by third parties, such as the money managers
and custodian. FRIMCo also develops the investment programs for each of the
Funds, selects money managers for the Funds (subject to approval by the Board),
allocates assets among the money managers, monitors the money managers'
investment programs and results, and may exercise investment discretion over
assets invested in the Funds' Liquidity Portfolios. (See, "Investment
Policies---Liquidity Portfolios.") FRIMCo also acts as RIF's transfer agent and
dividend disbursing agent. FRIMCo, as agent for RIF, pays the money managers'
fees for the Funds, as a fiduciary for the Funds, out of the management fee paid
by the Funds to FRIMCo. The remainder of the management fee is retained by
FRIMCo as compensation for the services described above and to pay expenses.
Each of the Funds pays an annual management fee to FRIMCo, billed monthly on a
pro rata basis and calculated as a specified percentage of the average daily net
assets of each of the Funds.
The following Funds paid FRIMCo the listed management fees before waivers and/or
reimbursements, for the years ended December 31, 1997, 1998 and 1999:
8
<PAGE>
<TABLE>
<CAPTION>
12/31/99 12/31/98 1997
-------- -------- ----
<S> <C> <C> <C>
Multi-Style Equity $1,357,070 $361,287 $150,747
Aggressive Equity 566,708 186,597 116,490
Real Estate Securities 286,897 -- --
Non-U.S. 1,006,593 130,606 61,283
Core Bond 347,592 118,852 43,221
</TABLE>
FRIMCo has contractually agreed to waive a portion of its management fee for
each Fund, up to the full amount of its fee, to the extent the Fund's operating
expenses exceed specified limits imposed by FRIMCo on an annual basis.
Additionally, FRIMCo has contractually agreed to reimburse each Fund for all
remaining expenses, after fee waivers, that still exceed their respective
expense caps. In 1997, the Funds also received a Custodian Fee Waiver from State
Street Bank. This waiver was in effect through December 31, 1997.
The expense caps and waivers as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
EXPENSE CAP MANAGEMENT CUSTODIAN FEES TOTAL EXPENSE
FEES WAIVED WAIVED REDUCTION
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Style Equity 0.92% $ 61,920 $ 70,798 $ 132,718
Aggressive Equity 1.25 34,172 84,542 118,714
Non-U.S. 1.30 35,823 116,412 152,235
Core Bond 0.80 43,221 64,682 107,903
The expense caps and waivers as of December 31, 1998 were as follows:
<CAPTION>
EXPENSE CAP MANAGEMENT REIMBURSED TOTAL EXPENSE
FEES WAIVED BY FRIMCo REDUCTION
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Style Equity 0.92% $ 132,360 ------ $ 132,360
Aggressive Equity 1.25 82,680 -------- 82,680
Non-U.S. 1.30 130,606 $16,449 147,055
Core Bond 0.80 95,578 ------ 95,578
</TABLE>
The expense caps and waivers as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
EXPENSE CAP MANAGEMENT REIMBURSED TOTAL EXPENSE
FEES WAIVED BY FRIMCo REDUCTION
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Style Equity .92% $22,022 -- $22,022
Aggressive Equity 1.25 51,002 -- 51,002
Real Estate Securities 1.15 -- -- --
Non-U.S. 1.30 214,869 -- 214,869
Core Bond .80 31,865 -- 31,865
</TABLE>
FRIMCo is a wholly-owned subsidiary of Frank Russell Company, a subsidiary of
The Northwestern Mutual Life Insurance Company. FRIMCo's mailing address is 909
A Street, Tacoma, WA 98402.
MONEY MANAGERS. The money managers have no affiliations or relationships with
RIF or FRIMCo, other than as discretionary managers for all or a portion of a
Fund's portfolio, except some money managers (and their affiliates) may effect
brokerage transactions for the Funds (see, "Brokerage Allocations" and
9
<PAGE>
"Brokerage Commissions"). Money managers may serve as advisers or discretionary
managers for Frank Russell Trust Company, other investment vehicles sponsored or
advised by Frank Russell Company or its affiliates, other consulting clients of
Frank Russell Company, other off-shore vehicles and/or for accounts which have
no business relationship with the Frank Russell Company organization.
From its management fees, FRIMCo, as agent for RIF, pays all fees to the money
managers for their investment selection services. Quarterly, each money manager
is paid the pro rata portion of an annual fee, based on the average for the
quarter of all the assets allocated to the money manager. For the years ended
December 31, 1997, 1998 and 1999, management fees paid to the money managers
were:
<TABLE>
<CAPTION>
ANNUAL RATE
FUND $ AMOUNT PAID (AS A % OF AVERAGE DAILY NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Multi-Style Equity $312,678 $ 95,629 $45,969 0.18% 0.21% 0.24%
Aggressive Equity 244,240 85,546 65,076 0.41 0.44 0.53
Real Estate Securities 89,570 -- -- 0.18 -- --
Non-U.S. 354,658 46,042 23,814 0.34 0.33 0.37
Core Bond 85,719 32,036 13,536 0.15 0.16 0.19
</TABLE>
Each money manager has agreed that it will look only to FRIMCo for the payment
of the money manager's fee, after RIF has paid FRIMCo. Fees paid to the money
managers are not affected by any voluntary or statutory expense limitations.
Some money managers may receive investment research prepared by Frank Russell
Company as additional compensation, or may receive brokerage commissions for
executing portfolio transactions for the Funds through broker-dealer affiliates.
DISTRIBUTOR. Russell Fund Distributors, Inc. serves as the distributor of RIF
Shares. The distributor receives no compensation from RIF for its services. The
distributor is a wholly owned subsidiary of FRIMCo and its mailing address is:
909 A Street, Tacoma, WA 98402.
CUSTODIAN AND PORTFOLIO ACCOUNTANT. State Street Bank and Trust Company ("State
Street") serves as the custodian for RIF. State Street also provides basic
portfolio recordkeeping required for each of the Funds for regulatory and
financial reporting purposes. For these services, State Street is paid the
following annual fees, which will be billed and payable on a monthly basis:
CUSTODY:
Domestic Custody - (i) $3,000 per portfolio per fund; (ii) First $10 billion in
average daily net assets - 0.75%, Over $10 billion - 0.65%. Global Custody -
(i) First $500 million in month end net assets - 0.11% - 0.35%, Over $500
million - 0.03% - 0.35% depending on the geographic classification of the
investments in the international funds (ii) a transaction charge ranging from
$25 - $100 depending on the geographic classification of the investments in the
international funds. All Custody - (i) Portfolio transaction charges range from
$6.00 - $25.00 depending on the type of transaction; (ii) Futures and Options
charges range from $8.00 - $25.00; (iii) monthly pricing fees of $375.00 per
portfolio and $6.00 - $11.00 per security; (iv) on-line access charges of $2,500
per fund; and (v) Reimbursement of out-of-pocket expenses including
postage, transfer fees, stamp duties, taxes, wire fees, telexes and freight. In
addition, interest earned on uninvested cash balances will be used to offset the
Funds' custodian expense.
FUND ACCOUNTING:
Domestic Fund Accounting - (i) $10,000 per portfolio; and (ii) 0.015% of average
daily net assets. International Fund Accounting - (i) $24,000 per portfolio per
year; and (ii) 0.03% of month end net assets. Yield calculation services -
$4,200 per fixed income fund. Tax accounting services - $8,500 per Equity Fund,
$11,000 per Fixed Income Fund, and $15,000 per Global Fund. The mailing address
for State Street Bank and Trust Company is: 1776 Heritage Drive, North Quincy,
MA 02171.
10
<PAGE>
TRANSFER AND DIVIDEND DISBURSING AGENT. FRIMCo serves as the transfer agent for
RIF. For this service, FRIMCo is paid a per account fee for transfer agency and
dividend disbursing services provided to RIF. From this fee, which is based upon
the number of shareholder accounts and total assets of the Funds, FRIMCo
compensates unaffiliated agents who assist in providing these services. FRIMCo
is also reimbursed by RIF for certain out-of-pocket expenses, including postage,
taxes, wires, stationery, and telephone. FRIMCo's mailing address is: 909 A
Street, Tacoma, WA 98402.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP serves as the independent
accountants of RIF. PricewaterhouseCoopers LLP is responsible for performing
annual audits of the financial statements and financial highlights of the Funds
in accordance with generally accepted auditing standards and tax returns. The
mailing address of PricewaterhouseCoopers LLP is 1800 First Interstate
Center, 999 Third Avenue, Seattle, WA 98104-4098.
CODES OF ETHICS. RIF, FRIMCo and RFD have each adopted a Code of Ethics as
required under SEC Rule 17j-1. These Codes permit personnel subject to the
Codes to invest in securities, which may include securities in which the Funds
can invest. Personal investments are subject to the regulatory and disclosure
provisions of the respective Codes. In addition, each Money Manager has adopted
a Code of Ethics under Rule 17j-1. The table below indicates whether each Money
Manager's Code of Ethics permits personnel covered by the Code to invest in
securities and, where appropriate, to invest in securities in which a Fund
advised by that Money Manager may invest.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IS PERSONAL ARE INVESTMENTS IN SECURITIES OWNED BY THE
INVESTING ALLOWED? ADVISED FUND ALLOWED?
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
AEW Capital Management, L.P. Yes No
- -------------------------------------------------------------------------------------------------------
Alliance Capital Management L.P. Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Barclays Global Fund Advisors N.A. Yes Yes, but not in securities with pending or
possible client buy
or sell orders and
certain blackouts
apply to securities
of Barclays PLC and
securities
underwritten by
Barclays affiliates
- -------------------------------------------------------------------------------------------------------
The Boston Company Asset Management Yes Yes, but not in securities with pending or
possible client buy or sell orders, also,
certain persons may not purchase
securities issued by financial services
organizations
- -------------------------------------------------------------------------------------------------------
CapitalWorks Investment Partners Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Cohen & Steers Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Geewax, Terker & Company Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Jacobs Levy Equity Management, Inc. Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
J.P. Morgan Investment Management, Yes Cannot purchase securities on a restricted
Inc. list or securities of financial services
organizations
- -------------------------------------------------------------------------------------------------------
Montgomery Asset Management LLC Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Oechsle International Advisors, LLC Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Pacific Investment Management Yes Yes, but not in securities with pending or
Company possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Peachtree Asset Management Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Sanford C. Bernstein & Co., Inc. Yes Yes, subject to blackouts and other
restrictions
- -------------------------------------------------------------------------------------------------------
Security Capital Global Capital Yes Yes, but not in securities with pending or
Management Group possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Standish, Ayer & Wood, Inc. Yes Cannot purchase securities on a restricted
list
- -------------------------------------------------------------------------------------------------------
Strong Capital Management Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Turner Investment Partners Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
Westpeak Investment Advisors, L.P. Yes Yes, but not in securities with pending or
possible client buy or sell orders
- -------------------------------------------------------------------------------------------------------
</TABLE>
FUND EXPENSES. The Funds will pay all their expenses other than those expressly
assumed by FRIMCo. The principal expense of the Funds is the annual management
fee payable to FRIMCo. The Funds' other expenses include: fees for independent
accountants, legal, transfer agent, registrar, custodian, fund accounting, tax
accounting, dividend disbursement, state taxes; brokerage fees and commissions;
insurance premiums; association membership dues; fees for filing of reports and
registering Shares with regulatory bodies; deferred organizational expenses; and
such extraordinary expenses as may arise, such as federal taxes and expenses
incurred in connection with litigation proceedings and claims and the legal
obligations of RIF to indemnify its Trustees, officers, employees, shareholders,
distributors and agents with respect thereto.
Whenever an expense can be attributed to a particular Fund, the expense is
charged to that Fund. Other common expenses are allocated among the Funds based
primarily upon their relative net assets.
FRIMCo may, from time to time, voluntarily agree to reimburse Fund expenses in
excess of certain limits on an annualized basis. These limits may be changed or
rescinded at any time to certain of the Funds (see the Prospectus for further
detail).
VALUATION OF FUND SHARES. The net asset value per share is calculated for each
Fund on each business day in which Shares are offered or orders to redeem are
tendered. A business day is one on which the New York Stock Exchange ("NYSE") is
open for trading. Currently, the Exchange is open for trading every weekday
except New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Net asset value per share is computed for each Fund by dividing the current
value of the Fund's assets less liabilities by the number of Shares of the Fund
outstanding and rounding to the nearest cent.
The Non-U.S. Fund's portfolio securities actively trade on foreign exchanges,
which may trade on Saturdays and on days that the Fund does not offer or
redeem Shares. The trading of portfolio securities on foreign exchanges on
such days may significantly increase or decrease the net asset value of Fund
Shares when the shareholder is not able to purchase or redeem Fund Shares.
Further, because foreign securities markets may close prior to the time the
Fund determines net asset value, events affecting the value of the portfolio
securities occurring between the time prices are determined and the time the
Fund calculates net asset value may not be reflected in the calculation of
net asset value unless FRIMCo determines that a particular event would
materially affect the net asset value.
VALUATION OF PORTFOLIO SECURITIES. With the exceptions noted below, the Funds
value their portfolio securities at "fair market value." This generally means
that equity securities and fixed-income securities listed and principally traded
on any national securities exchange are valued on the basis of the last sale
price or, if there were no sales, at the closing bid price, on the primary
exchange on which the security is traded. US over-the-counter equity and
fixed-income securities and options are valued on the basis of the closing bid
price, and futures contracts are valued on the basis of last sale price.
11
<PAGE>
Because many fixed-income securities do not trade each day, last sale or bid
prices often are not available. As a result, these securities may be valued
using prices provided by a pricing service when the prices are believed to be
reliable--that is, when the prices reflect the fair market value of the
securities.
International equity securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over-the-counter are valued on the basis of the mean of bid prices. If there is
no last sale or mean bid price, the securities may be valued on the basis of
prices provided by a pricing service when the prices are believed to be
reliable.
Money market instruments maturing within 60 days of the valuation date held by
the Funds are valued using the amortized cost method. Under this method, a
portfolio instrument is initially valued at cost, and thereafter a constant
accretion/amortization to maturity of any discount or premium is assumed. The
Funds utilize the amortized cost valuation method in accordance with the Rule.
The money market instruments are valued at "amortized cost" unless the Board
determines that amortized cost does not represent fair value. While amortized
cost provides certainty in valuation, it may result in periods when the value of
an instrument is higher or lower than the price a Fund would receive if it sold
the instrument.
The Funds value securities for which market quotations are not readily available
at "fair value," as determined in good faith and in accordance with procedures
established by the Board.
PORTFOLIO TRANSACTION POLICIES. Generally, securities are purchased for the
Funds for investment income and/or capital appreciation and not for short-term
trading profits. However, these Funds may dispose of securities without regard
to the time they have been held when such action, for defensive or other
purposes, appears advisable to their money managers.
The portfolio turnover rates for certain multi-manager Funds are likely to be
somewhat higher than the rates for comparable mutual funds with a single money
manager. Decisions to buy and sell securities for each Fund are made by a money
manager independently from other money managers. Thus, one money manager could
be selling a security when another money manager for the same Fund is purchasing
the same security, thereby increasing the Fund's portfolio turnover ratios and
brokerage commissions. The Funds' changes of money managers may also result in a
significant number of portfolio sales and purchases, as the new money manager
restructures the former money manager's portfolio.
The Funds do not give significant weight to attempting to realize long-term,
rather than short-term, capital gains when making portfolio management
decisions.
PORTFOLIO TURNOVER RATE. The portfolio turnover rate for each Fund is calculated
by dividing the lesser of purchases or sales of portfolio securities for the
particular year, by the monthly average value of the portfolio securities owned
by the Fund during the past 13 months. For purposes of determining the rate, all
short-term securities, including options, futures, forward contracts, and
repurchase agreements, are excluded. Significant variations in the portfolio
turnover rates for any Fund generally are primarily attributable to money
manager changes, market volatility, and duration of portfolio investments.
The portfolio turnover rates for the last two years for each Fund were:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Multi-Style Equity 67.67% 78.89%
Aggressive Equity 111.46 79.88
Real Estate Securities 23.98 --
Non-U.S. 83.45 50.36
Core Bond 139.06 75.95
</TABLE>
A high portfolio turnover rate generally will result in higher brokerage
transaction costs and may result in higher levels of realized capital gains or
losses with respect to a Fund's portfolio securities (see "Taxes").
12
<PAGE>
BROKERAGE ALLOCATIONS. Transactions on U.S. stock exchanges involve the payment
of negotiated brokerage commissions; on non-U.S. exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, including most debt
securities and money market instruments, but the price includes an undisclosed
payment in the form of a mark-up or mark-down. The cost of securities purchased
from underwriters includes an underwriting commission or concession.
Subject to the arrangements and provisions described below, the selection of a
broker or dealer to execute portfolio transactions is usually made by the money
manager. RIF's agreements with FRIMCo and the money managers provide, in
substance and subject to specific directions from officers of the Funds or
FRIMCo, that in executing portfolio transactions and selecting brokers or
dealers, the principal objective is to seek the best overall terms available to
the Fund. Securities will ordinarily be purchased from the primary markets, and
the money manager shall consider all factors it deems relevant in assessing the
best overall terms available for any transaction, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing basis).
In addition, those agreements authorize FRIMCo and the money manager,
respectively, in selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to consider the
"brokerage and research services" (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934) provided to the Funds, FRIMCo and/or to
the money manager (or their affiliates). FRIMCo and the money managers are
authorized to cause the Funds to pay a commission to a broker or dealer who
provides such brokerage and research services for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. FRIMCo or the money
manager, as appropriate, must determine in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided -- viewed in terms of that particular transaction or in terms of all
the accounts over which FRIMCo or the money manager exercises investment
discretion. Any commission, fee or other remuneration paid to an affiliated
broker-dealer is paid in compliance with RIF's procedures adopted in accordance
with Rule 17e-1 of the 1940 Act.
FRIMCo does not expect RIF to ordinarily effect a significant portion of RIF's
total brokerage business for the Funds with broker-dealers affiliated with its
money managers. However, a money manager may effect portfolio transactions for
the segment of a Fund's portfolio assigned to the money manager with a
broker-dealer affiliated with the manager, as well as with brokers affiliated
with other money managers.
FRIMCo and each Money Manager arranges for the purchase and sale of RIF's
securities and selects brokers and dealers (including affiliates), which in
its best judgment provide prompt and reliable execution at favorable prices
and reasonable commission rates. FRIMCo and each Money Manager may select
brokers and dealers which provide it with research services and may cause RIF
to pay such brokers and dealers commissions which exceed those other brokers
and dealers may have charged, if it views the commissions as reasonable in
relation to the value of the brokerage and/or research services. In selecting
a broker, including affiliates, for a transaction, the primary consideration
is prompt and effective execution of orders at the most favorable prices.
Subject to that primary consideration, dealers may be selected for research,
statistical or other services to enable FRIMCo and each Money Manager to
supplement its own research and analysis.
The Funds may effect portfolio transactions with or through Frank Russell
Securities, Inc. ("FRS"), an affiliate of FRIMCo, only when the applicable
money manager determines that the Fund will receive competitive execution,
price and commissions. Where brokerage transactions are effected by money
managers on behalf of the Funds through FRS at the request of FRIMCo,
research services obtained from third party service providers at market rates
are provided to the Funds by FRS. Such research services include performance
measurement statistics, fund analytics systems and market monitoring systems.
This arrangement may be used by the Multi-Style Equity, Aggressive Equity,
Non-US and Real Estate Securities Funds. All Funds may also effect portfolio
transactions on an agency basis through, and pay brokerage commissions to,
brokerage affiliates of the money managers.
13
<PAGE>
BROKERAGE COMMISSIONS. The Board of Trustees reviews, at least annually, the
commissions paid by the Funds to evaluate whether the commissions paid over
representative periods of time were reasonable in relation to commissions being
charged by other brokers and the benefits to the Funds. Frank Russell Company
maintains an extensive database showing commissions paid by institutional
investors, which is the primary basis for making this evaluation. Certain
services received by FRIMCo or the money managers attributable to a particular
transaction may benefit one or more other accounts for which investment
discretion is exercised by the money manager, or a Fund other than that for
which the particular portfolio transaction was effected. The fees of the money
managers are not reduced by reason of their receipt of such brokerage and
research services.
During the last three years, the brokerage Commissions paid by the Funds were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Multi-Style Equity* $ 311,283 $ 77,870 $ 36,614
Aggressive Equity* 167,564 21,613 39,991
Real Estate Securities** 172,975 -- --
Non-U.S.* 579,446 47,795 22,186
--------- --------- --------
Total $1,231,268 $ 142,278 $ 98,791
--------- --------- --------
--------- --------- --------
</TABLE>
* Commenced operations on January 2, 1997.
** Commenced operations on May 1, 1999.
The Core Bond Fund normally does not pay a stated brokerage commission on
transactions.
The principal reasons for changes in several Funds' brokerage commissions were
(1) changes in Fund asset size, (2) changes in market conditions, and (3)
changes in money managers of certain Funds, which required substantial
portfolio restructurings, resulting in increased securities transactions and
brokerage commissions.
During the year ended December 31, 1999, none of the brokerage commissions of
the funds were directed to brokers who provided research services to FRIMCo.
The research services included industry and company analysis, portfolio
strategy reports, economic analysis, and statistical data pertaining to the
capital markets.
Gross brokerage commissions received by affiliated broker/dealer from affiliated
and non-affiliated money managers for the year ended December 31, 1999 from
portfolio transactions effected for the Funds were as follows:
<TABLE>
<CAPTION>
AFFILIATED BROKER/DEALER COMMISSIONS PERCENT OF TOTAL COMMISSIONS
- ------------------------ ----------- ----------------------------
<S> <C> <C>
Frank Russell Securities $ 178,651 14.51%
JP Morgan 12,106 0.98
Salomon Smith Barney 7,079 0.57
Commerz Bank 4,155 0.34
Sanford C. Bernstein 2,933 0.24
Donaldson, Lufkin & Jenrette 2,976 0.24
Autranet 1,955 0.16
Robert Baird 633 0.05
Robinson Humphry 105 0.01
----------
Total Affiliated Commissions $ 210,683
==========
</TABLE>
The percentage of total affiliated transactions (relating to trading activity)
to total transactions during the year ended 1999 for the Funds was 17.0%.
During the year ended December 31, 1999 the Funds purchased securities issued by
the following regular brokers or dealers as defined by Rule 10b-1 of the 1940
Act, each of which is one of the Funds' ten largest brokers or dealers by dollar
amounts of securities executed or commissions received on behalf of the Funds.
The value of broker-dealer securities held as of December 31, 1999 was as
follows:
14
<PAGE>
<TABLE>
<CAPTION>
MERRILL MORGAN BEAR PAINE GOLDMAN SALOMON
FUND LYNCH STANLEY STEARNS WEBBER SACHS SMITH BARNEY
- ---- ------- ------- ------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Multi-Style Equity $400,800 $3,740,050 $523,687 $95,055 $423,844 --
Core Bond 322,287 1,406,146 -- -- 200,650 $587,555
</TABLE>
At December 31, 1999 the Funds did not have any holdings in the following top 10
broker-dealers:
Bridge Trading Company
Frank Russell Securities, Inc.
Instinet Corp.
Warburg Dillon Read
YIELD AND TOTAL RETURN QUOTATIONS. The Funds compute their average annual total
return by using a standardized method of calculation required by the Securities
and Exchange Commission (the "SEC"). Average annual total return is computed by
finding the average annual compounded rates of return on a hypothetical initial
investment of $1,000 over the one, five and ten year periods (or life of the
Funds, as appropriate), that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
P(1+T) TO THE POWER OF n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten year period at the end of the one, five, or ten
year period (or fractional portion thereof).
The calculation assumes that all dividends and distributions of each Fund are
reinvested at the price stated in the Prospectus on the dividend dates during
the period, and includes all recurring fees that are charged to all shareholder
accounts. The average annual total returns for the Funds are reported in the
Prospectus.
Yields are computed by using standardized methods of calculation required by the
SEC. Yields for Funds are calculated by dividing the net investment income per
share earned during a 30-day (or one month) period by the maximum offering price
per share on the last day of the period, according to the following formula:
YIELD = 2[(a-b+1) TO THE POWER OF 6 -1]
--------------
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = average daily number of Shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
The yields for the Funds investing primarily in fixed-income instruments are
reported in the Prospectus. Yield may fluctuate daily and does not provide a
basis for determining future yields.
15
<PAGE>
Each Fund may, from time to time, advertise non-standard performances, including
average annual total return for periods other than 1, 5 or 10 years or since
inception.
Each Fund may compare its performance with various industry standards of
performance, including the VARDS Report, Lipper Analytical Services, Inc. or
other industry publications, business periodicals, rating services and market
indices.
INVESTMENT RESTRICTIONS, POLICIES AND CERTAIN INVESTMENTS
Each Fund's investment objective is "fundamental" which means each investment
objective may not be changed without the approval of a majority of each Fund's
shareholders. Certain investment policies may also be fundamental. Other
policies may be changed by a Fund without shareholder approval. The Funds'
investment objectives are set forth in the Prospectus.
INVESTMENT RESTRICTIONS. Each Fund is subject to the following fundamental
investment restrictions. Unless otherwise noted, these restrictions apply on a
Fund-by-Fund basis at the time an investment is being made. No Fund will:
1. Invest in any security if, as a result of such investment, less than 75%
of its assets would be represented by cash; cash items; securities of the U.S.
government, its agencies, or instrumentalities; securities of other investment
companies; and other securities limited in respect of each issuer to an amount
not greater in value than 5% of the total assets of such Fund.
2. Invest 25% or more of the value of the Fund's total assets in the
securities of companies primarily engaged in any one industry (other than the
U.S. government, its agencies and instrumentalities), but such concentration may
occur incidentally as a result of changes in the market value of portfolio
securities. This restriction does not apply to the Real Estate Securities Fund.
The Real Estate Securities Fund may invest 25% or more of its total assets in
the securities of companies directly or indirectly engaged in the real estate
industry.
3. Acquire more than 5% of the outstanding voting securities, or 10% of all
of the securities, of any one issuer.
4. Invest in companies for the purpose of exercising control or management.
5. Purchase or sell real estate; provided that a Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
6. Purchase or sell commodities or commodities contracts, or interests in
oil, gas or other mineral exploration or development programs, except stock
index and financial futures contracts.
7. Borrow money, except that the Fund may borrow as a temporary measure for
extraordinary or emergency purposes, and not in excess of five percent of its
net assets; provided, that the Fund may borrow to facilitate redemptions (not
for leveraging or investment), provided that borrowings do not exceed an amount
equal to 33 1/3% of the current value of the Fund's assets taken at market
value, less liabilities other than borrowings. If at any time the Fund's
borrowings exceed this limitation due to a decline in net assets, such
borrowings will be reduced to the extent necessary to comply with this
limitation within three days. Reverse repurchase agreements will not be
considered borrowings for purposes of the foregoing restrictions, provided that
the Fund will not purchase investments when borrowed funds (including reverse
repurchase agreements) exceed 5% of its total assets.
8. Purchase securities on margin or effect short sales (except that a Fund
may obtain such short-term credits as may be necessary for the clearance of
purchases or sales of securities, may trade in futures and related options, and
may make margin payments in connection with transactions in futures contracts
and related options).
16
<PAGE>
9. Engage in the business of underwriting securities issued by others or
purchase securities subject to legal or contractual restrictions on disposition.
10. Participate on a joint or a joint and several basis in any trading
account in securities except to the extent permitted by the 1940 Act, and any
applicable rules and regulations and except as permitted by any applicable
exemptive orders from the 1940 Act. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with two or more Funds, or with a
Fund and such other accounts under the management of FRIMCo or any money manager
for the Funds to save brokerage costs or to average prices among them shall not
be considered a joint securities trading account.
11. Make loans of money or securities to any person or firm; provided,
however, that the making of a loan shall not be construed to include (i) the
acquisition for investment of bonds, debentures, notes or other evidences of
indebtedness of any corporation or government which are publicly distributed or
of a type customarily purchased by institutional investors; (ii) the entry into
"repurchase agreements"; or (iii) the lending of portfolio securities in the
manner generally described and in the Funds' Prospectus.
12. Purchase or sell options except to the extent permitted by the policies
set forth in the sections "Certain Investments -- Options on Securities and
Indices", "Certain Investments -- Foreign Currency Options", "Certain
Investments -- Futures Contracts and Options on Future Contracts" and "Certain
Investments -- Forward Foreign Currency Exchange Contracts" below.
13. Purchase the securities of other investment companies except to the
extent permitted by the 1940 Act, and any applicable rules and regulations and
except as permitted by any applicable exemptive orders from the 1940 Act.
14. Purchase from or sell portfolio securities to its officers, Trustees or
other "interested persons" (as defined in the 1940 Act) of RIF, including the
Funds' money managers and their affiliates, except as permitted by the 1940 Act,
SEC rules or exemptive orders.
15. Invest more than 5% of the current market value of its assets in
warrants nor more than 2% of such value in warrants which are not listed on the
New York or American Stock Exchanges; warrants attached to other securities are
not subject to this limitation.
16. Purchase or retain the securities of an issuer if, to the Fund's
knowledge, one or more of the Trustees or officers of the Fund, or one or more
of the officers or directors of the money manager responsible for the
investment, individually own beneficially more than l/2 of l% of the securities
of such issuer and together own beneficially more than 5% of such securities.
Compliance with this policy by the Fund's Trustees and officers is monitored by
Fund officers.
Additionally, as a non-fundamental investment policy, no Fund will issue senior
securities in contravention of Section 18 of the 1940 Act. As noted in Item 7,
above, the Fund may borrow to facilitate redemptions.
INVESTMENT POLICIES.
FUND INVESTMENT SECURITIES
The following table illustrates the investments that the Funds may invest
in or are permitted to invest in:
17
<PAGE>
<TABLE>
<CAPTION>
MULTI-STYLE AGGRESSIVE REAL ESTATE CORE
TYPE OF PORTFOLIO EQUITY EQUITY NON-U.S. SECURITIES BOND
SECURITY FUND FUND FUND FUND FUND
----------------- ----------- ---------- -------- ----------- ----
<S> <C> <C> <C> <C> <C>
Common stocks............ X X X X
Common stock equivalents
(warrants)............. X X X X
Common stock equivalents
(options).............. X X X X
Common stock equivalents
(convertible debt
securities)............ X X X X
Common stock equivalents
(depository receipts).. X X
Preferred stocks......... X X X X
Equity derivative
securities............... X X X X
Debt securities (below
investment grade or junk
bonds)................. X
US government securities. X X X X X
Municipal obligations.... X
Foreign securities....... X X X X X
</TABLE>
OTHER INVESTMENT PRACTICES
The Funds use investment techniques commonly used by other mutual funds.
The table below summarizes the investment practices of the Funds, each of which
may involve certain special risks. The Glossary located at the back of the SAI
describes each of the investment techniques identified below.
<TABLE>
<CAPTION>
MULTI-STYLE AGGRESSIVE REAL ESTATE CORE
TYPE OF PRACTICE EQUITY EQUITY NON-U.S. SECURITIES BOND
---------------- FUND FUND FUND FUND FUND
----------- ---------- -------- ----------- ----
<S> <C> <C> <C> <C> <C>
Cash reserves.............. X X X X X
Repurchase agreements(1)... X X X
When-issued and forward
commitment securities.... X X X
Reverse repurchase
agreements .............. X X X
Lending portfolio securities,
not to exceed 33 1/3% of
total Fund assets........ X X X X X
Illiquid securities (limited to
15% of a Fund's net
assets).................. X X X X X
Forward currency
contracts(2)............. X X
Write (sell) call and put
options on securities,
securities indexes and
foreign currencies(3).... X X X X X
Purchase options on securities,
securities indexes, and
currencies(3)............ X X X X X
Interest rate futures contracts,
stock index futures
contracts, foreign currency
contracts and options on
futures(4)............... X X X X X
Liquidity portfolios....... X X X X
</TABLE>
18
<PAGE>
(1) Under the 1940 Act, repurchase agreements are considered to be loans by a
Fund and must be fully collateralized by collateral assets. If the seller
defaults on its obligations to repurchase the underlying security, a Fund
may experience delay or difficulty in exercising its rights to realize upon
the security, may incur a loss if the value of the security declines and may
incur disposition costs in liquidating the security.
(2) Each of the Non-U.S. and Core Bond Funds may not invest more than 33% of its
assets in these contracts.
(3) A Fund will only engage in options where the options are traded on a
national securities exchange or in an over-the-counter market. A Fund may
invest up to 5% of its net assets, represented by the premium paid, in call
and put options. A Fund may write a call or put option to the extent that
the aggregate value of all securities or other assets used to cover all such
outstanding options does not exceed 25% of the value of its net assets.
(4) A Fund does not enter into any futures contracts or related options if the
sum of initial margin deposits on futures contracts, related options
(including options on securities, securities indexes and currencies) and
premiums paid for any such related options would exceed 5% of its total
assets. A Fund does not purchase futures contracts or related options if, as
a result, more than one-third of its total assets would be so invested.
CASH RESERVES. Each Fund, and its money managers, may elect to invest the
Fund's cash reserves in one or more affiliated or unaffilitated money market
funds. Such investment will not exceed 15% of the investing Fund's net assets.
If the Funds invest in affiliated money market funds, they will do so only
so long as it does not adversely affect the portfolio management and operations
of the money market funds. The affiliated money market funds, and the Funds
investing in them, treat such investments as the purchase and redemption of a
money market fund's shares. Any Fund investing in an affiliated money market
fund pursuant to this procedure participates equally on a pro rata basis in all
income, capital gains, and net assets of the money market fund, and will have
all rights and obligations of a shareholder, including voting rights. However,
shares of an affiliated money market fund issued to the Funds will be voted by
RIF's Trustees in the same proportion as the shares of the money market fund
that are held by shareholders that are not Funds. Funds investing in affiliated
money market fund effectively do not pay an advisory or administrative fee to a
money market fund and thus do not pay duplicative advisory or administrative
fees, as FRIMCo waives a portion of its advisory or administrative fees due from
those Funds in an amount that offsets the advisory or administrative fees it
receives from the applicable affiliated money market fund in respect of those
investments.
LIQUIDITY PORTFOLIO. A Fund at times has to sell portfolio securities in
order to meet redemption requests. The selling of securities may effect a
Fund's performance since the money manager sells the securities for other
than investment reasons. A Fund can avoid selling its portfolio securities by
holding adequate levels of cash to meet anticipated redemption requests.
The holding of significant amounts of cash is contrary to the investment
objectives of each of the Funds. The more cash the Funds hold, the more
difficult it is for their returns to meet or surpass their respective
benchmarks. FRIMCo will exercise investment discretion or select a money manager
to exercise investment discretion for approximately 5-15% of the Funds' assets
assigned to a "Liquidity Portfolio."
A Liquidity Portfolio addresses this potential detriment by having FRIMCo,
or a money manager selected for this purpose, create a temporary equity exposure
for cash reserves through the use of options and futures contracts. This will
enable the Funds to hold cash while receiving a return on the cash which is
similar to that of equity securities.
Liquidity Portfolios will be used for each of the Funds except the Core
Bond Fund.
19
<PAGE>
CERTAIN INVESTMENTS.
REPURCHASE AGREEMENTS. A Fund may enter into repurchase agreements with the
seller, a bank or securities dealer, who agrees to repurchase the securities at
the Fund's cost plus interest within a specified time (normally one day). The
securities purchased by a Fund have a total value in excess of the value of the
repurchase agreement and are held by the Custodian until repurchased. Repurchase
agreements assist a Fund in being invested fully while retaining "overnight"
flexibility in pursuit of investments of a longer-term nature. The Funds will
limit repurchase transactions to those member banks of the Federal Reserve
System and primary dealers in US government securities whose credit-worthiness
is continually monitored and found satisfactory by the Funds' money managers.
REVERSE REPURCHASE AGREEMENTS. A Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of portfolio
securities is deemed by the Fund's money managers to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby a Fund
transfers possession of a portfolio security to a bank or broker-dealer in
return for a percentage of the portfolio securities' market value. The Fund
retains record ownership of the security involved including the right to receive
interest and principal payments. At an agreed upon future date, the Fund
repurchases the security by paying an agreed upon purchase price plus interest.
Liquid assets of a Fund equal in value to the repurchase price, including any
accrued interest, will be segregated on the Fund's records while a reverse
repurchase agreement is in effect.
HIGH RISK BONDS. The Funds, other than the Core Bond Fund, do not invest
their assets in securities rated less than BBB by S&P or Baa by Moody's, or in
unrated securities judged by the money managers to be of a lesser credit quality
than those designations. Securities rated BBB by S&P or Baa by Moody's are the
lowest ratings which are considered "investment grade," although Moody's
considers securities rated Baa, and S&P considers bonds rated BBB, to have some
speculative characteristics. The Funds, other than the Core Bond Fund, will
dispose of, in a prudent and orderly fashion, securities whose ratings drop
below these minimum ratings. The market value of debt securities generally
varies inversely in relation to interest rates.
The Core Bond Fund will invest in "investment grade" securities and may
invest up to 25% of its total assets in debt securities rated less than BBB by
S&P or Baa by Moody's, or in unrated securities judged by the money managers of
the Fund to be of comparable quality. Lower rated debt securities generally
offer a higher yield than that available from higher grade issues. However,
lower rated debt securities involve higher risks, because they are especially
subject to adverse changes in general economic conditions and in the industries
in which the issuers are engaged, to changes in the financial condition of the
issuers and to price fluctuation in response to changes in interest rates.
During periods of economic downturn or rising interest rates, highly leveraged
issuers may experience financial stress which could adversely affect their
ability to make payments of principal and interest and increase the possibility
of default. In addition, the market for lower rated debt securities has expanded
rapidly in recent years, and its growth has paralleled a long economic
expansion. The market for lower rated debt securities is generally thinner and
less active than that for higher quality securities, which would limit the
Fund's ability to sell such securities at fair value in response to changes in
the economy or the financial markets. While such debt may have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposure to adverse conditions. The money managers of the Core Bond Fund
will seek to reduce the risks associated with investing in such securities by
limiting the Fund's holdings in such securities and by the depth of their own
credit analysis.
Securities rated BBB by S&P or Baa by Moody's may involve greater risks
than securities in higher rating categories. Securities receiving S&P's BBB
rating are regarded as having adequate capacity to pay interest and repay
principal. Such securities typically exhibit adequate investor protections
but adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal for debt in
this category than in higher rating categories.
Securities possessing Moody's Baa rating are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security is judged adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any
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great length of time. Such securities lack outstanding investment
characteristics and in fact may have speculative characteristics as well. For
further description of the various rating categories, see "Ratings of Debt
Instruments."
RISK FACTORS. The growth of the market for lower rated debt securities has
paralleled a long period of economic expansion. Lower rated debt securities may
be more susceptible to real or perceived adverse economic and competitive
industry conditions than investment grade securities. The prices of low rated
debt securities have been found to be less sensitive to interest rate changes
than investment grade securities, but more sensitive to economic downturns,
individual corporate developments, and price fluctuations in response to
changing interest rates. A projection of an economic downturn or of a period of
rising interest rates, for example, could cause a sharper decline in the prices
of low rated debt securities because the advent of a recession could lessen the
ability of a highly leveraged company to make principal and interest payments on
its debt securities. If the issuer of low rated debt securities defaults, a Fund
may incur additional expenses to seek financial recovery.
In addition, the markets in which low rated debt securities are traded are
generally thinner, more limited and less active than those for higher rated
securities. The existence of limited markets for particular securities may
diminish a Fund's ability to sell the securities at fair value either to meet
redemption requests or to respond to changes in the economy or in the financial
markets and could adversely affect and cause fluctuations in the daily net asset
value of the Fund's Shares.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
credit-worthiness of issuers of low rated securities may be more complex than
for issuers of other investment grade securities, and the ability of a Fund to
achieve its investment objectives may be more dependent on credit analysis than
would be the case if the Fund was investing only in investment grade securities.
The money managers of the Funds may use ratings to assist in investment
decisions. Ratings of debt securities represent a rating agency's opinion
regarding their quality and are not a guarantee of quality. Rating agencies
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings in response to subsequent events,
so that an issuer's current financial condition may be better or worse than a
rating indicates.
ILLIQUID SECURITIES. The Funds will not purchase or otherwise acquire any
security if, as a result, more than 15% of a Fund's net assets (taken at current
value) would be invested in securities, including repurchase agreements of more
than seven days' duration, that are illiquid by virtue of the absence of a
readily available market or because of legal or contractual restrictions on
resale. In addition, the Funds will not invest more than 10% of their respective
net assets (taken at current value) in securities of issuers which may not be
sold to the public without registration under the Securities Act of 1933, as
amended (the "1933 Act"). These policies do not include (1) commercial paper
issued under Section 4(2) of the 1933 Act, or (2) restricted securities eligible
for resale to qualified institutional purchasers pursuant to Rule 144A under the
1933 Act that are determined to be liquid by the money managers in accordance
with Board approved guidelines. These guidelines adopted by the Board for the
determination of liquidity of securities take into account trading activity for
such securities and the availability of reliable pricing information, among
other factors. If there is a lack of trading interest in a particular Rule 144A
security, a Fund's holding of that security may be illiquid. There may be
undesirable delays in selling illiquid securities at prices representing their
fair value.
The expenses of registration of restricted securities that are illiquid
(excluding securities that may be resold by the Funds pursuant to Rule 144A, as
explained in the respective Prospectuses) may be negotiated at the time such
securities are purchased by a Fund. When registration is required, a
considerable period may elapse between a decision to sell the securities and the
time the sale would be permitted. Thus, a Fund may not be able to obtain as
favorable a price as that prevailing at the time of the decision to sell. A Fund
also may acquire, through private placements, securities having contractual
resale restrictions, which might lower the amount realizable upon the sale of
such securities.
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FORWARD COMMITMENTS. A Fund may contract to purchase securities for a fixed
price at a future date beyond customary settlement time (a "forward commitment"
or "when-issued" transaction) so long as such transactions are consistent with
the Fund's ability to manage its investment portfolio and meet redemption
requests. A Fund may dispose of a forward commitment or when-issued transaction
prior to settlement if it is appropriate to do so and realize short-term profits
or losses upon such sale. When effecting such transactions, liquid assets of the
Fund in a dollar amount sufficient to make payment for the portfolio securities
to be purchased will be segregated on the Fund's records at the trade date and
maintained until the transaction is settled. Forward commitments and when-issued
transactions involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date or the other party to the transaction
fails to complete the transaction.
Additionally, under certain circumstances, the Non-U.S. Fund may
occasionally engage in "free trade" transactions in which delivery of securities
sold by the Fund is made prior to the Fund's receipt of cash payment therefor or
the Fund's payment of cash for portfolio securities occurs prior to the Fund's
receipt of those securities. "Free trade" transactions involve the risk of loss
to a Fund if the other party to the "free trade" transaction fails to complete
the transaction after a Fund has tendered cash payment or securities, as the
case may be.
LENDING PORTFOLIO SECURITIES. Cash collateral received by a Fund when it
lends its portfolio securities is invested in high-quality short-term debt
instruments, short-term bank collective investment and money market mutual funds
(including funds advised by the Custodian, for which it may receive an asset-
based fee), and other investments meeting certain quality and maturity
established by the Funds. Income generated from the investment of the cash
collateral is first used to pay the rebate interest cost to the borrower of the
securities then to pay for lending transaction costs, and then the remainder is
divided between the Fund and the lending agent.
Each Fund will retain most rights of beneficial ownership, including
dividends, interest or other distributions on the loaned securities. Voting
rights may pass with the lending. A Fund will call loans to vote proxies if a
material issue affecting the investment is to be voted upon.
A Fund may incur costs or possible losses in excess of the interest and
fees received in connection with securities lending transactions. Some
securities purchased with cash collateral are subject to market fluctuations
while a loan is outstanding. To the extent that the value of the cash collateral
as invested is insufficient to return the full amount of the collateral plus
rebate interest to the borrower upon termination of the loan, a Fund must
immediately pay the amount of the shortfall to the borrower.
OPTIONS AND FUTURES. The Funds may purchase and sell (write) both call and
put options on securities, securities indexes and foreign currencies, and enter
into interest rate, foreign currency and index futures contracts and purchase
and sell options on such futures contracts for hedging purposes. If other types
of options, futures contracts, or options on futures contracts are traded in the
future, the Funds may also use those instruments, provided that RIF's Board
determines that their use is consistent with the Funds' investment objectives,
and provided that their use is consistent with restrictions applicable to
options and futures contracts currently eligible for use by the Funds (i.e.,
that written call or put options will be "covered" or "secured" and that futures
and options on futures contracts will be used only for hedging purposes).
OPTIONS ON SECURITIES AND INDEXES. Each Fund, except as noted above, may
purchase and write both call and put options on securities and securities
indexes in standardized contracts traded on foreign or national securities
exchanges, boards of trade, or similar entities, or quoted on NASDAQ or on a
regulated foreign over-the-counter market, and agreements, sometimes called cash
puts, which may accompany the purchase of a new issue of bonds from a dealer.
The Funds intend to treat options in respect of specific securities that are not
traded on a national securities exchange and the securities underlying covered
call options as not readily marketable and therefore subject to the limitations
on the Funds' ability to hold illiquid securities. The Funds intend to purchase
and write call and put options on specific securities.
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An option on a security (or securities index) is a contract that gives the
purchaser of the option, in return for a premium, the right (but not the
obligation) to buy from (in the case of a call) or sell to (in the case of a
put) the writer of the option the security underlying the option at a specified
exercise price at any time during the option period. The writer of an option on
a security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise, the writer of an
option on an index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified multiplier
(established by the exchange upon which the stock index is traded) for the index
option. (An index is designed to reflect specified facets of a particular
financial or securities market, a specified group of financial instruments or
securities, or certain economic indicators.) Options on securities indexes are
similar to options on specific securities except that settlement is in cash and
gains and losses depend on price movements in the stock market generally (or in
a particular industry or segment of the market), rather than price movements in
the specific security.
A Fund may purchase a call option on securities to protect against
substantial increases in prices of securities the Fund intends to purchase
pending its ability or desire to purchase such securities in an orderly manner.
A Fund may purchase a put option on securities to protect holdings in an
underlying or related security against a substantial decline in market value.
Securities are considered related if their price movements generally correlate
to one another.
A Fund will write call options and put options only if they are
"covered." In the case of a call option on a security, the option is
"covered" if the Fund owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, liquid
assets in such amount are placed in a segregated account by the Custodian)
upon conversion or exchange of other securities held by the Fund. For a call
option on an index, the option is covered if the Fund maintains with the
Custodian liquid assets equal to the contract value. A call option is also
covered if the Fund holds a call on the same security or index as the call
written where the exercise price of the call held is (1) equal to or less
than the exercise price of the call written, or (2) greater than the exercise
price of the call written, provided the difference is maintained by the Fund
in liquid assets in a segregated account with the Custodian. A put option on
a security or an index is "covered" if the Fund maintains liquid assets equal
to the exercise price in a segregated account with the Custodian. A put
option is also covered if the Fund holds a put on the same security or index
as the put written where the exercise price of the put held is (1) equal to
or greater than the exercise price of the put written, or (2) less than the
exercise price of the put written, provided the difference is maintained by
the Fund in liquid assets in a segregated account with the Custodian.
If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by a Fund expires unexercised, the Fund realizes a capital loss (long
or short-term depending on whether the Fund's holding period for the option is
greater than one year) equal to the premium paid.
To close out a position when writing covered options, a Fund may make a
"closing purchase transaction," which involves purchasing an option on the same
security with the same exercise price and expiration date as the option which it
previously wrote on the security. To close out a position as a purchaser of an
option, a Fund may make a "closing sale transaction," which involves liquidating
the Fund's position by selling the option previously purchased. The Fund will
realize a profit or loss from a closing purchase or sale transaction depending
upon the difference between the amount paid to purchase an option and the amount
received from the sale thereof.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when the Fund desires.
A Fund will realize a capital gain from a closing transaction on an option
it has written if the cost of the closing option is less than the premium
received from writing the option, or, if it is more, the Fund will
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realize a capital loss. If the premium received from a closing sale
transaction is more than the premium paid to purchase the option, the Fund
will realize a capital gain or, if it is less, the Fund will realize a
capital loss. With respect to closing transactions on purchased options, the
capital gain or loss realized will be short or long-term depending on the
holding period of the option closed out. The principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price of the underlying security or index in
relation to the exercise price of the option, the volatility of the
underlying security or index, and the time remaining until the expiration
date.
The premium paid for a put or call option purchased by a Fund is an asset
of the Fund. The premium received for an option written by a Fund is recorded as
a liability. The value of an option purchased or written is marked-to-market
daily and is valued at the closing price on the exchange on which it is traded
or, if not traded on an exchange or no closing price is available, at the mean
between the last bid and asked prices.
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES AND INDEXES. There are several
risks associated with transactions in options on securities and on indexes. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
If a put or call option purchased by a Fund is not sold when it has
remaining value, and if the market price of the underlying security, in the case
of a put, remains equal to or greater than the exercise price or, in the case of
a call, remains less than or equal to the exercise price, the Fund will lose its
entire investment (i.e., the premium paid) on the option. Also, where a put or
call option on a particular security is purchased to hedge against price
movements in a related security, the price of the put or call option may move
more or less than the price of the related security.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option may expire worthless. If a Fund were
unable to close out a covered call option that it had written on a security, it
would not be able to sell the underlying security unless the option expired
without exercise.
As the writer of a covered call option, a Fund forgoes, during the option's
life, the opportunity to profit from increases in the market value of the
underlying security above the exercise price, but, as long as its obligation as
a writer continues, has retained a risk of loss should the price of the
underlying security decline. Where a Fund writes a put option, it is exposed
during the term of the option to a decline in the price of the underlying
security.
If trading were suspended in an option purchased by a Fund, the Fund would
not be able to close out the option. If restrictions on exercise were imposed,
the Fund might be unable to exercise an option it has purchased. Except to the
extent that a call option on an index written by the Fund is covered by an
option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; however, such losses may be mitigated by changes
in the value of the Fund's securities during the period the option was
outstanding.
OPTIONS ON FOREIGN CURRENCY. A Fund may buy and sell put and call options
on foreign currencies either on exchanges or in the over-the-counter market for
the purpose of hedging against changes in future currency exchange rates. Call
options convey the right to buy the underlying currency at a price which is
expected to be lower than the spot price of the currency at the time the option
expires. Put options convey the right to sell the underlying currency at a price
which is anticipated to be higher than the spot price of the currency at the
time the option expires. Currency options traded on US or other exchanges may be
subject to position limits which may limit the ability of a Fund to reduce
foreign currency risk using such options. Over-the-counter options differ from
traded options in that they are two-party contracts with price and other
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terms negotiated between buyer and seller, and generally do not have as much
market liquidity as exchange-traded options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Fund may invest in
interest rate futures contracts, foreign currency futures contracts, or stock
index futures contracts, and options thereon that are traded on a US or foreign
exchange or board of trade, as specified in the Prospectuses. An interest rate,
foreign currency or index futures contract provides for the future sale by one
party and purchase by another party of a specified quantity of financial
instruments (such as GNMA certificates or Treasury bonds) or foreign currency or
the cash value of an index at a specified price at a future date. A futures
contract on an index (such as the S&P 500) is an agreement between two parties
(buyer and seller) to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was originally
written. In the case of futures contracts traded on US exchanges, the exchange
itself or an affiliated clearing corporation assumes the opposite side of each
transaction (i.e., as buyer or seller). A futures contract may be satisfied or
closed out by delivery or purchase, as the case may be, of the financial
instrument or by payment of the change in the cash value of the index.
Frequently, using futures to effect a particular strategy instead of using the
underlying or related security or index will result in lower transaction costs
being incurred. Although the value of an index may be a function of the value of
certain specified securities, no physical delivery of these securities is made.
A public market exists in futures contracts covering several indexes as well as
a number of financial instruments and foreign currencies. For example: the S&P
500; the Russell 2000-Registered Trademark-; Nikkei 225; CAC-40; FT-SE 100; the
NYSE composite; US Treasury bonds; US Treasury notes; GNMA Certificates;
three-month US Treasury bills; Eurodollar certificates of deposit; the
Australian Dollar; the Canadian Dollar; the British Pound; the German Mark; the
Japanese Yen; the French Franc; the Swiss Franc; the Mexican Peso; and certain
multinational currencies, such as the European Currency Unit ("ECU"). It is
expected that other futures contracts will be developed and traded in the
future.
Each Fund may also purchase and write call and put options on futures
contracts. Options on futures contracts possess many of the same
characteristics as options on securities and indexes (discussed above). A
futures option gives the holder the right, in return for the premium paid, to
assume a long position (in the case of a call) or short position (in the case
of a put) in a futures contract at a specified exercise price at any time
during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned
the opposite short position. In the case of a put option, the opposite is
true. An option on a futures contract may be closed out (before exercise or
expiration) by an offsetting purchase or sale of an option on a futures
contract of the same series.
There can be no assurance that a liquid market will exist at a time when
a Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent a Fund from liquidating an unfavorable
position and the Fund would remain obligated to meet margin requirements until
the position is closed.
A Fund will only enter into futures contracts or options on futures
contracts which are standardized and traded on a US or foreign exchange or board
of trade, or similar entity, or quoted on an automated quotation system. A Fund
will enter into a futures contract only if the contract is "covered" or if the
Fund at all times maintains with its custodian liquid assets equal to or greater
than the fluctuating value of the contract (less any margin or deposit). A Fund
will write a call or put option on a futures contract only if the option is
"covered." For a discussion of how to cover a written call or put option, see
"Options on Securities and Indexes" above.
A Fund may enter into contracts and options on futures contracts for
"bona fide hedging" purposes, as defined under the rules of the Commodity
Futures Trading Commission (the "CFTC"). A Fund may also enter into futures
contracts and options on futures contracts for non hedging purposes provided the
aggregate initial margin and premiums required to establish these positions will
not exceed 5% of the Fund's net assets.
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As long as required by regulatory authorities, each Fund will limit its use
of futures contracts and options on futures contracts to hedging transactions.
For example, a Fund might use futures contracts to hedge against anticipated
changes in interest rates that might adversely affect either the value of the
Fund's securities or the price of the securities which the Fund intends to
purchase. Additionally, a Fund may use futures contracts to create equity
exposure for its cash reserves for liquidity purposes.
When a purchase or sale of a futures contract is made by a Fund, the Fund
is required to deposit with the Custodian (or broker, if legally permitted) a
specified amount of cash or US government securities ("initial margin"). The
margin required for a futures contract is set by the exchange on which the
contract is traded and may be modified during the term of the contract. The
initial margin is in the nature of a performance bond or good faith deposit on
the futures contract which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been satisfied. Each Fund
expects to earn interest income on its initial margin deposits. A futures
contract held by a Fund is valued daily at the official settlement price of the
exchange on which it is traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the futures contract.
This process is known as "marking to market." Variation margin does not
represent a borrowing or loan by a Fund, but is instead a settlement between the
Fund and the broker of the amount one would owe the other if the futures
contract expired. In computing daily net asset value, each Fund will mark-to-
market its open futures positions.
A Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund realizes a capital
gain, or if it is more, the Fund realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, the Fund
realizes a capital gain, or if it is less, the Fund realizes a capital loss. The
transaction costs must also be included in these calculations.
LIMITATIONS ON USE OF FUTURES AND OPTIONS ON FUTURES CONTRACTS. A Fund will
not enter into a futures contract or futures option contract if, immediately
thereafter, the aggregate initial margin deposits relating to such positions
plus premiums paid by it for open futures option positions, less the amount by
which any such options are "in-the-money," would exceed 5% of the Fund's total
assets. A call option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures contract
that is the subject of the option.
When purchasing a futures contract, a Fund will maintain with the Custodian
(and mark-to-market on a daily basis) liquid assets that, when added to the
amounts deposited with a futures commission merchant as margin, are equal to the
market value of the futures contract. Alternatively, the Fund may "cover" its
position by purchasing a put option on the same futures contract with a strike
price equal to or higher than the price of the contract held by the Fund.
When selling a futures contract, a Fund will maintain with the Custodian
(and mark-to-market on a daily basis) liquid assets that, when added to the
amount deposited with a futures commission merchant as margin, are equal to the
market value of the instruments underlying the contract. Alternatively, the Fund
may "cover" its position by owning the instruments underlying the contract (or,
in the case of an index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the futures contract is
based), or by holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the contract written by
the Fund (or at a higher price if the difference is maintained in liquid assets
with the Custodian).
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When selling a call option on a futures contract, a Fund will maintain with
the Custodian (and mark-to-market on a daily basis) liquid assets that, when
added to the amounts deposited with a futures commission merchant as margin,
equal the total market value of the futures contract underlying the call option.
Alternatively, the Fund may "cover" its position by entering into a long
position in the same futures contract at a price no higher than the strike price
of the call option, by owning the instruments underlying the futures contract,
or by holding a separate call option permitting the Fund to purchase the same
futures contract at a price not higher than the strike price of the call option
sold by the Fund.
When selling a put option on a futures contract, a Fund will maintain with
the Custodian (and mark-to-market on a daily basis) liquid assets that equal the
purchase price of the futures contract, less any margin on deposit.
Alternatively, the Fund may "cover" the position either by entering into a short
position in the same futures contract, or by owning a separate put option
permitting it to sell the same futures contract so long as the strike price of
the purchased put option is the same or higher than the strike price of the put
option sold by the Fund.
In order to comply with applicable regulations of the Commodity Futures
Trading Commission ("CFTC") pursuant to which the Funds avoid being deemed to
be "commodity pools," the Funds are limited in entering into futures
contracts and options on futures contracts to positions which constitute
"bona fide hedging" positions within the meaning and intent of applicable
CFTC rules, and with respect to positions for non-hedging purposes, to
positions for which the aggregate initial margins and premiums will not
exceed 5% of the net assets of a Fund as determined under the CFTC Rules.
The requirements for qualification as a regulated investment company also
may limit the extent to which a Fund may enter into futures, options on futures
contracts or forward contracts. See "Taxation."
RISKS ASSOCIATED WITH FUTURES AND OPTIONS ON FUTURES CONTRACTS. There are
several risks associated with the use of futures and options on futures
contracts as hedging techniques. A purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract. There
can be no guarantee that there will be a correlation between price movements in
the hedging vehicle and in the portfolio securities being hedged. In addition,
there are significant differences between the securities and futures markets
that could result in an imperfect correlation between the markets, causing a
given hedge not to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as variations in speculative market
demand for futures and options on futures contracts on securities, including
technical influences in futures trading and options on futures contracts, and
differences between the financial instruments being hedged and the instruments
underlying the standard contracts available for trading in such respects as
interest rate levels, maturities and creditworthiness of issuers. An incorrect
correlation could result in a loss on both the hedged securities in a Fund and
the hedging vehicle so that the portfolio return might have been greater had
hedging not been attempted. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures or a futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no
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assurance that an active secondary market will develop or continue to exist.
Lack of a liquid market for any reason may prevent a Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed.
ADDITIONAL RISKS OF OPTIONS ON SECURITIES, FUTURES CONTRACTS, OPTIONS ON
FUTURES CONTRACTS, AND FORWARD CURRENCY EXCHANGE CONTRACT AND OPTIONS THEREON.
Options on securities, futures contracts, options on futures contracts,
currencies and options on currencies may be traded on foreign exchanges. Such
transactions may not be regulated as effectively as similar transactions in the
United States; may not involve a clearing mechanism and related guarantees, and
are subject to the risk of governmental actions affecting trading in, or the
prices of, foreign securities. The value of such positions also could be
adversely affected by (1) other complex foreign, political, legal and economic
factors, (2) lesser availability than in the United States of data on which to
make trading decisions, (3) delays in a Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (4) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (5) lesser
trading volume.
HEDGING STRATEGIES. Stock index futures contracts may be used by the
Funds, other than the Core Bond Fund, as an "equitization" vehicle for cash
reserves held by the Funds. For example: equity index futures contracts are
purchased to correspond with the cash reserves in each of the Funds. As a
result, a Fund will realize gains or losses based on the performance of the
equity market corresponding to the relevant indexes for which futures
contracts have been purchased. Thus, each Fund's cash reserves will always be
fully exposed to equity market performance.
Financial futures contracts may be used by the Non-U.S. and Core Bond Funds
as a hedge during or in anticipation of interest rate changes. For example: if
interest rates were anticipated to rise, financial futures contracts would be
sold (short hedge) which would have an effect similar to selling bonds. Once
interest rates increase, fixed-income securities held in a Fund's portfolio
would decline, but the futures contract value would decrease, partly offsetting
the loss in value of the fixed-income security by enabling the Fund to
repurchase the futures contract at a lower price to close out the position.
The Funds may purchase a put and/or sell a call option on a stock index
futures contract instead of selling a futures contract in anticipation of market
decline. Purchasing a call and/or selling a put option on a stock index futures
contract is used instead of buying a futures contract in anticipation of a
market advance, or to temporarily create an equity exposure for cash balances
until those balances are invested in equities. Options on financial futures are
used in a similar manner in order to hedge portfolio securities against
anticipated changes in interest rates.
When purchasing a futures contract, a Fund will maintain with the Custodian
(and mark-to-market on a daily basis) liquid assets that, when added to the
amounts deposited with a futures commission merchant as margin, are equal to the
market value of the futures contract. Alternatively, a Fund may "cover" its
position by purchasing a put option on the same futures contract with a strike
price as high or higher than the price of the contract held by the Fund.
FOREIGN CURRENCY FUTURES CONTRACTS. The Funds are also permitted to enter
into foreign currency futures contracts in accordance with their investment
objectives and as limited by the procedures outlined above.
A foreign currency futures contract is a bilateral agreement pursuant to
which one party agrees to make, and the other party agrees to accept delivery of
a specified type of debt security or currency at a specified price. Although
such futures contacts by their terms call for actual delivery or acceptance of
debt securities or currency, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery.
The Funds may sell a foreign currency futures contract to hedge against
possible variations in the exchange rate of the foreign currency in relation
to the US dollar. When a manager anticipates a significant change in a
foreign exchange rate while intending to invest in a foreign security, a Fund
may purchase a
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foreign currency futures contract to hedge against a rise in foreign exchange
rates pending completion of the anticipated transaction. Such a purchase
would serve as a temporary measure to protect the Fund against any rise in
the foreign exchange rate which may add additional costs to acquiring the
foreign security position. The Funds may also purchase call or put options on
foreign currency futures contracts to obtain a fixed foreign exchange rate.
The Funds may purchase a call option or write a put option on a foreign
exchange futures contract to hedge against a decline in the foreign exchange
rates or the value of its foreign securities. The Funds may write a call
option on a foreign currency futures contract as a partial hedge against the
effects of declining foreign exchange rates on the value of foreign
securities.
RISK FACTORS. There are certain investment risks in using futures contracts
and/or options as a hedging technique. One risk is the imperfect correlation
between price movement of the futures contracts or options and the price
movement of the portfolio securities, stock index or currency subject of the
hedge. Another risk is that a liquid secondary market may not exist for a
futures contract causing a Fund to be unable to close out the futures contract
thereby affecting the Fund's hedging strategy.
In addition, foreign currency options and foreign currency futures
involve additional risks. Such transactions may not be regulated as
effectively as similar transactions in the United States; may not involve a
clearing mechanism and related guarantees; and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign
securities. The value of such positions could also be adversely affected by
(1) other complex foreign, political, legal and economic factors, (2) lesser
availability than in the United States of data on which to make trading
decisions, (3) delays in a Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(4) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (5) lesser trading
volume.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS ("FORWARD CURRENCY
CONTRACTS"). The Funds may engage in forward currency contracts to hedge against
uncertainty in the level of future exchange rates. The Funds will conduct their
forward foreign currency exchange transactions either on a spot (i.e. cash)
basis at the rate prevailing in the currency exchange market, or through
entering into forward currency exchange contracts ("forward contract") to
purchase or sell currency at a future date. A forward contract involves an
obligation to purchase or sell a specific currency. For example, to exchange a
certain amount of US dollars for a certain amount of Japanese Yen, at a future
date, which may be any fixed number of days from the date of the contract agreed
upon by the parties, at a price set at the time of the contract. Forward
currency contracts are (a) traded in an interbank market conducted directly
between currency traders (typically, commercial banks or other financial
institutions) and their customers, (b) generally have no deposit requirements
and (c) are consummated without payment of any commissions. A Fund may, however,
enter into forward currency contracts containing either or both deposit
requirements and commissions. In order to assure that a Fund's forward currency
contracts are not used to achieve investment leverage, the Fund will segregate
liquid assets in an amount at all times equal to or exceeding the Fund's
commitments with respect to these contracts. The Funds may engage in a forward
contract that involves transacting in a currency whose changes in value are
considered to be linked (a proxy) to a currency or currencies in which some or
all of the Funds' portfolio securities are or are expected to be denominated. A
Fund's dealings in forward contracts will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of foreign currency with respect to specific receivables or
payables of the Funds generally accruing in connection with the purchase or sale
of their portfolio securities. Position hedging is the sale of foreign currency
with respect to portfolio security positions denominated or quoted in the
currency. A Fund may not position hedge with respect to a particular currency to
an extent greater than the aggregate market value (at the time of making such
sale) of the securities held in its portfolio denominated or quoted in or
currency convertible into that particular currency (or another currency or
aggregate of currencies which act as a proxy for that currency). The Funds may,
however, enter into a position hedging transaction with respect to a currency
other than that held in the Funds' portfolios, if such a transaction is deemed a
hedge. If a Fund enters into this type of hedging transaction, liquid assets
will be placed in a segregated account in an amount equal to the value of the
Fund's total assets committed to the consummation of the forward contract. If
the value of the securities placed in the segregated account declines,
additional liquid assets will be placed in the account so that the
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value of the account will equal the amount of the Fund's commitment with
respect to the contract. Hedging transactions may be made from any foreign
currency into US dollars or into other appropriate currencies.
At or before the maturity of a forward foreign currency contract, a Fund
may either sell a portfolio security and make delivery of the currency, or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund will
obtain, on the same maturity date, the same amount of the currency which it
is obligated to deliver. If a Fund retains the portfolio security and engages
in an offsetting transaction, the Fund, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that
movement has occurred in forward currency contract prices. Should forward
prices decline during the period between the Fund's entering into a forward
contract for the sale of a currency and the date that it enters into an
offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent that the price of the currency that it has agreed to sell
exceeds the price of the currency that it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent that the
price of the currency it has agreed to purchase exceeds the price of the
currency that it has agreed to sell. There can be no assurance that new
forward currency contracts or offsets will be available to a Fund.
Upon maturity of a forward currency contract, the Funds may (a) pay for
and receive, or deliver and be paid for, the underlying currency, (b) negotiate
with the dealer to roll over the contract into a new forward currency contract
with a new future settlement date or (c) negotiate with the dealer to terminate
the forward contract by entering into an offset with the currency trader whereby
the parties agree to pay for and receive the difference between the exchange
rate fixed in the contract and the then current exchange rate. A Fund also may
be able to negotiate such an offset prior to maturity of the original forward
contract. There can be no assurance that new forward contracts or offsets will
always be available to the Funds.
The cost to a Fund of engaging in currency transactions varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because transactions in currency exchange are
usually conducted on a principal basis, no fees or commissions are involved. The
use of forward foreign currency contracts does not eliminate fluctuations in the
underlying prices of the securities, but it does establish a rate of exchange
that can be achieved in the future. In addition, although forward foreign
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, at the same time, they limit any potential gain that might
result should the value of the currency increase.
If a devaluation is generally anticipated, a Fund may be able to contract
to sell the currency at a price above the devaluation level that it anticipates.
A Fund will not enter into a currency transaction if, as a result, it will fail
to qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), for a given year.
Forward foreign currency contracts are not regulated by the SEC. They are
traded through financial institutions acting as market-makers. In the forward
foreign currency market, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over a
period of time. Moreover, a trader of forward contracts could lose amounts
substantially in excess of its initial investments, due to the collateral
requirements associated with such positions.
The market for forward currency contracts may be limited with respect to
certain currencies. These factors will restrict a Fund's ability to hedge
against the risk of devaluation of currencies in which the Fund holds a
substantial quantity of securities and are unrelated to the qualitative rating
that may be assigned to any particular portfolio security. Where available, the
successful use of forward currency contracts draws upon a money manager's
special skills and experience with respect to such instruments and usually
depends on the money manager's ability to forecast interest rate and currency
exchange rate movements correctly. Should interest or exchange rates move in an
unexpected manner, a Fund may not achieve the anticipated benefits of forward
currency contracts or may realize losses and thus be in a worse position than if
such strategies had not been used. Unlike many exchange-traded futures contracts
and options on futures contracts, there are no daily price fluctuation limits
with respect to forward currency contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of such instruments and
movements in the price of the
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securities and currencies hedged or used for cover will not be perfect. In
the case of proxy hedging, there is also a risk that the perceived linkage
between various currencies may not be present or may not be present during
the particular time a Fund is engaged in that strategy.
A Fund's ability to dispose of its positions in forward currency contracts
will depend on the availability of active markets in such instruments. It is
impossible to predict the amount of trading interest that may exist in various
types of forward currency contracts. Forward currency contracts may be closed
out only by the parties entering into an offsetting contract. Therefore, no
assurance can be given that the Fund will be able to utilize these instruments
effectively for the purposes set forth above.
Forward foreign currency transactions are subject to the additional risk of
governmental actions affecting trading in or the prices of foreign currencies or
securities. The value of such positions also could be adversely affected by (1)
other complex foreign, political, legal and economic factors, (2) lesser
availability than in the United States of data on which to make trading
decisions, (3) delays in a Fund's ability to act upon economic events occurring
in foreign markets during non-business hours in the United States, (4) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States, (5) lesser trading volume and (6) that a
perceived linkage between various currencies may not persist throughout the
duration of the contracts.
DEPOSITORY RECEIPTS. A Fund may hold securities of foreign issuers in the
form of American Depository Receipts ("ADRs"), American Depository Shares
("ADSs") and European Depository Receipts ("EDRs"), or other securities
convertible into securities of eligible European or Far Eastern issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs typically are issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depository Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. Generally, ADRs and ADSs in registered form are designed
for use in United States securities markets and EDRs in bearer form are designed
for use in European securities markets. For purposes of a Fund's investment
policies, the Fund's investments in ADRs, ADSs and EDRs will be deemed to be
investments in the equity securities representing securities of foreign issuers
into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into US dollars, the disposition of non-cash distributions, and the
performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass through voting
rights to ADR holders with respect to the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Funds may invest in sponsored and unsponsored ADRs.
BANK INSTRUMENTS. The Core Bond Fund may invest in bank instruments, which
include European certificates of deposit ("ECDs"), European time deposits
("ETDs") and Yankee Certificates of deposit ("Yankee CDs"). ECDs, ETDs, and
Yankee CDs are subject to somewhat different risks from the
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obligations of domestic banks. ECDs are dollar denominated certificates
of deposit issued by foreign branches of US and foreign banks; ETDs are US
dollar denominated time deposits in a foreign branch of a US bank or a
foreign bank; and Yankee CDs are certificates of deposit issued by a US
branch of a foreign bank denominated in US dollars and held in the United
States. Different risks may also exist for ECDs, ETDs, and Yankee CDs because
the banks issuing these instruments, or their domestic or foreign branches,
are not necessarily subject to the same regulatory requirements that apply to
domestic banks, such as reserve requirements, loan limitations, examinations,
accounting, auditing and recordkeeping, and the public availability of
information. These factors will be carefully considered by the money managers
when evaluating credit risk in the selection of investments for the Core Bond
Bond Fund.
INDEXED COMMERCIAL PAPER. Indexed commercial paper is US-dollar
denominated commercial paper the yield of which is linked to certain foreign
exchange rate movements. The yield to the investor on indexed commercial
paper is established at maturity as a function of spot exchange rates between
the US dollar and a designated currency as of or about that time. The yield
to the investor will be within a range stipulated at the time of purchase of
the obligation, generally with a guaranteed minimum rate of return that is
below, and a potential maximum rate of return that is above, market yields on
US-dollar denominated commercial paper, with both the minimum and maximum
rates of return on the investment corresponding to the minimum and maximum
values of the spot exchange rate two business days prior to maturity. While
such commercial paper entails risk of loss of principal, the potential risk
for realizing gains as a result of changes in foreign currency exchange rates
enables a Fund to hedge (or cross-hedge) against a decline in the US dollar
value of investments denominated in foreign currencies while providing an
attractive money market rate of return.
US GOVERNMENT OBLIGATIONS. The types of US government obligations the Funds
may purchase include: (1) a variety of US Treasury obligations which differ only
in their interest rates, maturities and times of issuance: (a) US Treasury bills
at time of issuance have maturities of one year or less, (b) US Treasury notes
at time of issuance have maturities of one to ten years and (c) US Treasury
bonds at time of issuance generally have maturities of greater than ten years;
(2) obligations issued or guaranteed by US government agencies and
instrumentalities and supported by any of the following: (a) the full faith and
credit of the US Treasury (such as Government National Mortgage Association
participation certificates), (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the US Treasury, (c) discretionary
authority of the US government agency or instrumentality or (d) the credit of
the instrumentality (examples of agencies and instrumentalities are: Federal
Land Banks, Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks and Federal National Mortgage
Association). No assurance can be given that the US government will provide
financial support to such US government agencies or instrumentalities described
in (2)(b), (2)(c) and (2)(d) in the future, other than as set forth above, since
it is not obligated to do so by law. Accordingly, such US government obligations
may involve risk of loss of principal and interest. The Funds may invest in
fixed-rate and floating or variable rate US government obligations. The Funds
may purchase US government obligations on a forward commitment basis.
VARIABLE AND FLOATING RATE SECURITIES. A floating rate security is one
whose terms provide for the automatic adjustment of its interest rate whenever a
specified interest rate changes. A variable rate security is one whose terms
provide for the automatic establishment of a new interest rate on set dates. The
interest rate on floating rate securities is ordinarily tied to and is a
percentage of the prime rate of a specified bank or some similar objective
standard, such as 90-day US Treasury Bill rate, and may change as often as twice
daily. Generally, changes in interest rates on floating rate securities will
reduce changes in the securities' market value from the original purchase price
resulting in the potential for capital appreciation or capital depreciation
being less than for fixed-income obligations with a fixed interest rate.
ZERO COUPON SECURITIES. Zero coupon securities are notes, bonds and
debentures that (1) do not pay current interest and are issued at a substantial
discount from par value, (2) have been stripped of their unmatured interest
coupons and receipts or (3) pay no interest until a stated date one or more
years into the future. These securities also include certificates representing
interests in such stripped coupons and receipts. Zero coupon securities trade at
a discount from their par value and are subject to greater fluctuations of
market value in response to changing interest rates.
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MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES. The forms of
mortgage-related and other asset-backed securities the Funds may invest in
include the securities described below:
MORTGAGE PASS-THROUGH SECURITIES. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are generally made monthly. The
securities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which in effect are a "pass-through"
of the monthly payments made by the individual borrowers on the underlying
mortgages, net of any fees paid to the issuer or guarantor. The principal
governmental issuer of such securities is the Government National Mortgage
Association ("GNMA"), which is a wholly owned US government corporation within
the Department of Housing and Urban Development. Government-related issuers
include the Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the United States created pursuant to an Act of Congress, and
which is owned entirely by the Federal Home Loan Banks, and the Federal National
Mortgage Association ("FNMA"), a government sponsored corporation owned entirely
by private stockholders. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers also create pass-through pools of conventional residential
mortgage loans. Such issuers may be the originators of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations
("CMOs") are hybrid instruments with characteristics of both mortgage-backed
bonds and mortgage pass-through securities. Similar to a bond, interest and
pre-paid principal on a CMO are paid, in most cases, monthly. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage passthrough securities guaranteed by GNMA, FHLMC, or
FNMA. CMOs are structured into multiple classes (or "tranches"), with each class
bearing a different stated maturity.
ASSET-BACKED SECURITIES. Asset-backed securities represent undivided
fractional interests in pools of instruments, such as consumer loans, and are
similar in structure to mortgage-related pass-through securities. Payments of
principal and interest are passed through to holders of the securities and are
typically supported by some form of credit enhancement, such as a letter of
credit, surety bond, limited guarantee by another entity or by priority to
certain of the borrower's other securities. The degree of enhancement varies,
generally applying only until exhausted and covering only a fraction of the
security's par value. If the credit enhancement held by a Fund has been
exhausted, and if any required payments of principal and interest are not made
with respect to the underlying loans, the Fund may experience loss or delay in
receiving payment and a decrease in the value of the security.
RISK FACTORS. Prepayment of principal on mortgage or asset-backed
securities may expose a Fund to a lower rate of return upon reinvestment of
principal. Also, if a security subject to prepayment has been purchased at a
premium, in the event of prepayment the value of the premium would be lost. Like
other fixed-income securities, the value of mortgage-related securities is
affected by fluctuations in interest rates.
LOAN PARTICIPATIONS. The Funds may purchase participations in commercial
loans. Such indebtedness may be secured or unsecured. Loan participations
typically represent direct participation in a loan to a corporate borrower,
and generally are offered by banks or other financial institutions or lending
syndicates. In purchasing the loan participations, a Fund assumes the credit
risk associated with the corporate buyer and may assume the credit risk
associated with the interposed bank or other financial intermediary. The
participation may not be rated by a nationally recognized rating service.
Further, loan participations may not be readily marketable and may be subject
to restrictions on resale.
MUNICIPAL OBLIGATIONS. "Municipal obligations" are debt obligations issued
by states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multi-state agencies or authorities the interest from which is exempt from
federal income tax in the opinion of bond counsel to the issuer. Municipal
obligations include debt obligations issued to obtain funds for various public
purposes and certain industrial development bonds issued by or on
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behalf of public authorities. Municipal obligations are classified as general
obligation bonds, revenue bonds and notes.
MUNICIPAL BONDS. Municipal bonds generally have maturities of more
than one year when issued and have two principal classifications -- General
Obligation Bonds and Revenue Bonds.
GENERAL OBLIGATION BONDS - are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal and
interest.
REVENUE BONDS - are payable only from the revenues derived from a
particular facility or group of facilities or from the proceeds of
special excise or other specific revenue service.
INDUSTRIAL DEVELOPMENT BONDS - are a type of revenue bond and do
not generally constitute the pledge of credit of the issuer of such
bonds. The payment of the principal and interest on such bonds is
dependent on the facility's user to meet its financial obligations and
the pledge, if any, of real and personal property financed as security
for such payment. Industrial development bonds are issued by or on
behalf of public authorities to raise money to finance public and
private facilities for business, manufacturing, housing, ports,
pollution control, airports, mass transit and other similar type
projects.
MUNICIPAL NOTES. Municipal notes generally have maturities of one year
or less when issued and are used to satisfy short-term capital needs.
Municipal notes include:
TAX ANTICIPATION NOTES - are issued to finance working capital
needs of municipalities and are generally issued in anticipation of
future tax revenues.
BOND ANTICIPATION NOTES - are issued in expectation of a
municipality issuing a long-term bond in the future. Usually the
long-term bonds provide the money for the repayment of the notes.
REVENUE ANTICIPATION NOTES - are issued in expectation of receipt
of other types of revenues such as certain federal revenues.
CONSTRUCTION LOAN NOTES - are sold to provide construction
financing and may be insured by the Federal Housing Administration.
After completion of the project, FNMA or GNMA frequently provides
permanent financing.
PRE-REFUNDED MUNICIPAL BONDS - are bonds no longer secured by the
credit of the issuing entity, having been escrowed with US Treasury
securities as a result of a refinancing by the issuer. The bonds are
escrowed for retirement either at original maturity or at an earlier
call date.
TAX FREE COMMERCIAL PAPER - is a promissory obligation issued or
guaranteed by a municipal issuer and frequently accompanied by a
letter of credit of a commercial bank. It is used by agencies of state
and local governments to finance seasonal working capital needs, or as
short-term financing in anticipation of long-term financing.
TAX FREE FLOATING AND VARIABLE RATE DEMAND NOTES - are municipal
obligations backed by an obligation of a commercial bank to the issuer
thereof which allows the issuer to issue securities with a demand
feature, which, when exercised, usually becomes effective within
thirty days. The rate of return on the notes is readjusted
periodically according to some objective standard such as changes in a
commercial bank's prime rate.
TAX FREE PARTICIPATION CERTIFICATES - are tax free floating, or
variable rate demand notes which are issued by a bank, insurance
company or other financial institution or affiliated organization that
sells a participation in the note. The Funds' money managers will
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continually monitor the pricing, quality and liquidity of the floating
and variable rate demand instruments held by the Funds, including the
participation certificates.
A participation certificate gives a Fund an undivided interest in
the municipal obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the
municipal obligation and provides the demand feature described below.
Each participation is backed by: an irrevocable letter of credit or
guaranty of a bank which may be the bank issuing the participation
certificate, a bank issuing a confirming letter of credit to that of
the issuing bank, or a bank serving as agent of the issuing bank with
respect to the possible repurchase of the certificate of
participation; or insurance policy of an insurance company that the
money manager has determined meets the prescribed quality standards
for the Fund. The Fund has the right to sell the participation
certificate back to the institution and draw on the letter of credit
or insurance on demand after thirty days' notice for all or any part
of the full principal amount of the Fund's participation interest in
the security plus accrued interest. The Funds' money managers intend
to exercise the demand feature only (1) upon a default under the terms
of the bond documents, (2) as needed to provide liquidity to the Funds
in order to make redemptions of Fund Shares, or (3) to maintain the
required quality of its investment portfolios.
The institutions issuing the participation certificates will
retain a service and letter of credit fee and a fee for providing the
demand feature, in an amount equal to the excess of the interest paid
on the instruments over the negotiated yield at which the
participations were purchased by a Fund. The total fees generally
range from 5% to 15% of the applicable prime rate or other interest
rate index. The Fund will attempt to have the issuer of the
participation certificate bear the cost of the insurance. The Fund
retains the option to purchase insurance if necessary, in which case
the cost of insurance will be a capitalized expense of the Fund.
INTEREST RATE TRANSACTIONS. The Core Bond Fund may enter into interest
rate swaps, on either an asset-based or liability-based basis, depending on
whether it is hedging its assets or its liabilities, and will usually enter into
interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Fund receiving or paying, as the case may be, only the net amount
of the two payments. When a fund engages in an interest rate swap, it exchanges
its obligations to pay or rights to receive interest payments for the
obligations or rights to receive interest payments of another party (i.e., an
exchange of floating rate payments for fixed rate payments). The Fund expects to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolios or to protect against any
increase in the price of securities it anticipates purchasing at a later date.
Inasmuch as these hedging transactions are entered into for good faith hedging
purposes, the money managers and the Fund believes such obligations do not
constitute senior securities and, accordingly, will not treat them as being
subject to the Fund's borrowing restrictions. The net amount of the excess, if
any, of the Fund's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis and an amount of cash or
liquid high-grade debt securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Fund's custodian. To the extent that the Fund enters into interest rate swaps on
other than a net basis, the amount maintained in a segregated account will be
the full amount of the Fund's obligations, if any, with respect to such interest
rate swaps, accrued on a daily basis. The Fund will not enter into any interest
rate swaps unless the unsecured senior debt or the claims-paying ability of the
other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into such
transaction. If there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreement related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid.
The use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If a money manager using this
technique is incorrect in its forecast of market values, interest rates and
other applicable factors, the investment performance of the Fund would diminish
compared to what it would have been if this investment technique was not used.
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The Fund may only enter into interest rate swaps to hedge its portfolio.
Interest rate swaps do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest rate swaps is limited to the net amount of interest payments that the
Fund is contractually obligated to make. If the other party to an interest rate
swap defaults, the Fund's risk of loss consists of the net amount of interest
payments that the Fund is contractually entitled to receive. Since interest rate
swaps are individually negotiated, the Fund expects to achieve an acceptable
degree of correlation between its rights to receive interest on its portfolio
securities and its rights and obligations to receive and pay interest pursuant
to interest rate swaps.
INVESTMENT IN FOREIGN SECURITIES. The Funds may invest in foreign
securities traded on US or foreign exchanges or in the over-the-counter market.
Investing in securities issued by foreign governments and corporations involves
considerations and possible risks not typically associated with investing in
obligations issued by the US government and domestic corporations. Less
information may be available about foreign companies than about domestic
companies, and foreign companies generally are not subject to the same uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic companies.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the United States or abroad) or changed circumstances in
dealings between nations. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including nationalization,
expropriation, confiscatory taxation, lack of uniform accounting and auditing
standards and potential difficulties in enforcing contractual obligations and
could be subject to extended settlement periods or restrictions affecting the
prompt return of capital to the United States.
FOREIGN GOVERNMENT SECURITIES. Foreign government securities which the
Funds may invest in generally consist of obligations issued or backed by the
national, state or provincial government or similar political subdivisions or
central banks in foreign countries. Foreign government securities also include
debt obligations of supranational entities, which include international
organizations designated or backed by governmental entities to promote economic
reconstruction or development, international banking institutions and related
government agencies. These securities also include debt securities of
"quasi-government agencies" and debt securities denominated in multinational
currency units of an issuer.
OTHER DEBT SECURITIES. The Core Bond Fund may invest in debt securities
issued by supranational organizations such as:
THE WORLD BANK -- An international bank which was chartered to finance
development projects in developing member countries.
THE EUROPEAN COMMUNITY -- An organization which consists of certain
European states engaged in cooperative economic activities.
THE EUROPEAN COAL AND STEEL COMMUNITY -- An economic union of various
European nations' steel and coal industries.
THE ASIAN DEVELOPMENT BANK -- An international development bank
established to lend funds, promote investment and provide technical
assistance to member nations in the Asian and Pacific regions.
The Core Bond Fund may also invest in debt securities denominated in the
ECU, which is a "basket" consisting of specific amounts of currency of member
states of the European Economic Community. The Counsel of Ministers of the
European Economic Community may adjust specific amounts of currency comprising
the ECU to reflect changes in the relative values of the underlying currencies.
The money
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managers investing in these securities do not believe that such adjustments
will adversely affect holders of ECU-denominated obligations or the
marketability of the securities.
BRADY BONDS. The Core Bond and Non-U.S. Funds may invest in Brady Bonds,
the products of the "Brady Plan," under which bonds are issued in exchange
for cash and certain of a country's outstanding commercial bank loans. The
Brady Plan offers relief to debtor countries that have effected substantial
economic reforms. Specifically, debt reduction and structural reform are the
main criteria countries must satisfy in order to obtain Brady Plan status.
Brady Bonds may be collateralized or uncollateralized, are issued in various
currencies (primarily US-dollar) and are actively traded on the
over-the-counter market. Brady Bonds have been issued only recently and
accordingly they do not have a long payment history.
TAXES
In order to qualify for treatment as a regulated investment company ("RIC")
under Subchapter X of the Internal Revenue Code of 1986, as amended ("Code"),
each Fund must distribute annually to its shareholders at least 90% of its
investment company taxable income (generally, net investment income plus net
short-term capital gain) ("Distribution Requirement") and also must meet several
additional requirements. Among these requirements are the following: (i) at
least 90% of a Fund's gross income each taxable year must be derived from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock or securities or foreign currencies
(exclusive of losses), or other income (including gains from options, futures,
or forward contracts) derived with respect to its business of investing in such
stock, securities or currencies ("Income Requirement"); (ii) at the close of
each quarter of a Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. government securities,
securities of other RICs and other securities, with such other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer.
As noted in the Prospectus, each Fund must, and intends to, comply with the
diversification requirements imposed by Section 817(h) of the Code and the
regulations thereunder. For information concerning the consequences of failure
to meet the requirements of Section 817(h), see the prospectus for the variable
contracts.
The Funds will not be subject to the 4% Federal excise tax imposed on RICs that
do not distribute substantially all their income and gains each calendar year
because that tax does not apply to a RIC whose only shareholders are segregated
asset accounts of life insurance companies held in connection with variable
annuity contracts and/or variable life insurance policies.
From November 1, 1999 to December 31, 1999, the Non- U.S., Core Bond and Real
Estate Securities Funds incurred net realized capital losses of $353,830,
$189,912 and $481,589, respectively. As permitted by tax regulations, the
Aggressive Equity and Non-U.S. Funds intend to elect to defer these losses
and treat them as arising in the year ending December 31, 2000.
At December 31, 1999, the Core Bond Fund and the Real Estate Securities
Fund had net tax basis capital loss carryforwards of $1,192,480 and $54,901,
respectively, which expire on December 31, 2007.
The foregoing is only a general summary of some of the important Federal income
tax considerations generally affecting the Funds and their shareholders. No
attempt is made to present a complete explanation of the Federal tax treatment
of the Funds' activities, and this discussion and the discussion in the
prospectuses and/or statements of additional information for variable contracts
are not intended as a substitute for careful tax planning. Accordingly,
potential investors are urged to consult their own tax advisers for more
detailed information and for information regarding any state, local, or foreign
taxes applicable to the variable contracts and the holders thereof.
ISSUES RELATED TO HEDGING AND OPTION INVESTMENTS. The use of hedging
instruments, such as options and futures contracts, involves specialized and
complex rules that will determine the amount and character for income tax
purposes of the income received in connection therewith by the Fund and
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thereby affect, among other things, the amount and proportion of
distributions that will be taxable to shareholders as ordinary income or
capital gain.
As described above and in the Prospectuses, the Funds may buy and sell
foreign currencies and options on foreign currencies, and may enter into
forward currency contracts and currency futures contracts. The Funds
anticipate that these investment activities will not prevent the Funds from
qualifying as a regulated investment company. As a general rule, gains or
losses on the disposition of debt securities denominated in a foreign
currency that are attributable to fluctuations in exchange rates between the
date that the debt securities are acquired and the date of disposition, gains
and losses from the disposition of foreign currencies, and gains and losses
attributable to options on foreign currencies, forward currency contracts and
currency futures contracts will be treated as ordinary income or loss.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time the fund accrues interest or other receivables, or expenses or
other liabilities, denominated in a foreign currency and the time a Fund
actually collects such receivables, or pays such liabilities, are generally
treated as ordinary income or loss. Similarly, gains or losses on disposition of
debt securities denominated in a foreign currency between the date of
acquisition of the security and the date of disposition also are treated as
ordinary gain or loss. These gains, referred to under the Code as "Section 988"
gains or losses, may increase or decrease the amount of a Fund's investment
company taxable income to be distributed to its shareholders, rather than
increasing or decreasing the amount of the Fund's capital gains or losses.
The Funds may acquire forward currency contracts, currency futures contracts and
options on foreign currencies to hedge their risk of currency fluctuations with
regard to property held or to be held by the Funds, and before the close of the
day on which the Funds enter into the contract or option, the Funds will, as a
general rule, identify on their records that the contract or option was entered
into as part of a hedging transaction. If the Funds were to invest in a forward
currency contract, currency futures contract or option on a foreign currency and
offsetting positions in such contracts or options, and if the two offsetting
positions were characterized as a straddle (as opposed to a hedge) for federal
income tax purposes, then the Funds might not be able to receive the benefit of
certain realized losses from the liquidation of one of those positions for an
indefinite period of time (i.e., until the gain position and any successor
positions are disposed of). The Funds expect that their activities with respect
to forward foreign currency contracts, currency futures contracts and options on
foreign currencies will not require it, as a general rule, to have to treat such
contracts or options as straddle positions for federal income tax purposes.
Under current law, unless certain requirements are satisfied, the Funds, will be
required to calculate separately certain gains and losses attributable to
certain of their forward currency contracts, currency futures contracts and
options on foreign currencies even if the Funds acquired the contract or option
to hedge their risk of currency fluctuations with regard to capital assets held
or to be held by the Funds. The Internal Revenue Service, however, has the
authority to issue additional regulations that would permit or require the Funds
either to integrate some or all of their forward currency contracts, currency
futures contracts, options on foreign currencies and hedged investments as a
single transaction or otherwise to treat the contracts or options in the manner
that is consistent with the hedged investments. It is uncertain if or when these
regulations will be issued.
To the extent that a Fund's forward contracts, currency futures contracts or
options on foreign currencies can be classified as either regulated futures
contracts or foreign currency contracts (as described in section 1256(b) of the
Code) (collectively referred to herein as "section 1256 contracts"), such
investments will be taxed pursuant to a special "mark-to-market" system. Under
the mark-to-market system, the Funds may be treated as realizing a greater or
lesser amount of gains or losses than actually realized. As a general rule,
except for certain currency related activities (as described above) in which
gain or loss is treated as ordinary income or loss, gain or loss on section 1256
contracts is treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss, and accordingly, the mark-to-market system generally will
affect the amount of capital gains or losses taxable to the Funds and the amount
of distributions taxable to a shareholder. If the Funds invested in both section
1256 contracts and offsetting positions with respect to such contracts, then the
Funds might not be able to receive the benefit of certain realized losses for an
indeterminate period of time (i.e., until disposition of the "gain leg" of the
straddle and any successor position). The Funds expect that their activities
with respect to section 1256 contracts and offsetting
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positions in such contracts (a) will not cause them or their shareholders to
be treated as receiving a materially greater amount of ordinary income,
capital gains, dividends, or distributions than actually realized or received
by the Funds and (b) will permit them to use substantially all of the losses
of the Funds for the fiscal years in which such losses actually occur.
Generally, the hedging transactions and certain other transactions in
options, futures and forward contracts undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences of transactions in options, futures
and forward contracts to a Fund are not entirely clear. The transactions may
increase the amount of short-term capital gain realized by a Fund which is
taxed as ordinary income when distributed to shareholders.
A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections operate to
accelerate the recognition of gains or losses from the affected straddle
positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gains, may be increased or decreased substantially in any
given fiscal year as compared to a fund that did not engage in such hedging
transactions.
Under certain Constructive Sales Transactions rules, a Fund must recognize gain
(but not loss) on any constructive sale of an appreciated financial position in
stock, a partnership interest or certain debt instruments. A Fund will generally
be treated as making a constructive sale when it: (a) enters into a short sale
on the same property, (b) enters into an offsetting notional principal contract,
or (c) enters into a futures or forward contract to deliver the same or
substantially similar property. Other transactions (including certain financial
instruments called collars) will be treated as constructive sales as provided in
Treasury regulations to be published. There are also certain exceptions that
apply for transactions that are closed before the end of the 30th day after the
close of the taxable year.
If a call option written by the Fund expires, the Fund will realize a short-term
capital gain equal to the amount of the premium it received for writing the
option. If the Fund terminates its obligations under a call option it has
written, or if the Fund writes a put option terminating its rights as the holder
of a put option, the Fund will realize a short-term capital gain or loss,
depending on whether the cost of the closing transaction is less than or exceeds
the premium received when the option was written. If a call option written by
the Fund is exercised, the Fund will be treated as having sold the underlying
security and will realize a long-term or short-term capital gain and loss,
depending on the holding period of the underlying security and on whether the
sum of the option price received upon the exercise plus the premium received
when the option was written exceeds or is less than the basis of the optioned
security.
If an option purchased by a Fund expires, the Fund generally will realize a
capital loss equal to the cost of the option, long-term if the option was held
for more than one year. If the Fund sells the option, it generally will realize
a capital gain or loss, depending on whether the proceeds from the sale are
greater or less than the cost of the option plus the transaction costs. If the
Fund exercises a call option, the cost of the option will be added to the basis
of the security purchased. If the Fund exercises a put option, it will realize a
capital gain or loss (depending on the Fund's basis for the underlying
security), which will be long-term or short-term depending on the holding period
of the underlying security. Any such capital gain will be decreased (or loss
increased) by the premium paid for the option.
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FOREIGN INCOME TAXES. Foreign governments may impose taxes on the income and
gains from a Fund's investments in foreign stocks and bonds. These taxes will
reduce the amount of the Fund's distributions to you, but, depending on the
amount of the Fund's assets that are invested in foreign securities and foreign
taxes paid, may be passed through to you as a foreign tax credit on your income
tax return.
If a Fund invests in an entity that is classified as a "passive foreign
investment company" ("PFIC") for federal income tax purposes, the application
of certain provisions of the Code applying to PFICs could result in the
imposition of certain federal income taxes on the Fund. Under the Internal
Revenue Code, the Non-U.S. Fund can elect to mark-to-market its PFIC holdings
in lieu of paying taxes on gains or distributions therefrom.
STATE AND LOCAL TAXES. Depending upon the extent of a Fund's activities in
states and localities in which its offices are maintained, in which its agents
or independent contractors are located or in which it is otherwise deemed to be
conducting business, a Fund may be subject to the tax laws of such states or
localities.
MONEY MANAGER INFORMATION
MULTI-STYLE EQUITY FUND
ALLIANCE CAPITAL MANAGEMENT L.P. is a limited partnership whose (i) general
partner, Alliance Capital Management Corporation, is a wholly owned
subsidiary of AXA Financial, Inc. (formerly The Equitable Companies
Incorporated)("AXF") and (ii) majority unit holder is ACMC, Inc., an indirect
wholly owned subsidiary of AXF. AXA, a French insurance company, owns
approximately 58.4% of the common stock of AXF.
BARCLAYS GLOBAL FUND ADVISORS N.A. is a wholly-owned subsidiary of Barclays
Global Investors, N.A.
PEACHTREE ASSET MANAGEMENT is a division of SSB Citi Fund Management LLC. SSB
Citi Fund Management LLC is 100% owned by Salomon Smith Barney Holdings, Inc.
which is a wholly owned subsidiary of the CitiGroup Inc.
SANFORD C. BERNSTEIN & CO., INC. is controlled by its Board of Directors. The
Board consists of: Lewis A. Sanders, Roger Hertog, Andrew S. Adleson, Kevin
R. Brine, Charles C. Cahn, Jr., Marilyn G. Fedak, Arthur W. Fried, Michael L.
Goldstein, Thomas S. Hexner, Jerry M. Lieberman, Marc O. Mayer, Jean M. Reid
and Francis H. Trainer, Jr.
STRONG CAPITAL MANAGEMENT, INC. is a corporation controlled by Richard S.
Strong.
TURNER INVESTMENT PARTNERS INC. is a corporation controlled by Robert E.
Turner.
WESTPEAK INVESTMENT ADVISORS, LP is a wholly-owned subsidiary of Nvest
Companies, L.P. ("Nvest Companies"). Nvest Companies' managing general
partner, Nvest Corporation, is an indirect, wholly-owned subsidiary of
Metropolitan Life Insurance Company ("MetLife"), which also owned, as of
January 31, 1999, approximately 48% of the limited partnership interests in
Nvest Companies. Nvest Companies' advising general partner, Nvest, L.P., is a
publicly-traded company listed on the New York Stock Exchange.
AGGRESSIVE EQUITY FUND
CAPITALWORKS INVESTMENT PARTNERS, LLC is a liability company controlled by
its members who include John D. Wylie, Jack C. Marshall, Mark J. Correnti
and Donovan T. Garcia.
GEEWAX, TERKER & COMPANY is a general partnership with its general partners,
John J. Geewax and Bruce E Terker, each owning 50% of the firm.
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JACOBS LEVY EQUITY MANAGEMENT, INC. is owned by Bruce Jacobs and Kenneth Levy.
WESTPEAK INVESTMENT ADVISORS, LP, see Multi-Style Equity Fund.
NON-U.S. FUND
J.P. MORGAN INVESTMENT MANAGEMENT, INC. is a wholly owned subsidiary of J.P.
Morgan & Co., Inc., a publicly held bank holding company.
MONTGOMERY ASSET MANAGEMENT LLC is a Delaware limited liability company with
majority ownership held by Commerzbank AG, a foreign banking organization.
OECHSLE INTERNATIONAL ADVISORS is a Delaware limited liability company that
is controlled by its manager, Oechsle Group, LLC, a Delaware limited
liability company. Oechsle Group, LLC is controlled by the following members:
S. Dewey Keesler, Stephen P. Langer, L. Sean Roche and Warren R. Walker.
THE BOSTON COMPANY ASSET MANAGEMENT, LLC is wholly owned, indirect
subsidiary of Mellon Financial Corporation, a publicly held corporation.
REAL ESTATE SECURITIES FUND
AEW CAPITAL MANAGEMENT, L.P. is a wholly-owned affiliate of Nvest Companies,
L.P. ("Nvest"). Nvest is a publicly held limited partnership. Metropolitan
Life Insurance Company owns approximately 48% of Nvest. AEW Capital
Management, Inc., a wholly-owned subsidiary of Nvest Holdings, Inc., is the
general partner, and Nvest is the sole limited partner of AEW Capital
Management, L.P.
COHEN & STEERS CAPITAL MANAGEMENT is a corporation whose two principals, Robert
H. Steers and Martin Cohen, control the corporation within the meaning of the
1940 Act.
SECURITY CAPITAL GLOBAL CAPITAL MANAGEMENT GROUP INCORPORATED is an indirect,
wholly-owned subsidiary of Security Capital, a publicly traded corporation.
CORE BOND FUND
PACIFIC INVESTMENT MANAGEMENT COMPANY ("PIMCO") is a subsidiary of PIMCO
Advisors L.P. ("PIMCO Advisors"). The general partners of PIMCO Advisors are
PIMCO Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH"). PIMCO
Partners, G.P. is a general partnership between PIMCO Holding LLC, a Delaware
limited liability company and indirect wholly-owned subsidiary of Pacific
Life Insurance Company, and PIMCO Partners LLC, a California limited
liability company controlled by the current PIMCO Managing Directors and two
former Managing Directors of PIMCO. PIMCO Partners, G.P. is the sole general
partner of PAH. It is expected that on or about May 5, 2000, Allianz of
America, Inc., ("A of A") will acquire (the "Acquisition") majority ownership
of PIMCO Advisors and its subsidiaries, including PIMCO. After the closing of
the Acquisition, A of A will own approximately 70% of the outstanding
partnership interests in PIMCO Advisors. Pacific Life Insurance Company will
retain its approximately 30% interest in an indirect general partner of PIMCO
Advisors. In connection with the Acquisition, A of A will enter into a
put/call arrangement for the possible disposition of Pacific Life Insurance
Company's indirect interest in PIMCO Advisors.
STANDISH, AYER & WOOD, INC. is organized as a Sub-chapter S Corporation and
is 100% owned by its twenty-five directors, with no director having more than
25% ownership.
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RATINGS OF DEBT INSTRUMENTS
CORPORATE AND MUNICIPAL BOND RATINGS.
MOODY'S INVESTORS SERVICE, INC. (MOODY'S):
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large
or exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great period of time. Such bonds
lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of time
may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect
to principal and interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification in its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic
category; the modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issue ranks in the lower end of its generic rating
category.
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STANDARD & POOR'S RATINGS GROUP ("S&P"):
AAA -- This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. While bonds with this rating normally
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than debt
in higher rated categories.
BB, B, CCC, CC, C -- Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB -- Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual
implied BBB- rating.
B -- Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual implied BB or BB- rating.
CCC -- Bonds rated CCC have a currently identifiable vulnerability to
default, and are dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual implied B or B-
rating.
CC -- The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C -- The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating. The C
rating has been used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
C1 -- The rating C1 is reserved for income bonds on which no interest
is being paid.
D -- Bonds rated D are in payment default. The D rating is used when
interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P
believes such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
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Plus (+) or Minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within
the appropriate category.
Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic issues. The ratings measure the credit
worthiness of the obligor but do not take into account currency exchange and
related uncertainties.
STATE, MUNICIPAL NOTES AND TAX EXEMPT DEMAND NOTES.
MOODY'S:
Moody's rating for state, municipal and other short-term obligations
will be designated Moody's Investment Grade ("MIG"). This distinction
is in recognition of the differences between short-term credit risk and
long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors
of the first importance in bond risk are of lesser importance in the
short run. Symbols used are as follows:
MIG-1--Notes bearing this designation are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing or both.
MIG-2--Notes bearing this designation are of high quality, with margins
of protection ample although not so large as in the preceding group.
S&P:
A S&P note rating reflects the liquidity concerns and market access
risks unique to notes. Notes due in 3 years or less will likely receive
a note rating. Notes maturing beyond 3 years will most likely receive
a long-term debt rating. The following criteria will be used in making
that assessment:
-- Amortization schedule (the larger the final maturity relative
to other maturities, the more likely it will be treated as a
note).
-- Source of Payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be treated
as a note).
Note rating symbols are as follows:
SP-1--Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
S&P assigns "dual" ratings to all long-term debt issues that have as
part of their provisions a variable rate demand or double feature.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand
feature. The long-term debt rating symbols are used to denote the put
option (for example, "AAA/A-1+") or if the nominal maturity is short, a
rating of "SP-1+/AAA" is assigned.
COMMERCIAL PAPER RATINGS.
MOODY'S:
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Commercial paper rated Prime by Moody's is based upon its evaluation of
many factors, including: (1) management of the issuer; (2) the issuer's
industry or industries and the speculative-type risks which may be
inherent in certain areas; (3) the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten
years; (7) financial strength of a parent company and the relationships
which exist with the issue; and (8) recognition by the management of
obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations. Relative
differences in these factors determine whether the issuer's commercial
paper is rated Prime-1, Prime-2, or Prime-3.
Prime-1 - indicates a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics: (1) leading market
positions in well established industries; (2) high rates of return on
funds employed; (3) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (4) broad margins
in earnings coverage of fixed financial charges and high internal cash
generation; and (5) well established access to a range of financial
markets and assured sources of alternative liquidity.
Prime-2 - indicates a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is
maintained.
S&P:
Commercial paper rated A by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements. Long-term
senior debt is rated A or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically,
the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management
are unquestioned. Relative strength or weakness of the above factors
determine whether the issuer's commercial paper is rated A-1, A-2, or
A-3.
A-1--This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A-1.
DUFF & PHELPS, INC.:
Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to
all obligations with maturities of under one year, including commercial
paper, the uninsured portion of certificates of deposit, unsecured bank
loans, master notes, bankers' acceptances, irrevocable letters of
credit, and current maturities of long-term debt.
Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including
trade credit, bank lines, and the capital markets. An important
consideration is the level of an obligor's reliance on short-term funds
on an ongoing basis.
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The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional '1' category. The majority of short-term
debt issuers carry the highest rating, yet quality differences exist
within that tier. As a consequence, Duff & Phelps has incorporated
gradations of '1+' (one plus) and '1-' (one minus) to assist investors
in recognizing those differences.
Duff 1+--Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
Duff 1--Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1- --High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
Good Grade
Duff 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
Satisfactory Grade
Duff 3--Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
Non-Investment Grade
Duff 4--Speculative investment characteristics. Liquidity is not
sufficient to ensure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
Default
Duff 5--Issuer failed to meet scheduled principal and/or interest
payments.
IBCA, INC.:
In addition to conducting a careful review of an institution's reports
and published figures, IBCA's analysts regularly visit the companies
for discussions with senior management. These meetings are fundamental
to the preparation of individual reports and ratings. To keep abreast
of any changes that may affect assessments, analysts maintain contact
throughout the year with the management of the companies they cover.
IBCA's analysts speak the languages of the countries they cover, which
is essential to maximize the value of their meetings with management
and to properly analyze a company's written materials. They also have a
thorough knowledge of the laws and accounting practices that govern the
operations and reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position,
companies entrust IBCA with confidential data. While this data cannot
be disclosed in reports, it is taken into account when assigning
ratings. Before dispatch to subscribers, a draft of the report is
submitted to each company to permit correction of any factual errors
and to enable clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all
ratings and to ensure that individual ratings are assigned consistently
for institutions in all the countries covered. Following
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the Committee meetings, ratings are issued directly to subscribers. At
the same time, the company is informed of the ratings as a matter of
courtesy, but not for discussion.
A1+--Obligations supported by the highest capacity for timely
repayment.
A1--Obligations supported by a very strong capacity for timely
repayment.
A2--Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
B1--Obligations supported by an adequate capacity for timely repayment.
Such capacity is more susceptible to adverse changes in business,
economic, or financial conditions than for obligations in higher
categories.
B2--Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial
conditions.
C1--Obligations for which there is an inadequate capacity to ensure
timely repayment.
D1--Obligations which have a high risk of default or which are
currently in default.
FITCH INVESTORS SERVICE, INC.:
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes,
and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's
obligations in a timely manner.
Fitch short-term ratings are as follows:
F-1+--Exceptionally strong credit quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1--Very strong credit quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.
F-2--Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned 'F-1+' and 'F-1' ratings.
F-3--Fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate, however, near-term adverse changes could cause
these securities to be rated below investment grade.
F-5--Weak credit quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial
and economic conditions.
D--Default. Issues assigned this rating are in actual or imminent
payment default.
THOMSON BANKWATCH (TBW) SHORT-TERM RATINGS:
The TBW Short-Term Ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which
the rating has been assigned. These ratings are derived
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exclusively from a quantitative analysis of publicly available
information. Qualitative judgments have not been incorporated. The
ratings are intended to be applicable to all operating entities of an
organization but there may be in some cases more credit liquidity
and/or risk in one segment of the business than another.
The TBW Short-Term Rating applies only to unsecured instruments that
have a maturity of one year or less, and reflect the likelihood of an
untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that while
more susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is
considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
FINANCIAL STATEMENTS
The 1999 annual financial statements of the Funds, including notes to financial
statements, financial highlights, and the Report of Independent Accountants, are
included in RIF's Annual Reports to Shareholders. Copies of these Annual Reports
accompany this Statement of Additional Information and are incorporated herein
by reference.
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GLOSSARY
BOARD -- The Board of Trustees of RIF.
CASH RESERVES -- Each Fund is authorized to invest its cash reserves (i.e.,
funds awaiting investment in the specific types of securities to be acquired by
a Fund) in money market instruments and in debt securities of comparable quality
to the Fund's permitted investments.
CODE -- Internal Revenue Code of 1986, as amended.
CONVERTIBLE SECURITY -- This is a fixed income security (a bond or
preferred stock) that may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stock in a
corporation's capital structure but are usually subordinated to similar
non-convertible securities. The price of a convertible security is influenced by
the market value of the underlying common stock.
COVERED CALL OPTION -- A call option is "covered" if the Fund owns the
underlying securities, has the right to acquire the securities without
additional consideration, has collateral assets sufficient to meet its
obligations under the option or owns an offsetting call option.
CUSTODIAN -- State Street Bank and Trust Company, RIF's custodian and
portfolio accountant.
DEPOSITORY RECEIPTS -- These include American Depository Receipts ("ADRs"),
European Depository Receipts, Global Depository Receipts, and other similar
securities convertible into securities of foreign issuers. ADRs are receipts
typically issued by a United States bank or trust company evidencing ownership
of the underlying securities. Generally, ADRs in registered form are designed
for use in US securities markets.
DERIVATIVES -- These include forward currency exchange contracts, stock
options, currency options, stock and stock index options, futures contracts,
swaps and options on futures contracts on US government and foreign government
securities and currencies.
DISTRIBUTOR -- Russell Fund Distributors, Inc., the organization that sells
the Shares of the Funds under a contract with RIF.
EQUITY DERIVATIVE SECURITIES -- These include, among other instruments,
options on equity securities, warrants and futures contracts on equity
securities.
FORWARD COMMITMENTS -- Each Fund may agree to purchase securities for a
fixed price at a future date beyond customary settlement time (a "forward
commitment" or "when-issued" transaction), so long as the transactions are
consistent with the Fund's ability to manage its portfolio and meet redemption
requests. When effecting these transactions, liquid assets of a Fund of a dollar
amount sufficient to make payment for the portfolio securities to be purchased
are segregated on the Fund's records at the trade date and maintained until the
transaction is settled.
FORWARD CURRENCY CONTRACTS -- This is a contract individually negotiated
and privately traded by currency traders and their customers and creates an
obligation to purchase or sell a specific currency for an agreed-upon price
at a future date. The Funds generally do not enter into forward contracts
with terms greater than one year, and they typically enter into forward
contracts only under two circumstances. First, if a Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the US dollar price of the security by
entering into a forward contract to buy the amount of a foreign currency
needed to settle the transaction. Second, if the Fund's money managers
believe that the currency of a particular foreign country will substantially
rise or fall against the US dollar, the Fund may enter into a forward
contract to buy or sell the currency approximating the value of some or all
of the Fund's portfolio securities denominated in the currency. A Fund will
not enter into a forward contract if, as
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a result, it would have more than one-third of its assets committed to such
contracts (unless it owns the currency that it is obligated to deliver or has
caused the Custodian to segregate segregable assets having a value sufficient
to cover its obligations). Although forward contracts are used primarily to
protect a Fund from adverse currency movements, they involve the risk that
currency movements will not be accurately predicted.
RIF -- Russell Insurance Funds, an open-end management investment company
which is registered with the SEC.
FRIMCo -- Frank Russell Investment Management Company, RIF's administrator,
manager and transfer and dividend paying agent.
FUNDS -- The 5 investment series of RIF. Each Fund is considered a separate
registered investment company (or RIC) for federal income tax purposes, and each
Fund has its own investment objective, policies and restrictions.
FUTURES AND OPTIONS ON FUTURES -- An interest rate futures contract is an
agreement to purchase or sell debt securities, usually US government securities,
at a specified date and price. For example, a Fund may sell interest rate
futures contracts (i.e., enter into a futures contract to sell the underlying
debt security) in an attempt to hedge against an anticipated increase in
interest rates and a corresponding decline in debt securities it owns. A Fund
will have collateral assets equal to the purchase price of the portfolio
securities represented by the underlying interest rate futures contracts it has
an obligation to purchase.
ILLIQUID SECURITIES -- The Funds will not purchase or otherwise acquire any
security if, as a result, more than 15% of a Fund's net assets (taken at current
value) would be invested in securities, including repurchase agreements maturing
in more than seven days, that are illiquid because of the absence of a readily
available market or because of legal or contractual resale restrictions. No Fund
will invest more than 10% of its respective net assets (taken at current value)
in securities of issuers that may not be sold to the public without registration
under the 1933 Act. These policies do not include (1) commercial paper issued
under Section 4(2) of the Securities Act of1933, as amended (the "1933 Act"), or
(2) restricted securities eligible for resale to qualified institutional
purchasers pursuant to Rule 144A under the 1933 Act that are determined to be
liquid by the money managers in accordance with Board-approved guidelines.
INSURANCE COMPANY -- An insurance company that has a relationship with RIF
pursuant to which RIF Funds are the investment base for one or more variable
insurance products offered by such insurance company.
INVESTMENT GRADE -- Investment grade debt securities are those rated within
the four highest grades by S&P (at least BBB) or Moody's (at least Baa), or
unrated debt securities deemed to be of comparable quality by a money manager
using Board-approved guidelines.
LENDING PORTFOLIO SECURITIES -- Each Fund may lend portfolio securities
with a value of up to 33 1/3% of each Fund's total assets. These loans may be
terminated at any time. A Fund will receive either cash (and agree to pay a
"rebate" interest rate), US government or US government agency obligations as
collateral in an amount equal to at least 102% (for loans of US securities) or
105% (for non-US securities) of the current market value of the loaned
securities. The collateral is daily "marked-to-market," and the borrower will
furnish additional collateral in the event that the value of the collateral
drops below 100% of the market value of the loaned securities. If the borrower
of the securities fails financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. Consequently, loans are made
only to borrowers which are deemed to be of good financial standing.
LIQUIDITY PORTFOLIO -- FRIMCo will manage or will select a money manager to
exercise investment discretion for approximately 5%-15% of each of the
Multi-Style, Aggressive Equity, Non-U.S. and Real Estate Securities Funds'
assets assigned to a liquidity portfolio. The liquidity portfolio will be used
to temporarily create an equity exposure for cash balances until those balances
are invested in securities or used for Fund transactions.
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MOODY'S -- Moody's Investors Service, Inc., an NRSRO
MUNICIPAL OBLIGATIONS -- Debt obligations issued by states, territories and
possessions of the United States and the District of Columbia, and their
political subdivisions, agencies and instrumentalities, or multi-state agencies
or authorities the interest from which is exempt from federal income tax,
including the alternative minimum tax, in the opinion of bond counsel to the
issuer. Municipal obligations include debt obligations issued to obtain funds
for various public purposes as well as certain industrial development bonds
issued by or on behalf of public authorities. Municipal obligations may include
project, tax anticipation, revenue anticipation, bond anticipation, and
construction loan notes; tax-exempt commercial paper; fixed and variable rate
notes; obligations whose interest and principal are guaranteed or insured by the
US government or fully collateralized by US government obligations; industrial
development bonds; and variable rate obligations.
NET ASSET VALUE (NAV) -- The value of a Fund is determined by deducting the
Fund's liabilities from the total assets of the portfolio. The net asset value
per share is determined by dividing the net asset value of the Fund by the
number of its Shares that are outstanding.
NRSRO -- A nationally recognized statistical rating organization, such as
S&P or Moody's
NYSE -- New York Stock Exchange
OPTIONS ON SECURITIES, SECURITIES INDEXES AND CURRENCIES -- A Fund may
purchase call options on securities that it intends to purchase (or on
currencies in which those securities are denominated) in order to limit the risk
of a substantial increase in the market price of such security (or an adverse
movement in the applicable currency). A Fund may purchase put options on
particular securities (or on currencies in which those securities are
denominated) in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option (or an adverse movement in the applicable currency relative to the US
dollar). Prior to expiration, most options are expected to be sold in a closing
sale transaction. Profit or loss from the sale depends upon whether the amount
received is more or less than the premium paid plus transaction costs. A Fund
may purchase put and call options on stock indexes in order to hedge against
risks of stock market or industry-wide stock price fluctuations.
POLICIES -- one or more variable insurance products to be issued by one or
more Insurance Companies.
PRIME RATE -- The interest rate charged by leading US banks on loans to
their most creditworthy customers
REPURCHASE AGREEMENTS -- A Fund may enter into repurchase agreements with a
bank or broker-dealer that agrees to repurchase the securities at the Fund's
cost plus interest within a specified time (normally the next business day). If
the party agreeing to repurchase should default and if the value of the
securities held by the Fund (102% at the time of agreement) should fall below
the repurchase price, the Fund could incur a loss. Subject to the overall
limitations described in "Illiquid Securities" in this Glossary, a Fund will not
invest more than 15% of its net assets (taken at current market value) in
repurchase agreements maturing in more than seven days.
REVERSE REPURCHASE AGREEMENTS -- A Fund may enter into reverse
repurchase agreements to meet redemption requests when a money manager
determines that selling portfolio securities would be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction where a Fund
transfers possession of a portfolio security to a bank or broker-dealer in
return for a percentage of the portfolio security's market value. The Fund
retains record ownership of the transferred security, including the right to
receive interest and principal payments. At an agreed upon future date, the
Fund repurchases the security by paying an agreed upon purchase price plus
interest. Liquid assets of the Fund equal in value to the repurchase price,
including any accrued interest, are segregated on the Fund's records while a
reverse repurchase agreement is in effect.
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RUSSELL -- Frank Russell Company, consultant to RIF and to the Funds
S&P -- Standard & Poor's Ratings Group, an NRSRO
S&P 500 -- Standard & Poor's 500 Composite Price Index
SEPARATE ACCOUNT -- a segregated asset account of an Insurance Company
which hold Shares of RIF.
SHARES -- The Shares in the Funds described in this prospectus. Each share
of a Fund represents a share of beneficial interest in the Fund.
STATEMENT -- RIF's Statement of Additional Information.
TRANSFER AGENT -- FRIMCo, in its capacity as RIF's transfer and dividend
paying agent
US -- United States
US GOVERNMENT OBLIGATIONS -- These include US Treasury bills, notes, bonds
and other obligations issued or guaranteed by the US government, its agencies or
instrumentalities. US Treasury bills, notes and bonds, and GNMA participation
certificates, are issued or guaranteed by the US government. Other securities
issued by US government agencies or instrumentalities are supported only by the
credit of the agency or instrumentality (for example, those issued by the
Federal Home Loan Bank) whereas others, such as those issued by FNMA, have an
additional line of credit with the US Treasury.
VARIABLE RATE OBLIGATION -- Municipal obligations with a demand feature
that typically may be exercised within 30 days. The rate of return on variable
rate obligations is readjusted periodically according to a market rate, such as
the Prime rate. Also called floating rate obligations.
WARRANTS -- Typically, a warrant is a long-term option that permits the
holder to buy a specified number of shares of the issuer's underlying common
stock at a specified exercise price by a particular expiration date. A warrant
not exercised or disposed of by its expiration date expires worthless.
1940 ACT -- The Investment Company Act of 1940, as amended. The 1940 Act
governs the operations of RIF and the Funds.
1933 ACT -- The Securities Act of 1933, as amended.
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Russell Insurance Funds
File No. 33-18030
1933 Act Post-Effective Amend. No. 8
1940 Act Amendment No. 12
PART C
OTHER INFORMATION
ITEM 23 EXHIBITS
(a)1.1 Master Trust Agreement (incorporated by reference to
Pre-effective Amendment No. 4 filed September 20, 1996)
(a)1.2 Amendment No. 1 to the Master Trust Agreement adopted October 5,
1998 (incorporated by reference to Item 23.1(b) filed under
Post-Effective Amendment No. 6 filed February 9, 1999)
(a)1.3 Amendment No. 2 to the Master Trust Agreement adopted
February 8, 1999 (incorporated by reference to Item 23.1(b)
filed under Post-Effective Amendment No. 7 filed April 23, 1999)
(b) Bylaws (incorporated by reference to Pre-effective Amendment
No. 4 filed September 20, 1996)
(c) Specimen Certificate of Shares of the Registrant (none)
(d)1.1 Management Agreement between RIF and FRIMCo dated January 1,
1999 (incorporated by reference to Post-Effective Amendment
No. 6 filed February 9, 1999)
(d)1.2 Letter Agreement to the Management Agreement between RIF and
FRIMCo dated February 8, 1999 adding the Real Estate Securities
Fund (incorporated by reference to Item 23.4(a)(2) filed under
Post-Effective Amendment No. 7 filed April 23, 1999)
(d)1.3 Form of Portfolio Management Agreement between RIF, FRIMCo and
Money Manager (incorporated by reference to Post-Effective
Amendment No. 7 filed April 23, 1999)
(e)1.1 Distribution Agreement between RIF and Russell Fund
Distributors, Inc. dated January 1, 1999 (incorporated by
reference to Post-Effective Amendment No. 6 filed on February 9,
1999)
<PAGE>
(e)1.2 Letter Agreement to the Distribution Agreement between RIF and
Russell Fund Distributors dated February 8, 1999 adding the Real
Estate Securities Fund (incorporated by reference to
Post-Effective Amendment No. 7 filed April 23, 1999)
(f) Bonus or Profit Sharing Contracts (none)
(g)1.1 Custody Agreement between RIF and State Street Bank and
Trust Company ("State Street") dated August 5, 1996
(incorporated by reference to Item 24(b)(8)(a) filed under
Pre-effective Amendment No. 4 filed September 20, 1996)
(g)1.2 Form of Letter Agreement to the Custody Agreement between
RIF and State Street Bank and Trust Company dated February
8, 1999 adding Real Estate Securities Fund (incorporated by
reference to Item 23.7(a)(1) filed under Post-Effective
Amendment No. 7 filed April 23, 1999)
(h)1.1 Form of Participation Agreement between RIF, Russell Fund
Distributors, Inc and various insurance companies
(incorporated by reference to Item 24(b)(9)(a)(1) filed
under Post-Effective Amendment No.4 filed on February 24,
1998)
(h)1.2 Transfer and Dividend Disbursing Agency Agreement between RIF
and FRIMCo dated August 5, 1996 (incorporated by reference to
Item 24(b)(9)(b) filed under Pre-effective Amendment No. 4 filed
September 20, 1996)
(h)1.3 Letter Agreement amending Schedule A to the Transfer and
Dividend Agency Agreement with Frank Russell Investment
Management Company (incorporated by reference to
Item 24(b)(9)(b)(1) filed under Post-Effective Amendment No. 5
filed May 1, 1998)
(h)1.4 Letter Agreement amending Schedule A to the Transfer and
Dividend Agency Agreement with Frank Russell Investment
Management Company dated February 9, 1999 adding the Real Estate
Securities Fund (incorporated by reference to Post-Effective
Amendment No. 7 filed April 23, 1999)
(h)1.5 Form of Tax Accounting Services Agreement between RIF and State
Street (incorporated by reference to Item 24(b)(9)(c) filed
under Pre-effective Amendment No. 4 filed September 20, 1996)
(h)1.6 Form of Yield Calculation Services Agreement between RIF and
State Street (incorporated by reference to Item 24(b)(9)(d)
filed under Pre-effective Amendment No. 4 filed September 20,
1996)
(h)1.7 Form of Letter Agreement to the Yield Calculation Services
Agreement between RIF and State Street Bank and Trust Company
dated February 9, 1999 adding the Real Estate Securities Fund
(incorporated by reference to Item 23.8(d)(1) filed under
Post-Effective Amendment No. 7 filed April 23, 1999)
<PAGE>
(h)1.8 Joint Insurance Agreement between RIF and Frank Russell
Investment Company dated August 5, 1996 (incorporated by
reference to Item 24(b)(9)(e) filed under Pre-effective
Amendment No. 4 filed September 20, 1996)
(h)1.9 Form of Letter Agreements regarding fee waivers and
reimbursements (incorporated by reference to Post-Effective
Amendment No. 7 filed April 23, 1999)
(i) Opinion and Consent of Counsel
(j)1.1 Consent of Independent Auditors
(j)1.2 Limited Powers of Attorney of RIF Trustees with respect to
Amendments to the SEC Registration Statement of RIF
(incorporated by reference to Item 24(b)(11)(b) filed under
Pre-effective Amendment No. 4 filed September 20, 1996)
(j)1.3 Limited Powers of Attorney of RIF Trustees with respect to
Amendments to the SEC Registration Stattement of RIF
(incorporated by reference to Item 24(b)(11)(c) filed under
Post-effective Amendment No. 1 filed February 27, 1997)
(j)1.4 Limited Powers of Attorney of RIF Trustees with respect to
Amendments to the SEC Registration Statement of RIF
(k) Financial Statement Omitted from Item 22 (none)
(l) Form of Seed Money Subscription Agreement between RIF and
General American (incorporated by reference to Item 24(b)(13)
filed under Pre-effective Amendment No. 4 filed September 20,
1996)
(m) Rule 12b-1 Plan (none)
(n) Financial Data Schedule (none)
(o) Rule 18f-3 Plan (none)
(p) Codes of Ethics of the following investment advisers and sub-advisers:
1.1 Frank Russell Investment Management Company
1.2 AEW Capital Management, L.P.
1.3 Alliance Capital Management L.P.
1.4 Barclays Global Fund Advisors N.A.
1.5 The Boston Company Asset Management
1.6 Capital Works Investment Partners
1.7 Cohen & Steers
1.8 Geewax, Terker & Company
1.9 Jacobs Levy Equity Management, Inc.
1.10 J.P. Morgan Investment Management, Inc.
1.11 Montgomery Asset Management LLC
1.12 Oechsle International Advisors, LLC
1.13 Pacific Investment Management Company
1.14 Peachtree Asset Management
1.15 Sanford C. Bernstein & Co., Inc.
1.16 Security Capital Global Capital Management Group
1.17 Standish, Ayer & Wood, Inc.'s
1.18 Strong Capital Management
1.19 Turner Investment Partners
1.20 Westpeak Investment Advisors, L.P.
ITEM 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Trustees
ITEM 25 INDEMNIFICATION
(Incorporated by reference to Item 27 filed under Pre-effective Amendment No. 4
filed September 20, 1996)
<PAGE>
ITEM 26 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
SEE, Registrant's prospectus sections "The Purpose of RIF," Frank Russell
Company -- Consultant to RIF," "Multi-Style, Multi Manager Diversification,"
"The Money Managers," "Money Manager Information," and "Management of the
Funds," the Statement of Additional Information sections "Structure and
Governance -- Trustees and Officers," "Operation of Investment Company -
Consultant," and Money Manager Information."
ITEM 27 PRINCIPAL UNDERWRITER
(a) SSgA Funds
Frank Russell Investment Company
(b) Russell Fund Distributors, Inc. is the principal underwriter of the
Registrant with respect to sales of Registrant's shares to Insurance
Companies. The directors and officers of Russell Fund Distributors,
Inc., their principal business address in each case is 909 A Street,
Tacoma, Washington 98402, and their respective positions and offices
with the Registrant and Russell Fund Distributors, Inc. are set forth
below:
<TABLE>
<CAPTION>
Positions and Offices with Positions and Offices with
Name Registrant Underwriter
- ---- ---------- -----------
<S> <C> <C>
Lynn L. Anderson Trustee, President, Chief Executive Director, Chairman of the Board and
Officer, Chairman of the Board Chief Executive Officer
Karl J. Ege Secretary and General Counsel Secretary and General Counsel
Randall P. Lert Director of Investments Director
J. David Griswold None Assistant Secretary and Associate
General Counsel
Gregory J. Lyons Assistant Secretary Assistant Secretary
B. James Rohrbacher None Director of Compliance and Internal
Audit, Chief Compliance Officer
Linda L. Gutmann None Treasurer and Controller
Carla L. Anderson None Assistant Secretary
John James None Assistant Secretary
</TABLE>
<PAGE>
(c) Inapplicable
ITEM 28 LOCATION OF ACCOUNTS AND RECORDS
RIF FRIMCo
- --- ------
Russell Insurance Funds Frank Russell Investment
909 A Street Management Company
Tacoma, Washington 98402 909 A Street
Tacoma, Washington 98402
SS MM
- -- --
State Street Bank & Trust Company Money Managers
1776 Heritage Drive JA4N SEE, Prospectus Section
North Quincy, Massachusetts 02171 "Money Manager Profiles"
for Names and Addresses
ITEM 31a-1
(a) Records forming basis for financial statements - at principal
offices of SS, RIF FRIMCo and MM for each entity
(b) RIF Records:
(1) SS - Journals, etc.
(2) SS - Ledgers, etc.
(3) Inapplicable
(4) RIF - Corporate charter, etc.
(5) MM - Brokerage orders
(6) MM - Other portfolio purchase orders
(7) SS - Contractual commitments
(8) SS and RIF - Trial balances
(9) MM - Reasons for brokerage allocations
(10) MM - Persons authorizing purchases and sales
(11) FRIC and MM - Files of advisory material
(12) ---
(c) Inapplicable
(d) FRIMCo - Broker-dealer records, to the extent applicable
(e) Inapplicable
(f) FRIMCo and MM - Investment adviser records
ITEM 29 MANAGEMENT SERVICES
None except as described in Parts A and B
ITEM 30 UNDERTAKINGS
The Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
The Registrant undertakes, if requested to do so by the holders of at least 10%
of the Registrant's outstanding shares, to call a meeting of shareholders for
the purpose of voting upon the question of removal of a director or directors
and to assist in communications with other shareholders as required by Section
16(c).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Russell Insurance Funds, certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to rule 485(b) of the Securities Act of 1933 has duly caused this Post
Effective Amendment No. 8 to its Registration Statement to be signed on its
behalf by the undersigned thereto duly authorized, in the city of Tacoma, and
State of Washington on the 26th day of April 2000.
RUSSELL INSURANCE FUNDS
Registrant
By: /s/ Lynn Anderson
---------------------------------------
Lynn L. Anderson, Trustee and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on April 26, 2000.
Signatures Title
- ---------- -----
/s/ Lynn L. Anderson Trustee and Chairman of the Board
- ----------------------------------------
Lynn L. Anderson
/s/ Mark E. Swanson Treasurer, in his capacity
- ---------------------------------------- as Chief Accounting Officer
Mark E. Swanson
Trustee
- ----------------------------------------
Paul E. Anderson*
Trustee
- ----------------------------------------
Paul Anton, PhD*
Trustee
- ----------------------------------------
William E. Baxter*
Trustee
- ----------------------------------------
Kristianne Blake*
Trustee
- ----------------------------------------
Lee C. Gingrich*
Trustee
- ----------------------------------------
Eleanor W. Palmer*
Trustee
- ----------------------------------------
Raymond P. Tennison, Jr.*
By: /s/ Gregory J. Lyons Assistant Secretary
-------------------------------------
Gregory J. Lyons
* Original Powers of Attorney authorizing the President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary, and each of
them singly to sign this Amendment thereto on behalf of the Board of
Trustees of Russell Insurance Funds are on file with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT INDEX
Exhibit Description
No. of Exhibit
--- ----------
(i)1.1 Opinion and Consent of Counsel
(j)1.1 Consent of Independent Auditors
(j)1.4 Limited Powers of Attorney
(p)1.1 Frank Russell Investment Management Company Code of Ethics
1.2 AEW Capital Management, L.P. Code of Ethics
1.3 Alliance Capital Management L.P. Code of Ethics
1.4 Barclays Global Fund Advisors N.A. Code of Ethics
1.5 The Boston Company Asset Management Code of Ethics
1.6 Capital Works Investment Partners Code of Ethics
1.7 Cohen & Steers Code of Ethics
1.8 Geewax, Terker & Company Code of Ethics
1.9 Jacobs Levy Equity Management, Inc. Code of Ethics
1.10 J.P. Morgan Investment Management, Inc. Code of Ethics
1.11 Montgomery Asset Management LLC Code of Ethics
1.12 Oechsle International Advisors, LLC Code of Ethics
1.13 Pacific Investment Management Company Code of Ethics
1.14 Peachtree Asset Management Code of Ethics
1.15 Sanford C. Bernstein & Co., Inc. Code of Ethics
1.16 Security Capital Global Capital Management Group Code of Ethics
1.17 Standish, Ayer & Wood, Inc.'s Code of Ethics
1.18 Strong Capital Management Code of Ethics
1.19 Turner Investment Partners Code of Ethics
1.20 Westpeak Investment Advisors, L.P. Code of Ethics
<PAGE>
Russell Insurance Funds
FILE NO. 33-18030
FILE NO. 811-5371
-----------------
EXHIBITS
--------
Listed in Part C, Item 23
To Post-Effective Amendment No. 8
and Amendment No. 12
to
Registration Statement on Form N-1A
Under
Securities Act of 1933
and
Investment Company Act of 1940
<PAGE>
April 20, 2000
Russell Insurance Funds
909 A Street
Tacoma, Washington 98402
RE: RUSSELL INSURANCE FUNDS
Ladies and Gentlemen:
We have previously executed an opinion with respect to the legality of the
issuance of shares of the Trust. We hereby consent to the continued use of
that opinion as an exhibit to Post-effective Amendment No. 8 to the
Registration Statement of the Trust, covering the registration of the shares
of the Trust under the Securities Act of 1933, as amended, and we further
consent to any reference in the Registration Statement of the Trust to the
fact that this opinion concerning the legality of the issue has been rendered
by us.
Sincerely,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By: /s/ Steven M. Felsenstein
---------------------------------
Steven M. Felsentein, a Partner
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment to the Registration Statement on Form N-1A of our report dated January
26, 2000 relating to the financial statements, which appear in the 1999 Annual
Reports to Shareholders of Russell Insurance Funds, which are incorporated by
reference in this Registration Statement. We also consent to the references to
us under the headings "Financial Highlights" and "Independent Accountants" in
such Registration Statement
/S/
- ---------------------------
PricewaterhouseCoopers LLP
Seattle, Washington
April 24, 2000
<PAGE>
EXHIBIT (j)1.4
LIMITED POWER OF ATTORNEY
with respect to
AMENDMENTS TO THE SECURITIES AND EXCHANGE COMMISSION
REGISTRATION STATEMENTS
of
RUSSELL INSURANCE FUNDS
Know by all men these presents that the undersigned hereby constitutes and
appoints the persons holding the offices of President, Treasurer, any Assistant
Treasurer, Secretary or any Assistant Secretary of Russell Insurance Funds from
time to time, and each of them, his or her attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign
amendments to Securities and Exchange Commission registration statements of
Russell Insurance Funds, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
or her substitutes, may do or cause to be done by virtue hereof.
/s/
--------------------------------
Raymond P. Tennison, Jr.
Trustee, Russell Insurance Funds
12/14/99
- --------------
Date
<PAGE>
EXHIBIT (j)1.4
LIMITED POWER OF ATTORNEY
with respect to
AMENDMENTS TO THE SECURITIES AND EXCHANGE COMMISSION
REGISTRATION STATEMENTS
of
RUSSELL INSURANCE FUNDS
Know by all men these presents that the undersigned hereby constitutes and
appoints the persons holding the offices of President, Treasurer, any Assistant
Treasurer, Secretary or any Assistant Secretary of Russell Insurance Funds from
time to time, and each of them, his or her attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign
amendments to Securities and Exchange Commission registration statements of
Russell Insurance Funds, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
or her substitutes, may do or cause to be done by virtue hereof.
/s/
--------------------------------
Kristianne Blake
Trustee, Russell Insurance Funds
12/20/99
- --------------
Date
<PAGE>
FRANK RUSSELL GROUP OF COMPANIES
CORPORATE CODE OF ETHICS
MARCH 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
TAB 1 - INTRODUCTION
I. Overview 1
II. Purpose 1
III. Applicability 1
1. General 1
2. Non-U.S. Offices 2
TAB 2 - ETHICAL STANDARDS
I. Introduction 3
II. Statement of Purpose and Values 3
III. Ethics Hotline 3
IV. Dispute Resolution 4
TAB 3 - MAINTAINING CONFIDENTIALITY
I. Obligation to Maintain Confidentiality 5
II. Client Information 5
1. Sound Business Practice 5
2. Duty as Agent 5
3. Confidentiality Agreements 6
4. Nondisclosure Agreements 6
III. Public Statements by Associates of the FRC Group 6
TAB 4 - INSIDER TRADING AND OTHER TRADING PRACTICES
I. Policy Statement 8
II. Penalties 8
TAB 5 - FIREWALLS / WATCH LIST POLICIES AND PROCEDURES
I. Overview 9
II. Monitoring the Effectiveness of Firewalls 9
III. Watch List Procedures 9
IV. Additional Procedures 10
TAB 6 - PERSONAL SECURITIES ACCOUNTS AND TRANSACTION REPORTING
I. Reporting of Personal Securities Accounts 11
II. Reporting of Private Securities Transactions 11
III. Approval of Securities Transactions for Access Persons 12
IV. Other Reporting Obligations 12
1. SEC Rule 17j-1 Amendments 12
2. Disinterested Trustees or Directors 13
<PAGE>
V. Restrictions and Exceptions Under PSA and Transaction
Reporting Requirements 13
1. Initial Public Offerings 13
2. Accounts Maintained by an Investment Advisor 13
3. Exempted Securities 14
TAB 7 - OUTSIDE BUSINESS AFFILIATIONS, EMPLOYMENT, AND COMPENSATION
I. General Policy 15
II. Service as a Director 15
III. Service on the Board of Charitable Organizations 15
TAB 8 - GIFTS
I. General Policy 17
II. Accepting Gifts 17
III. Gift Reporting Procedures 18
IV. Giving Gifts 18
V. Honoraria 19
TAB 9 - USE OF COMPUTER RESOURCES AND INFORMATION ASSETS
I. Overall Corporate Policy 20
II. Specific Standards 20
TAB 10 - SANCTIONS 21
TAB 11 - GLOSSARY 22
Tab 12 - Forms 26
</TABLE>
<PAGE>
INTRODUCTION
I. OVERVIEW
The Frank Russell Group of Companies (the "FRC GROUP", or "the Company")* is
one of the world's leading investment management and consulting firms. In
that regard, the FRC Group provides a full range of financial services
designed to meet all levels of investment needs, including consulting and
problem-solving tools to complete investment plan implementation, the
management of mutual and commingled trust fund instruments, and the design of
investment educational tools for use by individual investors and their
advisors, as well as by pension plan sponsors and their plan participants.
The overall mission of the FRC Group is to improve the financial security of
institutions and individuals.
This mission and the business activities supporting it are carried out in one of
the most heavily regulated industries in the world-the securities industry.
Regulatory agencies overseeing this industry impose strict standards of conduct
with regard to the fiduciary responsibilities of persons and business entities
advising clients with regard to, and/or effecting transactions in securities.
Regulatory requirements regarding the implementation of codes of ethics and the
monitoring of personal securities transactions give rise to the need for the FRC
Group CORPORATE CODE OF ETHICS (the "Code"). It is, therefore, of the utmost
importance that the ASSOCIATES of the FRC Group read, understand, and act in
accordance with the requirements and strictures of the Code. FOR THE CONVENIENCE
OF ASSOCIATES OF THE FRC GROUP, THE CODE OF ETHICS CAN BE ACCESSED ON THE
RUSSELL INTRANET SITE (INSITE) UNDER "TIMELY INFORMATION" . . . "CODE OF
ETHICS." THIS DOCUMENT INCLUDES A "FORMS" BUTTON THAT WILL ALLOW ACCESS TO THE
VARIOUS REPORTING FORMS REFERENCED IN THIS CODE.
II. PURPOSE
The purpose of the Code is to describe and implement the FRC Group policies
and procedures concerning:
- The maintenance of confidential client and internal FRC Group
corporate information;
- The prohibitions against engaging in insider trading by Associates of
the FRC Group; and
- The reporting of transactions in securities and other subject events
and occurrences.
III. APPLICABILITY
1. GENERAL
The information contained in this Code applies to all ASSOCIATES of the FRC
Group, whether located in the United States or at one of the Company's
offices located outside the United States.
NEW ASSOCIATES: At the time of hire, new Associates will be provided with
the then current copy of the Code. This document is a condition of
employment with the FRC Group, and Associates are required to acknowledge
that he or she has read the Code, understands its provisions, and agrees to
abide by its requirements. An executed Acknowledgment form and all
applicable reporting forms are to be returned to the FRC Group Human
Resources Department by the new Associate's start date. Any questions
regarding the Code should be
- ------------------
* All substantive terms appearing in BOLD print are defined in TAB 11 - GLOSSARY
of this Corporate Code of Ethics.
<PAGE>
directed to the FRC Compliance Department at 253-573-4860.
ALL ASSOCIATES: Every year, the FRC GROUP COMPLIANCE DEPARTMENT located at
the corporate headquarters in Tacoma, Washington, U.S.A. and in non-U.S.
offices located in Toronto, Canada; London, England; Tokyo, Japan; and
Sydney, Australia ("the FRC Compliance Department") distributes to all
Associates a current Code that incorporates all amendments or replacements.
EACH ASSOCIATE IS REQUIRED ANNUALLY TO ACKNOWLEDGE THAT HE OR SHE HAS READ
THE CODE, UNDERSTANDS ITS PROVISIONS, AND AGREES TO ABIDE BY ITS
REQUIREMENTS.
The Code is intended for the exclusive use of the Associates of the FRC
Group in connection with their job-related duties. It should not be read,
shown, or given to anyone outside of the FRC Group without the permission
of the FRC Compliance Department.
Violation of any of the policies described in this Code may lead to
disciplinary action, including termination of employment (see TAB 10 -
SANCTIONS).
Any questions you may have about this Code can be directed to the FRC
Compliance Department; or, in the Company's offices located outside the
United States, Associates should direct their questions to the local
Compliance Officer supporting those offices.
2. NON-U.S. OFFICES
Associates employed in non-U.S. offices of the FRC Group are fully subject
to the requirements set forth in the Code. Each non-U.S. office has
developed a Code consistent with that which has been adopted by the
Company's headquarters in Tacoma, but which has been modified as necessary
to adhere to local laws, regulations and best practices in operation in
each jurisdiction. Any questions regarding the Code or its application to
Associates in non-U.S. offices should be directed to the local Compliance
Officer supporting those offices.
<PAGE>
ETHICAL STANDARDS
I. INTRODUCTION
The FRC Group is recognized for adhering to the highest standards of ethics in
its business dealings. The reputation of the FRC Group is both highly valued and
valuable, and the maintenance of this reputation is critical to the continued
success of its business. Each Associate has the personal obligation to protect
the company's reputation by conducting business according to the highest
ethical, moral and legal standards.
II. STATEMENT OF PURPOSE AND VALUES
The cornerstones of the FRC Group commitment to business ethics are its
insistence on nonnegotiable integrity and the notion that Associates are the
most important element in our continued success. Associate understanding and
support of our values are the keys to accomplishing the purpose set forth in our
Statement of Purpose: Improve financial security for people.
These values are embodied in the Company's values statement:
- - We value integrity, in an environment of mutual trust and respect,
including fairness, teamwork, tolerance, family and community, in our
process of providing added value to our clients.
- - We value our Associates, families, and clients, who are critical to our
success. We especially appreciate our Associates' commitment to the
Company, and in return seek to provide opportunities for them to develop.
- - We require honest profitability for continued success, and we reward our
Associates accordingly. We seek to exceed client expectations. We aspire to
a higher set of values than required by law.
III. ETHICS HOTLINE
To support its commitment to integrity, the FRC Group has implemented a
confidential Ethics Hotline for Associates to report suspected instances of
unethical or illegal conduct or violations of company policy on the part of
another Associate, contractor or vendor. The Hotline is available 24 hours a
day, every day (including holidays) by calling 1-800-93-ALERT.
The Hotline is answered by an outside agency, which relays complaints to the FRC
Group's Legal Department for further action. The Legal Department refers all
complaints to a designated senior manager, who ensures that all reports are
investigated and, if required, that appropriate corrective action is taken.
Calls may be made on an anonymous basis, if desired. Each caller is assigned a
case number, which the caller may thereafter use in all follow-up communications
in order to maintain confidentiality.
Every effort is made to ensure confidentiality while allowing matters to be
properly investigated and resolved. No Associate's reputation will be put at
risk solely by raising concerns either through the Ethics Hotline or through any
other procedure. Retaliation against an Associate who uses the Hotline to raise
concerns or who participates in the investigation of a complaint is strictly
prohibited and may be grounds for termination of employment.
<PAGE>
IV. DISPUTE RESOLUTION
In addition to the Hotline, the FRC Group provides a confidential means for
Associates to bring grievances to the attention of management through its formal
and informal dispute resolution processes.
The informal dispute resolution process may be used for a situation or problem
that causes an Associate dissatisfaction with his or her general working
environment. The Associate should discuss the situation or problem with his or
her immediate supervisor. If a resolution is not achieved during this
discussion, the Associate should then discuss the matter with the department
manager and, if needed, the division manager. The Human Resources Director or
other specialists in the Human Resources Department, as appropriate, and/or the
Associate's division manager, will work with the Associate to help resolve the
matter to the satisfaction of all parties involved.
The formal dispute resolution process may be used when a problem or situation is
serious in nature. The Associate should present a written statement of the
problem or concern to his or her immediate supervisor. The supervisor will work
with the Associate to resolve the situation. If the problem is not resolved to
the satisfaction of the Associate, a written complaint should be sent to the
department manager and division manager. The complaint should include a request
for a meeting to discuss the problem or situation that is the subject of the
complaint. This request should receive a response in writing within five working
days, and a meeting with the Associate should be scheduled at the earliest
possible date. If this meeting does not produce a satisfactory solution, the
Associate should forward the written complaint to the Human Resources Director
who will investigate the complaint to determine a fair and equitable solution
within five working days. The solution will be presented in writing to the
Associate in a formal meeting with the division manager and the Human Resources
Director.
<PAGE>
MAINTAINING CONFIDENTIALITY
I. OBLIGATION TO MAINTAIN CONFIDENTIALITY
The obligation of all FRC Group Associates to maintain the confidentiality of
client and internal FRC Group corporate information arises largely from four
different sources: (1) sound business practice, (2) duty as agent for the
client, (3) specific confidentiality agreements into which the FRC Group may
enter from time to time, and (4) specific agreements executed between Associates
and the FRC Group. In addition, all Associates have an obligation to comply with
applicable laws prohibiting the use of MATERIAL, NONPUBLIC INFORMATION, however
obtained, in connection with INSIDER TRADING activity. Insider trading
prohibitions are discussed in detail in TAB 4 - INSIDER TRADING AND OTHER
TRADING PRACTICES.
II. CLIENT INFORMATION
All FRC Group Associates must treat client information as confidential unless it
is clearly in the public domain. Information must be kept confidential until an
appropriate supervisor has determined that disclosure is permissible.
1. SOUND BUSINESS PRACTICE
Sound business practice dictates that client information be kept
confidential. In order for the FRC Group to serve its clients effectively,
it must have access to sensitive information that the client often does not
wish disclosed to the public. The failure to keep such information
confidential may cause clients to withhold such information, making it more
difficult to serve their needs.
Clients have the right to expect from the FRC Group, at a minimum, the same
level of professional conduct maintained by other organizations in the
financial services industry. The failure to adhere to industry standards
could cause existing and potential clients to doubt the competence and
integrity of the FRC Group.
2. DUTY AS AGENT
The FRC Group has the obligation, under general principles of agency law,
to maintain the confidences of its clients. The FRC Group, while acting as
agent for its clients, must conduct its business activities in such a
manner as to avoid adversely affecting clients' interests. All entities
within the FRC Group (and, by extension, each of their Associates) must at
all times behave as would an ordinarily prudent person in similar
circumstances while acting on behalf of clients. If the unwarranted
disclosure of confidential information concerning any client results in
demonstrable financial harm to that client, the FRC Group may be liable for
some or all of the resulting damage.
3. CONFIDENTIALITY AGREEMENTS
From time to time, Associates of the FRC Group are asked to enter into
specific agreements with clients and others requiring that information be
kept confidential. These agreements impose a duty on members of the FRC
Group that is independent of those duties imposed by law. The terms of
these agreements usually require that the FRC Group hold to standards of
confidentiality that exceed those that would be imposed by law.
4. NONDISCLOSURE AGREEMENTS
<PAGE>
All Associates are required to sign a Nondisclosure Agreement at the time
of hire. It is a condition of employment that this agreement be executed
and placed in the Associate's permanent file. By signing this document, the
Associate agrees that he/she will not disclose to anyone outside the FRC
Group, for any purposes other than the prosecution of work-related duties,
any confidential or proprietary FRC Group information. Further, the
Associate agrees to not disclose any such confidential or proprietary
information to anyone INSIDE the FRC Group except on a "NEED TO KNOW"
basis. If questions arise as to what comprises such confidential or
proprietary information, or to whom, if anyone, inside or outside of the
FRC Group it may be disclosed, the Associate should consult with the FRC
Legal Department.
III. PUBLIC STATEMENTS BY ASSOCIATES OF THE FRC GROUP
From time to time FRC Group Associates are asked to comment publicly on matters
pertaining to the investment industry, financial market activity, and other
issues involving both factual, opinion and policy matters. This activity is a
vital part of FRC Group's program of increasing its public visibility by
providing timely and thoughtful commentary on matters of interest to the many
communities we serve. The FRC Group Code of Ethics and the Employee
Nondisclosure Agreement signed by each of our Associates restrict the disclosure
of "confidential information." Because of the increasing visibility the FRC
Group enjoys in the marketplace, it is important that the FRC Group provides a
clear policy statement designed to give further guidance to our Associates,
particularly those who are communicating regularly with persons outside the
Company.
The purpose of this policy statement is to make clear to all Associates that in
the following situations comments to the public, including comments to clients,
customers, suppliers, friends and family (including spouse, significant other,
children, and parents) are inappropriate.
Under no circumstances may an FRC Group Associate discuss with persons outside
the Russell organization any information concerning its business strategies, its
product design or development plans, its product distribution plans, and the
identity and nature of its arrangements with potential business partners. The
premature announcement of such matters could have a devastating impact on the
FRC Group's planned business strategies and may well violate the terms of
confidentiality agreements the FRC Group has with other organizations.
Furthermore, such improper disclosure could result in illegal "INSIDER TRADING"
if the parties with whom the FRC Group is dealing are publicly held institutions
(which is often the case) and the information is deemed material (which is quite
possible). Also, as a general rule, the dissemination of such information
internally within the FRC Group should be restricted only to those who have a
"NEED TO KNOW" in order to facilitate a particular strategic project.
All inquiries received from anyone outside the Russell organization concerning
the FRC Group's strategic plans should be rejected as inappropriate for comment.
If the person seeking such information is persistent, they should be referred
either to the FRC Group General Counsel or the Manager of Public Relations. The
proper response by Associates in all cases will be the following:
"Russell is a private company and we do not discuss our strategic plans with the
public."
If an FRC Group Associate is asked to comment on a rumor concerning the FRC
Group, the response in all cases will be the following:
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"We do not respond to or comment on unsubstantiated rumors or speculation,
whether involving Russell or other parties."
Violations of this Policy will be considered a serious breach of an Associate's
obligations to the FRC Group and will result in disciplinary action, including
the possibility of termination of employment for "cause." (See TAB 10 -
SANCTIONS)
The statements set forth in this Policy are in furtherance of and not a
substitution for the provisions set forth in any Employee Nondisclosure
Agreement between an Associate and the Company.
In those cases where there may appear to be a conflict between this policy and a
fiduciary, contractual or other obligation to a particular FRC Group client,
Associates should contact an attorney in the Legal Department directly before
speaking with the client.
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INSIDER TRADING AND OTHER TRADING PRACTICES
I. POLICY STATEMENT
INSIDER TRADING is illegal and is strictly prohibited. If there are any
questions after reviewing this policy statement, you should consult the FRC
Compliance Department and/or Legal Department. In the company's offices located
outside the United States, Associates should consult with the local Compliance
Officer supporting those offices, who will in turn consult with the Legal
Department, as necessary.
Associates in possession of MATERIAL, NONPUBLIC INFORMATION are considered
insiders and must preserve the confidentiality of such information and abstain
from trading until the INSIDER information is disclosed and made public. It is a
fundamental policy of the FRC Group that:
- - No Associate, while in possession of MATERIAL, NONPUBLIC INFORMATION
concerning any company, shall purchase or sell, or recommend or direct the
purchase or sale, of any SECURITY of such company for the following
accounts: (a) entities within the FRC Group; (b) clients of the FRC Group;
(c) accounts in which he or she has a direct or indirect BENEFICIAL
OWNERSHIP INTEREST; and (d) accounts over which the Associate has
discretionary authority or a power of attorney.
- - No Associate may purchase or sell a security if the Associate knows or
could reasonably ascertain that the purchase or sale: (a) would be
detrimental, or potentially detrimental, to any member of the FRC Group or
to any client of any member of the FRC Group; (b) is designed to benefit
the Associate by taking advantage of the market effect of purchases and
sales of securities by any member of the FRC Group or any client of any
member of the FRC Group; or (c) competes with transactions of any member of
the FRC Group or their respective clients.
- - No Associate shall disclose material, nonpublic information concerning
any company to any person outside the FRC Group, except for disclosures
that: (a) have been authorized by the Company; (b) are necessary for the
performance of FRC Group services; and (c) have been authorized by the
Compliance Department. An Associate who communicates material, nonpublic
information to another who trades on such information may be subject to
sanctions as set forth in this section under "Penalties" and/or in TAB 10 -
SANCTIONS, as though the Associate had directly bought or sold the
securities himself or herself.
- - Any Associate who, in the course of his or her employment, obtains
material, nonpublic information that is later disclosed to the general
public must allow sufficient time to elapse for the investing public to
assimilate and evaluate the information before taking any action for his or
her personal account on the basis of the disclosed facts.
- - No Associate may execute a personal securities transaction on a day during
which the Associate knows that the FRC Group or an FRC Group client has a
pending buy or sell order in place in that same security until that order
is executed or withdrawn.
II. PENALTIES
Penalties for trading in reliance on, or communicating to others who thereafter
trade in reliance on, material, nonpublic information can be severe, both for
the individuals involved and their employers. Such penalties vary among the
different countries in which the FRC Group does business and can include, but
are not necessarily limited to, fines and/or disgorgement of profits and
potential civil or criminal legal action.
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FIREWALLS / WATCH LIST POLICIES AND PROCEDURES
I. OVERVIEW
FRC Group Associates have a duty to maintain the confidentiality of client
information and information regarding firm-related activities that may involve
issuers of publicly traded securities. Associates working with, or who may come
into contact with, MATERIAL, NONPUBLIC INFORMATION in connection with a specific
client engagement of the FRC Group, or other significant corporate undertaking
of the FRC Group, owe a special duty to maintain the confidentiality of
information that may result from those activities. Applicable securities laws
make it illegal to trade in or to tip others regarding securities while in
possession of material, nonpublic information regarding those securities or
their issuer. In order to permit the FRC Group to continue its normal business
activities while in possession of material, nonpublic information, the FRC Group
has established strict procedures ("Firewalls') to prevent the flow of such
information to any business units and/or Associates except those with a
legitimate NEED TO KNOW such information.
II. MONITORING THE EFFECTIVENESS OF FIREWALLS
In order to ensure that the Firewall policies and procedures are effective and
have not been violated, the FRC Group has established a "Watch List" procedure
which will allow for the FRC Group to monitor trading in securities of companies
about which the Company or its Associates are in possession of material,
nonpublic information.
In order to ensure that the identities of companies appearing on the Watch List
remain confidential, distribution of the list is limited and carefully
controlled. Because of the Company's Firewall procedures, and the fact that the
Watch List is confidential, most Associates are able to continue their normal
investment activities even if those activities involve securities of a company
appearing on the Watch List. The only Associates whose activities are restricted
are those who are recipients of the list as well as those who are "over the
wall" and have received confidential nonpublic information with respect to a
company appearing on the list. These individuals may not, either directly or
indirectly, purchase, sell, recommend or discuss securities of the company(ies)
appearing on the list, nor may they pass on to anyone else the fact that a
company(ies) appears on the list or any information they have received
concerning any company(ies) on the list.
III. WATCH LIST PROCEDURES
- - CREATION AND MAINTENANCE OF THE WATCH LIST - The FRC Compliance Department,
through its Director of Compliance, is responsible for creating and
maintaining the Watch List. Information about a company to be placed on the
Watch List will be provided by the Project Head or other authorized member
of the Project Team. Information to be provided will include: 1) the name
of the issuer(s) involved in the engagement or proposed transaction and any
code names assigned; 2) the name of any contra-party(ies) to the engagement
or proposed transaction; 3) the date of the assignment or date upon which
monitoring of securities transactions should begin; 4) the nature of the
engagement or proposed transaction; and 5) the names of all Associates who
have knowledge of the information.
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- - DUTIES AND RESPONSIBILITIES OF THE PROJECT HEAD - In addition to his/her
responsibility for initial reporting to the FRC Compliance Department of a
company to be placed on the Watch List, the Project Head is also
responsible for: 1) maintaining confidentiality of information received in
connection with an engagement or proposed transaction; 2) ensuring that any
changes or additional information relating to the engagement or proposed
transaction that are germane to this Watch List procedure are communicated
to the Compliance Department; 3) approving any additional Associates that
are brought "over the wall" on an engagement or proposed transaction,
particularly those Associates from other business units of the FRC Group,
and notifying the Compliance Department of such additions; and 4) notifying
the Compliance Department of any instances in which confidential
information may have been inadvertently passed to someone outside the scope
of the engagement or proposed transaction.
- - MONITORING OF SECURITIES ON THE WATCH LIST - The FRC Compliance Department
is responsible for reviewing and monitoring the trading by Associates of
securities of companies on the Watch List. As soon as practicable after
receipt, the Compliance Department will review duplicate confirmations of
transactions for all PERSONAL SECURITIES ACCOUNTs of Associates. Any
transactions noted in securities on the Watch List will be subject to
further inquiry as deemed appropriate by the Director of Compliance
Officer.
- - DELETION FROM THE WATCH LIST - It is the responsibility of the Project Head
or other authorized member of the Project Team to contact the FRC
Compliance Department regarding a decision to delete a company from the
Watch List. A determination will be made as to whether the company should
be deleted or whether any follow-on procedures or monitoring should be
conducted. While a public announcement may have been made, a "deal" likely
will not settle for some period of time thereafter. Given that MATERIAL,
NONPUBLIC INFORMATION could still develop during the period of time between
announcement and settlement, it may be prudent to continue Watch List
monitoring for an appropriate period of time after announcement of a
transaction.
IV. ADDITIONAL PROCEDURES
- - ACCOUNTING PROCEDURES - Information concerning the billing or payment of
client fees and expenses may "tip" Associates as to the existence of an
engagement or proposed transaction. To preserve the confidentiality of such
information, the Project Head will, with the assistance of the Controller,
select a limited number of accounting personnel to handle all accounting
work on the engagement or proposed transaction. Code names will be utilized
for all communications with assigned accounting personnel. The Project Head
will promptly notify assigned accounting personnel of any new or changed
information that is relevant to the engagement or proposed transaction.
- - SECURITY OVER PROJECT FILES - Confidential information relating to an
engagement or proposed transaction should be provided with an appropriate
level of security in order to preserve that confidentiality. Code names
should be assigned whenever possible and utilized in communications.
Hardcopy files should be maintained in locking file cabinets; electronic
files should be maintained in special system libraries. In all cases,
access should be limited to only those Associates actively participating on
the Project Team. Transmission of hardcopy information internally should be
made using "Confidential" envelopes. Use of electronic mail should be
avoided unless proper encryption protocols are utilized.
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PERSONAL SECURITIES ACCOUNTS AND TRANSACTION REPORTING
This section of the FRC Code of Ethics covers the policies and procedures of the
FRC Group in connection with establishing and maintaining a PERSONAL SECURITIES
ACCOUNT ("PSA") and transaction and other reporting obligations. Terms used in
this section are defined in the Glossary section (See Tab 11 - Glossary).
I. REPORTING OF PERSONAL SECURITIES ACCOUNTS
1. All Associates must report to the FRC Group any EXISTING PSAs carried in
their name or in which the Associate has a BENEFICIAL OWNERSHIP INTEREST.
PSAs must be reported to the FRC Compliance Department, or, for offices
located outside the United States, the local Compliance Officer supporting
those offices. Such reports are to be made on the PERSONAL SECURITIES
ACCOUNT REPORT which can be found in the Forms Tab (TAB 12) or on Russell
InSite.
For Associates in the United States, recent amendments to Rule 17j-1 of the
Investment Company Act of 1940 require that the FRC Compliance Department
be provided with a listing of all PSAs and ALL securities beneficially
owned or held, whether in a PSA or held directly by the Associate, WITHIN
10 DAYS OF BECOMING EMPLOYED WITH THE FRC GROUP. (See further discussion in
this section.)
2. All Associates must also report, and receive prior approval for, any NEW
PSAs they wish to open. Approval may be obtained by submitting a PERSONAL
SECURITIES ACCOUNT REPORT to the FRC Compliance Department, or, for offices
located outside the United States, the local Compliance Officer supporting
those offices.
3. The FRC Compliance Department will provide the FINANCIAL INSTITUTION
maintaining the PSA a letter indicating that the Associate has the FRC
Group's permission to maintain the account. The letter will also direct the
Financial Institution to forward duplicate transaction confirmations and
monthly statements to a dedicated, confidential post office box maintained
by the FRC Compliance Department.
II. REPORTING OF PRIVATE SECURITIES TRANSACTIONS
PRIVATE SECURITIES TRANSACTIONs are those transactions that may occur outside an
established securities account maintained with a broker/dealer, investment
advisor or other financial institution. FRC Associates may not engage in any
Private Securities Transactions without having received the prior written
approval of the FRC Compliance Department. Requests for approval may be made on
the APPROVAL REQUEST FOR A PRIVATE SECURITIES TRANSACTION form that can be found
in the Forms Tab or on Russell InSite. The definition of a Private Securities
Transaction should be construed broadly. Any questions regarding such
transactions should be directed to the FRC Compliance Department.
Approval of such transactions will take into consideration the following:
- - Whether the investment opportunity should be reserved for the FRC Group or
its clients;
- - Whether the investment opportunity is being offered to an Associate by
virtue of his or her position with the FRC Group; and
- - Whether the investment represents a potential conflict of interest with an
FRC Group client.
<PAGE>
Additionally, Associates are required to disclose their interest in any such
security to the senior manager of their respective business unit and the FRC
Compliance Department when that Associate plays a part in the FRC Group's
consideration of the issuer of that security(s) on behalf of FRC Group clients.
Under such circumstances, any decisions regarding that issuer will be made by
other Associates with no personal interest in that issuer.
III. APPROVAL OF SECURITIES TRANSACTIONS FOR ACCESS PERSONS
Associates who are deemed to be ACCESS PERSONS must seek approval of their
COVERED SECURITIES TRANSACTIONS from the FRC Compliance Department, or, for
offices located outside the United States, the local Compliance Officer
supporting those offices. (SEE TAB 11 - GLOSSARY for the definition of ACCESS
PERSON and a listing of business units included within that definition.)
Associates who are Access Persons will be requested to provide the date of the
transaction of that security(ies), whether the transaction is a buy or a sale,
the name of the security and number of shares to be purchased or sold. Approvals
of market order transactions are valid for the day they are given. Any
transaction not executed must be RE-APPROVED before being entered on a
subsequent day. "Good 'til canceled" orders will not require re-approval unless
the Associate changes the terms of the order or withdraws the order and
subsequently re-enters it with the Financial Institution at a later time.
All requests for approval of securities transactions may be obtained by calling
Extension 4860 (or from outside at 253-573-4860). This is a dedicated telephone
line maintained in the FRC Compliance Department which is manned for transaction
approval purposes and general compliance questions during normal business hours.
Calls to this telephone line outside of normal business hours will be directed
to leave a voice mail message outlining the details of the transaction as noted
above. In addition, Associates may also email transaction details via the online
Personal Securities Transaction Approval form. This form can be found in the
Code of Ethics under "Timely Information" on the Russell Intranet site (InSite).
Click on the Forms button to bring up this document. An example of this form is
also included for reference in the Forms section (TAB 12).
IV. OTHER REPORTING OBLIGATIONS
1. SEC RULE 17j-1 AMENDMENTS
The U.S. Securities and Exchange Commission has recently approved amendments to
Rule 17j-1 of the Investment Company Act of 1940. These amendments mandate
certain new reporting obligations for Associates in the U.S. that have not
previously been required under the FRC Group Code of Ethics. The FRC Compliance
Department has developed an "Associate Profile" that is designed to assist
Associates in meeting their obligations under these reporting requirements. The
components of these new reporting requirements are as follows:
A. INITIAL HOLDINGS REPORT
As noted earlier in this section, all new Associates must report ALL
securities owned or beneficially held and all PSAs WITHIN 10 DAYS OF
BECOMING EMPLOYED BY THE FRC GROUP. This reporting obligation can be met
during the new hire process by completing the PERSONAL SECURITIES ACCOUNT
REPORT for approval of existing PSAs AND by providing the FRC Group at that
same time a copy of the most recent monthly statement for all such
accounts. Human Resources will collect these
<PAGE>
documents and forward them immediately to the FRC Compliance Department.
B. ANNUAL HOLDINGS REPORT
All FRC Associates must report annually ALL securities owned or
beneficially held, whether those securities are held in a PSA or are held
directly by the Associate. In connection with securities held personally
(example: stocks held in a safety deposit box), the Associate must report
those holdings on a SECURITIES HOLDINGS REPORT which can be found in the
Forms section (Tab 12).
To facilitate the annual holdings reporting obligation, the FRC Compliance
Department will provide Associates at the beginning of each year with a
copy of an "Associate Profile" that summarizes all reported PSAs, Private
Securities Transactions or securities held outside of a PSA, and other
reporting information required by the FRC Group Code of Ethics. For
Associates who maintain a securities license, the "Associate Profile" will
also provide a summary of this information. Associates will be required to
review and update the Profile and return it along with their Code of Ethics
Acknowledgment.
C. QUARTERLY TRANSACTIONS REPORT
FRC Associates are also required to report all securities transactions on a
quarterly basis. FRC Associates will be deemed to have fulfilled this
reporting obligation as long as all PSAs and Private Securities
Transactions have been reported and approved as discussed earlier in this
Tab and the FRC Compliance Department is receiving duplicate transaction
confirmations and monthly statements as noted earlier.
2. DISINTERESTED TRUSTEES OR DIRECTORS
A DISINTERESTED TRUSTEE OR DIRECTOR of FRTC, FRIC, RIF or the SSgA Funds is
required to report a transaction in securities only if such trustee or director,
at the time of the transaction, knew or should have known that during the 15-day
period immediately preceding or after the date of the transaction such security
is or was purchased or sold by any fund portfolio or was considered for purchase
or sale in the fund portfolio or by the fund's investment advisor.
V. RESTRICTIONS AND EXCEPTIONS UNDER PSA AND TRANSACTION REPORTING REQUIREMENTS
1. INITIAL PUBLIC OFFERINGS
All FRC Associates are prohibited from acquiring any securities in an initial
public offering, in order to preclude any possibility of profiting improperly
from their positions on behalf of the FRC Group. Associates are free to trade in
such securities as soon as the underwriting has terminated.
2. ACCOUNTS MAINTAINED BY AN INVESTMENT ADVISOR
FRC Associates may maintain PSAs with an investment advisor that are managed on
a DISCRETIONARY basis. If the account is managed on a discretionary basis, the
Associate has given the advisor the authority to purchase and sell securities in
the account without the Associate's prior knowledge or consent. FRC Associates
who are ACCESS PERSONS and who maintain accounts managed on a
<PAGE>
discretionary basis are NOT required to seek approval of covered securities
transactions, provided that the following conditions are met:
- At the time such account is initially reported to the FRC Compliance
Department, the Associate will provide a copy of the executed
discretionary advisory agreement with the PERSONAL SECURITIES ACCOUNT
REPORT.
- The Associate will provide the FRC Compliance Department with an
additional written representation that transactions in the account
are, in fact, effected on a discretionary basis by the investment
advisor.
- In the event that the Associate participates in any decision
regarding purchases or sales in the account, that transaction must be
submitted for approval by the FRC Compliance Department as noted
earlier in this Tab.
- On an annual basis, the Associate will be required to provide a
written representation that he or she has not participated in any
purchase or sale decisions in the previous twelve months.
3. EXEMPTED SECURITIES
The reporting and approval requirements described above apply to any investment
instrument categorized as a SECURITY. However, for purposes of the Code, the
definition of "security" does not include the following:
- U.S. Government securities
- Bankers' acceptances
- Bank certificates of deposit
- Commercial paper
- High-quality, short-term debt instruments, including repurchase
agreements
- Shares of registered, open-end investment companies (mutual funds) or
open-end unit trusts
- Transactions in securities of issuer-sponsored dividend reinvestment
programs
- Transactions in securities of an employer-sponsored stock purchase
plan or upon the exercise of employee stock options
As the foregoing investment instruments fall outside the definition of
"security" as provided in the Glossary section of the Code, FRC Associates
are not required to report transactions or seek approval of transactions in
these instruments.
<PAGE>
OUTSIDE BUSINESS AFFILIATIONS,
EMPLOYMENT, AND COMPENSATION
I. GENERAL POLICY
No FRC Group Associate may maintain any outside business affiliations
(directorships, governorships or trusteeships) with business organizations,
outside employment, or receive compensation from any source, without PRIOR
APPROVAL of their manager AND the FRC Compliance Department or, for offices
located outside the United States, the local non-U.S. Associate's manager and
the Compliance Officer supporting those offices. Requests for approval of all
such affiliations must be made on the OUTSIDE BUSINESS AFFILIATION, EMPLOYMENT
OR COMPENSATION form which can be found in the Forms Tab (TAB 12) or on Russell
InSite. Termination of such affiliations must be reported to the FRC Compliance
Department or appropriate Compliance Officer in non-U.S.
offices.
II. SERVICE AS A DIRECTOR
FRC Group Associates may be asked to serve on the boards of directors of
publicly traded companies as well as private companies. Such service carries
with it certain risks and business considerations for the FRC Group and, as
such, should be strictly limited to those engagements that are specifically
approved by the FRC Group. Approval of service as a director will be based on a
determination that: (a) board service would be consistent with the interests of
the FRC Group and its clients; and (b) no conflict of interest exists with
respect to the nature of the entity with which the Associate is a board member
and the duties of the Associate within the FRC Group. Associates serving on
boards of directors of publicly traded companies must be especially mindful of
the FRC Group policy on maintaining client confidentiality.
III. SERVICE ON THE BOARD OF CHARITABLE ORGANIZATIONS
FRC Group Associates generously provide their time, talents and monetary support
to many worthy charitable and civic organizations in their communities. The FRC
Group is justifiably proud that many Associates also serve as officers,
directors, trustees or fund-raisers for these organizations.
From time to time, these organizations may need to procure, either directly or
indirectly, the services that the FRC Group provides. In such cases, the
Associate may expect to either provide those services on behalf of the FRC
Group; or be compensated by the FRC Group as a result of the use of these
services; or, be directed business by an unrelated service provider recommended
by the Associate to the organization with which they are associated.
For the benefit of the charitable organization, the FRC Group and the Associate,
the following guidelines apply WHENEVER the FRC Group is providing or is
expected to provide services, directly or indirectly, to the organization with
which the Associate is affiliated:
1. The Associate must disclose his or her employment by the FRC Group; and,
2. If the Associate expects to be compensated by the FRC Group in connection
with, or as a result of, the services provided by the FRC Group or an
unrelated service provider recommended by the Associate,
<PAGE>
the Associate must disclose this fact; and,
3. If the Associate is a member of the body that decides whether to employ the
FRC Group or an unrelated service provider which is expected to utilize the
services of the FRC Group, the Associate must abstain from participating in
the selection of the FRC Group or the service provider; and,
4. All of the foregoing must be memorialized in writing to the appropriate
officer of the board of the charitable organization or in the minutes of
the applicable meeting(s) of the governing body at which the selection is
to be made.
<PAGE>
GIFTS
I. GENERAL POLICY
Giving or accepting gifts, hospitality, payments or preferential treatment to or
from clients or vendors/suppliers of the FRC Group may be a conflict of
interest. Of course, FRC Group Associates acting in a nonbusiness capacity may
give or accept gifts motivated by family or personal relationships that exist
outside of the company. However, if the giver or recipient is a client or a
vendor/supplier of the FRC Group, the Associate should carefully consider the
context of the exchange in order to avoid any appearance of bribery or other
motive which could embarrass or expose to liability the Associate, the FRC Group
or its clients or vendors/suppliers.
II. ACCEPTING GIFTS
It is FRC Group policy that Associates conduct business in a manner that makes
it clear that their first loyalty is to the FRC Group rather than to their
personal benefit. UNLESS THE ACCEPTANCE OF A GIFT FROM A CLIENT OR
VENDOR/SUPPLER QUALIFIES UNDER THE EXCEPTIONS LISTED BELOW, FRC GROUP ASSOCIATES
ARE PROHIBITED FROM:
- - Accepting gifts of cash or gift certificates in any amount;
- - Soliciting for themselves or for a third party (other than the FRC Group)
anything of value from anyone in return for any business, service or
confidential information; or,
- - Accepting anything of value (other than salary, wages, fees or other
compensation paid by the FRC Group) from anyone in connection with FRC
Group business, either before or after a transaction is discussed or
completed.
Associates may accept gifts (other than cash or gift certificates) or
acts of hospitality of reasonable value without violating the
provisions of this policy. In most cases, a gift or act of hospitality
of $100 or less (or, for non-U.S. offices, a reasonably comparable
amount in local currency) will be considered to be of reasonable value
and may be accepted, provided:
- No effort is made to influence the intended recipient's
professional judgment;
- The intended recipient's judgment is not affected by acceptance
of the gift or hospitality;
- The intended recipient has not solicited the gift or hospitality;
and,
- The gift or hospitality offered is timely reported to the
Compliance Department for review and approval on a case-by-case basis.
Associates should tactfully refuse a gift or act of hospitality with a
fair market value of more than $100 (or, for non-U.S. offices, a
reasonably comparable amount in local currency), unless to do so would
embarrass the giver and/or prejudice a business relationship. Such a
gift will become the property of the FRC Group and/or be donated to
charity.
<PAGE>
Certain gifts and acts of hospitality are acceptable and not subject to the gift
reporting provisions so long as they meet the criteria noted above. Such gifts
or acts of hospitality are:
- - Meals, refreshments, travel arrangements or accommodations may be accepted
if:
- They are of reasonable value;
- They are offered in the course of a meeting or other occasion for
the purpose of providing an opportunity for a business discussion
or to foster a better business relationship; and,
- The expense incurred would have been paid by the FRC Group as a
reasonable business expense had the other party not paid it.
- - Advertising or promotional materials (items containing a company's name and
or logo) of reasonable value such as pens, pencils, notepads, key chains,
calendars, tote bags, and similar items;
- - Discounts and rebates on merchandise or services that do not exceed those
offered to other clients;
- - Gifts of reasonable value that are presented in connection with commonly
recognized events such as holidays, weddings, births of children,
promotions, new jobs or retirements;
- - Awards by civic, charitable, educational or religious organizations for
recognition of services or accomplishments; and,
- - Attendance at sporting events and other entertainment events at the expense
of the giver, so long as the expense is reasonable and both the Associate
and the giver are present.
III. GIFT REPORTING PROCEDURES
Associates must report in writing any gift received in a business context that
does not qualify under the types of acceptable gifts noted above. The report
should contain the following:
- - The name of the recipient;
- - The name of the giver;
- - The gift or act of hospitality received and its approximate market value;
and,
- - The date received.
The report should be sent to the FRC Compliance Department, or, for offices
located outside the United States, the local Compliance Officer supporting those
offices, and may be sent either through interoffice or electronic mail. A
permanent record of gift reports will be maintained.
IV. GIVING GIFTS
Giving or offering gifts or acts of hospitality to any FRC Group client,
vendor/supplier or competitor with the intention of influencing the recipient's
judgment in favor of the FRC Group is prohibited.
Gifts or acts of hospitality may be offered if all of the following conditions
apply:
- - No effort is made to influence the intended recipient's judgment;
- - The value of the gift or hospitality is worth less than $100 (or, for
non-U.S. offices, a reasonably comparable amount in local currency);
<PAGE>
- - The gift is not in the form of cash or a gift certificate, and;
- - All gifts or acts of hospitality to clients or vendors/suppliers paid for
by the FRC Group are claimed on the standard expense report.
FRC Group Associates should be especially sensitive to giving gifts to persons
associated with ERISA funds, since acceptance might be deemed to be a use of
plan assets to obtain a personal gain, which could expose both the recipient and
the FRC Group to legal action, public censure and financial penalties.
Associates should also be aware of the U.S. Foreign Corrupt Practices Act of
1977, which generally prohibits the payment of anything of value by anyone
affiliated with a U.S. company (including employees or agents of non-U.S.
affiliates of a U.S. company) to a foreign official (including through an
intermediary) for the purpose of obtaining or retaining business. Penalties for
violations of the Act are severe, including potential criminal sanctions and
fines in excess of $1 million. Even an investigation under the Act can adversely
affect FRC's relations with clients and future foreign business.
V. HONORARIA
FRC Group Associates are frequently requested to speak at events sponsored by
business, educational, civic, and charitable organizations. Such speaking
engagements may involve Associates specifically as representatives of the FRC
Group, but also in a personal capacity as members of these various communities.
Once again, the FRC Group is proud of the fact that its Associates are sought
after for participation in such events. In connection with such events, these
organizations will frequently offer to pay an honorarium and/or reimburse the
speaker for reasonable and customary travel expenses incurred in attending the
event.
In order to address any potential conflicts of interest that may arise,
Associates are expected to notify the senior management of their respective
business unit regarding ANY engagement that the Associate wishes to accept at
which the Associate will be functioning as a representative of the FRC Group,
and to provide details of the subject of the speech and the intended audience.
All speaking engagements in which the organization offers to pay an honorarium
are deemed by the FRC Group to be fully subject to this policy and, as such,
require the prior written approval of the senior manager of the business unit
AND the FRC Compliance Department, or, for offices located outside of the United
States, the local Compliance Officer supporting those offices. In addition,
approval of such activities is subject to the following:
1. Honoraria offered for speaking engagements in which the Associate is
serving specifically in their capacity as a representative of the FRC Group
may not be accepted and should be politely declined. Should the
organization insist that the honorarium be accepted, the Associate may
accept, but should advise the organization that the honorarium will become
the property of the FRC Group and/or be donated to charity.
2. Any offers by the organization of a "speakers gift" to an Associate serving
in their capacity as a representative of the FRC Group are subject to the
FRC Gifts Policy as described in Sections II and III of this tab.
<PAGE>
USE OF COMPUTER RESOURCES AND INFORMATION ASSETS
I. OVERALL CORPORATE POLICY
Information asset usage is governed by a corporate security policy and
accompanying standards that delineate the terms and conditions for the usage of
Russell information assets and computer resources and systems. These state, in
part, that all information and data stored on or transmitted over the FRC Group
network system, and all transactional records generated by using this system,
are the property of the FRC Group and may be used by the FRC Group for any
purpose. The FRC Group reserves the right to monitor, access, and disclose all
activities and information on this system to appropriate FRC Group personnel and
other persons. Without limitation, anyone using this system expressly consents
to such monitoring, access or disclosure by the FRC Group and is advised that if
such actions by the FRC Group reveal possible evidence of criminal activity, the
FRC Group may provide the evidence obtained through such monitoring, access or
disclosure to law enforcement officials.
II. SPECIFIC STANDARDS
In addition to the above, the FRC Group Information Systems Security Policy and
Standards set forth specific computing resource and information asset usage
standards which must be adhered to. Use of FRC's computer network, computing
resources and information assets is intended for the express purpose of
supporting Frank Russell Company business-related activities. Business units
retain the authority to approve individual usage in line with the
above-mentioned standards. These standards are specifically set forth in the
usage agreement that all permanent employees and contractors are required to
sign upon commencing employment. These standards and the complete policy
statement on computing security, resource, and information asset usage can be
found on the Russell Intranet site (InSite) under "Services" . . . "Security
Services" (http://intra3.russell.com/security). ALL permanent Associates and
contractors are REQUIRED to read and familiarize themselves with these standards
and their intent.
<PAGE>
SANCTIONS
Any violation of the rules and requirements set forth in the Code may result in
the imposition of such sanctions as the FRC Group General Counsel and senior
management of the FRC Group, as applicable, may deem appropriate under the
circumstances. These sanctions can include, but are not limited to: (a) removal
or suspension from office; (b) a letter of censure; (c) restitution to the
appropriate member of the FRC Group or client of the FRC Group, as management
deems appropriate; and/or (d) termination of employment for "cause."
<PAGE>
GLOSSARY
ACCESS PERSONS. (1) Any director, officer or member of senior management of the
Frank Russell Group of Companies; (2) any Associate of the Frank Russell Group
of Companies (a) who, in connection with his or her regular duties, makes,
participates in, obtains, or involuntarily receives information regarding the
purchase or sale of a security by any account or fund managed by, or client of,
the Frank Russell Group of Companies, (b) whose functions relate to the making
of any recommendations with respect to such purchases or sales, or (c) whose
functions give them access to money manager research data or any information of
the sort available to the Associates described in clauses (a) or (b) above; and
(3) any other persons or departments that may be categorized as Access Persons
by the FRC Compliance Department.
All Associates performing the following functions or working in the following
departments and/or business units are deemed to be Access Persons:
- Investment Management Group--including non-U.S. offices
- Investment Policy and Research--including non-U.S. offices
- Consulting--including non-U.S. offices
- Chairman/President's Office
- Members of FRC Executive and Operating Committees
- Frank Russell Securities--including Transition Management
- Frank Russell Capital
ASSOCIATE. Any officer, director, trustee, controlling person, general partner,
or employee of any of the entities within the FRC Group.
BENEFICIAL OWNERSHIP INTEREST. An Associate or immediate family member shall be
considered to have a beneficial ownership interest in a Personal Securities
Account if he or she obtains benefits from the account substantially equivalent
to whole or partial, direct or indirect ownership. Associates and immediate
family members are also deemed to have a Beneficial Interest in accounts in
which they have the power, directly or indirectly, to make investment decisions.
Examples include, but are not limited to, accounts for trusts, partnerships and
corporations in which an Associate or immediate family member maintains an
interest or derives a benefit.
COVERED SECURITIES TRANSACTIONS. Transactions in the investment instruments
included in the definition of "securities" given below and not specifically
excepted from that definition either in the text of the Code or in the
above-mentioned definition of "securities."
DISCRETIONARY ACCOUNTS. Accounts in which the client gives a broker-dealer,
investment advisor, or other financial institution discretion as to the purchase
or sale of securities or commodities, including selection, timing, and price to
be paid or received. By so doing the client empowers the financial institution
to buy and sell without the client's prior knowledge or consent, although the
client may set broad guidelines for managing the account (e.g., limiting
investments in blue chip stocks or banning investment in "sin" stocks).
DISINTERESTED TRUSTEE OR DIRECTOR. A disinterested trustee or director of the
FRIC, RIF or SSgA Funds is a trustee or director who is not an interested
trustee or director of the FRIC, RIF or SSgA Funds within
<PAGE>
the meaning of Section 2(a)(10) of the 1940 Act.
- - FRC Compliance Department. When used in this Code, this term refers to the
FRC Group Compliance Department located at the corporate headquarters in
Tacoma, Washington, U.S.A. and also includes those compliance officers
located in certain non-U.S. offices of the FRC Group with a strong dotted
line reporting relationship back to the Tacoma headquarters.
FRC GROUP. Refers collectively to Frank Russell Company ("FRC") and each of its
subsidiaries and affiliates, including:
- - Frank Russell Capital Inc. ("Russell Capital")
- - Frank Russell Investment Company ("FRIC")
- - Frank Russell Investment Management Company ("FRIMCo")
- - Frank Russell Securities, Inc. ("FRS")
- - Frank Russell Trust Company ("FRTC")
- - Russell Insurance Funds ("RIF")
- - Russell Real Estate Advisors, Inc. ("RREA")
- - Russell Fund Distributors, Inc. ("RFD")
- - SSgA Funds
- - Russell Investment Management Ltd.
- - Russell Private Capital Party Ltd.
- - Frank Russell Company Limited
- - Frank Russell Canada Limited/Limitee
- - Frank Russell Company Pty. Limited
- - Frank Russell Company K.K.
- - Frank Russell Company (N.Z.) Limited
- - Frank Russell Investments (Cayman) Ltd.
- - Frank Russell Investments (Ireland) Ltd.
- - Frank Russell Investments (Japan) Ltd.
- - Frank Russell Investments (Singapore) PLC
- - Frank Russell Japan Co. Ltd.
- - Frank Russell Company , S.A.
- - Russell Systems Limited
<PAGE>
FINANCIAL INSTITUTION. See "PERSONAL SECURITIES ACCOUNT."
IMMEDIATE FAMILY. Shall include spouse, minor children, dependents and other
relatives who share the same residence as the Associate and depend on the
Associate for support.
INSIDER. Includes officers, directors, trustees and employees of a company.
Under current judicial interpretation, the company must reasonably expect a
person to whom material, nonpublic information is disclosed to keep such
information confidential, and the relationship between the company and such
person must at least imply a duty of confidentiality before the person will be
considered an insider. 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 of that relationship is given access to
information solely for the company's purposes. Temporary insiders can include,
among others, a company's attorneys, accountants, consultants, bank lending
officers, and the employees of such organizations. Any of the FRC Group member
companies may become a temporary insider of a company it advises or for which it
performs other services. In such cases insider status would likely extend to all
Associates of the FRC Group member company who are personally in possession of
material, nonpublic information about the client company.
INSIDER TRADING. Trading in a security while in possession of material,
nonpublic information (whether or not one is an insider) or communicating
material, nonpublic information to others in connection with trading activity.
Law concerning insider trading, like any law, is subject to change. Generally,
insider trading law prohibits:
- - Trading in securities of a company by an insider while in possession of
material, nonpublic information relating to that company;
- - Trading by a noninsider in the securities of a company while in possession
of material, nonpublic information relating to that company, where the
information either was: (a) disclosed to the noninsider in violation of an
insider's duty to keep it confidential; or (b) misappropriated by the
noninsider; or
- - Communicating material, nonpublic information to others not authorized to
receive such information.
MATERIAL INFORMATION. MATERIAL INFORMATION is generally defined as information
for which there is a substantial likelihood that a reasonable investor would
consider it important in making an investment decision, or information that is
reasonably certain to have a substantial effect on the price of a company's
securities. Information that Associates should consider material includes, but
is not limited to: dividend changes; earnings estimates; changes in previously
released earnings estimates; significant merger, acquisition, disposition,
refinancing, restructuring, or other similar proposals or agreements; major
litigation; liquidity problems; and extraordinary management developments.
NEED TO KNOW. Generally, a need to know exists when an Associate REQUIRES such
information in order to effectively perform his or her duties on behalf of
clients (or prospective clients). A need to know does not exist simply because
the information MAY help another individual or business unit in activities that
are unrelated to performance of the particular services requested by the client.
NONPUBLIC INFORMATION. Information is nonpublic until it has been effectively
communicated to the marketplace. FRC Group Associates should consider all client
information to be nonpublic unless it can be shown that the information has been
previously publicly disclosed. Effective public disclosure of information
implies that sufficient time has passed since public dissemination and that the
information is known generally in the financial marketplace. For example,
information found in a report filed with the
<PAGE>
SEC or appearing in DOW JONES, REUTERS ECONOMIC SERVICES, THE WALL STREET
JOURNAL, or other publications of general circulation would be considered
public.
PERSONAL SECURITIES ACCOUNT ("PSA"). A securities trading account maintained by
an FRC Associate or a member of their immediate family with a broker-dealer,
investment advisor, bank or other financial institution (collectively,
"Financial Institutions").
PRIVATE SECURITIES TRANSACTION. A Private Securities Transaction is a
transaction that may occur outside a securities brokerage account and includes,
but is not limited to: private placements, unregistered securities, private
partnerships and investment partnerships.
SECURITY. This term has the same meaning as that set forth in Section 2(a)(36)
of the 1940 Act and includes commodities contracts as defined in Section
2(a)(1)(a) of the Commodity Exchange Act. So, GENERALLY SPEAKING, securities
include the following: any note; stock; bond; debenture; evidence of
indebtedness; certificate of interest or participation in any profit sharing
agreement; collateral trust certificate; preorganization certificate of
subscription; transferable share; investment contract; voting-trust certificate;
certificate of deposit for a security; fractional undivided interest in oil,
gas, or other mineral rights; any put, call, straddle, option, or privilege on
any security (including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value thereof); or
any put, call, straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency; or, in general, any interest
or instrument commonly known as a "security;" or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase any of the foregoing.
HOWEVER, FOR PURPOSES OF THIS CODE, SECURITIES DO NOT INCLUDE SECURITIES ISSUED
BY THE GOVERNMENTS OF THE UNITED STATES, THE UNITED KINGDOM, FRANCE, ITALY,
GERMANY, CANADA, AND JAPAN; BANKERS' ACCEPTANCES; BANK CERTIFICATES OF DEPOSIT;
COMMERCIAL PAPER; HIGH-QUALITY, SHORT-TERM DEBT INSTRUMENTS, INCLUDING
REPURCHASE AGREEMENTS; SHARES OF REGISTERED, OPEN-END INVESTMENT COMPANIES
(MUTUAL FUNDS) OR OPEN-END UNIT TRUSTS; SECURITIES PURCHASED UNDER
ISSUER-SPONSORED DIVIDEND REINVESTMENT PROGRAMS; AND SECURITIES PURCHASED UNDER
AN EMPLOYER-SPONSORED STOCK PURCHASE PLAN OR UPON THE EXERCISE OF EMPLOYEE STOCK
OPTIONS.
<PAGE>
SUMMARY OF FORMS
----------------
<TABLE>
<S> <C>
I. ACKNOWLEDGMENT 27
(To be signed upon employment and during annual
acknowledgment process)
II. PERSONAL SECURITIES ACCOUNT REPORT 28
(Request approval to MAINTAIN or OPEN a PSA)
III. APPROVAL REQUEST FOR A PRIVATE SECURITIES TRANSACTION 29
(Request approval before making a private securities
transaction)
IV. PERSONAL SECURITIES TRANSACTION APPROVAL 30
(Online request for approval of personal
securities transaction.
Sample of form found on Russell InSite.)
V. SECURITIES HOLDINGS REPORT 31
(Report personally held securities, such as stock certificates)
VI. OUTSIDE BUSINESS AFFILIATION, EMPLOYMENT
OR COMPENSATION 32-33
(Request approval for outside business affiliation)
</TABLE>
<PAGE>
ACKNOWLEDGMENT
--------------
I,_______________________________________, acknowledge that I have received
Printed Name
the Frank Russell Group of Companies Corporate Code of Ethics (the "Code")
dated ________________, 20___. I have read the Code and understand its policies
and provisions, and I agree to be bound by the terms and conditions set forth
therein.
I further certify that I have reported all Personal Securities Accounts, all
Private Securities Transactions, and all other reportable items required to be
disclosed pursuant to the requirements of the Code.
Dated:__________________________________, 20___
By:____________________________________________
Signature
Print Name:____________________________________
Department Name:_______________________________
Return to the FRC Group Compliance Department
<PAGE>
PERSONAL SECURITIES ACCOUNT REPORT
----------------------------------
Associate Name: ___________________________ Date: _____________, 20___
Position: __________________________________ Dept.:____________________
Check one:
/__/ I hereby submit and request permission to MAINTAIN the following
pre-existing Personal Securities Account(s). I understand that if my
request is approved, I must comply with all provisions of the Corporate
Code of Ethics with respect to Personal Securities Accounts. With this
request, I am giving FRC Compliance Department the right to receive
duplicate statements and trade confirmations for this account.
/__/ I hereby request permission to OPEN a Personal Securities Account. I
understand that I must comply with all provisions of the Corporate Code of
Ethics with respect to Personal Securities Accounts. With this request, I
am giving FRC Compliance Department the right to receive duplicate
statements and trade confirmations for this account.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF FINANCIAL INSTITUTION AND
NAME OF ACCOUNT OWNER ACCOUNT NO. REGISTERED REPRESENTATIVE MAINTAINING ACCOUNT
--------------------- ----------- ---------------------------------------------
<S> <C> <C>
</TABLE>
Signed:______________________________________ Date: _____________, 20___
Please note that your financial institution maintaining the above account(s)
will be directed to send duplicate trade confirmations and monthly statements to
a private post office box, not the FRC Group's regular mailing address, to
ensure privacy.
ACKNOWLEDGED BY:
Manager:_____________________________________ Date: _____________, 20___
<PAGE>
*******************************************************************************
COMPLIANCE DEPARTMENT USE ONLY
We have reviewed and approved this Personal Securities Account. A letter
requesting duplicate trade confirmations and monthly statements has been mailed
to the financial institution(s) noted above.
Reviewed by: ________________________________ Date: _____________, 20___
APPROVAL REQUEST FOR A PRIVATE SECURITIES TRANSACTION
-----------------------------------------------------
To: FRC Group Compliance Department (or Appropriate Person in non-U.S. Office)
From: ______________________________________ (Name)____________________ (Title)
______________________________________ (Name of Department)
THE UNDERSIGNED REQUESTS APPROVAL OF THE FOLLOWING SECURITIES TRANSACTION:
Issuer:___________________ Is the Issuer a publicly traded company? Yes___ No___
Buy: _____ Sell: _____ Anticipated date of transaction:_______________________
Description of Securities:_____________________________________________________
Number of shares/units:______________________ Cost/Proceeds___________________
Name of Person from whom I propose to purchase or to whom I propose to sell:
__________________________________________________
To your knowledge, is this investment being offered to others? Yes___ No___
Are you providing any service or advice to this Issuer? Yes___ No___ If yes,
please describe the service or advice:_________________________________________
Signed:______________________________________ Date: _____________, 20___
*******************************************************************************
TO BE COMPLETED BY THE REQUESTER'S MANAGER
I have reviewed and approve this request for permission to engage in the Private
Securities Transaction described. In connection with the request, I have the
following comments:____________________________________________________________
_______________________________________________________________________________
Name of Manager (print):_______________________________
Signed:______________________________________ Date: _____________, 20___
*******************************************************************************
COMPLIANCE DEPARTMENT USE ONLY
<PAGE>
To:__________________________________________(Associate Requesting Approval)
Your request for permission to engage in the Private Securities Transaction
described on this form has been approved. If any of the details of that
transaction change, please advise me before the transaction is completed.
Reviewed by:_________________________________ Date: _____________, 20___
<PAGE>
InSite form goes here:
PERSONAL SECURITIES TRANSACTION APPROVAL
<PAGE>
SECURITIES HOLDINGS REPORT
--------------------------
Associate's Name: ___________________________ Hire Date:________________
Position: ___________________________________ Dept.:____________________
Under the penalties of perjury, I declared that the following securities
holdings are in my name, or are those over which I have beneficial ownership:
<TABLE>
<CAPTION>
Security Name/ Number of Principal Account Number
Symbol Shares Amount Broker Name Account Owner
------ ------ ------ ----------- -------------
<S> <C> <C> <C> <C>
</TABLE>
I hereby give the Frank Russell Company Compliance Department permission to
contact the broker/dealer where my account(s) is/are maintained for the purposes
of receiving duplicate statements and confirms.
Signed:______________________________________ Date: _____________, 20___
*******************************************************************************
COMPLIANCE DEPARTMENT USE ONLY
We have reviewed and approved this personal securities account report.
Reviewed by:_________________________________ Date: _____________, 20___
<PAGE>
OUTSIDE BUSINESS AFFILIATION,
EMPLOYMENT OR COMPENSATION
--------------------------
No Associate may maintain any outside affiliations (e.g., officer or director,
governor, trustee, etc.) with any business organization, outside employment, or
receive compensation from any source without prior approval of the Associate's
manager and the FRC Compliance Department, or, for offices located outside the
United States, the local Compliance Officer supporting those offices. Please
provide the information requested below, sign and submit the form to your
manager for approval. You will be informed if approval is granted.
To: FRC Group Compliance Department (or Appropriate Person in non-U.S. Office)
From: ______________________________________ (Name)____________________ (Title)
______________________________________ (Name of Department)
1. Organization with which you wish to become affiliated, organization or person
by whom you wish to be employed or compensated:
a. Name:_________________________________________________________________
b. Address:______________________________________________________________
c. Nature of business:___________________________________________________
d. Does the organization have publicly traded securities?________________
e. If so, where are they traded?_________________________________________
f. Is the organization a client of the FRC Group?________________________
g. If so, in what capacity?______________________________________________
2. State the nature of your proposed affiliation and employment, or the nature
of the services for which you will be compensated, and briefly describe your
duties:________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
3. On what date will your proposed affiliation, employment or compensation
begin?____________________________
4. a. Will you be compensated? ______________________
b. If so, how much?_______________________________
5. State the nature and extent of your financial interest, if any, in the
organization:__________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
Continued . . .
6. State the amount of time you will devote to the business and indicate whether
you will devote any time to the business during normal working hours:
_______________________________________________________________________________
*******************************************************************************
I, the undersigned, hereby request approval of the outside business affiliation,
employment or compensation described herein.
Signed: _____________________________________
Date: _____________________________________, 20____
*******************************************************************************
TO BE COMPLETED BY THE REQUESTER'S MANAGER
I have reviewed and approved this request for the outside business affiliation,
employment or compensation described on this request. In connection with the
request, I have the following comments:
_______________________________________________________________________________
_______________________________________________________________________________
Name of Manager (print):___________________________________
Signature: ________________________________________________
Date: ________________________________________, 20____
*******************************************************************************
COMPLIANCE DEPARTMENT USE ONLY
To: ______________________________________ (Associate Requesting Approval)
The outside business affiliation, employment or compensation described above has
been approved. Please advise, in writing, your manager and the Compliance
Department, or the appropriate person in a non-U.S. office, if any of the
information in this request changes materially.
Reviewed by:_________________________________________
Date: _____________________________________, 20____
<PAGE>
CODE OF ETHICS AND BUSINESS PRACTICES
AEW CAPITAL MANAGEMENT, L.P.
AEW REAL ESTATE ADVISORS, INC.
AEW ADVISORS, INC.
AEW MANAGEMENT AND ADVISORS, L.P.
<PAGE>
I. INTRODUCTION
AEW Capital Management ("AEW" or the "Firm") puts its clients' interests
first and expects each of its employees to do the same. AEW expects its
employees to hold themselves to the highest standard of conduct. It is of
paramount importance to AEW that our clients never have reason to doubt their
decision to place their faith and confidence in us. It is the policy of AEW
that investment advisory services of AEW and all related activities comply
fully with the highest principles of fiduciary responsibility and with the
provisions of the Investment Advisors Act of 1940 and the rules and
regulations thereunder, as well as other federal and state statutes and
regulations pertaining to AEW's activities.
One of the most valued assets of the Firm is the dedication, service and
integrity of its employees. AEW constantly strives to maintain the highest
level of ethical business practices, which its clients expect and deserve.
Exactly what constitutes an unethical business practice or a conflict of
interest is both a moral and legal question. The Firm recognizes and respects
each employee's right to engage in activities outside of his or her
employment which are private in nature and do not in any way conflict with
or reflect poorly on the Firm. Management reserves the right, however, to
determine when an employee's activities represent a conflict with the Firm's
interest and to take whatever action is necessary to resolve the situation.
To this end, all employees of AEW and its subsidiaries (including, without
limitation, AEW Real Estate Advisors, Inc., AEW Advisors, Inc. and AEW
Management and Advisors, L.P.) are required to abide by the following policies
and guidelines (as used herein, the term "AEW" or the "Firm" shall include,
as appropriate, subsidiaries of AEW Capital Management, L.P.). Failure to
comply with them may result in sanctions up to and including termination of
employment, and, in some instances, damages in civil lawsuits or criminal
penalties which could involve fines and/or imprisonment. If you should have
any questions about these policies and guidelines or their applicability to
any given situation, you should immediately contact the Firm's Compliance
Officer or, in his absence, the General Counsel.
II. CONFLICTS OF INTEREST
Prohibited Conduct:
You may not:
- Use your position in the Firm or knowledge of its clients' affairs for
outside personal gain.
- Misuse proprietary or privileged information or reveal confidential
data to outsiders.
- Simultaneously be employed by or do consulting work for another firm,
particularly if that firm is a competitor with or supplier to AEW.
<PAGE>
- Have, either directly or through a family member or other relative, a
significant ownership interest or other participation in a firm with which
AEW does business.
- Serve on the Board of Directors of a publicly-traded company, absent
prior authorization of the President of AEW. If Board service is authorized,
appropriate "FORMAL SCREEN" procedures will be adopted and enforced.
- Accept gifts or excessive entertainment from any person or entity
doing business or seeking to do business with AEW. (See Employee Handbook for
details on this policy).
- Pay, solicit or accept bribes or kickbacks.
- Engage in any other form of conduct raising an issue regarding a
possible conflict of interest with AEW or one or more of its clients.
III. INSIDER TRADING
GENERAL RULE: Neither you nor any member of your family may trade in
any type of securities of an issuer, either personally or on behalf of AEW or
others, while in possession of material, nonpublic information about issuer,
I.E., inside information and insider trading. In addition, you may not
communicate material, nonpublic information to others.
DEFINITIONS:
"MATERIAL" means information about an issuer, its prospects or
securities which is likely to be considered important by reasonable investors
in determining whether or not to trade in securities of an issuer or which
could affect the market price of that issuer's securities. Some examples of
material information are information about earnings and cash flow, dividend
action, pending acquisitions and dispositions, major personnel changes, etc.
"NONPUBLIC" means information that has not been disclosed generally
to the marketplace. In this case, a press release or newspaper or magazine
article are among the best evidence of the public nature of information.
IV. TRADING IN REAL ESTATE SECURITIES
GENERAL RULE FOR ALL EMPLOYEES: No employee shall purchase or sell,
directly or indirectly, or by reason of any such transaction acquire, any
direct or indirect legal or beneficial ownership of any securities of any
real estate investment trust, partnership, limited liability company,
business trust or other type of entity that invests primarily in commercial,
industrial, office, retail or multi-family residential real estate,
mortgages, hotels or other interests in real estate ("Real Estate
Securities") without submitting a prior written request to and receiving
approval from the Compliance Officer on the form attached as EXHIBIT B. ANY
QUESTIONS AS TO WHAT CONSTITUTES REAL ESTATE SECURITIES SHOULD BE ADDRESSED
TO THE COMPLIANCE OFFICER.
<PAGE>
EXCEPTIONS:
MUTUAL FUND SHARES: Shares of open-end mutual funds that invest in
Real Estate Securities should not be considered to be Real Estate Securities
and hence may be traded by employees without obtaining approval in advance.
INDEPENDENTLY MANAGED DISCRETIONARY ACCOUNTS: Employees who have
arrangements with investment managers who manage their investment accounts on
a discretionary basis do not need to pre-clear transactions in Real Estate
Securities in such accounts, PROVIDED THAT such employees shall not make
recommendations or give instructions to such investment managers with respect
to any decision to buy or sell particular Real Estate Securities in such
accounts without prior approval from the Compliance officer as provided above.
RULE FOR ALL PERSONS INVOLVED IN TRADING OR RECOMMENDING SECURITIES FOR
CLIENT ACCOUNTS: Any employee of AEW who recommends or executes trades in
Real Estate Securities for client accounts shall not purchase or sell, or by
reason of any such transaction acquire any direct or indirect beneficial
interest in, Real Estate Securities which are the primary focus of such
client accounts. Any other purchase or sale of Real Estate Securities by such
persons shall require pre-clearance as provided above. The Firm will, from
time to time, directly identify the employees who are subject to this
limitation.
REPORTING:
INITIAL REPORT: Upon adoption of this Code or commencement of
employment, if later, you must complete and return a copy of EXHIBIT A to the
Firm's Compliance Officer.
REQUEST PERMISSION TO TRADE: If you are eligible to seek permission
to trade in Real Estate Securities, you must complete a copy of EXHIBIT B,
in duplicate, and have it approved in writing by the Compliance Officer prior
to the trade.
PERIODIC REPORT: If you have received permission to purchase or sell
any Real Estate Securities and have actually purchased or sold such securities
during a calendar quarter ending March 31, June 30, September 30 or December
31, you must within ten days after the end of that quarter complete a copy
of EXHIBIT C and return it to the Compliance Officer.
ANNUAL REPORT: Once each year, you will be asked to complete, sign
and return to the Firm's Compliance Officer a copy of the form attached as
EXHIBIT D.
SPECIAL MUTUAL FUND REPORTING: If you won 5% or more of the total
outstanding securities of any registered investment company that invests in
Real Estate Securities, you should note such holdings on the periodic and
annual reports discussed above.
<PAGE>
V. CONCLUSION
This Code of Ethics is adopted pursuant to the Investment Advisers Act
of 1940, as amended, and the Investment Company Act of 1940, as amended. This
Code supersedes the prior Code of Ethics and Business Practices of Aldrich,
Eastman & Waltch, L.P. and Aldrich, Eastman & Waltch, Inc., and, with respect
to AEW Real Estate Advisors, Inc. AEW Advisors, Inc. and AEW Management and
Advisors, L.P., this Code supersedes the Conduct and Ethics Policy of Copley
Real Estate Advisors, Inc., Copley Investment Group, Inc. and Affiliates.
Depending on your responsibilities and duties at AEW, you may be bound by
one or more additional codes of ethics or trading policies. For example, AEW
Commercial Mortgage Securities Fund, Inc., for which AEW acts as investment
adviser, has its own Code of Ethics. In addition, BBC Investment Advisors,
L.P., and affiliate of AEW, has its own code of ethics. If you are deemed to
be subject to any such other Codes, you will receive a separate memorandum
from the Compliance Officer.
This Code is intended to be as straight forward and concise as possible.
Regardless of length, it is impossible to cover all of the types of conflicts
of interests and restricted conduct and the nuances thereto. Compliance with
this Code is your responsibility. Do not hesitate to obtain advice on the
interpretation of this Code from the Compliance Officer.
<PAGE>
EXHIBIT A
AEW CAPITAL MANAGEMENT
To the Compliance Officer of AEW Capital Management:
1. I hereby acknowledge receipt of a copy of the Code of Ethics and
Business Practices (the "Code").
2. I hereby certify that I am in compliance with the Code and will comply
with it in the future.
3. As of the date below, I had a direct or indirect beneficial ownership
in the following Real Estate Securities:
<TABLE>
<CAPTION>
Type of Interest
Name of Securities Number of Shares Direct or Indirect
<S> <C> <C>
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
Date:______________ Signature:______________
Print Name:_____________
</TABLE>
<PAGE>
EXHIBIT B
AEW CAPITAL MANAGEMENT
REQUEST FOR PERMISSIONS TO ENGAGE IN
PERSONAL SECURITIES TRANSACTION
To the Compliance Officer of AEW Capital Management:
On each of the dates proposed below, I hereby request permission to effect a
transaction in securities as indicated below on behalf of myself, my family
(spouse, minor children or adults living in my household), trusts of which I
am trustee or other account in which I have a beneficial ownership interest
or legal title, and which are required to be pre-approved pursuant to the
Code of Ethics and Business Practices adopted by AEW.
<TABLE>
<CAPTION>
DATE OF DOLLAR NATURE OF
TRANSACTION AMOUNT TRANSACTION
(OR PROPOSED) NO. OF OF (PURCHASE, PROPOSED
SECURITY TRANSACTION SHARES TRANSACTION SALE, OTHER) BROKER/DEALER
<S> <C> <C> <C> <C> <C>
- -------- ------------ ------ ----------- ----------- ---------------
- -------- ------------ ------ ----------- ----------- ---------------
- -------- ------------ ------ ----------- ----------- ---------------
- -------- ------------ ------ ----------- ----------- ---------------
- -------- ------------ ------ ----------- ----------- ---------------
- -------- ------------ ------ ----------- ----------- ---------------
- -------- ------------ ------ ----------- ----------- ---------------
</TABLE>
With respect to transactions in the securities set forth in the table above,
I hereby certify that:
(a) I have no knowledge of the existence of any conflict of interest which
may involve AEW or an AEW Client in connection with my proposed
transaction[s]; and
(b) Such transactions are in compliance with the AEW Code of Ethics and
Business Practices.
Date:______________ Signature:______________
Print Name:_____________
==============================================================================
In accordance with the provisions of the Code of Ethics and Business
Practices of AEW, the transaction[s] proposed to be effected as set forth in
this Report [is] [are]:
Authorized [ ] Not Authorized [ ]
Signature:____________________ Date: ________, 19__
Compliance Officer
IF AUTHORIZED FOR TRADING, SAID APPROVAL IS ONLY VALID FOR THE DATE OR DATES
INDICATED IN THIS AUTHORIZATION.
==============================================================================
<PAGE>
EXHIBIT C
AEW CAPITAL MANAGEMENT
SECURITIES TRANSACTIONS REPORT FOR THE CALENDAR QUARTER ENDED:
___________, 19__
To the Compliance Officer of AEW Capital Management:
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transactions
acquired, direct or indirect beneficial ownership, and which are required to
be reported pursuant to AEW's Code of Ethics and Business Practices.
<TABLE>
<CAPTION>
DOLLAR NATURE OF
AMOUNT TRANSACTION BROKER/DEALER
DATE OF NO. OF OF (PURCHASE, THROUGH WHOM
SECURITY TRANSACTION SHARES TRANSACTION SALE, OTHER) PRICE EFFECTED
<S> <C> <C> <C> <C> <S> <C>
- -------- ------------ ------ ----------- ----------- -------- ---------------
- -------- ------------ ------ ----------- ----------- -------- ---------------
- -------- ------------ ------ ----------- ----------- -------- ---------------
- -------- ------------ ------ ----------- ----------- -------- ---------------
- -------- ------------ ------ ----------- ----------- -------- ---------------
- -------- ------------ ------ ----------- ----------- -------- ---------------
- -------- ------------ ------ ----------- ----------- -------- ---------------
</TABLE>
(a) I have no knowledge of the existence of any personal conflict of
interest relationship which may involve AEW or an AEW Client in connection
with the transaction[s] described herein; and
(b) I am in compliance with AEW's Code of Ethics and Business Practices.
Date:______________ Signature:______________
Print Name:_____________
<PAGE>
EXHIBIT D
AEW CAPITAL MANAGEMENT
ANNUAL CERTIFICATION
To the Compliance Officer of AEW Capital Management:
I have read and understand AEW's Code of Ethics and Business Practices and
recognize that I am subject thereto.
I hereby certify that, during the year ended December 31, ____, I have
complied with the requirements of the Code and have reported all securities
transactions required to be reported pursuant to the Code.
I hereby certify that I have no knowledge of the existence of any personal
conflict of interest relationship which may involve AEW or any AEW client.
As of December 31, ____, I had a direct or indirect beneficial ownership in
the following Real Estate Securities:
<TABLE>
<CAPTION>
Type of Interest
Name of Securities Number of Shares Direct or Indirect
<S> <C> <C>
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
- ------------------- ---------------- ------------------------
Date:______________ Signature:______________
Print Name:_____________
</TABLE>
<PAGE>
FEBRUARY 2000
AS AMENDED AND RESTATED
ALLIANCE CAPITAL MANAGEMENT L.P.
CODE OF ETHICS AND STATEMENT OF POLICY AND PROCEDURES REGARDING
PERSONAL SECURITIES TRANSACTIONS
1. PURPOSES
(a) Alliance Capital Management L.P. ("Alliance", "we" or "us") is a
registered investment adviser and acts as investment manager or
adviser to investment companies and other Clients. In this
capacity, we serve as fiduciaries and owe our Clients an undivided
duty of loyalty. We must avoid even the appearance of a conflict
that may compromise the trust Clients have placed in us and must
insist on strict adherence to fiduciary standards and compliance
with all applicable federal and state securities laws. Adherence
to this Code of Ethics and Statement of Policy and Procedures
Regarding Personal Securities Transactions (the "Code and
Statement") is a fundamental condition of service with us, any of
our subsidiaries or our general partner (the "Alliance Group").
(b) The Code and Statement is intended to comply with Rule 17j-1 under
the Investment Company Act which applies to us because we serve as
an investment adviser to registered investment companies. Rule
17j-1 specifically requires us to adopt a code of ethics that
contains provisions reasonably necessary to prevent our "access
persons" (defined in Rule 17j-1 to cover persons such as officers,
directors, portfolio managers, traders, research analysts and
others) from engaging in fraudulent conduct, including insider
trading. Each investment company we advise has also adopted a code
of ethics with respect to its access persons. As set forth in
Section 3 below, our Code and Statement applies to all Employees
and all other individuals who are Access Persons. The Code and
Statement is also intended to comply with the provisions of Rule
204-2 under the Investment Advisers Act of 1940 (the "Advisers
Act") which requires us to maintain records of securities
transactions in which certain of our personnel have any Beneficial
Ownership.
(c) All Employees and all other individuals who are Access Persons
(collectively, "you") also serve as fiduciaries with respect to
our Clients and in this capacity you owe an undivided duty of
loyalty to our Clients. As part of this duty and as expressed
throughout the Code and Statement, you must at all times:
(i) Place the interests of our Clients first;
(ii) Conduct all personal securities transactions consistent
with this Code and Statement and in such a manner that
avoids any actual or potential conflict of interest or any
abuse of your responsibility and position of trust; and
<PAGE>
(iii) Abide by the fundamental standard that you not take
inappropriate advantage of your position.
(d) This Code and Statement does not attempt to identify all possible
conflicts of interests and literal compliance with each of the
specific procedures will not shield you from liability for
personal trading or other conduct which violates your fiduciary
duties to our Clients. In addition to the specific prohibitions
contained in this Code and Statement, you are also subject to a
general requirement not to engage in any act or practice that
would defraud our Clients. This general prohibition includes, in
connection with the purchase or sale of a Security held or to be
acquired or sold (as this phrase is defined below in Section 2(k))
by a Client:
(i) Making any untrue statement of a material fact;
(ii) Creating materially misleading impressions by omitting to
state or failing to provide any information necessary to
make any statements made, in light of the circumstances in
which they are made, not misleading;
(iii) Making investment decisions, changes in research ratings
and trading decisions other than exclusively for the
benefit of and in the best interest of our Clients;
(iv) Using information about investment or trading decisions or
changes in research ratings (whether considered, proposed
or made) to benefit or avoid economic injury to you or
anyone other than our Clients;
(v) Taking, delaying or omitting to take any action with
respect to any research recommendation, report or rating or
any investment or trading decision for a Client in order to
avoid economic injury to you or anyone other than our
Clients;
(vi) Purchasing or selling a Security on the basis of knowledge
of a possible trade by or for a Client;
(vii) Revealing to any other person (except in the normal course
of your duties on behalf of a Client) any information
regarding Securities transactions by any Client or the
consideration by any Client of Alliance of any such
Securities transactions; or
(viii) Engaging in any manipulative practice with respect to any
Client.
(e) The provisions contained in this Code and Statement MUST be
followed when making a personal securities transaction. These
policies and procedures, which must be followed, are considerably
more restrictive and time-consuming than those applying to
investments in the mutual funds and other Clients we advise. If
you are not
<PAGE>
prepared to comply with these policies and procedures, you must
forego personal trading.
<PAGE>
2. DEFINITIONS
The following definitions apply for purposes of the Code and Statement in
addition to the definitions contained in the text itself.
(a) "ACCESS PERSON" means any director or officer of the general
partner of Alliance, as well as any of the following persons:
(i) any Employee who, in connection with his or her regular
functions or duties --
(A) makes, participates in, or obtains information
regarding the purchase or sale of a Security by a
Client, or whose functions relate to the making of
any recommendations with respect to such purchases
or sales;
(B) obtains information from any source regarding any
change, or consideration of any change in Alliance's
internal research coverage, a research rating or an
internally published view on a Security or issuer;
or
(C) obtains information from any source regarding the
placing or execution of an order for a Client
account; and
(ii) any natural person having the power to exercise a
controlling influence over the management or policies of
Alliance (unless that power is solely the result of his or
her position with Alliance) who:
(A) obtains information concerning recommendations made
to a Client with regard to the purchase or sale of a
Security;
(B) obtains information from any source regarding any
change, or consideration of any change in research
coverage, research rating or a published view on a
Security or issuer; and
(C) obtains information from any source regarding the
placing or execution of an order for a Client
account.
(b) A SECURITY IS "BEING CONSIDERED FOR PURCHASE OR SALE" WHEN:
(i) an Alliance research analyst issues research information
(including as part of the daily morning call) regarding
initial coverage of, or changing a rating with respect to,
a Security;
(ii) a portfolio manager has indicated (during the daily morning
call or otherwise) his or her intention to purchase or sell
a Security;
<PAGE>
(iii) a portfolio manager places an order for a Client; or
(iv) a portfolio manager gives a trader discretion to execute an
order for a Client over a specified period of time.
(c) "BENEFICIAL OWNERSHIP" is interpreted in the same manner as in
determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 ("Exchange
Act"), Rule 16a-1 and the other rules and regulations thereunder
and includes ownership by any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary interest
in a Security. For example, an individual has an indirect
pecuniary interest in any Security owned by the individual's
spouse. Beneficial Ownership also includes, directly or
indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, having or sharing "voting power" or
"investment power," as those terms are used in Section 13(d) of
the Exchange Act and Rule 13d-3 thereunder.
(d) "CLIENT" means any person or entity, including an investment
company, for which Alliance serves as investment manager or
adviser.
(e) "COMPLIANCE OFFICER" refers to Alliance's Compliance Officer.
(f) "CONTROL" has the same meaning set forth in Section 2(a)(9) of the
Investment Company Act.
(g) "EMPLOYEE" refers to any person who is an employee of any member
of the Alliance Group, including both part-time employees, as well
as consultants (acting in the capacity of a portfolio manager,
trader or research analyst) under the control of Alliance who, but
for their status as consultants, would otherwise come within the
definition of Access Person.
(h) "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.
(i) "INVESTMENT PERSONNEL" refers to:
(i) any Employee who acts in the capacity of a portfolio
manager, research analyst or trader;
(ii) any Employee who assists someone acting in the capacity of
a portfolio manager, research analyst or trader and as an
assistant has access to information generated or used by
portfolio managers, research analysts and traders
(including, for example, assistants who have access to the
Alliance Investment
<PAGE>
Review or the Alliance International Investment Review);
(iii) any Employee who receives the Alliance Investment Review or
the Alliance International Investment Review; or
(iv) any natural person who Controls Alliance and who obtains
information concerning recommendations made to a Client
regarding the purchase or sale of securities by the Client.
(j) "LIMITED OFFERING" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Sections
4(2) or 4(6) thereof or pursuant to Rules 504, 505 or 506 under
the Securities Act of 1933.
(k) "PERSONAL ACCOUNT" refers to any account (including, without
limitation, a custody account, safekeeping account and an account
maintained by an entity that may act in a brokerage or a principal
capacity) in which an Access Person or Employee has any Beneficial
Ownership and any such account maintained by or for a financial
dependent. For example, this definition includes Personal Accounts
of:
(i) an Access Person's or Employee's spouse, including a
legally separated or divorced spouse who is a financial
dependent,
(ii) financial dependents residing with the Access Person or
Employee, and
(iii) any person financially dependent on an Access Person or
Employee who does not reside with that person, including
financially dependent children away at college.
(l) "PURCHASE OR SALE OF A SECURITY" includes, among other
transactions, the writing or purchase of an option to sell a
Security and any short sale of a Security.
(m) "SECURITY" has the meaning set forth in Section 2(a)(36) of the
Investment Company Act and any derivative thereof, commodities,
options or forward contracts, except that it shall not include
shares of open-end investment companies registered under the
Investment Company Act, securities issued by the Government of the
United States, short-term debt securities that are government
securities within the meaning of Section 2(a)(16) of the
Investment Company Act, bankers' acceptances, bank certificates of
deposit, commercial paper, and such other money market instruments
as are designated by the Compliance Officer.
<PAGE>
(n) "SECURITY HELD OR TO BE ACQUIRED OR SOLD" means:
(i) any Security which, within the most recent 15 days (1) is
or has been held by a Client or (2) is being or has been
considered by a Client (to the extent known by Alliance) or
Alliance for purchase by the Client; and
(ii) any option to purchase or sell, and any Security
convertible into or exchangeable for, a Security.
(o) "SUBSIDIARY" refers to either of the following types of entities
with respect to which Alliance, directly or indirectly, through
the ownership of voting securities, by contract or otherwise has
the power to direct or cause the direction of management or
policies of such entity:
(i) any U.S. entity engaged in money management; and
(ii) any non-U.S. entity engaged in money management for U.S.
accounts.
3. APPLICATION
(a) This Code and Statement applies to all Employees and to all other
individuals who are Access Persons. Please note that certain
provisions apply to all Employees while other provisions apply
only to Access Persons and others apply only to certain categories
of Access Persons who are also Investment Personnel (e.g.,
portfolio managers and research analysts).
(b) Alliance will provide a copy of this Code and Statement to all
Employees and all individuals who are Access Persons. In addition,
the Compliance Officer will maintain lists of Access Persons and
Investment Personnel, including a separate list of portfolio
managers and research analysts.
4. LIMITATIONS ON PERSONAL SECURITIES TRANSACTIONS
(a) ALL EMPLOYEES
It is the responsibility of each Employee to ensure that all
personal securities transactions are made in strict compliance
with the restrictions and procedures in the Code and Statement and
otherwise comply with all applicable legal and regulatory
requirements.
EMPLOYEES MUST HOLD ALL SECURITIES IN A PERSONAL ACCOUNT. This
requirement applies to all types of personal securities
transactions including, for example, the purchase of Securities in
a private placement or other direct investment. In addition,
Employees may not take physical possession of certificates or
other formal evidence of ownership.
<PAGE>
Personal securities transactions for Employees may be effected
only in a Personal Account and in accordance with the following
provisions:
(i) DESIGNATED BROKERAGE ACCOUNTS
All Personal Accounts of an Employee that are
maintained as brokerage accounts must be held only at
the following designated broker-dealers: Donaldson,
Lufkin & Jenrette, Merrill Lynch & Co., and Charles
Schwab.
(ii) SECURITIES BEING CONSIDERED FOR CLIENT PURCHASE OR SALE
An Employee may not purchase or sell a Security, or engage in any
short sale of a Security, in a Personal Account if, at the time of
the transaction, the Security is being considered for purchase or
sale for a Client or is being purchased or sold for a Client. The
following non-exhaustive list of examples illustrates this
restriction:
- An Alliance research analyst issues research information
(including as part of the daily morning call) regarding
initial coverage of, or changing a rating with respect to,
a Security.
- A portfolio manager has, during the daily morning call,
indicated his or her intention to purchase or sell a
Security.
- A portfolio manager places an order in the Security to
purchase or sell the Security for a Client.
- An open order in the Security exists on the trading desk.
- An open limit order exists on the trading desk, and it is
reasonably likely that the Security will reach that limit
price in the near future.
(iii) RESTRICTED LIST
A Security may not be purchased or sold in a Personal Account if,
at the time of the transaction, the Security appears on the
Alliance Daily Restricted List and is restricted for Employee
transactions. The Daily Restricted List is made available each
business day to all Employees via Lotus Notes and the Alliance
Alert.
(iv) PRECLEARANCE REQUIREMENT
An Employee may not purchase or sell, directly or indirectly, any
Security in which the Employee has (or after such transaction
would have) any Beneficial Ownership unless the Employee obtains
the prior written approval to the transaction from the Compliance
Department and, in the case of Investment
<PAGE>
Personnel, the head of the business unit in which the Employee
works. A request for preclearance must be made in writing in
advance of the contemplated transaction and must state:
a. the name of the Security involved,
b. the number of shares or principal amount to be purchased or
sold, and
c. a response to all questions contained in the appropriate
pre-clearance form.
Preclearance requests will be acted on only between the hours of
10:00 a.m. and 3:30 p.m. Any approval given under this paragraph
will remain in effect only until the end of the trading day on
which the approval was granted.
When a Security is being considered for purchase or sale for a
Client or is being purchased or sold for a Client following the
approval on the same day of a personal trading request form with
respect to the same security, the Compliance Department is
authorized to cancel the personal order if (x) it has not been
executed and the order exceeds a market value of $50,000 or (y)
the Compliance Department determines, after consulting with the
trading desk and the appropriate business unit head (if
available), that the order, based on market conditions, liquidity
and other relevant factors, could have an adverse impact on a
Client or on a Client's ability to purchase or sell the Security
or other Securities of the issuer involved.
(v) AMOUNT OF TRADING
No more than an aggregate of 20 securities transactions may occur
in an Employee's Personal Accounts in any consecutive thirty-day
period.
(vi) DISSEMINATION OF RESEARCH INFORMATION
An Employee may not buy or sell any Security that is the subject
of "significantly new" or "significantly changed" research during
a forty-eight hour period commencing with the first publication or
release of the research. The terms "significantly new" and
"significantly changed" include:
a. the initiation of coverage by an Alliance research
analysts;
b. any change in a research rating or position by an Alliance
research analyst (unless the research analyst who makes the
change advises the Compliance Department in writing that
the change is the result of an unanticipated widely
disseminated announcement or market event, e.g., the
announcement of a major earnings warning as opposed to the
research analysts independently rethinking his or her
subjective
<PAGE>
assessment of the security); and
c. any other rating, view, opinion, or advice from an Alliance
research analyst, the issuance (or reissuance) of which in
the opinion of such research analyst or head of research
would be reasonably likely to have a material effect on the
price of the security.
(b) ACCESS PERSONS
In addition to the requirements set forth in paragraph (a) of this
Section 4, the following restrictions apply to all Access Persons:
(i) SHORT SALES
No Access Person shall engage in any short sale of a
Security if, at the time of the transaction, any Client has
a long position in such Security (except that an Access
Person may engage in short sales against the box and
covered call writing provided that these personal
securities transactions do not violate the prohibition
against short-term trading).
(ii) SHORT-TERM TRADING
All Access Persons are subject to a mandatory buy and hold
of all Securities for 60 calendar days. An Access Person
may, however, after 30 calendar days, sell a Security if
the sale price is lower than the original purchase price
(i.e., at a loss on the original investment). Any trade
made in violation of this paragraph shall be unwound, or,
if that is not practicable, all profits from the short-term
trading must be disgorged as directed by the Compliance
Officer.
(iii) NON-EMPLOYEE ACCESS PERSONS
Any non-Employee Access Person with actual knowledge that a
Security is being considered for purchase or sale for a
Client may not purchase or sell such Security.
(c) INVESTMENT PERSONNEL
In addition to the requirements set forth in paragraphs (a) and
(b) of this Section 4, the following restrictions apply to all
Investment Personnel:
(i) INITIAL PUBLIC OFFERINGS
No Investment Personnel shall acquire any direct or
indirect Beneficial Ownership in any Securities in any
Initial Public Offering.
(ii) LIMITED OFFERINGS
<PAGE>
No Investment Personnel shall acquire any Beneficial
Ownership in any Securities in any Limited Offering of
Securities unless the Compliance Officer and the business
unit head give express prior written approval and document
the basis for granting or denying approval after due
inquiry. The Compliance Officer, in determining whether
approval should be given, will take into account, among
other factors, whether the investment opportunity should be
reserved for a Client and whether the opportunity is being
offered to the individual by virtue of his or her position
with the Alliance Group. Investment Personnel so authorized
to acquire Securities in a Limited Offering must disclose
that investment when they play a part in any Client's
subsequent consideration of an investment in the issuer,
and in such a case, the decision of Alliance to purchase
Securities of that issuer for a Client will be subject to
an independent review by Investment Personnel with no
personal interest in such issuer.
(iii) BOARD MEMBER OR TRUSTEE
No Investment Personnel shall serve on any board of
directors or trustees or in any other management capacity
of any private or public company without prior written
authorization from the Compliance Officer based upon a
determination that such service would not be inconsistent
with the interests of any Client. This prohibition does not
include non-profit corporations, charities or foundations;
however, approval from the Investment Personnel's
supervisor is necessary.
(iv) RECEIPT OF GIFTS
No Investment Personnel shall receive any gift or other
thing of more than DE MINIMIS value from any person or
entity, other than a member of the Alliance Group, that
does business with Alliance on behalf of a Client,
provided, however, that receipt of the following shall not
be prohibited:
a. an occasional breakfast, luncheon, dinner or
reception, ticket to a sporting event or the
theater, or comparable entertainment, that is not so
frequent, so costly, nor so extensive as to raise
any question of impropriety;
b. a breakfast, luncheon, dinner, reception or cocktail
party in conjunction with a bona fide business
meeting; and
c. a gift approved in writing by the Compliance
Officer.
(d) PORTFOLIO MANAGERS
<PAGE>
In addition to the requirements set forth in paragraphs (a), (b)
and (c) of this Section 4, the following restrictions apply to all
persons acting in the capacity of a portfolio manager of a Client
account:
<PAGE>
(i) BLACKOUT PERIODS
No person acting in the capacity of a portfolio manager
shall buy or sell a Security for a Personal Account within
seven calendar days before and after a Client trades in
that Security. In the case of Client accounts managed by
more than one portfolio manager, this restriction will
apply to the portfolio manager who makes the decision to
purchase or sell the relevant Security. If a portfolio
manager engages in such a personal securities transaction
during a blackout period, the Compliance Officer will break
the trade or, if the trade cannot be broken, the Compliance
Officer will direct that any profit realized on the trade
be disgorged.
(ii) ACTIONS DURING BLACKOUT PERIODS
No person acting in the capacity of a portfolio manager
shall delay or accelerate a Client trade due to a previous
purchase or sale of a Security for a Personal Account. In
the event that a portfolio manager determines that it is in
the best interest of a Client to buy or sell a Security for
the account of the Client within seven days of the purchase
or sale of the same Security in a Personal Account, the
portfolio manager should contact the Compliance Officer
immediately who may direct that the trade in the Personal
Account be canceled or take other appropriate relief.
(iii) TRANSACTIONS CONTRARY TO CLIENT POSITIONS
No person acting in the capacity of a portfolio manager
shall purchase or sell a Security in a Personal Account
contrary to investment decisions made on behalf of a
Client, unless the portfolio manager represents and
warrants in the personal trading request form that (x) it
is appropriate for the Client account to buy, sell or
continue to hold that Security and (y) the decision to
purchase or sell the Security for the Personal Account
arises from the need to raise or invest cash or some other
valid reason specified by the portfolio manager and
approved by the Compliance Officer and is not otherwise
based on the portfolio manager's view of how the Security
is likely to perform.
(e) RESEARCH ANALYSTS
In addition to the requirements set forth in paragraphs
(a), (b), (c) of this Section 4, the following restrictions
apply to all persons acting in the capacity of a research
analyst:
(i) BLACKOUT PERIODS
No person acting as a research analyst shall buy or
sell a Security within seven calendar days before
and after making a change in a rating or other
published
<PAGE>
view with respect to that Security. If a research
analyst engages in such a personal securities
transaction during a blackout period, the Compliance
Officer will break the trade or, if the trade cannot
be broken, the Compliance Officer will direct that
any profit realized on the trade be disgorged.
(ii) ACTIONS DURING BLACKOUT PERIODS
No person acting as a research analyst shall delay
or accelerate a rating or other published view with
respect to any Security because of a previous
purchase or sale of a Security in such person's
Personal Account. In the event that a research
analyst determines that it is appropriate to make a
change in a rating or other published view within
seven days of the purchase or sale of the same
Security in a Personal Account, the research analyst
should contact the Compliance Officer immediately
who may direct that the trade in the Personal
Account be canceled or take other appropriate
relief.
(iii) ACTIONS CONTRARY TO RATINGS
No person acting as a research analyst shall
purchase or sell a Security (to the extent such
Security is included in the research analyst's
research universe) contrary to an outstanding rating
or a pending ratings change, unless (x) the research
analyst represents and warrants in the personal
trading request form that (as applicable) there is
no reason to change the outstanding rating and (y)
the research analyst's personal trade arises from
the need to raise or invest cash or some other valid
reason specified by the research analyst and
approved by the Compliance Officer and is not
otherwise based on the research analyst's view of
how the security is likely to perform.
5. EXEMPTED TRANSACTIONS
(a) The pre-clearance requirements, as described in Section 4(a)(iv)
of this Code and Statement, do not apply to:
(i) NON-VOLITIONAL TRANSACTIONS
Purchases or sales that are non-volitional (including, for
example, any Security received as part of an individual's
compensation) on the part of an Employee (and any Access
Person who is not an Employee) or are pursuant to a
dividend reinvestment plan (up to an amount equal to the
cash value of a regularly declared dividend, but not in
excess of this amount).
(ii) EXERCISE OF PRO RATA ISSUED RIGHTS
Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of the issuer's
Securities, to the extent such rights were acquired from
such issuer, and sales of such rights so acquired. This
<PAGE>
exemption applies only to the exercise or sale of rights
that are issued in connection with a specific upcoming
public offering on a specified date, as opposed to rights
acquired from the issuer (such as warrants or options),
which may be exercised from time-to-time up until an
expiration date. This exemption does not apply to the sale
of stock acquired pursuant to the exercise of rights.
(b) The restrictions on effecting transactions in a (1) Security being
considered for purchase or sale, as described in Sections 4(a)(ii)
and 4(b)(iii) or (2) that is the subject of "significantly new" or
"significantly changed" research, as described in Section 4(a)(vi)
of this Code and Statement, do not apply to:
(i) NON-VOLITIONAL TRANSACTIONS
Purchases or sales that are non-volitional (including, for
example, any Security received as part of an individual's
compensation) on the part of an Access Person or are
pursuant to a dividend reinvestment plan (up to an amount
equal to the cash value of a regularly declared dividend,
but not in excess of this amount).
(ii) EXERCISE OF PRO RATA ISSUED RIGHTS
Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of the issuer's
Securities, to the extent such rights were acquired from
such issuer, and sales of such rights so acquired. This
exemption applies only to the exercise or sale of rights
that are issued in connection with a specific upcoming
public offering on a specified date, as opposed to rights
acquired from the issuer (such as warrants or options),
which may be exercised from time-to-time up until an
expiration date. This exemption does not apply to the sale
of stock acquired pursuant to the exercise of rights.
(iii) DE MINIMIS TRANSACTIONS -- FIXED INCOME SECURITIES
Any of the following Securities, if at the time of the
transaction, the Access Person has no actual knowledge that
the Security is being considered for purchase or sale by a
Client, that the Security is being purchased or sold by the
Client or that the Security is the subject of significantly
new or significantly changed research:
a. Fixed income securities transaction involving no
more than 100 units or having a principal amount not
exceeding $25,000; or
b. Non-convertible debt securities and non-convertible
preferred stocks which are rated by at least one
nationally recognized statistical rating
<PAGE>
organization ("NRSRO") in one of the three highest
investment grade rating categories.
(iv) DE MINIMIS TRANSACTIONS -- EQUITY SECURITIES
Any equity Securities transaction, or series of related
transactions, involving shares of common stock and
excluding options, warrants, rights and other derivatives,
provided
a. any orders are entered after 10:00 a.m. and before
3:00 p.m. and are not designated as "market on open"
or "market on close";
b. the aggregate value of the transactions do not
exceed (1) $10,000 for securities with a market
capitalization of less than $1 billion; (2) $25,000
for securities with a market capitalization of $1
billion to $5 billion and (3) $50,000 for securities
with a market capitalization of greater than $5
billion; and
c. the Access Person has no actual knowledge that the
Security is being considered for purchase or sale by
a Client, that the Security is being purchased or
sold by or for the Client or that the Security is
the subject of significantly new or significantly
changed research.
(c) NON-EMPLOYEE ACCESS PERSONS
The restrictions on Employees and Access Persons, as described in
Sections 4(a) and 4(b) of this Code and Statement, do not apply to
non-Employee Access Persons, if at the time of the transaction
involved, such person has no actual knowledge that the Security
involved is being considered for purchase or sale.
(d) EXTREME HARDSHIP
In addition to the exceptions contained in Section 5(a) and (b),
the Compliance Officer may, in very limited circumstances, grant
other exceptions under any Section of the Code and Statement on a
case-by-case basis, provided:
(i) The individual seeking the exception furnishes to the
Compliance Officer:
a. a written statement detailing the efforts made to
comply with the requirement from which the
individual seeks an exception;
b. a written statement containing a representation and
warranty that (1) compliance with the requirement
would impose a severe undue hardship on the
individual and (2) the exception would not, in any
manner or degree, harm or defraud the Client or
compromise the
<PAGE>
individual's or Alliance's fiduciary duty to any
Client; and
c. any supporting documentation that the Compliance
Officer may request;
(ii) The Compliance Officer conducts an interview with the
individual or takes such other steps the Compliance Officer
deems appropriate in order to verify that granting the
exception will not in any manner or degree, harm or defraud
the Client or compromise the individual's or Alliance's
fiduciary duty to any Client; and
(iii) The Compliance Officer maintains, along with statements
provided by the individual, a written record that contains:
a. the name of the individual;
b. the specific requirement of Section 4 from which the
individual sought an exception;
c. the name of the Security involved, the number of
shares or principal amount purchased or sold, and
the date or dates on which the Securities were
purchased or sold;
d. the reason(s) the individual sought an exception
from the requirements of Section 4;
e. the efforts the individual made to comply with the
requirements of Section 4 from which the individual
sought to be excepted; and
f. the independent basis upon which the Compliance
Officer believes that the exemption should be
granted.
(e) Any Employee or Access Person who acquires an interest in any
private investment fund (including a "hedge fund") or any other
Security that cannot be purchased and held in a Personal Account
shall be excepted from the requirement that all Securities be held
in a Personal Account, as described in Section 4(a) of this Code
and Statement. Such Employee or Access Person shall provide the
Compliance Officer with a written statement detailing the reason
why such Security cannot be purchased and held in a Personal
Account. Transactions in these Securities nevertheless remain
subject to all other requirements of this Code and Statement,
including applicable private placement procedures, preclearance
requirements and blackout period trading restrictions.
6. REPORTING
<PAGE>
(a) INITIAL HOLDINGS REPORTS BY ALL ACCESS PERSONS
Each Access Person must, at the time of becoming an Access Person,
provide an initial holdings report to the Compliance Officer
disclosing the following:
(i) all Securities beneficially owned by the Access Person
(including the title, number of shares and/or principal
amount of each Security beneficially owned);
(ii) the name of any broker-dealer or financial institution
where the Access Person maintains a Personal Account; and
(iii) the date the report is submitted by the Access Person.
This report must be submitted no later than 10 days after a
person becomes an Access Person. In the event that Alliance
already maintains a record of the required information via account
statements received from the Access Person's broker-dealer
(because, for example, a new Access Person is already an Alliance
Employee), the Access Person may satisfy this requirement by (i)
confirming in writing (which may include e-mail) the accuracy of
the record within 10 days after becoming an Access Person and (ii)
recording the date of the confirmation.
(a) ANNUAL HOLDINGS REPORTS BY ACCESS PERSONS
Each Access Person must, by January 30 of each year, provide an
annual holdings report to the Compliance Officer disclosing the
following:
(i) all Securities beneficially owned by the Access Person
(including the title, number of shares and/or principal
amount of each Security beneficially owned);
(ii) the name of any broker-dealer or financial institution
where the Access Person maintains a Personal Account; and
(iii) the date the report is submitted by the Access Person.
The first annual holdings report submitted will be for the
year ending December 31, 2000 and must be provided to the
Compliance Officer by January 30, 2001.
The information must be current as of a date not more than
30 days before the report is submitted. In the event that Alliance
already maintains a record of the required information via account
statements received from the Access Person's broker-dealer, an
Access Person may satisfy this requirement by (i) confirming in
writing (which may include e-mail) the accuracy of the record and
(ii) recording the date of the confirmation.
<PAGE>
(b) DISCLOSURE OF PERSONAL ACCOUNTS AND BENEFICIALLY OWNED SECURITIES
Upon commencement of employment with a member of the Alliance
Group, an Employee must:
(i) file with the Compliance Officer a list of all Personal
Accounts by completing the Employee Compliance Statement (a
copy of which is attached as Appendix A), and while so
employed maintain the list on a current basis; and
(ii) Disclose to the Compliance Officer all Securities holdings
in which the Employee has any Beneficial Ownership, and
thereafter on an annual basis, to the extent these
Securities do not appear on the Employee's account
statements.
(c) ACCESS PERSONS WHO ARE NOT EMPLOYEES OF ALLIANCE
Every Access Person who is not an Employee of Alliance, shall
report to the Compliance Officer the information described in
Section 6(a) and (b) as well as 6(e) below with respect to
transactions in any Security in which such Access Person has, or
by reason of such transaction acquires, any Beneficial Ownership
in the Security; provided, however, that such Access Person is not
required to make a report with respect to transactions effected in
any account over which the Access Person does not have any direct
or indirect influence or control, including such an account in
which an Access Person has any Beneficial Ownership.
(d) REPORT CONTENTS
Every report of a non-Employee Access Person required by Section
6(D) (b) above shall be in writing and shall be delivered not
later than ten days after the end of the calendar quarter in which
a transaction to which the report relates was effected, and shall
contain the following information:
(i) the date of the transaction, the title and the number of
shares, and the principal amount of each Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom
the transaction was effected.
(e) REPORT REPRESENTATIONS
<PAGE>
Any such report may contain a statement that the report is not to
be construed as an admission by the person making the report that
he or she has any direct or indirect Beneficial Ownership in the
Security to which the report relates.
(f) MAINTENANCE OF REPORTS
The Compliance Officer shall maintain the information required by
Section 6 and such other records, if any, as are required by Rule
17j-1 under the Investment Company Act and Rule 204-2 under the
Advisers Act. All reports furnished pursuant to this Section will
be kept confidential, subject to the rights of inspection by the
Compliance Officer, the Transaction Compliance Committee, the
Securities and Exchange Commission and by other third parties
pursuant to applicable law.
7. ANNUAL VERIFICATIONS
Each person subject to this Code and Statement must certify annually that
he or she has read and understands this Code and Statement, recognizes
that he or she is subject thereto and has complied with its provisions
and disclosed or reported all personal Securities transactions required
to be disclosed or reported by this Code and Statement. Such certificates
and reports are to be given to the Compliance Officer.
8. SANCTIONS
Upon learning of a violation of this Code and Statement, any member of
the Alliance Group, with the advice of the Compliance Officer, may impose
such sanctions as it deems appropriate, including, among other things,
censure, suspension or termination of service. Individuals subject to
this Code and Statement who fail to comply with this Code and Statement
may also be violating the federal securities laws or other federal and
state laws. Any such person who is suspected of violating this Code and
Statement should be reported immediately to the Compliance Officer.
<PAGE>
CERTIFICATION
I hereby acknowledge receipt of the Code of Ethics and Statement of
Policy and Procedures Regarding Personal Securities Transactions (the "Code and
Statement") of Alliance Capital Management L.P. and its Subsidiaries. I certify
that I have read and understand the Code and Statement and recognize that I am
subject to its provisions. I also certify that I have complied with the
requirements of the Code and Statement and have disclosed or reported all
personal securities transactions required to be disclosed or reported pursuant
to the Code and Statement.
Name
-----------------------------------------
(PLEASE PRINT)
Signature
-----------------------------------------
Date
-----------------------------------------
<PAGE>
APPENDIX A
ALLIANCE CAPITAL MANAGEMENT L.P.
EMPLOYEE COMPLIANCE STATEMENT
I hereby certify that I have read and understand the Code of Ethics and
Statement of Policy and Procedures Regarding Personal Securities Transactions
(the "Code and Statement"), dated August 1999 and hereby agree, in consideration
of my continued employment by Alliance Capital Management L.P. or one of its
subsidiaries, to comply with the policies and procedures contained in the Code
and Statement.
1. In connection therewith, I agree to:
a. file with the Compliance Officer and maintain on a current basis a
list of ALL Personal Accounts (as defined in paragraph 2(h) of the
Code and Statement);
b. arrange to have duplicate trade confirmations and periodic
statements for EACH Personal Account submitted to the Compliance
Officer directly by the securities firm maintaining the
Account(s); and
c. be personally responsible for determining if any security
transaction for my Personal Account(s) is prohibited by the Code
and Statement or any other Alliance policy statement.
2. The following Personal Account(s) are maintained at the broker-dealer(s)
and/or financial institution(s) named below (if none write "none"):
a. registered in my name at the following BROKER-DEALER(S) AND/OR
FINANCIAL INSTITUTION(S):
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
b. registered in the name of my spouse at the following
BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S):
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
<PAGE>
c. registered in the name of a family member who resides with me at
the following BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S):
name of family member name of broker-dealer and/or financial
institution(s)
--------------------
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--------------------
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--------------------
-------------------------------------------------
d. registered in the name of any other person who resides with me
and is financially dependent on me at the following
BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S):
name of person name of broker-dealer and/or financial
institution(s)
--------------------
-------------------------------------------------
--------------------
-------------------------------------------------
--------------------
-------------------------------------------------
e. registered in the name of any other person who does not reside
with me, but who is financially dependent on me, at the following
BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S):
name of person name of broker-dealer and/or financial
institution(s)
--------------------
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--------------------
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--------------------
-------------------------------------------------
3. I have investment discretion over the following other account(s) at the
following BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S) (do NOT list
Client accounts):
name and description name of broker-dealer and/or
of account financial institution(s)
--------------------
-------------------------------------------------
--------------------
<PAGE>
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--------------------
-------------------------------------------------
4. I will notify the Compliance Officer if a Personal Account is opened or
closed. If the answers to paragraphs a through e of Section 2 above are
all "none", I certify that neither I nor any member of my family who
resides with me, any other person who resides with me currently and is
financially dependent on me, or any other person who is financially
dependent on me maintains a BROKERAGE ACCOUNT OR OTHER TYPE OF FINANCIAL
ACCOUNT.
- ---------------------------- ------------------------------
Date Employee Signature
------------------------------
Type or print name
<PAGE>
BARCLAYS GLOBAL INVESTORS, N.A.
And its Subsidiaries:
BARCLAYS GLOBAL FUNDS ADVISORS
BARCLAYS GLOBAL INVESTORS SERVICES
CODE OF ETHICS
INTRODUCTION
Barclays Global Investors, N.A. and its subsidiaries Barclays Global Funds
Advisors (BGFA) and Barclays Global Investors Services (BGIS), collectively
referred to as "BGI", have adopted the following Code of Ethics regarding
personal securities transaction policies and procedures intended to prevent
their US officers, directors and employees from engaging in any fraudulent or
manipulative acts with respect to accounts managed or advised by BGI as set
forth in SEC 17 CFR 270 Rule 17j-1, SEC 17 CFR 275 Rule 204-2 and OCC Regulation
12 CFR 12.7. Policies and Procedures on Insider Trading and Chinese Walls are
included in Appendix A.
DEFINITIONS
"Securities" are defined as any SEC registered or privately placed equity and
fixed income security, future or option contract, or other related commodity
derivative investment. This includes closed-end mutual funds, unit investment
trusts, physical-form securities, and exchange traded funds. "Securities" do not
include US Treasuries and other direct obligations of the US Government,
banker's acceptance, commercial paper, and shares of registered open- end
investment companies.
"Employee" include any US directors, officers and employees of BGI and his/her
spouse, domestic partner, minor children, a relative who shares the employee's
home or other persons by reason of any contract, arrangement, understanding or
relationship that provides to the employee with sole or shared voting or
investment powers.
"Personal Account" includes any securities account or portfolio in which
securities are held for the employee in which the employee has a direct or
indirect pecuniary (monetary) interest. The term includes IRA and 401(k)
accounts in which securities can be purchased or sold.
<PAGE>
PROHIBITED TRADING ACTIVITIES
INSIDER TRADING
- - All employees are prohibited from engaging in insider trading or tipping.
Insider trading occurs when a personal securities transaction occurs on the
basis of or while in possession of material, nonpublic information. Information
is considered material if it could reasonably affect the employee's decision to
invest (or not to invest) in a security. Nonpublic information is that which is
generally not available to the ordinary investors in the marketplace.
Refer to Appendix A for further details on insider trading.
PARALLEL TRADING, FRONT RUNNING AND SHADOWING RESTRICTIONS
- - All employees are prohibited from conducting personal securities
transactions that are considered parallel trading, front running and
shadowing.
Shadowing and parallel trading occur when an employee observes a BGI trade or
trading pattern and places the same (or similar) trade in his/her account or
passes the information to others inside or outside of the company. Front running
occurs when an employee uses (or passes to others who use the information)
advance knowledge of a BGI trade to enter into a personal transaction in the
same security ahead of BGI's order and to capitalize on the impact of the BGI
order.
RESTRICTED TRADING ACTIVITIES
TRADING IN BARCLAYS PLC SECURITIES AND SECURITIES UNDERWRITTEN BY BARCLAYS'
AFFILIATES
- - All Members of the Board of Directors of BGI, members of the Management
Committee, employees reporting directly to BGI's Chief Financial Officer
and all employees within the U.S. and Global Finance and Treasury Groups
are prohibited from trading in the securities of Barclays PLC during the
period from the end of the accounting year or half year until the relevant
results are announced, i.e., from January 1 to the preliminary results
announcement in February and from July 1 to the interim results
announcement in August. During other times, these individuals must
pre-clear trades in Barclays PLC securities in accordance with the Barclays
PLC policy.
- - Access Persons are not permitted to purchase securities underwritten by
Barclays' affiliates as manager or co-manager for a period of sixty days
after an offering is commenced.
<PAGE>
REQUIREMENTS FOR ALL EMPLOYEES
REPORTING OF PERSONAL ACCOUNTS AND SECURITIES TRANSACTIONS
- - All employees must disclose all personal accounts to US Compliance and must
authorize US Compliance to receive duplicate trade confirmations and
account statements.
- - Upon employment, new employees must sign a document stating that they
understand and agree to abide by BGI's personal trading requirements,
restrictions and prohibitions.
ANNUAL CERTIFICATION
- - All employees must provide an annual certification of their personal
accounts and securities holdings.
- - All employees must certify at least annually their understanding and
compliance with the Code of Ethics.
60 DAY HOLDING PERIOD
- - Employees are required to hold securities including options and futures for
a minimum of 60 days, and to avoid short-term trading practices. US
Compliance may pre-approve exceptions to the 60 day holding period.
PRE-CLEARANCE PRIOR TO TRANSACTIONS IN IPOS, PRIVATE PLACEMENTS, OPTIONS, AND
FUTURES
- - All employees must obtain pre-clearance for transactions in IPOs, private
placements, options and futures. For options and futures, the employee must
execute the transaction by the end the next business day or request another
pre-clearance.
BLACKOUT PERIODS
- - Employees are restricted from trading securities in selected indexes during
a designated "blackout" period when the specific index is undergoing a
major scheduled reconstitution. US Compliance will notify employees of the
"blackout" periods which will include the period 15 days before and after a
major scheduled index reconstitution.
ADDITIONAL REQUIREMENTS FOR ACCESS PERSONS
Access persons include all employees whose Group 1) participates in making
securities
<PAGE>
purchase and sell recommendations or 2) may have access to timely and material
information concerning BGI's securities transactions. Access Persons also
include the Boards of Directors and officers of BGFA and BGIS.
US Compliance will identify BGI's Access Persons who are required to submit
reports under this Code of Ethics and inform them of their reporting and
securities preclearance obligations.
REPORTING OF SECURITIES TRANSACTIONS AND HOLDINGS
- - All Access Persons must provide a listing of securities holdings to US
Compliance within 10 calendar days from when a personal account is opened
and provide US Compliance with transaction information until such time as
US Compliance receives duplicate confirmations and statements.
- - All newly hired Access Persons must provide a complete listing of
securities holdings on their initial day of employment.
ACCESS PERSONS REQUIRING PRE-CLEARANCE BY MANAGEMENT AND US COMPLIANCE
All Access Persons, whose Group directly participates in making securities
purchase or sell recommendations or has timely and material knowledge of BGI's
securities transactions, must pre-clear their personal securities transactions
with their Group manager in addition to pre-clearance by US Compliance. The
manager will verify that there is no timely or material knowledge of trades
pending for specific securities within the Access Person's Group. These Groups
include Portfolio Management, Trading, Trading Operations, Client Order
Management, Transition Services, Index Research Group, Alpha Strategy Group and
other Groups identified by US Compliance from time to time.
ACCESS PERSONS REQUIRING PRE-CLEARANCE FROM US COMPLIANCE ONLY
- - The following Groups have access to information relating to BGI's
securities transactions. Employees within these Groups must pre-clear their
securities transactions with US Compliance. These Groups include Internal
Audit, US Compliance, US Risk Management, the US Executive Committee, US
members of the Management Committee, BGFA and BGIS Board of Directors and
officers. In addition, all BGI staff who have access to the following
systems must also pre-clear trades with US Compliance: Landmark, Bulk
Console, Beacon, Bidbook, Fifus, TOC, ITOC, TSC, IntelProd, Quantex and any
other systems identified by US Compliance from time to time.
Pre-clearance authorization is valid until the next day's closing of the
relevant market.
<PAGE>
Access Persons are not required to pre-clear transactions in accounts managed by
a registered investment advisor for which full discretion has been granted.
Documentation of such an arrangement must be provided and an exemption must be
obtained from US Compliance who will confirm the discretionary arrangement.
Pre-clearance is not required for transactions in automatic dividend
reinvestment plans, periodic stock purchase plans or in selling or exercising
rights obtained as a shareholder in an issue.
MONITORING OF PERSONAL SECURITIES TRANSACTIONS
POST TRADE REVIEW
- - US Compliance will review personal securities transactions to identify
violations of the Code of Ethics. Violations to this policy will be
reviewed by management and disciplinary action may be taken up to and
including dismissal.
ADOPTION AND APPROVAL OF BGI CODE OF ETHICS
- - US Compliance will present the BGI Code of Ethics for approval by the Board
of Directors or Trustees of all funds for which BGFA or BGIS is the
investment advisor. This will be done at the initiation of investment
advisory services provided by BGFA or BGIS to the fund and no later than
six months after a material change has been adopted. In connection with
each approval, BGFA and BGIS will certify to the board that they have
adopted procedures reasonably necessary to prevent the Access Persons from
materially violating the BGI Code of Ethics.
- - BGFA and BGIS will provide to the fund's board a written report describing
issues, material violations and sanctions, and will certify to the board
that procedures have been adopted which are intended to prevent Access
Persons from violating the BGI Code of Ethics. This report and
certification will be submitted Code of Ethics at least annually.
RECORDKEEPING REQUIREMENTS
BGI will follow the recordkeeping practices outlined below:
- - A copy of the Code of Ethics that is in effect, or at any time within the
past five years was in effect, will be maintained in an easily accessible
place.
- - A record of any violation of the Code of Ethics, and of any action taken as
a result of the violation, will be maintained in an easily accessible place
for at least five years after the end of the fiscal year in which the
violation occurs.
<PAGE>
- - A copy of each personal account statement, trade confirmation and any
information provided in lieu of a report will be retained for five years,
two years in an easily accessible location.
- - A record of all persons, currently or within the past five years, who are
or were required to make reports, and who are or were responsible for
reviewing these reports will be retained in an easily accessible location.
- - A copy of each report submitted to a fund board pursuant to the Code of
Ethics will be maintained for at least five years after the end of the
fiscal year in which it is made, two years in an easily accessible
location.
- - A record of any decision to approve and the reasons supporting the decision
to approve the acquisition by employees of IPOs and private placements will
be maintained for at least five years after the end of the fiscal year in
which the approval is granted.
<PAGE>
APPENDIX A
INSIDER TRADING AND CHINESE WALL POLICY
A. INTRODUCTION
The continued success of Barclays depends on its relationships with its
customers and on its well-deserved reputation as an institution grounded in
a tradition of integrity and ethical conduct in all of its dealings. To
maintain this high standard and, thus, Barclays' reputation in today's
regulatory and business climate, requires strict observance of ethical
behavior as well as of legal obligations created by the Federal securities
laws and specific contractual undertakings of Barclays such as
confidentiality agreements. This Policy emphasizes generally the importance
of adhering to professional and ethical conduct and provides specific
policies and, in certain instances, procedures, with respect to Personal
Securities Transactions and Chinese Walls. These guidelines will help
employees meet Barclays' contractual, ethical and statutory obligations.
BGI EMPLOYEES WHO VIOLATE THESE POLICIES AND PROCEDURES WILL BE SUBJECT TO
SUCH DISCIPLINARY ACTION AS MANAGEMENT DEEMS APPROPRIATE, INCLUDING A
LETTER OF CENSURE OR SUSPENSION, OR REMOVAL FROM OFFICE, OR SUMMARY
TERMINATION OF EMPLOYMENT.
B. INSIDER TRADING
All employees must strictly comply with Federal, provincial or state
securities laws in transactions on behalf of Barclays and in their own
personal transactions. Such securities laws prohibit trading on material
non-public information ("Insider Trading") or communicating such
information to others who may trade on it ("Tipping").
What constitutes material non-public information ("Inside Information")
must be determined on the basis of all pertinent circumstances. First, the
information must be material. Material information is generally defined as
(i) information for which there is a substantial likelihood that a
reasonable investor would consider it important in making his or her
investment decisions, or (ii) information that is reasonably certain to
have a substantial effect on the price of a company's securities. Second,
the information must be non-public. Information that has been communicated
to the market place is generally public and, therefore, not Inside
Information. For example, information found in a filing or a report made
with the Securities and Exchange Commission or appearing in newspapers,
industry journals, financial newsletters or other publications would be
considered public, although information obtained by word-of-mouth or
through rumors
<PAGE>
would not necessarily be public. Information that is known only inside a
company or to a limited number of outsiders such as accountants, bankers,
financial advisors or attorneys, is not public.
The following information will generally be Inside Information if not
publicly known: (a) information concerning a company, including information
concerning its business, financial matters and management, such as changes
in earnings or dividends, significant technical achievements, important
discoveries of natural resources, the obtaining or losing of major
contracts, or changes in management; and (b) information concerning a
company's securities, including the market for a security or its terms,
such as a prospective tender offer, merger or acquisition, prospective
block trade, prospective private placement or public offering, impending
stock dividend or stock split or proposed recapitalization. A BGI employee
who had any of the types of Inside Information described above would be
guilty of Tipping if he or she (a) either communicated the Information to
another person or (b) simply told another person, without explanation, to
buy or sell the securities of that company, and the other person did indeed
purchase such securities as a result of such Tipping. Similarly, a staff
member, possessing Inside Information, would be guilty of Insider Trading
if he or she bought or sold securities for his or her personal account, or
for BGI's account, based on that Inside Information.
C. CONFIDENTIALITY AND CHINESE WALL POLICY
Beyond simply complying with the letter of the law, employees are expected
to understand and observe the highest professional and ethical standards in
conducting BGI's business. All BGI employees have a duty to respect the
confidential nature of information received from customers and to use that
information only for the purpose for which it is provided, whether or not
that information is Inside Information and regardless of the basis on which
confidentiality is required - whether it be statutory requirements, ethical
considerations or contractual obligations. Maintaining strict standards
with respect to the confidentiality of information will accomplish several
goals. It will enable BGI to (a) preserve its reputation for corporate
integrity, (b) maintain compliance with the Federal securities laws, and
(c) reduce the occurrence of conflicts of interest both within divisions
(and even within teams) as well as between separate operating entities of
Barclays. Indeed, maintaining strict standards of confidentiality will
enable BGI to serve the needs of its customers more effectively.
In certain areas Chinese Walls will be, or have been, established to ensure
that employees have adopted procedures to safeguard the confidentiality of
information. The term "Chinese Wall" is a familiar one to most people.
However, what it means or how it actually operates in the workplace is
often misunderstood.
<PAGE>
A Chinese Wall is a barrier that controls or restricts the flow of
confidential information. It is essentially a system or set of procedures
designed to segregate information and prevent the communication of that
information between certain people or operating areas. The procedures that
comprise each Chinese Wall may vary depending on the location of the
particular wall or the times when it is operative. A Chinese Wall may need
to be in place only at certain times or on a constant basis. A Chinese Wall
may need to be located between various operating areas, between divisions,
between teams within a division and even, temporarily, between staff who
are on the same team but assigned to different accounts. The existence and
proper maintenance of Chinese Walls will allow Barclays to serve
simultaneously the needs of customers who have competing interests. For the
most part, the maintenance of Chinese Walls will reduce the occurrence of
conflicts of interest within Barclays as well as reduce the possibility of
abuse of Inside Information.
Regardless of the existence of specific Chinese Walls, the following
procedures should be observed by all employees at all times:
1. Never communicate confidential information to anyone outside Barclays
except for communications with auditors, approved counsel or other experts
who have been specifically engaged for certain matters. Communicate
confidential information inside Barclays only on a need-to-know basis.
1. Do not communicate confidential information through a Chinese Wall
unless permission is obtained from the appropriate designated manager or
the Manager of Compliance.
1. Never discuss confidential information in a public place such as an
elevator, a restaurant or a hallway.
1. Always log off your computer before leaving the area for any length of
time and at the end of the day.
1. Use systems and information solely for authorized activities.
1. Notify a supervisor of any unauthorized use or misuse of the system or
information or any activity that appears questionable.
1. Maintain the secrecy of passwords and other system access
identification.
1. Prevent others from using a terminal to which another employee has
logged on until that employee has logged off.
9. Keep documents and papers containing confidential information in
locked file
<PAGE>
cabinets or other secured facilities. Do not leave papers and documents
containing confidential information exposed on desks or credenzas.
<PAGE>
CONFIDENTIAL INFORMATION AND
SECURITIES TRADING POLICY
<PAGE>
CONTENTS
- ---------------------------
<TABLE>
<S> <C>
Page
INTRODUCTION ............................................................................ 1
PART I
APPLICABLE TO ALL ASSOCIATES
SECTION ONE
CONFIDENTIAL INFORMATION.................................................... 2
-Types of Confidential Information.......................................... 2
-Rules for Protecting Confidential Information.............................. 3
-Supplemental Procedures.................................................... 4
SECTION TWO
INSIDER TRADING AND TIPPING................................................. 5
-Legal Prohibitions......................................................... 5
-Mellon's Policy............................................................ 6
SECTION THREE
RESTRICTIONS ON THE FLOW OF INFORMATION
WITHIN MELLON (THE "CHINESE WALL").......................................... 7
-Rules for Maintaining the Chinese Wall..................................... 7
-Reporting Receipt of Material Nonpublic Information........................ 8
-Functions "Above the Wall"................................................. 9
-Supplemental Procedures.................................................... 9
SECTION FOUR
RESTRICTIONS ON TRANSACTIONS IN MELLON SECURITIES...........................10
-Beneficial Ownership.......................................................11
SECTION FIVE
RESTRICTIONS ON TRANSACTIONS IN OTHER SECURITIES............................12
SECTION SIX
CLASSIFICATION OF ASSOCIATES................................................14
-Insider Risk Associate.....................................................14
-Investment Associate.......................................................15
-Other Associate............................................................15
PART II
APPLICABLE TO INSIDER
RISK ASSOCIATES ONLY ............................................................................16
-Prohibition on Investments in Securities of Financial
Services Organizations....................................................16
-Conflict of Interest.......................................................17
-Preclearance for Personal Securities Transactions..........................17
-Personal Securities Transactions Reports...................................19
-Confidential Treatment.....................................................19
<PAGE>
PART III
APPLICABLE TO INVESTMENT
ASSOCIATES ONLY ............................................................................20
-Special Standards of Conduct for Investment Associates.....................20
-Preclearance for Personal Securities Transactions..........................21
-Personal Securities Transactions Reports...................................23
-Confidential Treatment.....................................................24
PART IV
APPLICABLE TO OTHER
ASSOCIATES ONLY ............................................................................25
-Preclearance for Personal Securities Transactions..........................25
-Personal Securities Transactions Reports...................................25
-Restrictions on Transactions in Other Securities...........................25
-Confidential Treatment.....................................................26
PART V
APPLICABLE TO NONMANAGEMENT
BOARD MEMBERS ............................................................................27
-Nonmanagement Board Member.................................................27
-Standards of Conduct for Nonmanagement Board Member........................27
-Preclearance for Personal Securities Transactions..........................28
-Personal Securities Transactions Reports...................................29
-Confidential Treatment.....................................................29
GLOSSARY
DEFINITIONS.................................................................30
INDEX OF EXHIBITS
.............................................................................33
</TABLE>
<PAGE>
INTRODUCTION
- --------------------------
Mellon Bank Corporation ("Mellon") and its associates,
and the registered investment companies for which The
Dreyfus Corporation ("Dreyfus") and/or Mellon serves as
investment adviser, sub-investment adviser or
administrator, are subject to certain laws and
regulations governing the use of confidential
information and personal securities trading. Mellon has
developed this CONFIDENTIAL INFORMATION AND SECURITIES
TRADING POLICY (THE "POLICY") to establish specific
standards to promote compliance with applicable laws.
Further, the Policy is intended to protect Mellon's
business secrets and proprietary information as well as
that of its customers and any entity for which it acts
in a fiduciary capacity.
The Policy set forth procedures and limitations which
govern the personal securities transactions of every
Mellon associate and certain other individuals
associated with the registered investment companies for
which Dreyfus and/or Mellon serves as investment
adviser, sub-investment adviser or administrator. The
Policy is designed to reinforce Mellon's reputation for
integrity by avoiding even the appearance of impropriety
in the conduct of Mellon's business.
Associates should be aware that they may be held
personally liable for any improper or illegal acts
committed during the course of their employment, and
that "ignorance of the law" is not a defense. Associates
may be subject to civil penalties such as fines,
regulatory sanctions including suspensions, as well as
criminal penalties.
Associates outside the United States are also subject to
applicable laws of foreign jurisdictions, which may
differ substantially from U.S. law and which may subject
such associates to additional requirements. Such
associates must comply with applicable requirements of
pertinent foreign laws as well as with the provisions of
the Policy. To the extent any particular portion of the
Policy is inconsistent with foreign law, associates
should consult the General Counsel or the Manager of
Corporate Compliance.
Any provision of this Policy may be waived or exempted
at the discretion of the Manager of Corporate
Compliance. Any such waiver or exemption will be
evidenced in writing and maintained in the Risk
Management and Compliance Department.
Associates must read the Policies and MUST
COMPLY with them. Failure to comply with the
provisions of the Policies may result in the
imposition of serious sanctions, including
but not limited to disgorgement of profits,
dismissal, substantial personal liability
and referral to law enforcement agencies or
other regulatory agencies. Associates should
retain the Policies in their records for
future reference. Any questions regarding
the Policies should be referred to the
Manager of Corporate Compliance or his/her
designee.
1
<PAGE>
PART I - APPLICABLE TO ALL ASSOCIATES
- ----------------------------
SECTION ONE
CONFIDENTIAL INFORMATION
As an associate you may receive information about
Mellon, its customers and other parties that, for
various reasons, should be treated as confidential. All
associates are expected to strictly comply with measures
necessary to preserve the confidentiality of
information.
TYPES OF CONFIDENTIAL INFORMATION - Although it is
impossible to provide an exhaustive list of information
that should remain confidential, the following are
examples of the general types of confidential
information that associates might receive in the
ordinary course of carrying out their job
responsibilities.
- INFORMATION OBTAINED FROM BUSINESS RELATIONS - An
associate might receive confidential information
regarding customers or other parties with whom Mellon
has business relationships. If released, such
information could have a significant effect on their
operations, their business reputations or the market
price of their securities. Disclosing such information
could expose both the associate and Mellon to liability
for damages.
- MELLON FINANCIAL INFORMATION - An associate might
receive financial information regarding Mellon before
such information has been disclosed to the public. It is
the policy of Mellon to disclose all material corporate
information to the public in such a manner that all
those who are interested in Mellon and its securities
have equal access to the information. Disclosing such
information to unauthorized persons could subject both
the associate and Mellon to liability under the federal
securities laws.
- MELLON PROPRIETARY INFORMATION - Certain nonfinancial
information developed by Mellon - such as business
plans, customer lists, methods of doing business,
computer software, source codes, databases and related
documentation - constitutes valuable Mellon proprietary
information. Disclosure of such information to
unauthorized persons could harm, or reduce a benefit to,
Mellon and could result in liability for both the
associate and Mellon.
- MELLON EXAMINATION INFORMATION - Banks and certain other
Mellon subsidiaries are periodically examined by
regulatory agencies. Certain reports made by those
regulatory agencies are the property of those agencies
and are strictly confidential. Giving information from
these reports to anyone not officially connected with
Mellon is a criminal offense.
- PORTFOLIO MANAGEMENT INFORMATION - Portfolio management
information relating to investment accounts or funds
managed by Mellon or Dreyfus, including investment
decisions or strategies developed for the benefit of
investment companies advised by Dreyfus, is for the
benefit of such account or fund. Disclosure or
exploitation of such information by an associate in an
unauthorized manner may cause detriment to such accounts
or funds and may subject the associate to liability
under the federal securities laws.
2
<PAGE>
RULES FOR PROTECTING CONFIDENTIAL INFORMATION - The
following are some basic rules to follow to protect
confidential information.
- LIMITED COMMUNICATION TO OUTSIDERS - Confidential
information should not be communicated to anyone outside
Mellon, except to the extent they need to know the
information in order to provide necessary services to
Mellon.
- LIMITED COMMUNICATION TO INSIDERS - Confidential
information should not be communicated to other
associates, except to the extent they need to know the
information to fulfill their job responsibilities and
their knowledge of the information is not likely to
result in misuse or a conflict of interest. In this
regard, Mellon has established specific restrictions
with respect to material nonpublic information in order
to separate and insulate different functional areas and
personnel within Mellon. Please refer to Section Three,
"Restrictions on The Flow of Information Within Mellon"
(The "Chinese Wall").
- CORPORATE USE ONLY - Confidential information should be
used only for Corporate purposes. Under no circumstances
may an associate use it, directly or indirectly, for
personal gain or for the benefit of any outside party
who is not entitled to such information.
- OTHER CUSTOMERS - Where appropriate, customers should be
made aware that associates will not disclose to them
other customers' confidential information or use the
confidential information of one customer for the benefit
of another.
- NOTIFICATION OF CONFIDENTIALITY - When confidential
information is communicated to any person, either inside
or outside Mellon, they should be informed of the
information's confidential nature and the limitations on
its further communication.
- PREVENTION OF EAVESDROPPING - Confidential matters
should not be discussed in public or in places, such as
in building lobbies, restaurants or elevators, where
unauthorized persons may overhear. Precautions, such as
locking materials in desk drawers overnight, stamping
material "Confidential" and delivering materials in
sealed envelopes, should be taken with written materials
to ensure they are not read by unauthorized persons.
- DATA PROTECTION - Data stored on personal computers and
diskettes should be properly secured to ensure they are
not accessed by unauthorized persons. Access to computer
files should be granted only on a need-to-know basis. At
a minimum, associates should comply with applicable
Mellon policies on electronic data security.
3
<PAGE>
- CONFIDENTIALITY AGREEMENTS - Confidentiality agreements
to which Mellon is a party must be complied with in
addition to, but not in lieu of, this Policy.
Confidentiality agreements that deviate from commonly
used forms should be reviewed in advance by the Legal
Department.
- CONTACT WITH THE PUBLIC - All contacts with
institutional shareholders or securities analysts about
Mellon must be made through the Investor Relations
Division of the Finance Department. All contacts with
the media and all speeches or other public statements
made on behalf of Mellon or about Mellon's businesses
must be cleared in advance by Corporate Affairs. In
speeches and statements not made on behalf of Mellon,
care should be taken to avoid any implication that
Mellon endorses the views expressed.
SUPPLEMENTAL PROCEDURES - Mellon entities, departments,
divisions and groups should establish their own
supplemental procedures for protecting confidential
information, as appropriate. These procedures may
include:
- establishing records retention and destruction policies;
- using code names;
- limiting the staffing of confidential matters (for
example, limiting the size of working groups and the use
of temporary employees, messengers and word processors);
and
- requiring written confidentiality agreements from
certain associates.
ANY SUPPLEMENTAL PROCEDURES SHOULD BE USED ONLY TO
PROTECT CONFIDENTIAL INFORMATION AND NOT TO CIRCUMVENT
APPROPRIATE REPORTING AND RECORDKEEPING REQUIREMENTS.
4
<PAGE>
SECTION TWO
INSIDER TRADING AND TIPPING
LEGAL PROHIBITIONS - Federal securities laws generally
prohibit the trading of securities while in possession
of "material nonpublic" information regarding the issuer
of those securities (insider trading). Any person who
passes along the material nonpublic information upon
which a trade is based (tipping) may also be liable.
"MATERIAL" - Information is material if there is a
substantial likelihood that a reasonable investor would
consider it important in deciding whether to buy, sell
or hold securities. Obviously, information that would
affect the market price of a security would be material.
Examples of information that might be material include:
- a proposal or agreement for a merger, acquisition or
divestiture, or for the sale or purchase of substantial
assets;
- tender offers, which are often material for the party
making the tender offer as well as for the issuer of the
securities for which the tender offer is made;
- dividend declarations or changes;
- extraordinary borrowings or liquidity problems;
- defaults under agreements or actions by creditors,
customers or suppliers relating to a company's credit
standing;
- earnings and other financial information, such as large
or unusual write-offs, write-downs, profits or losses;
- pending discoveries or developments, such as new
products, sources of materials, patents, processes,
inventions or discoveries of mineral deposits;
- a proposal or agreement concerning a financial
restructuring;
- a proposal to issue or redeem securities, or a
development with respect to a pending issuance or
redemption of securities;
- a significant expansion or contraction of operations;
- information about major contracts or increases or
decreases in orders;
- the institution of, or a development in, litigation or a
regulatory proceeding;
- developments regarding a company's senior management;
- information about a company received from a director of
that company; and
- information regarding a company's possible noncompliance
with environmental protection laws.
This list is not exhaustive. All relevant circumstances
must be considered when determining whether an item of
information is material.
5
<PAGE>
"NONPUBLIC" - Information about a company is nonpublic
if it is not generally available to the investing
public. Information received under circumstances
indicating that it is not yet in general circulation and
which may be attributable, directly or indirectly, to
the company or its insiders is likely to be deemed
nonpublic information.
If an associate can refer to some public source to show
that the information is generally available (that is,
available not from inside sources only) and that enough
time has passed to allow wide dissemination of the
information, the information is likely to be deemed
public. While information appearing in widely accessible
sources - such as newspapers - becomes public very soon
after publication, information appearing in less
accessible sources - such as regulatory filings - may
take up to several days to be deemed public. Similarly,
highly complex information might take longer to become
public than would information that is easily understood
by the average investor.
MELLON'S POLICY - Associates who possess material
nonpublic information about a company - whether that
company is Mellon, another Mellon entity, a Mellon
customer or supplier, or other company - may not trade
in that company's securities, either for their own
accounts or for any account over which they exercise
investment discretion. In addition, associates may not
recommend trading in those securities and may not pass
the information along to others, except to associates
who need to know the information in order to perform
their job responsibilities with Mellon. These
prohibitions remain in effect until the information has
become public.
Associates who have investment responsibilities should
take appropriate steps to avoid receiving material
nonpublic information. Receiving such information could
create severe limitations on their ability to carry out
their responsibilities to Mellon's fiduciary customers.
Associates managing the work of consultants and
temporary employees who have access to the types of
confidential information described in this Policy are
responsible for ensuring that consultants and temporary
employees are aware of Mellon's policy and the
consequences of noncompliance.
Questions regarding Mellon's policy on material
nonpublic information, or specific information that
might be subject to it, should be referred to the
General Counsel.
6
<PAGE>
SECTION THREE
RESTRICTIONS ON THE FLOW OF
INFORMATION WITHIN MELLON
(THE "CHINESE WALL")
As a diversified financial services organization, Mellon
faces unique challenges in complying with the
prohibitions on insider trading and tipping of material
nonpublic information and misuse of confidential
information. This is because one Mellon unit might have
material nonpublic information about a company while
other Mellon units may have a desire, or even a
fiduciary duty, to buy or sell that company's securities
or recommend such purchases or sales to customers. To
engage in such broad-ranging financial services
activities without violating laws or breaching Mellon's
fiduciary duties, Mellon has established a "Chinese
Wall" policy applicable to all associates. The "Chinese
Wall" separates the Mellon units or individuals that are
likely to receive material nonpublic information
(Potential Insider Functions) from the Mellon units or
individuals that either trade in securities - for
Mellon's account or for the accounts of others - or
provide investment advice (Investment Functions).
EXAMPLES OF POTENTIAL INSIDER FUNCTIONS - Potential
Insider Functions include, among others, certain
commercial lending, corporate finance, and credit policy
areas. Insider Risk Associates (see Section Six,
"Insider Risk Associates") should consider themselves to
be in Potential Insider Functions unless their
particular job responsibilities clearly indicate
otherwise.
EXAMPLES OF INVESTMENT FUNCTIONS - Investment Functions
include, among others, securities sales and trading,
investment management and advisory services, investment
research and various trust or fiduciary functions.
RULES FOR MAINTAINING THE "CHINESE WALL" - Without the
prior approval of the General Counsel, material
nonpublic information obtained by anyone in a Potential
Insider Function should not be communicated to anyone in
an Investment Function. To reduce the risk of material
nonpublic information being communicated, communications
between these associates in these functions must be
limited to the maximum extent consistent with valid
business needs.
PARTICULAR RULES -
- FILE RESTRICTIONS - Associates in Investment Functions
must not have access to commercial credit files,
corporate finance files, or any other Potential Insider
Function files that might contain material nonpublic
information. All such files that contain material
nonpublic information should be marked as "Confidential"
and, if feasible, segregated from nonconfidential files.
- ELECTRONIC DATA - Associates in Investment Functions
must not have access to personal computer or word
processing files of associates in Potential Insider
Functions.
- MEETINGS - Associates in Investment Functions must not
attend meetings between customers and associates in
Potential Insider Functions unless appropriate steps
have been taken to ensure that material nonpublic
information will not be disclosed or discussed.
- COMMITTEE SERVICE - Without the prior approval of the
General Counsel, associates other than those "Above the
Wall" (see page 9) must not serve simultaneously on a
committee having responsibility for any Investment
Function and a committee having responsibility for any
Potential Insider Function.
7
<PAGE>
- INFORMATION REQUESTS - Requests for nonmaterial
information or public information across the "Chinese
Wall" should be made in writing to an appropriate
associate in the applicable area. Associates sending or
receiving such a request should resolve any questions
regarding the materiality or nonpublic nature of the
requested information by consulting their department
head, who will contact the General Counsel, as
appropriate.
- INFORMATION BACKFLOW - Associates should take care to
avoid inadvertent backflow of information that may be
interpreted as the prohibited communication of material
nonpublic information. For example, the mere fact that
someone in a Potential Insider Function, such as a
mergers and acquisitions specialist, requests
information from an associate in an Investment Function
could give the latter person a clue as to possible
material developments affecting a customer.
- CUSTOMERS - Associates in Investment Functions must not
state or imply to customers that associates making
decisions or recommendations will have the benefit of
information from Mellon's Potential Insider Functions.
When appropriate, associates should inform customers of
Mellon's "Chinese Wall" policy.
- CONFLICTS OF INTEREST - Associates should not receive or
pass on any information that would create an undue risk
of Mellon or any associate having a conflict of interest
or breaching a fiduciary obligation.
REPORTING RECEIPT OF MATERIAL NONPUBLIC INFORMATION -
Associates in Investment Functions who receive any
suspected material nonpublic information must report
such receipt promptly to their department or entity
head. A department or entity head who receives
information believed to be material and nonpublic should
report the matter promptly to the General Counsel. If
the General Counsel determines that the information is
material and nonpublic, the affected department or
entity will:
- immediately SUSPEND ALL TRADING in the securities of the
issuer to which the information applies, as well as all
recommendations with respect to such securities. The
suspension will remain in effect as long as the
information remains both material and nonpublic.
- NOTIFY THE GENERAL COUNSEL before resuming transactions
or recommendations in the affected securities. The
General Counsel will advise as to possible further
steps, including ascertaining the validity and nonpublic
nature of the information with the issuer of the
securities; requesting the issuer of the securities, or
other appropriate parties, to disseminate the
information promptly to the public if the information is
valid and nonpublic; and publishing the information.
In certain circumstances, the department or entity head
may be able to demonstrate conclusively that the receipt
of the material nonpublic information has been confined
to an individual or small group of individuals and that
measures other than those described above will
comparably reduce the likelihood of trading on the basis
of the information. These measures might include
temporarily relieving individuals of responsibility for
any Investment Functions and preventing any contact
between those individuals and associates in Investment
Functions. In these circumstances, the department head,
with the approval of the General Counsel, may take those
measures rather than the measures described above.
8
<PAGE>
FUNCTIONS "ABOVE THE WALL" - Some functions at Mellon
are deemed to be "Above the Wall." For example, members
of senior management, Auditing, Risk Management and
Compliance, and the Legal Department will typically need
to have access to information on both sides of the
"Chinese Wall" to carry out their job responsibilities.
These individuals cannot rely on the procedural
safeguards of the "Chinese Wall" and, therefore, need to
be particularly careful to avoid any improper use or
dissemination of material nonpublic information.
SUPPLEMENTAL PROCEDURES - As appropriate, certain Mellon
departments or areas, such as Mellon Trust, should
establish their own procedures to reduce the possibility
of information being communicated to associates who
should not have access to that information.
9
<PAGE>
SECTION FOUR
RESTRICTIONS ON TRANSACTIONS
IN MELLON SECURITIES
Associates who engage in transactions involving Mellon
securities should be aware of their unique
responsibilities with respect to such transactions
arising from the employment relationship and should be
sensitive to even the appearance of impropriety.
The following restrictions apply to ALL transactions in
Mellon's publicly traded securities occurring in the
associate's own account and in all other accounts over
which the associate could be expected to exercise
influence or control (see provisions under "Beneficial
Ownership" below for a more complete discussion of the
accounts to which these restrictions apply). These
restrictions are to be followed in addition to any
restrictions that apply to particular officers or
directors (such as restrictions under Section 16 of the
Securities Exchange Act of 1934).
- SHORT SALES - Short sales of Mellon securities by
associates are prohibited.
- SALES WITHIN 60 DAYS OF PURCHASE - Sales of Mellon
securities within 60 days of acquisition are prohibited.
For purposes of the 60-day holding period, securities
will be deemed to be equivalent if one is convertible
into the other, if one entails a right to purchase or
sell the other, or if the value of one is expressly
dependent on the value of the other (e.g., derivative
securities).
In cases of extreme hardship, associates (other than
senior management) may obtain permission to dispose of
Mellon securities acquired within 60 days of the
proposed transaction, provided the transaction is
pre-cleared with the Manager of Corporate Compliance and
any profits earned are disgorged in accordance with
procedures established by senior management. The Manager
of Corporate Compliance reserves the right to suspend
the 60-day holding period restriction in the event of
severe market disruption.
- MARGIN TRANSACTIONS - Purchases on margin of Mellon's
publicly traded securities by associates is prohibited.
Margining Mellon securities in connection with a
cashless exercise of an employee stock option through
the Human Resources Department is exempt from this
restriction. Further, Mellon securities may be used to
collateralize loans or the acquisition of securities
other than those issued by Mellon.
- OPTION TRANSACTIONS - Option transactions involving
Mellon's publicly traded securities are prohibited.
Transactions under Mellon's Long-Term Incentive Plan or
other associate option plans are exempt from this
restriction.
- MAJOR MELLON EVENTS - Associates who have knowledge of
major Mellon events that have not yet been announced are
prohibited from buying and selling Mellon's publicly
traded securities before such public announcements, even
if the associate believes the event does not constitute
material nonpublic information.
- MELLON BLACKOUT PERIOD - Associates are prohibited from
buying or selling Mellon's publicly traded securities
during a blackout period, which begins the 16th day of
the last month of each calendar quarter and ends three
business days after Mellon publicly announces the
financial results for that quarter. In cases of extreme
hardship, associates (other than senior management) may
request permission from the Manager of Corporate
Compliance to dispose of Mellon securities during the
blackout period.
10
<PAGE>
BENEFICIAL OWNERSHIP - The provisions discussed above
apply to transactions in the associate's own name and to
all other accounts over which the associate could be
expected to exercise influence or control, including:
- accounts of a spouse, minor children or relatives to
whom substantial support is contributed;
- accounts of any other member of the associate's
household (e.g., a relative living in the same home);
- trust accounts for which the associate acts as trustee
or otherwise exercises any type of guidance or
influence;
- Corporate accounts controlled, directly or indirectly,
by the associate;
- arrangements similar to trust accounts that are
established for bona fide financial purposes and benefit
the associate; and
- any other account for which the associate is the
beneficial owner (see Glossary for a more complete legal
definition of "beneficial owner").
11
<PAGE>
SECTION FIVE
RESTRICTIONS ON TRANSACTIONS
IN OTHER SECURITIES
Purchases or sales by an associate of the securities of
issuers with which Mellon does business, or other third
party issuers, could result in liability on the part of
such associate. Associates should be sensitive to even
the appearance of impropriety in connection with their
personal securities transactions. Associates should
refer to the provisions under "Beneficial Ownership"
(Section Four, "Restrictions on Transactions in Mellon
Securities"), which are equally applicable to the
following provisions.
The Mellon Code of Conduct contains certain restrictions
on investments in parties that do business with Mellon.
Associates should refer to the Code of Conduct and
comply with such restrictions in addition to the
restrictions and reporting requirements set forth below.
The following restrictions apply to ALL securities
transactions by associates:
- CREDIT OR ADVISORY RELATIONSHIP - Associate may not buy
or sell securities of a company if they are considering
granting, renewing or denying any credit facility to
that company or acting as an adviser to that company
with respect to its securities. In addition, lending
associates who have assigned responsibilities in a
specific industry group are not permitted to trade
securities in that industry. This prohibition does not
apply to transactions in securities issued by open-end
investment companies.
- CUSTOMER TRANSACTIONS - Trading for customers and Mellon
accounts should always take precedence over associates'
transactions for their own or related accounts.
- FRONT RUNNING - Associates may not engage in "front
running," that is, the purchase or sale of securities
for their own accounts on the basis of their knowledge
of Mellon's trading positions or plans.
- INITIAL PUBLIC OFFERINGS - Mellon prohibits its
associates from acquiring any securities in an initial
public offering ("IPO").
- MARGIN TRANSACTIONS - Margin trading is a highly
leveraged and relatively risky method of investing that
can create particular problems for financial services
employees. For this reason, all associates are urged to
avoid margin trading.
Prior to establishing a margin account, the associate
must obtain the written permission of the Manager of
Corporate Compliance. Any associate having a margin
account prior to the effective date of this Policy must
notify the Manager of Corporate Compliance of the
existence of such account.
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All associates having margin accounts, other than
described below, must designate the Manager of Corporate
Compliance as an interested party on that account.
Associates must ensure that the Manager of Corporate
Compliance promptly receives copies of all trade
confirmations and statements relating to the account
directly from the broker. If requested by a brokerage
firm, please contact the Manager of Corporate Compliance
to obtain a letter (sometimes referred to as a "407
letter") granting permission to maintain a margin
account. Trade confirmations and statements are not
required on margin accounts established at Dreyfus
Investment Services Corporation for the sole purpose of
cashless exercises of employee stock options. In
addition, products may be offered by a broker/dealer
that, because of their characteristics, are considered
margin accounts but have been determined by the Manager
of Corporate Compliance to be outside the scope of this
Policy (e.g., a Cash Management Account which provides
overdraft protection for the customer). Any questions
regarding the establishment, use and reporting of margin
accounts should be directed to the Manager of Corporate
Compliance. Examples of an instruction letter to a
broker are shown in Exhibits B1 and B2.
- MATERIAL NONPUBLIC INFORMATION - Associates possessing
material nonpublic information regarding any issuer of
securities must refrain from purchasing or selling
securities of that issuer until the information becomes
public or is no longer considered material.
- NAKED OPTIONS, EXCESSIVE TRADING - Mellon discourages
all associates from engaging in short-term or
speculative trading, in trading naked options, in
trading that could be deemed excessive or in trading
that could interfere with an associate's job
responsibilities.
- PRIVATE PLACEMENTS - Associates are prohibited from
acquiring any security in a private placement unless
they obtain the prior written approval of the
Preclearance Compliance Officer (applicable only to
Investment Associates), the Manager of Corporate
Compliance and the associate's department head. Approval
must be given by all appropriate aforementioned persons
for the acquisition to be considered approved. After
receipt of the necessary approvals and the acquisition,
associates are required to disclose that investment when
they participate in any subsequent consideration of an
investment in the issuer for an advised account. Final
decision to acquire such securities for an advised
account will be subject to independent review.
- SCALPING - Associates may not engage in "scalping," that
is, the purchase or sale of securities for their own or
Mellon's accounts on the basis of knowledge of
customers' trading positions or plans or Mellon's
forthcoming investment recommendations.
- SHORT-TERM TRADING - Associates are discouraged from
purchasing and selling, or from selling and purchasing,
the same (or equivalent) securities within 60 calendar
days. With respect to Investment Associates only, any
profits realized on such short-term trades must be
disgorged in accordance with procedures established by
senior management.
13
<PAGE>
SECTION SIX
CLASSIFICATION OF ASSOCIATES
Associates are engaged in a wide variety of activities
for Mellon. In light of the nature of their activities
and the impact of federal and state laws and the
regulations thereunder, the Policy imposes different
requirements and limitations on associates based on the
nature of their activities for Mellon. To assist the
associates in complying with the requirements and
limitations imposed on them in light of their
activities, associates are classified into one of three
categories: Insider Risk Associate, Investment Associate
and Other Associate. Appropriate requirements and
limitations are specified in the Policy based upon the
associate's classification.
INSIDER RISK ASSOCIATE -
You are considered to be an Insider Risk Associate if
you are:
- employed in any of the following departments or
functional areas, however named, of a Mellon entity
other than Dreyfus (see Glossary for definition of
"Dreyfus"):
<TABLE>
<S> <C>
- Auditing - International
- Capital Markets - Leasing
- Corporate Affairs - Legal
- Credit Policy - Mellon Business Credit
- Credit Recovery - Middle Market
- Credit Review - Portfolio and Funds Management
- Domestic Corporate Banking - Risk Management and Compliance
- Finance - Strategic Planning
- Institutional Banking - Wholesale, Administration and Operations
</TABLE>
- a member of the Mellon Senior Management Committee,
provided that those members of the Mellon Senior
Management Committee who have management responsibility
for fiduciary activities or who routinely have access to
information about customers' securities transactions are
considered to be Investment Associates and are subject
to those provisions of the Policy pertaining to
Investment Associates;
- employed by a broker/dealer subsidiary of a Mellon
entity other than Dreyfus;
- an associate in the Stock Transfer business unit and
have been specifically designated as an Insider Risk
Associate by the Manager of Corporate Compliance; or
- an associate specifically designated as an Insider Risk
Associate by the Manager of Corporate Compliance.
14
<PAGE>
INVESTMENT ASSOCIATE -
You are considered to be an Investment Associate if you
are:
- a member of Mellon's Senior Management Committee who, as
part of his/her usual duties, has management
responsibility for fiduciary activities or routinely has
access to information about customers' securities
transactions;
- a Dreyfus associate;
- an associate of a Mellon entity registered under the
Investment Advisers Act of 1940;
- employed in the trust area of Mellon and:
- have the title of Vice President, First Vice
President or Senior Vice President; or
- have access to material, confidential information
regarding securities transactions by or on behalf
of Mellon customers; or
- an associate specifically designated as an Investment
Associate by the Manager of Corporate Compliance.
OTHER ASSOCIATE -
You are considered to be an Other Associate if you are
an associate of Mellon Bank Corporation or any of its
direct or indirect subsidiaries who is not either an
Insider Risk Associate or an Investment Associate.
15
<PAGE>
PART II - APPLICABLE TO INSIDER
RISK ASSOCIATES ONLY
- ---------------------------
PROHIBITION ON INVESTMENTS IN SECURITIES OF FINANCIAL
SERVICES ORGANIZATIONS
You are prohibited from acquiring any security issued by
a financial services organization if you are:
- a member of the Mellon Senior Management Committee. For
purposes of this restriction only, this prohibition also
applies to those members of the Mellon Senior Management
Committee who are considered Investment Associates.
- employed in any of the following departments of a Mellon
entity other than Dreyfus (see Glossary for definition
of "Dreyfus"):
- Strategic Planning - Finance
- Institutional Banking - Legal
- an associate specifically designated by the Manager of
Corporate Compliance and informed that this prohibition
is applicable to you.
FINANCIAL SERVICES ORGANIZATIONS - The term "security
issued by a financial services organization" includes
any security issued by:
<TABLE>
<S> <C>
- Commercial Banks - Bank Holding Companies
(other than Mellon) (other than Mellon)
- Thrifts - Savings and Loan Associations
- Insurance Companies - Broker/Dealers
- Investment Advisory Companies - Transfer Agents
- Shareholder Servicing Companies - Other Depository Institutions
</TABLE>
The term "securities issued by a financial services
organization" DOES NOT INCLUDE securities issued by
mutual funds, variable annuities or insurance policies.
Further, for purposes of determining whether a company
is a financial services organization, subsidiaries and
parent companies are treated as separate issuers.
EFFECTIVE DATE - The foregoing restrictions will be
effective upon adoption of this Policy. Securities of
financial services organizations properly acquired
before the later of the effective date of this Policy or
the date of hire may be maintained or disposed of at the
owner's discretion.
Additional securities of a financial services
organization acquired through the reinvestment of the
dividends paid by such financial services organization
through a dividend reinvestment program (DRIP) are not
subject to this prohibition, provided your election to
participate in the DRIP predates the later of the
effective date of this Policy or date of hire. Optional
cash purchases through a DRIP are subject to this
prohibition.
Within 30 days of the later of the effective date of
this Policy or date of becoming subject to this
prohibition, all holdings of securities of financial
services organizations must be disclosed in writing to
the Manager of Corporate Compliance. Periodically, you
will be asked to file an updated disclosure of all your
holdings of securities of financial services
organizations.
16
<PAGE>
CONFLICT OF INTEREST - No Insider Risk Associate may
engage in or recommend any securities transaction that
places, or appears to place, his or her own interests
above those of any customer to whom investment services
are rendered, including mutual funds and managed
accounts, or above the interests of Mellon.
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS - All
Insider Risk Associates must notify the Manager of
Corporate Compliance in writing and receive preclearance
before they engage in any purchase or sale of a
security. Insider Risk Associates should refer to the
provisions under "Beneficial Ownership" (Section Four,
"Restrictions on Transactions in Mellon Securities"),
which are equally applicable to these provisions.
EXEMPTIONS FROM REQUIREMENT TO PRECLEAR - Preclearance
is NOT required for the following transactions:
- purchases or sales of Exempt Securities (see Glossary);
- purchases or sales of municipal bonds;
- purchases or sales effected in any account over which an
associate has no direct or indirect control over the
investment decision-making process (e.g.,
nondiscretionary trading accounts). Nondiscretionary
trading accounts may only be maintained, without being
subject to preclearance procedures, when the Manager of
Corporate Compliance, after a thorough review, is
satisfied that the account is truly nondiscretionary;
- transactions that are non-volitional on the part of an
associate (such as stock dividends);
- the sale of stock received upon the exercise of an
associate stock option if the sale is part of a "netting
of shares" or "cashless exercise" administered by the
Human Resources Department (for which the Human
Resources Department will forward information to the
Manager of Corporate Compliance);
- the automatic reinvestment of dividends under a DRIP
(preclearance is required for OPTIONAL cash purchases
under a DRIP);
- purchases effected upon the exercise of rights issued by
an issuer pro rata to all holders of a class of
securities, to the extent such rights were acquired from
such issuer;
- sales of rights acquired from an issuer, as described
above; and/or
- those situations where the Manager of Corporate
Compliance determines, after taking into consideration
the particular facts and circumstances, that prior
approval is not necessary.
REQUESTS FOR PRECLEARANCE - All requests for
preclearance for a securities transaction shall be
submitted to the Manager of Corporate Compliance by
completing a Preclearance Request Form (see Exhibit C1).
The Manager of Corporate Compliance will notify the
Insider Risk Associate whether the request is approved
or denied, without disclosing the reason for such
approval or denial.
17
<PAGE>
Notifications may be given in writing or verbally by the
Manager of Corporate Compliance to the Insider Risk
Associate. A record of such notification will be
maintained by the Manager of Corporate Compliance.
However, it shall be the responsibility of the Insider
Risk Associate to obtain a written record of the Manager
of Corporate Compliance's notification within 24 hours
of such notification. The Insider Risk Associate should
retain a copy of this written record.
As there could be many reasons for preclearance being
granted or denied, Insider Risk Associates should not
infer from the preclearance response anything regarding
the security for which preclearance was requested.
Although making a preclearance request does not obligate
an Insider Risk Associate to do the transaction, it
should be noted that:
- preclearance authorization will expire at the end of the
third business day after it is received (the day
authorization is granted is considered the first
business day);
- preclearance requests should not be made for a
transaction that the Insider Risk Associate does not
intend to make; and
- Insider Risk Associates should not discuss with anyone
else, inside or outside Mellon, the response they
received to a preclearance request.
Every Insider Risk Associate must follow these
procedures or risk serious sanctions, including
dismissal. If you have any questions about these
procedures you should consult the Manager of Corporate
Compliance. Interpretive issues that arise under these
procedures shall be decided by, and are subject to the
discretion of, the Manager of Corporate Compliance.
RESTRICTED LIST - The Manager of Corporate Compliance
will maintain a list (the "Restricted List") of
companies whose securities are deemed appropriate for
implementation of trading restrictions for Insider Risk
Associates. Restricted List(s) will not be distributed
outside of the Risk Management and Compliance
Department. From time to time, such trading restrictions
may be appropriate to protect Mellon and its Insider
Risk Associates from potential violations, or the
appearance of violations, of securities laws. The
inclusion of a company on the Restricted List provides
no indication of the advisability of an investment in
the company's securities or the existence of material
nonpublic information on the company. Nevertheless, the
contents of the Restricted List will be treated as
confidential information to avoid unwarranted
inferences.
To assist the Manager of Corporate Compliance in
identifying companies that may be appropriate for
inclusion on the Restricted List, the department heads
of sections in which Insider Risk Associates are
employed will inform the Manager of Corporate Compliance
in writing of any companies they believe should be
included on the Restricted List, based upon facts known
or readily available to such department heads. Although
the reasons for inclusion on the Restricted List may
vary, they could typically include the following:
- Mellon is involved as a lender, investor or adviser in a
merger, acquisition or financial restructuring involving
the company;
- Mellon is involved as a selling shareholder in a public
distribution of the company's securities;
18
<PAGE>
- Mellon is involved as an agent in the distribution of the company's
securities;
- Mellon has received material nonpublic information on the company;
- Mellon is considering the exercise of significant creditors' rights
against the company; or
- The company is a Mellon borrower in Credit Recovery.
Department heads of sections in which Insider Risk Associates are
employed are also responsible for notifying the Manager of Corporate
Compliance in writing of any change in circumstances making it
appropriate to remove a company from the Restricted List.
PERSONAL SECURITIES TRANSACTIONS REPORTS
- BROKERAGE ACCOUNTS - All Insider Risk Associates are required to
instruct their brokers to submit directly to the Manager of Corporate
Compliance copies of all trade confirmations and statements relating
to their account. An example of an instruction letter to a broker is
contained in Exhibit B1.
- REPORT OF TRANSACTIONS IN MELLON SECURITIES - Insider Risk Associates
must also report in writing to the Manager of Corporate Compliance
within ten calendar days whenever they purchase or sell Mellon
securities if the transaction was not through a brokerage account as
described above. Purchases and sales of Mellon securities include the
following:
DRIP OPTIONAL CASH PURCHASES - Optional cash purchases under Mellon's
Dividend Reinvestment and Common Stock Purchase Plan (the "Mellon
DRIP").
STOCK OPTIONS - The sale of stock received upon the exercise of an
associate stock option unless the sale is part of a "netting of
shares" or "cashless exercise" administered by the Human Resources
Department (for which the Human Resources Department will forward
information to the Manager of Corporate Compliance).
It should be noted that the reinvestment of dividends under the DRIP,
changes in elections under Mellon's Retirement Savings Plan, the
receipt of stock under Mellon's Restricted Stock Award Plan and the
receipt or exercise of options under Mellon's Long-Term Profit
Incentive Plan are not considered purchases or sales for the purpose
of this reporting requirement.
An example of a written report to the Manager of Corporate Compliance
is contained in Exhibit A.
CONFIDENTIAL TREATMENT
THE MANAGER OF CORPORATE COMPLIANCE WILL USE HIS OR HER BEST EFFORTS
TO ASSURE THAT ALL REQUESTS FOR PRECLEARANCE, ALL PERSONAL SECURITIES
TRANSACTION REPORTS AND ALL REPORTS OF SECURITIES HOLDINGS ARE TREATED
AS "PERSONAL AND CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE
AVAILABLE FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES AND BY
OTHER PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO EVALUATE
COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY.
19
<PAGE>
PART III - APPLICABLE TO
INVESTMENT ASSOCIATES ONLY
- --------------------------
Because of their particular responsibilities, Investment Associates
are subject to different preclearance and personal securities
reporting requirements as discussed below.
SPECIAL STANDARDS OF CONDUCT FOR INVESTMENT ASSOCIATES
CONFLICT OF INTEREST - No Investment Associate may recommend a
securities transaction for a Mellon customer to whom a fiduciary duty
is owed, or for Mellon, without disclosing any interest he or she has
in such securities or issuer (other than an interest in publicly
traded securities where the total investment is equal to or less than
$25,000), including:
- any direct or indirect beneficial ownership of any securities of such
issuer;
- any contemplated transaction by the Investment Associate in such
securities;
- any position with such issuer or its affiliates; and
- any present or proposed business relationship between such issuer or
its affiliates and the Investment Associate or any party in which the
Investment Associate has a beneficial ownership interest (see
"Beneficial Ownership" in Section Four, "Restrictions On Transactions
in Mellon Securities").
PORTFOLIO INFORMATION - No Investment Associate may divulge the
current portfolio positions, or current or anticipated portfolio
transactions, programs or studies, of Mellon or any Mellon customer to
anyone unless it is properly within his or her job responsibilities to
do so.
MATERIAL NONPUBLIC INFORMATION - No Investment Associate may engage in
or recommend a securities transaction, for his or her own benefit or
for the benefit of others, including Mellon or its customers, while in
possession of material nonpublic information regarding such
securities. No Investment Associate may communicate material nonpublic
information to others unless it is properly within his or her job
responsibilities to do so.
SHORT-TERM TRADING - Any Investment Associate who purchases and sells,
or sells and purchases, the same (or equivalent) securities within any
60-calendar-day period is required to disgorge all profits realized on
such transaction in accordance with procedures established by senior
management. For this purpose, securities will be deemed to be
equivalent if one is convertible into the other, if one entails a
right to purchase or sell the other, or if the value of one is
expressly dependent on the value of the other (e.g., derivative
securities).
ADDITIONAL RESTRICTIONS FOR DREYFUS ASSOCIATES AND ASSOCIATES OF
MELLON ENTITIES REGISTERED UNDER THE INVESTMENT ADVISERS ACT OF 1940
ONLY ("40 Act Associates")
- OUTSIDE ACTIVITIES - No 40 Act associate may serve on the board of
directors/trustees or as a general partner of any publicly traded
company (other than Mellon) without the prior approval of the Manager
of Corporate Compliance.
20
<PAGE>
- GIFTS - All 40 Act associates are prohibited from accepting gifts from
outside companies, or their representatives, with an exception for
gifts of (1) a DE MINIMIS value and (2) an occasional meal, a ticket
to a sporting event or the theater, or comparable entertainment for
the 40 Act associate and, if appropriate, a guest, which is neither so
frequent nor extensive as to raise any question of impropriety. A gift
shall be considered DE MINIMIS if it does not exceed an annual amount
per person fixed periodically by the National Association of
Securities Dealers, which is currently $100 per person.
- BLACKOUT PERIOD - 40 Act associates will not be given clearance to
execute a transaction in any security that is being considered for
purchase or sale by an affiliated investment company, managed account
or trust, for which a pending buy or sell order for such affiliated
account is pending, and for two business days after the transaction in
such security for such affiliated account has been effected. This
provision does not apply to transactions effected or contemplated by
index funds.
In addition, portfolio managers for the investment companies are
prohibited from buying or selling a security within seven calendar
days before and after such investment company trades in that security.
Any violation of the foregoing will require the violator to disgorge
all profit realized with respect to such transaction.
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS - All Investment
Associates must notify the Preclearance Compliance Officer (see
Glossary) in writing and receive preclearance BEFORE they engage in
any purchase or sale of a security.
EXEMPTIONS FROM REQUIREMENT TO PRECLEAR - Preclearance is not required
for the following transactions:
- purchases or sales of "Exempt Securities" (see Glossary);
- purchases or sales effected in any account over which an associate has
no direct or indirect control over the investment decision-making
process (i.e., nondiscretionary trading accounts). Nondiscretionary
trading accounts may only be maintained, without being subject to
preclearance procedures, when the Preclearance Compliance Officer,
after a thorough review, is satisfied that the account is truly
nondiscretionary;
- transactions which are non-volitional on the part of an associate
(such as stock dividends);
- the sale of stock received upon the exercise of an associate stock
option if the sale is part of a "netting of shares" or "cashless
exercise" administered by the Human Resources Department (for which
the Human Resources Department will forward information to the manager
of Corporate Compliance);
- purchases which are part of an automatic reinvestment of dividends
under a DRIP (Preclearance is required for OPTIONAL cash purchases
under a DRIP);
- purchases effected upon the exercise of rights issued by an issuer PRO
RATA to all holders of a class of securities, to the extent such
rights were acquired from such issuer;
- sales of rights acquired from an issuer, as described above; and/or
- those situations where the Preclearance Compliance Officer determines,
after taking into consideration the particular facts and
circumstances, that prior approval is not necessary.
21
<PAGE>
REQUESTS FOR PRECLEARANCE - All requests for preclearance for a
securities transaction shall be submitted to the Preclearance
Compliance Officer by completing a Preclearance Request Form.
(Investment Associates other than Dreyfus associates are to use the
Preclearance Request Form shown as Exhibit C1. Dreyfus associates are
to use the Preclearance Request Form shown as Exhibit C2.)
The Preclearance Compliance Officer will notify the Investment
Associate whether the request is approved or denied without disclosing
the reason for such approval or denial.
Notifications may be given in writing or verbally by the Preclearance
Compliance Officer to the Investment Associate. A record of such
notification will be maintained by the Preclearance Compliance
Officer. However, it shall be the responsibility of the Investment
Associate to obtain a written record of the Preclearance Compliance
Officer's notification within 24 hours of such notification. The
Investment Associate should retain a copy of this written record.
As there could be many reasons for preclearance being granted or
denied, Investment Associates should not infer from the preclearance
response anything regarding the security for which preclearance was
requested.
Although making a preclearance request does not obligate an Investment
Associate to do the transaction, it should be noted that:
- preclearance authorization will expire at the end of the day on which
preclearance is given;
- preclearance requests should not be made for a transaction that the
Investment Associate does not intend to make; and
- Investment Associates should not discuss with anyone else, inside or
outside Mellon, the response the Investment Associate received to a
preclearance request.
Every Investment Associate must follow these procedures or risk
serious sanctions, including dismissal. If you have any questions
about these procedures, consult the Preclearance Compliance Officer.
Interpretive issues that arise under these procedures shall be decided
by, and are subject to the discretion of, the Manager of Corporate
Compliance.
RESTRICTED LIST - Each Preclearance Compliance Officer will maintain a
list (the "Restricted List") of companies whose securities are deemed
appropriate for implementation of trading restrictions for Investment
Associates in their area. From time to time, such trading restrictions
may be appropriate to protect Mellon and its Investment Associates
from potential violations, or the appearance of violations, of
securities laws. The inclusion of a company on the Restricted List
provides no indication of the advisability of an investment in the
company's securities or the existence of material nonpublic
information on the company. Nevertheless, the contents of the
Restricted List will be treated as confidential information in order
to avoid unwarranted inferences.
In order to assist the Preclearance Compliance Officer in identifying
companies that may be appropriate for inclusion on the Restricted
List, the head of the entity/department/area in which Investment
Associates are employed will inform the appropriate Preclearance
Compliance Officer in writing of any companies that they believe
should be included on the Restricted List based upon facts known or
readily available to such department heads.
22
<PAGE>
PERSONAL SECURITIES TRANSACTIONS REPORTS
- BROKERAGE ACCOUNTS - All Investment Associates are required to
instruct their brokers to submit directly to the Manager of Corporate
Compliance copies of all trade confirmations and statements relating
to their account. Examples of instruction letters to a broker are
contained in Exhibits B1 and B2.
- REPORT OF TRANSACTIONS IN MELLON SECURITIES - Investment Associates
must also report in writing to the Manager of Corporate Compliance
within ten calendar days whenever they purchase or sell Mellon
securities if the transaction was not through a brokerage account as
described above. Purchases and sales of Mellon securities include the
following:
DRIP OPTIONAL CASH PURCHASES - Optional cash purchases under Mellon's
Dividend Reinvestment and Common Stock Purchase Plan (the "Mellon
DRIP").
STOCK OPTIONS - The sale of stock received upon the exercise of an
associate stock option unless the sale is part of a "netting of
shares" or "cashless exercise" administered by the Human Resources
Department (for which the Human Resources Department will forward
information to the Manager of Corporate Compliance).
It should be noted that the reinvestment of dividends under the DRIP,
changes in elections under Mellon's Retirement Savings Plan, the
receipt of stock under Mellon's Restricted Stock Award Plan, and the
receipt or exercise of options under Mellon's Long-Term Profit
Incentive Plan are not considered purchases or sales for the purpose
of this reporting requirement.
An example of a written report to the Manager of Corporate Compliance
is contained in Exhibit A.
- STATEMENT OF SECURITIES HOLDINGS - Within ten days of receiving this
Policy and on an annual basis thereafter, all Investment Associates
must submit to the Manager of Corporate Compliance a statement of all
securities in which they presently have any direct or indirect
beneficial ownership other than Exempt Securities, as defined in the
Glossary. Investment Associates should refer to "Beneficial Ownership"
in Section Four, "Restrictions on Transactions in Mellon Securities,"
which is also applicable to Investment Associates. Such statements
should be in the format shown in Exhibit D. The annual report must be
submitted by January 31 and must report all securities holdings other
than Exempt Securities. The annual statement of securities holdings
contains an acknowledgment that the Investment Associate has read and
complied with this Policy.
- SPECIAL REQUIREMENT WITH RESPECT TO AFFILIATED INVESTMENT COMPANIES -
The portfolio managers, research analysts and other Investment
Associates specifically designated by the Manager of Corporate
Compliance are required within ten calendar days of receiving this
Policy (and by no later than ten calendar days after the end of each
calendar quarter) to report every transaction in the securities issued
by an affiliated investment company occurring in an account in which
the Investment Associate has a beneficial ownership interest. The
quarterly reporting requirement may be satisfied by notifying the
Manager of Corporate Compliance of the name of the investment company,
account name and account number for which such quarterly reports must
be submitted.
23
<PAGE>
CONFIDENTIAL TREATMENT
THE PRECLEARANCE COMPLIANCE OFFICER WILL USE HIS OR HER BEST EFFORTS
TO ASSURE THAT ALL REQUESTS FOR PRECLEARANCE, ALL PERSONAL SECURITIES
TRANSACTION REPORTS AND ALL REPORTS OF SECURITIES HOLDINGS ARE TREATED
AS "PERSONAL AND CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE
AVAILABLE FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES, AND BY
OTHER PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO EVALUATE
COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY. DOCUMENTS RECEIVED
FROM DREYFUS ASSOCIATES ARE ALSO AVAILABLE FOR INSPECTION BY THE
BOARDS OF DIRECTORS OF DREYFUS AND BY THE BOARDS OF DIRECTORS (OR
TRUSTEES OR MANAGING GENERAL PARTNERS, AS APPLICABLE) OF THE
INVESTMENT COMPANIES MANAGED OR ADMINISTERED BY DREYFUS.
24
<PAGE>
PART IV - APPLICABLE TO
OTHER ASSOCIATES ONLY
- -------------------------
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS - Except for private
placements, Other Associates ARE PERMITTED to engage in personal
securities transactions without obtaining prior approval from the
Manager of Corporate Compliance (for preclearance of private
placements, use the Preclearance Request Form shown as Exhibit C1.)
PERSONAL SECURITIES TRANSACTIONS REPORTS - Other Associates are NOT
required to report their personal securities transactions OTHER THAN
margin transactions and transactions involving Mellon securities as
discussed below. Other Associates are required to instruct their
brokers to submit directly to the Manager of Corporate Compliance
copies of all confirmations and statements pertaining to margin
accounts. Examples of an instruction letter to a broker are shown in
Exhibit B1.
REPORT OF TRANSACTIONS IN MELLON SECURITIES - Other Associates must
report in writing to the Manager of Corporate Compliance within ten
calendar days whenever they purchase or sell Mellon securities.
Purchases and sales of Mellon securities include the following:
- DRIP OPTIONAL CASH PURCHASES - Optional cash purchases under Mellon's
Dividend Reinvestment and Common Stock Purchase Plan (the "Mellon
DRIP").
- STOCK OPTIONS - The sale of stock received upon the exercise of an
associate stock option unless the sale is part of a "netting of
shares" or "cashless exercise" administered by the Human Resources
Department (for which the Human Resources Department will forward
information to the Manager of Corporate Compliance).
It should be noted that the reinvestment of dividends under the DRIP,
changes in elections under Mellon's Retirement Savings Plan, the
receipt of stock under Mellon's Restricted Stock Award Plan and the
receipt or exercise of options under Mellon's Long-Term Profit
Incentive Plan are not considered purchases or sales for the purpose
of this reporting requirement.
An example of a written report to the Manager of Corporate Compliance
is contained in Exhibit A.
RESTRICTIONS ON TRANSACTIONS IN OTHER SECURITIES
MARGIN TRANSACTIONS - Prior to establishing a margin account, Other
Associates must obtain the written permission of the Manager of
Corporate Compliance. Other Associates having a margin account prior
to the effective date of this Policy must notify the Manager of
Corporate Compliance of the existence of such account.
25
<PAGE>
All associates having margin accounts, other than described below,
must designate the Manager of Corporate Compliance as an interested
party on each account. Associates must ensure that the Manager of
Corporate Compliance promptly receives copies of all trade
confirmations and statements relating to the accounts directly from
the broker. If requested by a brokerage firm, please contact the
Manager of Corporate Compliance to obtain a letter (sometimes referred
to as a "407 letter") granting permission to maintain a margin
account. Trade confirmations and statements are not required on margin
accounts established at Dreyfus Investment Services Corporation for
the sole purpose of cashless exercises of Mellon employee stock
options. In addition, products may be offered by a broker/dealer that,
because of their characteristics, are considered margin accounts but
have been determined by the Manager of Corporate Compliance to be
outside the scope of this Policy (e.g., a Cash Management account
which provides overdraft protection for the customer). Any questions
regarding the establishment, use and reporting of margin accounts
should be directed to the Manager of Corporate Compliance. An example
of an instruction letter to a broker is shown in Exhibit B1.
PRIVATE PLACEMENTS - Other Associates are prohibited from acquiring
any security in a private placement unless they obtain the prior
written approval of the Manager of Corporate Compliance and the
Associate's department head. Approval must be given by both of the
aforementioned persons for the acquisition to be considered approved.
As there could be many reasons for preclearance being granted or
denied, Other Associates should not infer from the preclearance
response anything regarding the security for which preclearance was
requested.
Although making a preclearance request does not obligate an Other
Associate to do the transaction, it should be noted that:
- preclearance authorization will expire at the end of the third
business day after it is received (the day authorization is granted is
considered the first business day);
- preclearance requests should not be made for a transaction that the
Other Associate does not intend to make; and
- Other Associates should not discuss with anyone else, inside or
outside Mellon, the response they received to a preclearance request.
Every Other Associate must follow these procedures or risk serious
sanctions, including dismissal. If you have any questions about these
procedures you should consult the Manager of Corporate Compliance.
Interpretive issues that arise under these procedures shall be decided
by, and are subject to the discretion of, the Manager of Corporate
Compliance.
CONFIDENTIAL TREATMENT
THE MANAGER OF CORPORATE COMPLIANCE WILL USE HIS OR HER BEST EFFORTS
TO ASSURE THAT ALL REQUESTS FOR PRECLEARANCE, ALL PERSONAL SECURITIES
TRANSACTION REPORTS AND ALL REPORTS OF SECURITIES HOLDINGS ARE TREATED
AS "PERSONAL AND CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE
AVAILABLE FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES AND OTHER
PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO EVALUATE
COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY.
26
<PAGE>
PART V - APPLICABLE TO
NONMANAGEMENT BOARD MEMBER
- ---------------------
NONMANAGEMENT BOARD MEMBER -
You are considered to be a Nonmanagement Board Member if you are:
- a director of Dreyfus who is not also an officer or employee of
Dreyfus ("Dreyfus Board Member"); or
- a director, trustee or managing general partner of any investment
company who is not also an officer or employee of Dreyfus ("Mutual
Fund Board Member").
The term "Independent" Mutual Fund Board Member means those Mutual
Fund Board Members who are NOT deemed "interested persons" of an
investment company, as defined by the Investment Company Act of 1940,
as amended.
STANDARDS OF CONDUCT FOR NONMANAGEMENT BOARD MEMBER
OUTSIDE ACTIVITIES - Nonmanagement Board Members are prohibited from:
- accepting nomination or serving as a director, trustee or managing
general partner of an investment company not advised by Dreyfus,
WITHOUT the express prior approval of the board of directors of
Dreyfus and the board of directors/trustees or managing general
partners of the pertinent Dreyfus-managed fund(s) for which a
Nonmanagement Board Member serves as a director, trustee or managing
general partner;
- accepting employment with or acting as a consultant to any person
acting as a registered investment adviser to an investment company
without the express prior approval of the board of directors of
Dreyfus;
- owning Mellon securities if the Nonmanagement Board Member is an
"Independent" Mutual Fund Board Member, (since that would destroy his
or her "independent" status); and/or
- buying or selling Mellon's publicly traded securities during a
blackout period, which begins the 16th day of the last month of each
calendar quarter and ends three business days after Mellon publicly
announces the financial results for that quarter.
INSIDER TRADING AND TIPPING - The provisions set forth in Section Two,
"Insider Trading and Tipping," are applicable to Nonmanagement Board
Members.
27
<PAGE>
CONFLICT OF INTEREST - No Nonmanagement Board Member may recommend a
securities transaction for Mellon, Dreyfus or any Dreyfus-managed fund
without disclosing any interest he or she has in such securities or
issuer thereof (other than an interest in publicly traded securities
where the total investment is less than or equal to $25,000),
including:
- any direct or indirect beneficial ownership of any securities of such
issuer;
- any contemplated transaction by the Nonmanagement Board Member in such
securities;
- any position with such issuer or its affiliates; and
- any present or proposed business relationship between such issuer or
its affiliates and the Nonmanagement Board Member or any party in
which the Nonmanagement Board Member has a beneficial ownership
interest (see "Beneficial Ownership", Section Four, "Restrictions on
Transaction in Mellon Securities").
PORTFOLIO INFORMATION - No Nonmanagement Board Member may divulge the
current portfolio positions, or current or anticipated portfolio
transactions, programs or studies, of Mellon, Dreyfus or any
Dreyfus-managed fund, to anyone unless it is properly within his or
her responsibilities as a Nonmanagement Board Member to do so.
MATERIAL NONPUBLIC INFORMATION - No Nonmanagement Board Member may
engage in or recommend any securities transaction, for his or her own
benefit or for the benefit of others, including Mellon, Dreyfus or any
Dreyfus-managed fund, while in possession of material nonpublic
information. No Nonmanagement Board Member may communicate material
nonpublic information to others unless it is properly within his or
her responsibilities as a Nonmanagement Board Member to do so.
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS -
Nonmanagement Board Members ARE PERMITTED to engage in personal
securities transactions without obtaining prior approval from the
Preclearance Compliance Officer.
28
<PAGE>
PERSONAL SECURITY TRANSACTIONS REPORTS -
- "INDEPENDENT" MUTUAL FUND BOARD MEMBERS - Any "Independent" Mutual
Fund Board Members, as defined above, who effects a securities
transaction where he or she knew, or in the ordinary course of
fulfilling his or her official duties should have known, that during
the 15-day period immediately preceding or after the date of such
transaction, the same security was purchased or sold, or was being
considered for purchase or sale by Dreyfus (including any investment
company or other account managed by Dreyfus), are required to report
such personal securities transaction. In the event a personal
securities transaction report is required, it must be submitted to the
Preclearance Compliance Officer not later than ten days after the end
of the calendar quarter in which the transaction to which the report
relates was effected. The report must include the date of the
transaction, the title and number of shares or principal amount of the
security, the nature of the transaction (e.g., purchase, sale or any
other type of acquisition or disposition), the price at which the
transaction was effected and the name of the broker or other entity
with or through whom the transaction was effected. This reporting
requirement can be satisfied by sending a copy of the confirmation
statement regarding such transactions to the Preclearance Compliance
Officer within the time period specified. Notwithstanding the
foregoing, personal securities transaction reports are NOT required
with respect to any securities transaction described in "Exemption
from the Requirement to Preclear" in Part III.
- DREYFUS BOARD MEMBERS AND "INTERESTED" MUTUAL FUND BOARD MEMBERS -
Dreyfus Board Members and Mutual Fund Board Members who are
"interested persons" of an investment company, as defined by the
Investment Company Act of 1940, are required to report their personal
securities transactions. Personal securities transaction reports are
required with respect to any securities transaction other than those
described in "Exemptions from Requirement to Preclear" on Page 21.
Personal securities transaction reports are required to be submitted
to the Preclearance Compliance Officer not later than ten days after
the end of the calendar quarter in which the transaction to which the
report relates was effected. The report must include the date of the
transaction, the title and number of shares or principal amount of the
security, the nature of the transaction (e.g., purchase, sale or any
other type of acquisition or disposition), the price at which the
transaction was effected and the name of the broker or other entity
with or through whom the transaction was effected. This reporting
requirement can be satisfied by sending a copy of the confirmation
statement regarding such transactions to the Preclearance Compliance
Officer within the time period specified.
CONFIDENTIAL TREATMENT
THE PRECLEARANCE COMPLIANCE OFFICER WILL USE HIS OR HER BEST EFFORTS
TO ASSURE THAT ALL PERSONAL SECURITIES TRANSACTION REPORTS ARE TREATED
AS "PERSONAL AND CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE
AVAILABLE FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES AND OTHER
PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO EVALUATE
COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY.
29
<PAGE>
GLOSSARY
- -------------------
DEFINITIONS
- APPROVAL - written consent or written notice of nonobjection.
- ASSOCIATE - any employee of Mellon Bank Corporation or its direct or
indirect subsidiaries; does not include outside consultants or
temporary help.
- BENEFICIAL OWNERSHIP - securities owned of record or held in the
associate's name are generally considered to be beneficially owned by
the associate.
Securities held in the name of any other person are deemed to be
beneficially owned by the associate if by reason of any contract,
understanding, relationship, agreement or other arrangement, the
associate obtains therefrom benefits substantially equivalent to those
of ownership, including the power to vote, or to direct the
disposition of, such securities. Beneficial ownership includes
securities held by others for the associate's benefit (regardless of
record ownership), e.g. securities held for the associate or members
of the associate's immediate family, defined below, by agents,
custodians, brokers, trustees, executors or other administrators;
securities owned by the associate, but which have not been transferred
into the associate's name on the books of the company; securities
which the associate has pledged; or securities owned by a corporation
that should be regarded as the associate's personal holding
corporation. As a natural person, beneficial ownership is deemed to
include securities held in the name or for the benefit of the
associate's immediate family, which includes the associate's spouse,
the associate's minor children and stepchildren and the associate's
relatives or the relatives of the associate's spouse who are sharing
the associate's home, unless because of countervailing circumstances,
the associate does not enjoy benefits substantially equivalent to
those of ownership. Benefits substantially equivalent to ownership
include, for example, application of the income derived from such
securities to maintain a common home, meeting expenses that such
person otherwise would meet from other sources, and the ability to
exercise a controlling influence over the purchase, sale or voting of
such securities. An associate is also deemed the beneficial owner of
securities held in the name of some other person, even though the
associate does not obtain benefits of ownership, if the associate can
vest or revest title in himself at once, or at some future time.
In addition, a person will be deemed the beneficial owner of a
security if he has the right to acquire beneficial ownership of such
security at any time (within 60 days) including but not limited to any
right to acquire: (1) through the exercise of any option, warrant or
right; (2) through the conversion of a security; or (3) pursuant to
the power to revoke a trust, nondiscretionary account or similar
arrangement.
30
<PAGE>
With respect to ownership of securities held in trust, beneficial
ownership includes ownership of securities as a trustee in instances
where either the associate as trustee or a member of the associate's
"immediate family" has a vested interest in the income or corpus of
the trust, the ownership by the associate of a vested beneficial
interest in the trust and the ownership of securities as a settlor of
a trust in which the associate as the settlor has the power to revoke
the trust without obtaining the consent of the beneficiaries. Certain
exemptions to these trust beneficial ownership rules exist, including
an exemption for instances where beneficial ownership is imposed
solely by reason of the associate being settlor or beneficiary of the
securities held in trust and the ownership, acquisition and
disposition of such securities by the trust is made without the
associate's prior approval as settlor or beneficiary. "Immediate
family" of an associate as trustee means the associate's son or
daughter (including any legally adopted children) or any descendant of
either, the associate's stepson or stepdaughter, the associate's
father or mother or any ancestor of either, the associate's stepfather
or stepmother and his spouse.
To the extent that stockholders of a company use it as a personal
trading or investment medium and the company has no other substantial
business, stockholders are regarded as beneficial owners, to the
extent of their respective interests, of the stock thus invested or
traded in. A general partner in a partnership is considered to have
indirect beneficial ownership in the securities held by the
partnership to the extent of his pro rata interest in the partnership.
Indirect beneficial ownership is not, however, considered to exist
solely by reason of an indirect interest in portfolio securities held
by any holding company registered under the Public Utility Holding
Company Act of 1935, a pension or retirement plan holding securities
of an issuer whose employees generally are beneficiaries of the plan
and a business trust with over 25 beneficiaries.
Any person who, directly or indirectly, creates or uses a trust,
proxy, power of attorney, pooling arrangement or any other contract,
arrangement or device with the purpose or effect of divesting such
person of beneficial ownership as part of a plan or scheme to evade
the reporting requirements of the Securities Exchange Act of 1934
shall be deemed the beneficial owner of such security.
The final determination of beneficial ownership is a question to be
determined in light of the facts of a particular case. Thus, while the
associate may include security holdings of other members of his
family, the associate may nonetheless disclaim beneficial ownership of
such securities.
- "CHINESE WALL" POLICY - procedures designed to restrict the flow of
information within Mellon from units or individuals who are likely to
receive material nonpublic information to units or individuals who
trade in securities or provide investment advice. (see pages 12-14).
- CORPORATION - Mellon Bank Corporation.
- DREYFUS - The Dreyfus Corporation and its subsidiaries.
- DREYFUS ASSOCIATE - any employee of Dreyfus; does not include outside
consultants or temporary help.
31
<PAGE>
- EXEMPT SECURITIES - Exempt Securities are defined as:
- securities issued or guaranteed by the United States government
or agencies or instrumentalities;
- bankers' acceptances;
- bank certificates of deposit and time deposits;
- commercial paper;
- repurchase agreements; and
- securities issued by open-end investment companies.
- GENERAL COUNSEL - General Counsel of Mellon Bank Corporation or any
person to whom relevant authority is delegated by the General Counsel.
- INDEX FUND - an investment company which seeks to mirror the
performance of the general market by investing in the same stocks (and
in the same proportion) as a broad-based market index.
- INITIAL PUBLIC OFFERING (IPO) - the first offering of a company's
securities to the public.
- INVESTMENT COMPANY - a company that issues securities that represent
an undivided interest in the net assets held by the company. Mutual
funds are investment companies that issue and sell redeemable
securities representing an undivided interest in the net assets of the
company.
- MANAGER OF CORPORATE COMPLIANCE - - the associate within the Risk
Management and Compliance Department of Mellon Bank Corporation who is
responsible for administering the Confidential Information and
Securities Trading Policy, or any person to whom relevant authority is
delegated by the Manager of Corporate Compliance.
- MELLON - Mellon Bank Corporation and all of its direct and indirect
subsidiaries.
- NAKED OPTION - an option sold by the investor which obligates him or
her to sell a security which he or she does not own.
- NONDISCRETIONARY TRADING ACCOUNT - an account over which the
associated person has no direct or indirect control over the
investment decision-making process.
- OPTION - a security which gives the investor the right but not the
obligation to buy or sell a specific security at a specified price
within a specified time.
- PRECLEARANCE COMPLIANCE OFFICER - a person designated by the Manager
of Corporate Compliance, to administer, among other things,
associates' preclearance request for a specific business unit.
- PRIVATE PLACEMENT - an offering of securities that is exempt from
registration under the Securities Act of 1933 because it does not
constitute a public offering.
- SENIOR MANAGEMENT COMMITTEE - the Senior Management Committee of
Mellon Bank Corporation.
- SHORT SALE - the sale of a security that is not owned by the seller at
the time of the trade.
32
<PAGE>
INDEX OF EXHIBITS
- --------------------------
EXHIBIT A SAMPLE REPORT TO MANAGER OF CORPORATE COMPLIANCE
EXHIBIT B SAMPLE INSTRUCTION LETTER TO BROKER
EXHIBIT C PRECLEARANCE REQUEST FORM
EXHIBIT D PERSONAL SECURITIES HOLDINGS FORM
33
<PAGE>
EXHIBIT A
- ------------------------------------
SAMPLE REPORT TO MANAGER OF CORPORATE COMPLIANCE
<TABLE>
<S><C>
- -------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
MELLON INTEROFFICE
MEMORANDUM
Date: From: Associate
To: Manager, Corporate Compliance Dept:
Aim #:
Aim #: 151-4342 Phone:
Fax:
- ---------------------------------------------------------------------------------------------------------
RE: REPORT OF SECURITIES TRADE
Type of Associate: ____________ Insider Risk
____________ Investment
____________ Other
Type of Security: ____________ Mellon Bank Corporation
____________ Mellon Bank Corporation - optional cash
purchases under Dividend Reinvestment
and Common Stock Purchase Plan
____________ Mellon Bank Corporation - exercise of
an employee stock option
Attached is a copy of the confirmation slip for a securities
trade I engaged in on _____________________, 19xx.
or
On _____________________, 19xx, I (purchased/sold) _______________________
shares of ___________________________ through (broker). I will arrange
to have a copy of the confirmation slip for this trade delivered to you as soon
as possible.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
EXHIBIT B1
- ----------------------------------
FOR NON-DREYFUS ASSOCIATES
- --------------------------------------------------------------------------------
Date
Broker ABC
Street Address
City, State ZIP
Re: John Smith & Mary Smith
Account No. xxxxxxxxxxxxx
In connection with my existing brokerage accounts at your firm noted
above, please be advised that the Risk Management and Compliance
Department of Mellon Bank should be noted as an "Interested Party"
with respect to my accounts. They should, therefore, be sent copies of
all trade confirmations and account statements relating to my account.
Please send the requested documentation ensuring the account holder's
name appears on all correspondence to:
Manager, Corporate Compliance
Mellon Bank
P.O. Box 3130
Pittsburgh, PA 15230-3130
Thank you for your cooperation in this request.
Sincerely yours,
Associate
cc: Manager, Corporate Compliance (151-4342)
- --------------------------------------------------------------------------------
35
<PAGE>
EXHIBIT B2
- ---------------------------------
FOR DREYFUS ASSOCIATES
- --------------------------------------------------------------------------------
Date
Broker ABC
Street Address
City, State ZIP
Re: John Smith & Mary Smith
Account No. xxxxxxxxxxxxx
In connection with my existing brokerage accounts at your firm noted
above, please be advised that the Risk Management and Compliance
Department of Dreyfus Corporation should be noted as an "Interested
Party" with respect to my accounts. They should, therefore, be sent
copies of all trade confirmations and account statements relating to
my account.
Please send the requested documentation ensuring the account
holder's name appears on all correspondence to:
Compliance Officer at The Dreyfus Corporation
200 Park Avenue
Legal Department
New York, NY 10166
Thank you for your cooperation in this request.
Sincerely yours,
Associate
cc: Dreyfus Compliance
- --------------------------------------------------------------------------------
36
<PAGE>
EXHIBIT C1
- -----------------------------------
<TABLE>
<S><C>
PRECLEARANCE REQUEST FORM NON DREYFUS ASSOCIATES
- ----------------------------------------------------------------------------------------------------------------------------------
To: Manager, Corporate Compliance 151-4342 (All Insider and Other Associates)
Designated Preclearance Compliance Officer (All Investment Associates excluding Dreyfus)
- ----------------------------------------------------------------------------------------------------------------------------------
Associate Name: Title: Date:
- ----------------------------------------------------------------------------------------------------------------------------------
Phone #: AIM #: Social Security #: Department:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
ACCOUNT INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
Account Name: Account Number: Name of Broker/Bank:
- ----------------------------------------------------------------------------------------------------------------------------------
Relationship to registered owner(s) (if other than associate)
- ----------------------------------------------------------------------------------------------------------------------------------
I hereby request approval to execute the following trade in the above account:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DETAIL
- ----------------------------------------------------------------------------------------------------------------------------------
Buy: Sell: Security/Contract: No. of Shares:
- ----------------------------------------------------------------------------------------------------------------------------------
If sale, date acquired: Margin Transaction: Initial Public Offering: Private Placement:
/ / Yes / / Yes / / Yes
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
DISCLOSURE STATEMENT
- ----------------------------------------------------------------------------------------------------------------------------------
I hereby represent that, to the best of my knowledge, neither I nor the registered account holder is (1) attempting to benefit
personally from any existing business relationship between the issuer and Mellon or any Mellon-related fund or affiliate; (2)
engaging in any manipulative or deceptive trading activity; (3) in possession of any material non-public information concerning
the security to which is request relates.
- ---------------------------------------------------------------------------------------------------------------------------------
Associate Signature: Date:
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
COMPLIANCE OFFICER USE ONLY
- ---------------------------------------------------------------------------------------------------------------------------------
Approved: Disapproved: Authorized Signatory: Date:
- ---------------------------------------------------------------------------------------------------------------------------------
Comments:
- ---------------------------------------------------------------------------------------------------------------------------------
Note: This preclearance will lapse at the end of the day on ___________________________, 19__.
If you decide not to effect the trade, please notify me.
- ---------------------------------------------------------------------------------------------------------------------------------
Date: By:
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
EXHIBIT C2
- ---------------------------------------
<TABLE>
<S><C>
PRECLEARANCE REQUEST FORM DREYFUS ASSOCIATES ONLY
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
To: Dreyfus Compliance Officer
- ----------------------------------------------------------------------------------------------------------------------------------
Associate Name: Title: Date:
- ----------------------------------------------------------------------------------------------------------------------------------
Phone #: AIM #: Social Security #: Department:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
ACCOUNT INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
Account Name: Account Number: Name of Broker/Bank:
- ----------------------------------------------------------------------------------------------------------------------------------
Relationship to registered owner(s) (if other than associate)
- ----------------------------------------------------------------------------------------------------------------------------------
I hereby request approval to execute the following trade in the above account:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DETAIL
- ----------------------------------------------------------------------------------------------------------------------------------
Buy: Sell: Security/Contract: Symbol:
- ----------------------------------------------------------------------------------------------------------------------------------
Amount: Current Market Price: If sale, date acquired: Margin Transaction:
- ----------------------------------------------------------------------------------------------------------------------------------
Is this a New Issue? Is this a Private Placement?
/ / Yes / / No / / Yes / / No
- ----------------------------------------------------------------------------------------------------------------------------------
Reason for Transaction, identify source:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
DISCLOSURE STATEMENT
- ----------------------------------------------------------------------------------------------------------------------------------
I hereby represent that, to the best of my knowledge, neither I nor the registered account holder is (1) attempting to benefit
personally from any existing business relationship between the issuer and Mellon or any Mellon-related fund or affiliate; (2)
engaging in any manipulative or deceptive trading activity; (3) in possession of any material non-public information concerning
the security to which is request relates.
- ----------------------------------------------------------------------------------------------------------------------------------
Associate Signature: Date:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
COMPLIANCE OFFICER USE ONLY
- ----------------------------------------------------------------------------------------------------------------------------------
Approved: Disapproved: Authorized Signatory: Date:
- ----------------------------------------------------------------------------------------------------------------------------------
Comments:
- ----------------------------------------------------------------------------------------------------------------------------------
Note: This preclearance will lapse at the end of the day on _____________________________, 19__.
If you decide not to effect the trade, please notify me.
- ----------------------------------------------------------------------------------------------------------------------------------
Date: By:
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
EXHIBIT D1
- -------------------------------
Return to: Manager, Corporate Compliance
Mellon Bank
P.O. Box 3130
Pittsburgh, PA 15230-3130
<TABLE>
<S><C>
STATEMENT OF SECURITY HOLDINGS
As of _________________________
1. List of all securities in which you, your immediate family, any other member of your immediate household, or any
trust or estate of which you or your spouse is a trustee or fiduciary or beneficiary, or of which your minor
child is a beneficiary, or any person for whom you direct or effect transactions under a power of attorney or
otherwise, maintain a beneficial ownership - (see Glossary in Policy). If none, write NONE. Securities
issued or guaranteed by the U.S. government or its agencies or instrumentalities, bankers' acceptances, bank
certificates of deposit and time deposits, commercial paper, repurchase agreements and shares of registered
investment companies need NOT be listed. IF YOUR LIST IS EXTENSIVE, PLEASE ATTACH A COPY OF THE MOST RECENT
STATEMENT FROM YOUR BROKER(S), RATHER THAN LIST THEM ON THIS FORM.
-------------------------------------------------------------------------------------------------------------
NAME OF SECURITY TYPE OF SECURITY AMOUNT OF SHARES
-------------------------------------- -------------------------------------- -------------------------------
-------------------------------------- -------------------------------------- -------------------------------
-------------------------------------- -------------------------------------- -------------------------------
-------------------------------------- -------------------------------------- -------------------------------
2. List the names and addresses of any broker/dealers holding accounts in which you have a beneficial interest,
including the name of your registered representative (if applicable), the account registration and the
relevant account numbers. If none, write NONE.
--------------------------------------------------------------------------------------------------------------
BROKER/ ADDRESS NAME OF ACCOUNT ACCOUNT
DEALER REGISTERED REGISTRATION NUMBER(S)
REPRESENTATIVE
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
I certify that the statements made by me on this form are true, complete and correct to the best of my
knowledge and belief, and are made in good faith. I acknowledge I have read, understood and complied with the
Confidential Information and Securities Trading Policy.
--------------------------------------------------------------------------------------------------------------
Date: Printed Name:
--------------------------------------------------------------------------------------------------------------
Signature:
--------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
EXHIBIT D2
- --------------------------------------
Return to: Compliance Officer at the Dreyfus Corporation
200 Park Avenue
Legal Department
New York, NY 10166
STATEMENT OF SECURITY HOLDINGS
<TABLE>
<S><C>
As of _____________________________
1. List of all securities in which you, your immediate family, any other member of your immediate household, or
any trust or estate of which you or your spouse is a trustee or fiduciary or beneficiary, or of which your minor
child is a beneficiary, or any person for whom you direct or effect transactions under a power of attorney or
otherwise, maintain a beneficial interest. If none, write NONE. Securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities, bankers' acceptances, bank certificates of deposit and time
deposits, commercial paper, repurchase agreements and shares of registered investment companies need NOT be
listed. IF YOUR LIST IS EXTENSIVE, PLEASE ATTACH A COPY OF THE MOST RECENT STATEMENT FROM YOUR BROKER(S),
RATHER THAN LIST THEM ON THIS FORM.
-------------------------------------------------------------------------------------------------------------
NAME OF SECURITY TYPE OF SECURITY AMOUNT OF SHARES
-------------------------------------- -------------------------------------- -------------------------------
-------------------------------------- -------------------------------------- -------------------------------
-------------------------------------- -------------------------------------- -------------------------------
-------------------------------------- -------------------------------------- -------------------------------
2. List the names and addresses of any broker/dealers holding accounts in which you have a beneficial interest,
including the name of your registered representative (if applicable), the account registration and the
relevant account numbers. If none, write NONE.
--------------------------------------------------------------------------------------------------------------
BROKER/ ADDRESS NAME OF ACCOUNT ACCOUNT
DEALER REGISTERED REGISTRATION NUMBER(S)
REPRESENTATIVE
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
--------------------- -------------------- ------------------------- --------------------- -------------------
I certify that the statements made by me on this form are true, complete and correct to the best of my
knowledge and belief, and are made in good faith. I acknowledge I have read, understood and complied with the
Confidential Information and Securities Trading Policy.
--------------------------------------------------------------------------------------------------------------
Date: Printed Name:
--------------------------------------------------------------------------------------------------------------
Signature:
--------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
CODE OF CONDUCT AND
STATEMENT OF POLICY AND PROCEDURES
REGARDING TRADING FOR
PERSONAL ACCOUNTS
This memorandum is intended to serve as a guide to each partner, officer and
employee of CapitalWorks Investment Partners regarding his or her activities and
trading for personal accounts. The Code and Statement is intended to ensure that
the activities of partners, officers and employees of CapitalWorks Investment
Partners and their personal securities transactions are conducted in accordance
with the following principles:
1. A duty at all times to place first the interests of clients;
2. The requirement that all personal securities transactions be conducted
consistent with this Code and Statement and in such a manner to avoid
any actual or potential conflict of interest or any abuse of an
individual's responsibility and position of trust; and
3. The fundamental standard that partners, officers and employees of
CapitalWorks Investment Partners not take inappropriate advantage of
their positions.
In addition to the specific prohibitions on certain personal securities
transactions described in this Code and Statement, all partners, officers and
employees of CapitalWorks Investment Partners are prohibited from:
1. Employing any device, scheme or artifice to defraud any client;
2. Engaging in any act, practice or course of business which operates or
would operate as a fraud or deceit; and
3. Engaging in any manipulative practice with respect to any client.
DEFINITION OF PERSONAL ACCOUNT
For purposes of this Code and Statement, "personal accounts" include the account
of any partner, officer or employee of CapitalWorks Investment Partners, the
account of CapitalWorks Investment Partners, and any other account as to which
CapitalWorks Investment Partners or any partner, officer or employee has a
direct or indirect pecuniary interest or exercises direct or indirect control or
influence ("affiliated accounts"). Affiliated accounts include accounts of:
1. a spouse (other than a legally separated or divorced spouse) of a
partner, officer or employee;
2. a minor child or grandchild of a partner, officer or employee;
3. any other family member who resides with a partner, officer or employee
or whose account is managed by a partner, officer or employee; and
4. any entity or other account as to which a partner, officer or employee,
or any person specified in clauses 1 through 3 above, has a pecuniary
interest or exercises direct or indirect control or
<PAGE>
influence (such as a trust or estate, a partnership of which the person
is a partner or a corporation in which the person has a pecuniary
interest), except that affiliated accounts do not include, for this
purpose, CapitalWorks Cypress Fund, L.P., CapitalWorks Cypress Fund II,
L.P. and CapitalWorks Small Cap Fund, L.P.
A partner, officer or employee may, by written application to either John Wylie
or Jack Marshall, request a waiver from the application of part or all of this
Code and Statement to any personal account over which such person does not have
any direct or indirect influence or control; although neither Mr. Wylie nor Mr.
Marshall is, under any circumstances, obligated to grant any such waiver.
Note: Partners, officers and employees are cautioned that under the federal
securities laws, a wide variety of indirect interests, or accounts over which
partners, officers or employees may exercise direct or indirect control or
influence, may constitute a "personal account" and in case of any doubt or
uncertainty such persons are strongly urged to discuss the applicability of
these rules with either Mr. Wylie or Mr. Marshall, who may consult with legal
counsel.
RESTRICTIONS ON TRANSACTIONS FOR PERSONAL ACCOUNTS
1. A transaction for a personal account may not be effected without the
prior approval of Mr. Wylie or Mr. Marshall, and any transaction for a
personal account may be cancelled at the end of the day by either Mr.
Wylie or Mr. Marshall, as the case may be, and that execution given to
a client. Mr. Wylie or Mr. Marshall, as the case may be, shall promptly
notify the partner, director or employee of clearance or denial of
clearance to trade by indicating such action on the trading order
ticket.
2. Duplicates of all confirmations and monthly statements for each
personal account are required to be sent to CapitalWorks Investment
Partners to the attention of Laurie Appel. Mr. Wylie or Mr. Marshall,
in their sole discretion, may prohibit personal accounts from being
maintained at certain brokerage firms.
3. A security may not be purchased or sold for a personal account on a day
when the same security is purchased or sold for clients unless ALL of
the following conditions are met:
a. All client orders have been filled and there is no buying or
selling program in progress; and
b. The transaction for the personal account is on the same side
as the client.
4. A security held for a personal account which is still held for client
accounts may not be sold from the personal account unless there are no
existing unfilled client orders in the security and no buying or selling
program is underway.
5. When any partner, officer or employee recommends that a security be
bought or sold for client accounts, such person must disclose to Mr.
Wylie or Mr. Marshall if a position in that security is currently held
in a personal account in which such person has a direct or indirect
pecuniary interest or exercises direct or indirect control or
influence. Mr. Wylie or Mr. Marshall may restrict such person from
buying or selling the position from any personal account until a
specified period of time after the client orders have been filled and
there is no buying or selling program in progress.
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6. Transactions in listed options are considered to be transactions in the
underlying security.
7. The foregoing restrictions do not apply to purchases and sales of U.S.
government securities, shares of money market funds or shares of
registered open-end investment companies.
8. Exceptions to these restrictions may be granted by either Mr. Wylie or
Mr. Marshall in the case of extenuating or unusual circumstances.
STATEMENT OF COMPLIANCE
Every partner, officer or employee of CapitalWorks Investment Partners
will be required upon the adoption of the Code and Statement by CapitalWorks
Investment Partners or the commencement of such person's employment with
CapitalWorks Investment Partners and, after that, annually, to execute a
statement (substantially in the form of Exhibit A hereto) to the effect that he
or she has read and understands, has complied with and will continue to comply
with, the procedures set forth in this Code and Statement.
ENFORCEMENT
Responsibility for enforcement of the Code and Statement will lie with Mr. Wylie
and Mr. Marshall. There shall be maintained a file by CapitalWorks Investment
Partners which will include all memoranda and other materials referred to in the
Code and Statement.
I have read and understand this Code of Conduct and Statement of Policy and
Procedures Regarding Trading of Personal Accounts and I agree that I will comply
in all respects with the procedures set forth therein, including, in particular,
the requirement that all transactions for personal accounts be approved in
advance by Mr. Wylie or Mr. Marshall.
Signature:
-------------------------------------
Print Name:
-------------------------
Date:
-------------------------------
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<PAGE>
EXHIBIT A
ANNUAL STATEMENT OF COMPLIANCE WITH CODE OF CONDUCT AND
STATEMENT OF POLICY AND PROCEDURES REGARDING TRADING
FOR PERSONAL ACCOUNTS
I have read and understand the procedures set forth in the "Code of
Conduct and Statement of Policy and Procedures Regarding Trading for Personal
Accounts" (the "Procedures"). All transactions from ______________, 199__
through the date hereof for personal accounts in which I have an interest have
compiled with the Procedures and, in particular, were approved in advance by Mr.
Wylie or Mr. Marshall. Further, I agree that I will continue to comply in all
respects with the Procedures, including, in particular, the requirement that all
transactions for personal accounts be approved in advance by Mr. Wylie or Mr.
Marshall.
Date: ______________________ __________________________
Print Name
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<PAGE>
COHEN & STEERS CAPITAL MANAGEMENT, INC.
CODE OF ETHICS
INTRODUCTION
This Code of Ethics shall apply to all directors, officers and employees of
Cohen & Steers Capital Management, Inc., and of each of its subsidiaries and
affiliates.
FOR PURPOSES OF THIS CODE:
(a) "Access Person" means any director, officer or employee of Cohen & Steers
Capital Management, Inc., and of each of its subsidiaries or affiliates ("Cohen
& Steers").
(b) Purchase or sale of a security includes, among other things, the writing of
any option to purchase or sell a security or any transaction by reason of which
a person acquires or disposes of any direct or indirect ownership in a security.
(c) A security is "being considered for purchase or sale" when a recommendation
to purchase or sell a security has been made and communicated and, with respect
to the person making the recommendation, when a person seriously considers
making such a recommendation.
THIS CODE APPLIES TO ALL TRANSACTIONS (OTHER THAN BONA FIDE CLIENT TRANSACTIONS)
IN ALL ACCOUNTS IN WHICH AN ACCESS PERSON MAY EXERCISE CONTROL OR HAS A
BENEFICIAL INTEREST. UPON DISCOVERING A VIOLATION OF THIS CODE, THE CHAIRMAN OR
PRESIDENT MAY IMPOSE SUCH SANCTIONS AS DEEMED APPROPRIATE, INCLUDING A LETTER OF
CENSURE OR SUSPENSION OR EVEN TERMINATION OF THE EMPLOYMENT OF THE VIOLATOR.
FURTHER, ANY PROFITS REALIZED IN CONNECTION WITH A VIOLATION OF THIS CODE WILL
BE REQUIRED TO BE DISGORGED.
PROHIBITED TRANSACTIONS
The following transactions are prohibited, except as provided for below:
(a) No Access Person shall purchase or sell any security that the Access Person
knew or reasonably should have known is being or has been considered for
purchase or sale for a Client, or is being purchased or sold by a Client.
<PAGE>
(b) No Access Person shall purchase or sell any security issued or guaranteed by
a real estate investment trust or other company engaged in the real estate
business (as defined below), except that an Access Person may invest in shares
of Cohen & Steers Realty Shares, Inc., Cohen & Steers Special Equity Fund, Inc.
and Cohen & Steers Equity Income Fund, Inc. and, with the written prior approval
of the Chairman or President, shares of Cohen & Steers Realty Income Fund, Inc.
and Cohen & Steers Total Return Realty Fund, Inc. (see Attachment A).
(c) No Access Person shall purchase any security issued in an initial public
offering.
(d) No Access Person shall purchase any security issued in a private placement
unless the Chairman or President approves the transaction in advance. In
determining whether or not to grant approval, the Chairman or President will
consider whether the investment opportunity should be reserved for a Client and
whether the opportunity is being offered by virtue of the Access Person's
position with Cohen & Steers. The general counsel shall maintain a written
record of decisions to permit these transactions, along with the reasons
supporting the decision. Any Access Person who has been authorized to acquire
securities in a private placement must disclose the investment to the Chairman
or President if the Access Person is involved in any subsequent consideration of
an investment in the issuer, and these investment decisions will be subject to
independent review by investment personnel with no personal interest in the
issuer.
(e) No Access Person shall execute any securities transaction on a day during
which any Client has a pending buy or sell order in that same security until
that order is executed or withdrawn. Furthermore, no Access Person shall buy or
sell a security within seven calendar days before or after a Client trades in
that security.
(f) No Access Person shall receive any gift of more than DE MINIMIS value from
any person or entity that does business with or on behalf of Cohen & Steers, its
affiliates and subsidiaries, or a Client.
(g) No Access Person shall serve on the board of directors of a publicly traded
company, unless approved in advance by the Chairman or President. This
authorization will be provided only if the Chairman or President concludes that
service on the board would be consistent with the interests of Clients. Access
Persons who have received this approval shall not trade for a Client or their
own account in the securities of the company while in possession of material,
non-public information ("Inside Information"). Cohen & Steers' Inside
Information Policy and Procedures provide further details on the obligations of
Access Persons concerning Inside Information.
<PAGE>
EXEMPTED TRANSACTIONS
The prohibitions of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access Person has
no direct or indirect influence (including any account that is managed on a
discretionary basis by a person other than the Access Person and with respect to
which the Access Person does not in fact influence or control the transactions).
(b) Purchases or sales that are non-volitional on the part of either the Access
Person or a Client.
(c) Purchases that are part of an automatic dividend reinvestment plan.
(d) Purchases effected upon the exercise of rights issued by an issuer PRO RATA
to all holders of a class of its securities, to the extent these rights were
acquired from the issuer, and sales of rights so acquired.
(e) Purchases or sales that receive the prior approval of the Chairman or
President of Cohen & Steers (such approving officer having no personal interest
in such purchases or sales) because they: (i) are only remotely potentially
harmful to any Client account, (ii) would be very unlikely to affect a highly
institutional market, or (iii) clearly are not related economically to the
securities to be purchased, or sold or held on behalf of a Client or (iv) are a
result of the sale of securities that were acquired prior to February 1995 (and
such person was an employee of Cohen & Steers Capital Management, Inc. prior to
February 1995) or acquired prior to the time a person became an employee of
Cohen & Steers. The general counsel shall maintain a written record of decisions
to permit these transactions, along with the reasons supporting the decision.
REPORTING
(a) Every Access Person shall report all transactions in any security in which
the Access Person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership in the security; provided, however, that an Access
Person shall not be required to report transactions effected for any account
over which the Access Person does not have any direct or indirect influence or
control.
(b) Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:
(i) the date of the transaction, the title, interest rate and maturity date
(if applicable), the number of shares, and the principal amount of the
security
<PAGE>
involved;
(ii) the nature of the transaction (I.E., purchase, sale or any other type
of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected;
(v) with respect to any account established by the Access Person during the
quarter, the name of the broker, dealer or bank with whom the Access Person
established the account and the date the account was established; and
(vi) the date the report is submitted.
(c) Any report may contain a statement that the report shall not be construed as
an admission that the person making the report has any direct or indirect
beneficial ownership in the security to which the report relates.
(d) Every Access Person must provide a list of all personal securities holdings
no later than 10 days after commencement of employment ("Initial Holdings
Report") and no later than 30 days after the beginning of each year ("Annual
Holdings Report") thereafter (see Attachment B). Both the Initial Holdings
Report and Annual Holdings Report also shall provide 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.
Each Annual Holdings Report must provide information that is current as of a
date no more than 30 days before the report is submitted. Both the Initial
Holdings Report and the Annual Holdings Report shall state the date the report
is submitted by the Access Person.
(e) The Applicant's compliance administrator and general counsel shall be
responsible for reviewing all quarterly securities transaction reports, the
Initial Holdings Report and the Annual Holdings Report, and shall report to the
Chairman and President all potential violations of this Code of Ethics. The
Chairman and President, in consultation with the general counsel, shall
determine the appropriate response to any violation.
(f) All Access Persons must certify on the attached form initially and annually
thereafter that they have read and understand this Code of Ethics and that they
recognize that they are subject to the provisions of this Code. Furthermore, all
Access Persons must certify annually that they have complied with the
requirements of the Code of Ethics and that they have reported all personal
securities transactions and accounts required to be reported pursuant to the
Code.
<PAGE>
FUND BOARD APPROVAL AND REPORTING
The Board of Directors of each Cohen & Steers Fund, including a majority of the
Directors who are not "interested persons" (as defined in the Investment Company
Act of 1940), must approve this Code and any material changes to the Code. This
approval shall be based on a determination that the Code contains provisions
reasonably necessary to prevent Access Persons from engaging in any conduct
prohibited by Rule 17j-1 under the Investment Company Act of 1940. In connection
with this approval, Cohen & Steers shall provide a certification to the Board
that Cohen & Steers has adopted procedures reasonably necessary to prevent
Access Persons from violating the Code.
Cohen & Steers shall furnish annually to the Directors a written report (i)
describing any issues arising under the Code of Ethics and related supervisory
procedures, 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) certifying that Cohen & Steers has adopted procedures that
are reasonably necessary to prevent Access Persons from violating the Code.
ADDITIONAL DEFINITIONS
(a) "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.
(b) "Security" shall have the meaning set forth in Section 2(a) (36) of the
Investment Company Act, except that it shall not include direct obligations of
the Government of the United States; bankers' acceptances, bank certificates of
deposit, commercial paper and high-quality short-term debt instruments,
including repurchase agreements; and shares of registered open-end investment
companies.
(c) A company is engaged in the "real estate business" if it derives at least
50% of its revenues from the ownership, construction, financing, management or
sale of commercial, industrial or residential real estate or has at least 50% of
its assets in such real estate. Any questions as to whether a company is engaged
in the real estate business should be referred to the Chairman or President.
<PAGE>
COHEN & STEERS CAPITAL MANAGEMENT, INC.
CERTIFICATION OF PERSONAL SECURITIES TRANSACTIONS
AND COMPLIANCE WITH THE CODE OF ETHICS
I hereby certify that I have received, read and understand the
Cohen & Steers Code of Ethics. Furthermore, I understand that I am
subject to the Code of Ethics and that any failure to follow the Code
could subject me to discipline, including the possible termination of
my employment with Cohen & Steers.
I further certify that, for the preceding calendar year, I
have complied with the requirements of the Code of Ethics in effect
for the year and that I have reported all personal securities
transactions, holdings and accounts required to be reported pursuant
to this Code.
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Name
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Signature
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Date
<PAGE>
CODE OF ETHICS
AND
INSIDER TRADING POLICY
GENERAL
Geewax, Terker & Company ("Employer"), a registered investment
advisor, has adopted this Code of Ethics and Insider Trading Policy pursuant of
to the requirements of Rule 17j-1 under the Investment Company Act of 1940 and
the Investment Advisers Act of 1940.
1. DEFINITIONS
(a) "Covered Person" means Employer and each partner and employee of
Employer.
(b) "Covered Account" means the investment account of a Covered Person
and the investment account(s) of the spouse, minor children and adults living
in the same house as a Covered Person, including a trust in which any such
person has a beneficial interest or as to which a Covered Person serves as
trustee.
(c) "Security" shall have the meaning set forth in Section 2(a)(36) of
the Investment Company Act of 1940 (see Appendix), except the following
exempt securities -- securities issued by the Government of the United States
or by federal agencies and which are direct obligations of the United States,
bankers acceptances, certificates of deposit, commercial paper and shares of
registered open-end investment companies and securities which mature not more
than one year from the acquisition date that are guaranteed by the U.S.
Government.
(d) "Beneficial Ownership" shall have the meaning ascribed thereto
under Section 16 of the Securities Exchange Act of 1934.
(e) A security is "being considered for purchase or sale" or is "being
purchased or sold" when an analyst or portfolio manager of Employer has
decided to purchase or sell the security for a Client Account.
<PAGE>
(f) "Client Account" means the investment account of any person, firm,
trust, partnership, foundation, corporation, syndicate, Fund or other entity
that is managed by Employer.
(g) "Fund" means an investment company, which is registered under the
Investment Company Act of 1940, as to which Employer serves as investment
advisor or sub-advisor.
2. CONDUCT OF COVERED PERSONS
(a) No Covered Person, in connection with the purchase or sale by such
Person of a security (or an option for such security) which is also held, or
within the most recent 15 days has been held, or which is being considered by
Employer for purchase, by a Fund:
i) shall employ any device, scheme, or artifice to defraud such
Fund;
ii) make to the Fund any untrue statement of a material fact, or omit
to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading;
iii) engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Fund; or
iv) engage in any manipulative practice with respect to the Fund.
(b) It is the ongoing responsibility of Employer's securities analysts and
portfolio managers to prepare and maintain, on a daily basis, a current schedule
of securities that are being purchased or sold, or being considered for purchase
or sale, for Client Accounts (a "Schedule of Securities"). It shall be the
responsibility of John J. Geewax ("Mr. Geewax") to maintain such Schedule in
Employer's trading room where it shall be available for review by Covered
Persons. Except for transactions in exempt securities, as defined in section
1(c) above,
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<PAGE>
it is the obligation of every Covered Person to review the then current Schedule
of Securities before engaging in any personal securities transactions or
recommending the purchase or sale of any security to any person having a
beneficial interest in a Covered Account.
(c) No Covered Person shall purchase or sell, directly or indirectly, any
security, or right, warrant or option for such security, in which he or she has,
or by reason of such transaction acquires, any direct or indirect Beneficial
Ownership and (i) which to his or her actual knowledge is then being considered
for purchase or sale, or is being purchased or sold by Employer for a Client
Account or (ii) which is listed on the then current Schedule of Securities.
(d) No Covered Person shall inform any person who has a beneficial
interest in a Covered Account of the identity of any security referred to in
clause (i) or (ii) of paragraph 2(c) above.
(e) Only occasional meals/tickets and holiday gifts from broker dealers
may be accepted by a Covered Person.
(f) No Covered person shall acquire any equity securities in an initial
public offering or private placement without the prior approval of Mr. Geewax or
Mr. Terker.
(g) No Covered Person shall serve on the Board of Directors of any
publicly traded company without the prior approval of either Mr. Geewax or Mr.
Terker.
EXEMPTED TRANSACTIONS
The prohibition of paragraphs (a) and (c) of section 2 above shall not apply to:
(a) Purchases or sales effected in any Covered Account over which a
Covered Person has no direct or indirect influence or control.
3
<PAGE>
(b) Purchases or sales of securities which are not eligible for purchase
or sale by any Client Account.
(c) Acquisition or dispositions which are non-volitional on the part of
either the Covered Person or a Client Account.
(d) Purchases which are part of an automatic dividend reinvestment plan.
(e) 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 rights so acquired.
4. PROCEDURAL MATTERS
(a) Mr. Geewax shall:
(i) Furnish a copy of this Code of Ethics and Insider Trading
Policy to each Covered Person and obtain from each such Person a written
acknowledgment of the receipt thereof.
(ii) Receive and maintain the reports provided for by Section 5 of
this Code.
(iii) Decide whether the facts contained in any report filed hereunder
when any such report indicates that a Covered Person engaged in a
transaction in a security that within 15 days thereof was held by a Client
Account or was to be acquired by such Account.
(iv) Maintain the records required by paragraph (d) of Rule 17j-1.
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<PAGE>
5. REPORTING
(a) Within 15 days after the end of each month every Covered Person shall
provide Mr. Geewax with a report of all transactions for the purchase or sale of
securities in a Covered Account, which identifies the broker or dealer that
effected the transaction, the securities and the nature of the transaction, the
trade and settlement dates and purchase or sale price. Mr. Geewax will review
these confirmations to detect violations of the Code of Ethics. Mr. Geewax will
be responsible, in his sole discretion, to determine whether a violation has
occurred.
(b) Every Covered Person shall certify annually that :
(i) they have read and understand the Code of Ethics and recognize
that they are subject thereto;
(ii) they have complied with the requirements of the Code of Ethics;
and
(iii) they have reported all personal securities transactions required
to be reported pursuant to the requirements of the Code of Ethics.
6. VIOLATIONS
Upon deciding that a violation of this Code has occurred, Mr. Geewax
shall impose such sanctions as they deem appropriate under the circumstances,
including fine, disgorgement of profits, termination or suspension of employment
with, or without compensation.
SECTION II. POLICY STATEMENT ON INSIDER TRADING
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<PAGE>
Employer forbids any Covered Person from trading, either personally or
on behalf of a Client Account, on material nonpublic information, or
communicating material nonpublic information to other persons in violation of
the law. This conduct is frequently referred to as "insider trading". Employer's
policy applies to every Covered Person and extends to activities within and
outside their duties for Employer. Every Covered Person must read and retain a
copy of this policy statement. Any questions regarding Employer's Policy and
procedures should be referred to Mr. Geewax.
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:
i) trading by an insider, while in possession of material
nonpublic information, or
ii) 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
iii) 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 Mr. Geewax.
1. WHO IS AN INSIDER?
The concept of "insider" is broad. It includes partners 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
6
<PAGE>
such organizations. In addition, Employer may become a temporary insider of a
company it advises or for which it performs other services. According to the
Supreme Court, the company must expect the outsider to keep the disclosed
nonpublic information confidential and the relationship must at least imply such
a duty before the outsider 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. Information that Covered Persons 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 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.
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 DOW JONES, REUTERS ECONOMIC SERVICES, THE
WALL STREET JOURNAL or other publications of general circulation would be
considered public.
4. BASIS FOR LIABILITY.
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i) fiduciary duty theory
In 1980, the Supreme Court found that there is no general duty to
disclose before trading on material nonpublic information, but that such a
duty arises only where there is a fiduciary relationship. That is, there
must be a relationship between the parties to the transaction such that one
party has a right to expect that the other party will disclose any material
nonpublic information or refrain from trading. CHIARELLA V. U.S., 445 U.S.
22 (1980).
In DIRKS V. SEC, 463 U.S. 646 (1983), the Supreme Court stated
alternate theories under which non-insiders can acquire the fiduciary duties
of insiders: they can enter into a confidential relationship with the company
through which they gain information (I.E., attorneys, accountants), or they
can acquire a fiduciary duty to the company's shareholders as "tippees" if
they are aware or should have been aware that they have been given
confidential information by an insider who has violated his fiduciary duty to
the company's shareholders.
However, in the "tippee" situation, a breach of duty occurs
only if the insider personally benefits, directly or indirectly from the
disclosure. The benefit does not have to be pecuniary, but can be a gift, a
reputational benefit that will translate into future earnings, or even
evidence of relationship that suggests a QUID PRO QUO.
ii) misappropriation theory
Another basis for insider trading liability is the
"misappropriation" theory, where liability is established when trading occurs
on material nonpublic information that was stolen or misappropriated from any
other person. In U.S. V. CARPENTER, SUPRA, the Court found, in 1987, a
columnist defrauded THE WALL STREET JOURNAL when he stole information from
the JOURNAL and used it for trading in the securities markets. It should be
noted that the misappropriation theory can be used to reach a variety of
individuals not previously thought to be encompassed under the fiduciary duty
theory.
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<PAGE>
5. 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:
i) civil injunctions
ii) treble damages
iii) disgorgement of profits
iv) jail sentences
v) 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
vi) fines for the employer or other controlling person of up to the
greater of $1,000.00 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 Employer, including dismissal of the persons
involved.
SECTION III. PROCEDURES TO IMPLEMENT EMPLOYER'S INSIDER TRADING POLICY
The following procedures have been established to aid Covered Persons
to avoid insider trading and to aid Employer in preventing, detecting and
imposing sanctions against insider trading. Every Covered Person of Employer
must follow these procedures or risk serious sanctions, including dismissal,
substantial personal liability and criminal penalties. If you have any questions
about these procedures, you should consult Mr. Geewax.
9
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1. Identifying Inside Information
Before trading for yourself or others, including Client Accounts, in
the securities of a company about which you may have potential inside
information, ask yourself the following questions:
i) Is the information material? Is this information that an
investor would consider important in making his or her investment decisions? Is
this information that would substantially effect the market price of the
securities if generally disclosed?
ii) 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 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 take the following steps:
i) Report the matter immediately to Mr. Geewax.
ii) Do not purchase or sell the securities on behalf of yourself
or others, including Client Accounts.
iii) Do not communicate the information inside or outside Employer,
other than to Mr. Geewax.
iv) After Mr. Geewax has reviewed the issue, you will be
instructed to continue the prohibitions against trading and communication, or
you will be allowed to trade and communicate the information.
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The Undersigned has read, understands and agrees to abide by, the Geewax, Terker
& Company Code of Ethics and Insider Trading Policy and has retained a copy of
the said document.
_____________________ ____________________________________
Date Signature
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APPENDIX
"Security means any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege
on any security (including a certificate of deposit) or on any group or index
of securities (including any interest therein or based on the value thereof),
or any put, call, straddle option, or privilege entered into in a national
securities exchange relating to foreign currency, or, in general, any interest
or instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the foregoing.
12
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JACOBS LEVY EQUITY MANAGEMENT, INC.
CODE OF ETHICS AND STATEMENT OF
POLICY AND PROCEDURES REGARDING
PERSONAL SECURITIES TRANSACTIONS
1. PURPOSES
(a) As a registered investment adviser and a fiduciary, Jacobs
Levy Equity Management, Inc. ("Jacobs Levy") owes an undivided
duty of loyalty to the investment companies and other clients
for which Jacobs Levy serves as investment manager, adviser or
sub-adviser. Jacobs Levy must avoid even the appearance of a
conflict that may compromise the trust clients have placed in
Jacobs Levy and must insist on strict adherence to fiduciary
standards and compliance with all applicable federal and state
securities laws. Adherence to this Code of Ethics and
Statement of Policy and Procedures Regarding Personal
Securities Transactions (the "Code and Statement") is a
fundamental condition of service with Jacobs Levy.
(b) The Code and Statement is intended to comply with Rule 17j-1
under the Investment Company Act of 1940, as amended (the
"Company Act"), which requires Jacobs Levy to adopt a code of
ethics containing provisions reasonably necessary to prevent
specified individuals from engaging in certain conduct. Under
Rule 17j-1(a), certain conduct by "access persons" (as defined
in the Rule) of investment companies managed by Jacobs Levy,
of Jacobs Levy itself as adviser or as a sub-adviser of these
companies, with respect to purchases or sales of securities
held or to be acquired by the investment companies is
prohibited. Jacobs Levy understands that each such investment
company has adopted a code of ethics with respect to access
persons of the investment companies themselves. As set forth
in Section 3 below, this Code and Statement is also intended
to comply with the provisions of Rule 204-2 of the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), which
requires Jacobs Levy to maintain records of securities
transactions in which certain of its personnel have any
Beneficial Ownership.
(c) This Code and Statement is intended to ensure that the
personal securities transactions of persons subject thereto
are conducted in accordance with the following principles:
(i) A duty at all times to place first the interests of
Clients;
(ii) The requirement that all personal securities
transactions be conducted consistent with this Code
and Statement and in such a manner as to avoid any
actual or potential conflict of interest or
<PAGE>
any abuse of an individual's responsibility and
position of trust; and
(iii) The fundamental standard that Jacobs Levy personnel
not take inappropriate advantage of their positions.
(d) In addition to the specific prohibitions on certain personal
Securities transactions as set forth below, all Employees are
prohibited, in connection with the purchase or sale, directly
or indirectly, by such persons of Security held or to be
acquired by a Client, from:
(i) Employing any device, scheme or artifice to defraud
any Client;
(ii) Making to any Client any untrue statement of a
material fact or omitting to state to such Client a
material fact necessary in order to make the
statements made, in light of the circumstances under
which they are made, not misleading;
(iii) Engaging in any act, practice or course of business
which operates or would operate as a fraud or deceit
upon any Client;
(iv) Engaging in any manipulative practice with respect to
any Client; or
(v) Revealing to any other person (except in the normal
course of his or her duties on behalf of a Client)
any information regarding securities transactions by
any Client or the consideration by any Client or
Jacobs Levy of any such securities transactions.
2. DEFINITIONS
The following definitions apply for purpose of the Code and Statement
in addition to the definitions contained elsewhere herein.
(a) "Beneficial Ownership" is interpreted in the same manner as in
determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder and includes
ownership by any person who, directly or indirectly, through
any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary
interest in a Security. For purposes of this Code of Ethics,
however, the partners as defined in section 2(g) will not be
deemed to be beneficial owners of any securities held in the
investment portfolios of those Partnerships.
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(b) "Client" means any person or entity, including an investment
company, for which Jacobs Levy serves as investment manager,
adviser or sub-adviser.
(c) "Compliance Officer" refers to Jacobs Levy's Compliance
Officer.
(d) "Control" has the same meaning as that set forth in Section
2(a)(9) of the Company Act.
(e) "Employee" refers to a person who is an employee of Jacobs
Levy.
(f) "Jacobs Levy Trading Program" refers to the list of securities
which Jacobs Levy is currently trading or attempting to trade.
(g) The "Partnerships" refers to any partnerships managed by JLEM,
which are traded and allocated pari passu with other separate
accounts.
(h) "Personal Account", except as set forth below in Section
2(h)(iv), refers to a brokerage account in which an individual
subject to the Code and Statement has any Beneficial Ownership
and a brokerage account maintained by or for:
(i) such an individual's spouse (other than a legally
separated or divorced spouse),
(ii) any person who resides with an Employee, and
(iii) any other account (except a Client Account) with
respect to which the individual has investment
discretion.
(iv) For purposes of this Code of Ethics "Personal
Account" shall not include the Partnerships provided,
however, that under no circumstances will any of the
Partnerships receive more favorable treatment than
any Client in any respect.
(i) "Purchase or Sale of a Security" includes, among other things,
the writing or purchase of an option to purchase or sell a
security.
(j) "Security" has the meaning set forth in Section 2(a)(36) of
the Company Act and any derivative thereof, commodities,
options or forward contracts, except that it shall not include
shares of open-end investment companies registered under the
Company Act, securities issued by the Government of the United
States, short-term debt securities that are government
securities within the meaning of Section 2(a)(16) of the
Company Act, bankers' acceptances, bank certificates of
deposit, commercial paper, and such other money market
instruments as are designated by the Compliance
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Officer. In addition, for purposes of this Code of Ethics,
"Security" will not include municipal bonds, the income and
capital gains from which are exempt from Federal and State
taxation.
3. PROHIBITED PURCHASES AND SALES
(a) It is the responsibility of each Employee to ensure that a
particular securities transaction being considered for his or
her Personal Account is not subject to a restriction contained
in this Code and Statement or otherwise prohibited by any
applicable laws. Personal securities transactions for
Employees may be effected only in accordance with the
following provisions. No Employee shall:
(i) purchase or sell, directly or indirectly, any
Security in which the Employee has (or after such
transaction would have) any Beneficial Ownership
unless such Employee obtains the prior written
approval of the Compliance Officer to the
transaction. The Compliance Officer (having no
personal interest in the subject transaction) may
approve the transaction if the Compliance Officer
concludes that the transaction is not likely to have
any adverse economic impact on a Client or on its
ability to purchase or sell Securities of the same
class or other Securities of the issuer involved. A
request for preclearance must be made in writing in
advance of the contemplated transaction and must
state:
(A) the name of the Security involved,
(B) the number of shares or principal amount to
be purchased or sold,
(C) the date or dates on which such Securities
are to be acquired or sold, and
(D) a brief description of the reason(s) the
transaction is considered to be appropriate.
Any approval given under this paragraph will remain
in effect for 24 hours.
(ii) execute or cause the execution of a transaction in a
security in which the Employee has (or by reason of
such transaction would have) any Beneficial
Ownership, on a day during which such security is
included in the Jacobs Levy Trading Program;
(iii) acquire any Beneficial Ownership in any securities in
any private placement of securities unless the
Compliance Officer has given
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<PAGE>
express prior written approval. The Compliance
Officer, in determining whether approval should be
given, will take into account, among other
factors, whether the investment opportunity should
be reserved for a Client and whether the
opportunity is being offered to the individual by
virtue of his or her position with Jacobs Levy.
Employees so authorized to acquire Securities in a
private placement must disclose that investment
when they play a part in any Client's subsequent
consideration of an investment in the issuer, and
in such a case, the decision of Jacobs Levy to
purchase Securities of that issuer for a Client
will be subject to an independent review by a
senior officer of Jacobs Levy with no personal
interest in such issuer;
(iv) serve on any board of directors or trustees or in any
other management capacity of any private or public
company without prior written authorization from the
Compliance Officer based upon a determination that
such service would not be inconsistent with the
interests of any Client; or
(v) receive any gift or other thing of more than de
minimis value from any person or entity that does
business or may do business with Jacobs Levy on
behalf of a Client, provided, however, that receipt
of the following shall not be prohibited:
(A) an occasional breakfast, luncheon, dinner or
reception, ticket to a sporting event or
theater, or comparable entertainment, that
is not so frequent, so costly, nor so
extensive as to raise any question of
impropriety;
(B) a breakfast, luncheon, dinner, reception or
cocktail party in conjunction with a bona
fide business meeting; and
(C) a gift approved in writing by the Compliance
Officer.
4. EXEMPTED TRANSACTIONS
The requirements of Section 3 of this Code and Statement do not apply
to:
(a) Purchases or sales of Securities with respect to which an
Employee has (or by reason of such transaction would have) no
Beneficial Ownership.
(b) Purchases or sales that are non-volitional on the part of
either an Employee or a Client or are pursuant to a dividend
reinvestment plan.
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<PAGE>
(c) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of the issuer's
Securities, to the extent such rights were acquired from such
issuer, and sales of such rights so acquired.
5. REPORTING
(a) Every Employee of Jacobs Levy shall report to the Compliance
Officer the information described in Section 5(b) below with
respect to transactions in any Security in which such Employee
has, or by reason of such transaction acquires, any Beneficial
Ownership in the Security; provided, however, that such
Employee is not required to make a report with respect to
transactions effected in any account over which the Employee
does not have any direct or indirect influence or control,
including such an account in which an Employee has any
Beneficial Ownership.
(b) Every report of an Employee required by Section 5(a) above
shall be in writing and shall be delivered not later than ten
days after the end of the calendar quarter in which a
transaction to which the report relates was effected, and
shall contain the following information:
(i) the date of the transaction, the title and the number
of shares, and the principal amount of each Security
involved;
(ii) the nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or
through whom the transaction was effected.
(c) Any such report may contain a statement that the report is not
to be construed as an admission by the person making the
report that he or she has any direct or indirect Beneficial
Ownership in the Security to which the report relates.
(d) The Compliance Officer shall maintain the reports required by
paragraph (a) above and such other records, if any, as are
required by Rule 17j-1 under the Company Act and Rule 204-2
under the Advisers Act. All reports furnished pursuant to this
Section will be kept confidential, subject to the rights of
inspection by the Compliance Officer, the Securities and
Exchange Commission and by other third parties pursuant to
applicable law.
(e) Each person subject to this Code and Statement must certify
annually that he or she has read and understands this Code and
Statement, recognizes
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<PAGE>
that he or she is subject thereto and has complied with its
provisions and disclosed or reported all personal Securities
transactions required to be disclosed or reported by this
Code and Statement. Such certificates and reports are to be
given to the Compliance Officer.
6. SANCTIONS
Upon learning of a violation of this Code and Statement, Jacobs Levy,
with the advice of the Compliance Officer, may impose such sanctions as
it deems appropriate, including, among other things, censure,
suspension or termination of service. Individuals subject to this Code
and Statement who fail to comply with this Code and Statement may also
be violating the federal securities laws or other federal and state
laws. Any such person who is suspected of violating this Code and
Statement should be reported immediately to the Compliance Officer.
January 2, 1996
<PAGE>
DRAFT
CODE OF ETHICS
1. PURPOSES
This Code of Ethics (the "Code") has been adopted by the Directors of J.P.
Morgan Investment Management Inc. (the "Adviser"), in accordance with Rule
17j-1(c) promulgated under the Investment Company Act of 1940, as amended (the
"Act"). Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to purchases or sales of securities held or to be
acquired by investment companies, if effected by associated persons of such
companies. The purpose of this Code is to adopt provisions reasonably necessary
to prevent Access Persons from engaging in any unlawful conduct as set forth in
Rule 17j-1(b) as follows:
(b) It is unlawful for any affiliated person of or principal underwriter
for a Fund, or any affiliated person of an investment adviser of or principal
underwriter for a Fund, in connection with the purchase or sale, directly or
indirectly, by the person of a Security Held or to be Acquired by the Fund:
(i) To employ any device, scheme or artifice to defraud the Fund;
(ii) To make any untrue statement of a material fact to the Fund or omit to
state a material fact necessary in order to make the statements made
to the Fund, in light of the circumstances under which they are made,
not misleading;
(iii) To engage in any act, practice, or course of business that operates
or would operate as a fraud or deceit on the Fund; or
(iv) To engage in any manipulative practice with respect to the Fund.
2. DEFINITIONS
(a) "Access Person" means any director, officer, general partner or
Advisory Person of the Adviser.
(b) "Administrator" means Morgan Guaranty Trust Company.
(c) "Advisory Person" means (i) any employee of the Adviser or the
Administrator (or any company in a control relationship to the Adviser) who, in
connection with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of securities for a Fund,
or whose functions relate to the making of any recommendations with respect to
such purchases or sales; and (ii) any natural person in a control relationship
to the Adviser who obtains information concerning recommendations regarding the
<PAGE>
purchase or sale of securities by a Fund.
(d)"Beneficial ownership" shall be interpreted in the same manner as it
would be under Exchange Act Rule 16a-1(a)(2)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.
(e)"Control" has the same meaning as in Section 2(a)(9) of the Act.
(f)"Covered Security" shall have the meaning set forth in Section 2(a)(36)
of the Act, except that it shall not include shares of open-end funds, direct
obligations of the United States Government, bankers' acceptances, bank
certificates of deposit, commercial paper and high quality short-term debt
instruments, including repurchase agreements.
(g)"Fund" means an Investment Company registered under the Investment
Company Act of 1940.
(h)"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.
(i)"Limited Offering" means an offering that is exempt from registration
under the Securities Act pursuant to Section 4(2) or Section 4(6) or pursuant to
Rule 504, Rule 505, or Rule 506 under the Securities Act.
(j)"Purchase or sale of a Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security.
(k)"Security Held or to be Acquired" by a Adviser means: (i) any Covered
Security which, within the most recent 15 days, is or has been held by a Fund or
other client of the Adviser or is being or has been considered by the Adviser
for purchase by a Fund or other client of the Adviser; and (ii) any option to
purchase or sell, and any security convertible into or exchangeable for, a
Covered Security.
3. STATEMENT OF PRINCIPLES
It is understood that the following general fiduciary
principles govern the personal investment activities of Access Persons:
(a)the duty to at all times place the interests of shareholders and
other clients of the Adviser first;
(b)the requirement that all personal securities transactions be
conducted consistent with this Code of Ethics 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;
(c)the fundamental standard that Investment Personnel may not take
inappropriate advantage of their position; and
(d)all personal transactions must be oriented toward investment, not
short-term or speculative trading.
It is further understood that the procedures, reporting and recordkeeping
requirements set forth below are hereby adopted and certified by the Adviser as
reasonably necessary to prevent Access Persons from violating the provisions of
this Code of Ethics.
<PAGE>
4. PROCEDURES TO BE FOLLOWED REGARDING PERSONAL INVESTMENTS BY ACCESS
PERSONS
(a)Pre-clearance requirement. Each Access Person must obtain prior
written approval from his or her group head (or designee) and from the Adviser's
trading desk before transacting in any Covered Security. For details regarding
transactions in mutual funds, see Section 4(e).
(b)Brokerage transaction reporting requirement. Each Access Person
working in the United States must maintain all of his or her accounts and the
accounts of any person of which he or she is deemed to be a beneficial owner
with a broker designated by the Adviser and must direct such broker to provide
broker trade confirmations to the Adviser's legal/compliance department, unless
an exception has been granted by the Adviser's legal/compliance department. Each
Access Person to whom an exception to the designated broker requirement has been
granted must instruct his or her broker to forward all trade confirms and
monthly statements to the Adviser's legal/compliance department. Access Persons
located outside the United States are required to provide details of each
brokerage transaction of which he or she is deemed to be the beneficial owner,
to the Adviser's legal/compliance group, within the customary period for the
confirmation of such trades in that market.
(c)Initial public offerings (new issues). Access Persons are prohibited
from participating in Initial Public Offerings, whether or not J.P. Morgan or
any of its affiliates is an underwriter of the new issue, while the issue is in
syndication.
(d)Minimum investment holding period. Each Access Person is subject to
a 60-day minimum holding period for personal transactions in Covered Securities.
An exception to this minimum holding period requirement may be granted in the
case of hardship as determined by the legal/compliance department.
(e)Mutual funds. Each Access Person must pre-clear transactions in
shares of closed-end Funds with the Adviser's trading desk, as they would with
any other Covered Security. See Section 4(a). Each Access Person must obtain
pre-clearance from his or her group head(or designee) before buying or selling
shares in an open-end Fund or a sub-advised Fund managed by the Adviser if such
Access Person or the Access Person's department has had recent dealings or
responsibilities regarding such mutual fund.
(f)Limited offerings. An Access Person may participate in a limited
offering only with written approval of such Access Person's group head (or
designee) and with advance notification to the Adviser's compliance group.
(g)Blackout periods. Access Persons are subject to blackout periods 7
calendar days before and after the trade date of a Covered Security where such
Access Person initiated a trade order for the Covered Security for any of their
client Accounts.
(h)Prohibitions. Short sales are generally prohibited. Transactions in
options, rights, warrants, or other short-term securities and in futures
contracts (unless for bona fide hedging) are prohibited, except for purchases of
options on widely traded indices specified by the Adviser's compliance group if
made for investment purposes.
(i)Securities of J.P. Morgan. No Access Person may buy or sell any
security issued by J.P. Morgan from the 27th of each March, June, September, and
December until the first full business day after earnings are released in the
following month. All transactions in securities issued by J.P. Morgan must be
<PAGE>
pre-cleared with the Adviser's compliance group and executed through an approved
trading area. Transactions in options and short sales of J.P. Morgan stock are
prohibited.
(j)Certification requirements. In addition to the reporting
requirements detailed in Sections 6 below, each Access Person, no later than 30
days after becoming an Access Person, must certify to the Adviser's compliance
group that he or she has complied with the broker requirements in Section 4(b).
5. OTHER POTENTIAL CONFLICTS OF INTEREST
(a)Gifts. No employee of the Adviser or the Administrator may (i)accept
gifts, entertainment, or favors from a client, potential client, supplier, or
potential supplier of goods or services to the Adviser or the Administrator
unless what is given is of nominal value and refusal to accept it would be
discourteous or otherwise harmful to the Adviser or Administrator; (ii)provide
excessive gifts or entertainment to clients or potential clients; and (iii)
offer bribes, kickbacks, or similar inducements.
(b)Outside Business Activities. The prior consent of the Chairman of
the Board of J.P. Morgan, or his or her designee, is required for an officer of
the Adviser or Administrator to engage in any business-related activity outside
of the Adviser or Administrator, whether the activity is intermittent or
continuing, and whether or not compensation is received. For example, such
approval is required such an officer to become:
-An officer, director, or trustee of any corporation (other
than a nonprofit corporation or cooperative corporation owning the
building in which the officer resides);
-A member of a partnership (other than a limited partner in a
partnership established solely for investment purposes);
-An executor, trustee, guardian, or similar fiduciary advisor
(other than for a family member).
6. REPORTING REQUIREMENTS
(a) Every Access Person must report to the Adviser:
(i)Initial Holding Reports. No later than 10 days after the
person becomes an Access Person, the following information:
(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 Covered
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.
(ii)Quarterly Transaction Reports. No later than 10 days after
the end of a calendar quarter, with respect to any transaction
during the quarter in a Covered Security in which the Access
Person had any direct or indirect beneficial ownership: (A)
the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and
principal amount of each Covered Security involved; (B) the
nature of the transaction; (C) the price of the Covered
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.
<PAGE>
(iii)New Account Report. No later than 10 days after the
calendar quarter, with respect to any account established by
the Access Person in which any Covered Securities were held
during the quarter for the direct or indirect benefit of the
Access Person: (A) the name of the broker, dealer or bank with
whom the Access Person established the account; (B) the date
the account was established; and (C) the date that the report
is submitted by the Access Person.
(iv)Annual Holding Report. Annually, the following information
(which information must be current as of a date no more than
30 days before the report is submitted): (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; (B) the name of any broker, dealer or bank with
whom the Access Person maintains an account in which any
Covered Securities are held for the direct or indirect benefit
of the Access Person: and (C) the date that the report is
submitted by the Access Person.
(b) Exceptions from the Reporting Requirements.
(i) Notwithstanding the provisions of Section 6(a), no Access
Person shall be required to make:
A. a report with respect to transactions effected for any
account over which such person does not have any direct or
indirect influence or control;
B. a Quarterly Transaction Report under Section 6(a)(ii) if
the report would duplicate information contained in broker
trade confirmations or account statements received by the
Adviser with respect to the Access Person no later than 10
days after the calendar quarter end, if all of the
information required by Section 6(a)(ii) is contained in the
broker trade confirmations or account statements, or in the
records of the Adviser.
(c) Each Access Person shall promptly report any transaction which
is, or might appear to be, in violation of this Code. Such
report shall contain the information required in quarterly
reports filed pursuant to Section 6(a)(ii).
(d) All reports prepared pursuant to this Section 6 shall be filed
with the appropriate compliance personnel designated by the
Adviser and reviewed in accordance with procedures adopted by
such personnel.
(e) The Adviser will identify all Access Persons who are required
to file reports pursuant to this Section 6 and will inform
them of their reporting obligation.
(f) The Adviser no less frequently than annually shall furnish to
a Fund's board of directors for their consideration a written
report that:
(a) describes any issues under this Code of Ethics or
related procedures since the last report to the
board of directors, including, but limited to,
information about material violations of the Code or
procedures and sanctions imposed in response to the
material violations; and
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(b) certifies that the Adviser has adopted
procedures reasonably necessary to prevent
Access Persons from violating this Code of
Ethics.
7. RECORDKEEPING REQUIREMENTS
The Adviser must at its principal place of business maintain records in
the manner and extent set out in this Section of this Code and must
make available to the Securities and Exchange Commission (SEC) at any
time and from time to time for reasonable, periodic, special or other
examination:
(a) A copy of its code of ethics that is in effect, or at any
time within the past five years was in effect, must be
maintained in an easily accessible place;
(b) A record of any violation of the code of ethics, and of any
action taken as a result of the violation, must be
maintained in an easily accessible place for at least five
years after the end of the fiscal year in which the
violation occurs;
(c) A copy of each report made by an Access Person as required
by Section 6(a) including any information provided in lieu
of a quarterly transaction report, must be maintained for
at least 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.
(d) A record of all persons, currently or within the past five
years, who are or were required to make reports as Access
Persons or who are or were responsible for reviewing these
reports, must be maintained in an easily accessible place.
(e) A copy of each report required by 6(f) above must be
maintained for at least five years after the end of the
fiscal year in which it is made, the first two years in an
easily accessible place.
(f) A record of any decision and the reasons supporting the
decision to approve the acquisition by Access Persons of
securities under Section 4(f) above, for at least five
years after the end of the fiscal year in which the
approval is granted.
8. SANCTIONS
Upon discovering a violation of this Code, the Directors of the Adviser
may impose such sanctions as they deem appropriate, including, INTER ALIA,
financial penalty, a letter of censure or suspension or termination of the
employment of the violator.
<PAGE>
STATEMENT OF POLICY ON PERSONAL SECURITIES TRANSACTIONS AND GUIDELINES
FOR PERSONAL TRADING
(CODE OF ETHICS)
MONTGOMERY ASSET MANAGEMENT, LLC
MAM COLORADO, LLC
THE MONTGOMERY FUNDS
THE MONTGOMERY FUNDS II
THE MONTGOMERY FUNDS III
Revised October 1999
INTRODUCTION
As a registered investment company with substantial
responsibility to shareholders, each of The Montgomery Funds, The Montgomery
Funds II and The Montgomery Funds III (together, the "Trusts") has an obligation
to implement and maintain a meaningful policy governing the personal securities
transactions of its trustees, officers, and advisory persons (collectively,
"access persons"). The purpose of the Code of Ethics is to minimize conflicts of
interest (including the appearance of such conflicts), as well as to comply with
the provisions of Section 17(j) of the Investment Company Act of 1940 (the "1940
Act") and Rule 17j-1 thereunder. In addition, this Code of Ethics is designed to
protect fiduciary relationships owed to Montgomery Asset Management, LLC and MAM
Colorado, LLC (collectively, "MAM") clients and each series of the Trusts and to
provide a program for detecting and preventing insider trading by the officers,
trustees and employees of MAM and the Trusts.
Section 17(j) of the 1940 Act makes it unlawful for an
affiliated person of a registered investment company to engage in transactions
in securities which are also held or are to be acquired by a registered
investment company if such transactions are in contravention of rules adopted by
the Securities and Exchange Commission to prevent fraudulent, deceptive, or
manipulative practices. Section 17(j) broadly prohibits any such affiliate from
engaging in any type of manipulative, deceptive, or fraudulent practice with
respect to the investment company and, furtherance of that prohibition, requires
each registered investment company to adopt a written code of ethics containing
provisions reasonably necessary to prevent "access persons" from engaging in
conduct prohibited by the Rule. The Rule also requires that reasonable diligence
be used and procedures instituted to prevent violations of such code of ethics.
This Code of Ethics is intended to comply with the
requirements of Section 17(j) and Rule 17j-1 and a copy of this Code of Ethics
shall be circulated to each access person by an officer of the relevant Trust
together with an acknowledgment of receipt which shall be signed and returned to
a designated compliance officer by each access person. The designated compliance
officer is charged with responsibility for ensuring that the requirements of
this Code of Ethics are adhered to by all access persons.
The Code recognizes that a fiduciary relationship exists with
respect to MAM's clients and each series of the Trusts (each, a "Fund"). This
Code of Ethics is intended to provide legal protection to the Trusts and their
shareholders and MAM accounts and account holders for which a fiduciary
relationship exists, and at the same time maintain an atmosphere within which
conscientious professionals can make responsible personal investment decisions.
As a matter of policy, this Code of Ethics should not and is not intended to
inhibit responsible personal investment within the boundaries reasonably
necessary to protect MAM's clients and the Trusts. To that end, this Code is
designed to encourage investment in a manner that is consistent with the
fiduciary relationships that exist between MAM and its clients and MAM and the
Trusts.
This Code of Ethics is not intended to cover all possible
areas of potential liability under the 1940 Act or under the federal securities
law in general. For example, other provisions of Section 17 of the 1940 Act
prohibit various transactions between a registered investment company on a
principal basis, and joint transactions (E.G., combining to achieve a
substantial position in a security or commingling of funds) between an
investment company and an affiliated person. Persons covered by this Code,
therefore, are advised to seek advice before engaging in any transactions
involving securities
<PAGE>
held or under consideration for purchase or sale by a Fund or if a transaction
directly or indirectly involves themselves and any Trust, other than the
purchase and redemption of shares of a Fund in the performance of their normal
business duties.
In addition, the Securities Exchange Act of 1934 may impose
fiduciary obligations and trading restrictions on access persons in certain
situations. It is expected that access persons will be sensitive to these areas
of potential conflict, even though this Code of Ethics does not address
specifically these other areas of fiduciary responsibility.
DEFINITIONS
1. "Access person" means any officer, trustee or advisory
person of a Fund or a Trust, including certain employees located in the San
Francisco office of the distributor of the Funds, Funds Distributor, Inc., who
perform sales activities for the Funds, and certain members of the Steering
Committee for MAM who have regular access to information about portfolio
transactions of the Funds or other clients of MAM. For purposes of this Code of
Ethics, access persons also include members of such person's immediate family
(I.E., husband, wife, children and who are directly or indirectly dependents of
an access person), accounts in which an access person or members of his or her
family has a beneficial interest or over which an access person has investment
control or exercises investment discretion (E.G., a trust account).
2. "Advisory person" means (i) any employee of the Trusts or
its investment adviser or any company in a control relationship to the Trusts,
who in connection with his, her or its regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale of a
security by a Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and (ii) any natural
person in a control relationship to the Trusts or their investment adviser who
obtains information concerning the recommendations made to the Fund with regard
to the purchase or sale of a security.
Advisory persons include officers, members and control persons
of MAM, and the Trusts, as well as all persons involved in the advisory process,
including portfolio managers, traders, employees whose duties or functions
involve them in the investment process, and any employee (including employees of
MAM's affiliates) who obtains information concerning the investment decisions
that are being made for MAM clients and the Funds.
3. A security is "being considered for purchase or sale" when
a recommendation to purchase or sell a security has been communicated and, with
respect to the person making the recommendation, when such person seriously
considers making such a recommendation.
4. "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.
5. "Cash compensation" means any discount, concession, fee,
service fee, commission, asset-based sales charge, loan, override or cash
employee benefit received in connection with the sale and distribution of the
Funds or the offering of MAM's services.
6. "Control" means the power to exercise a controlling
influence over the management or policies of any Trust, unless such power is
solely the result of an official position with such Trust as further defined in
Section 2(a)(9) of the 1940 Act.
7. "Hot-issue" is defined as securities of a public offering
which trade at a premium in the secondary market whenever such secondary market
begins.
8. "Non-cash compensation" means any form of compensation
received in connection with the sale and distribution of the Funds or the
offering of MAM's services that is not cash compensation, including but not
limited to merchandise, gifts and prizes, travel expenses, meals and lodging.
<PAGE>
9. "Securities" or "Security" shall have the meaning set forth
in Section 2(a)(36) of the 1940 Act except that it shall not include shares of
registered open end investment companies, securities issued by the Government of
the United States (including Government agencies), short-term debt securities
which are "government securities" within the meaning of Section 2(a)(16) of the
1940 Act ("Government Securities"), bankers acceptances, bank certificates of
deposit and commercial paper. Securities also shall include futures, options and
other derivatives.
PERSONS COVERED BY THIS CODE.
This Code applies to all officers, members and control persons
of MAM, and the Trusts. This Code also applies to all persons involved in the
advisory process, including portfolio managers, traders, employees whose duties
or functions involve them in the investment process, and any employee who
obtains information concerning the investment decisions that are being made for
MAM clients and the Funds, including such employees of MAM's affiliates. All
such persons shall be designated access persons for purposes of this Code. This
Code also applies to investments by members of an access person's immediate
family (as described above), accounts in which an access person or members of
his or her family has a beneficial interest or over which an access person has
investment control or exercises investment discretion. Access persons also
remain fully subject to the obligations imposed by MAM's trading policies as
contained in its Compliance Manual.
The disinterested trustees of the Trusts shall not be
considered access persons solely by reason of their trusteeship.
PERSONS COVERED BY OTHER CODES OF ETHICS
Each Access Person or Advisory Person who would otherwise be
covered by this Code of Ethics shall be excluded from the pre-approval,
reporting and other requirements of this Code of Ethics if that Access Person or
Advisory Person is subject to another organization's code of ethics satisfactory
to MAM and the Trustees of the Trusts.
PRE-APPROVAL
All purchases and sales (including short sales) of individual
Securities (defined above to exclude Government Securities and other items) must
be pre-approved before an order is placed. Transactions involving options,
futures and other derivatives also require pre-approval. Approval must be given
by one of the persons on EXHIBIT A of this Code. Approval should be obtained in
writing using the form attached as EXHIBIT B (or, in unusual circumstances,
promptly confirmed in writing), initialed by one of the persons identified on
EXHIBIT A, and, once approved, orders must be executed WITHIN TWO BUSINESS DAYS
of the approval date. No exceptions will be given for the two business day
approval period for unfilled limit orders.
As necessary, before giving approval, the person providing
approval will consult (on a "no name" basis) with the appropriate portfolio
managers to determine whether the proposed sale or accusation in any way
conflicts with an investment decision being contemplated or carried out on
behalf of a MAM client or Fund. Access persons seeking approval to acquire or
dispose of individual securities should allow sufficient time for this review
and approval process.
PROHIBITED PURCHASES AND SALES
No approval will be given for proposed transactions that
violate the following rules, subject to the limited exception given below. No
access person shall purchase or sell (including short sales and options),
directly or indirectly, any security in which he or she has, or by such
transaction acquires, any direct or indirect beneficial ownership, which
security at the time of such purchase or sale:
(1) is being considered for purchase or sale by a Fund or
a MAM client account;
(2) is being purchased or sold by a Fund or a MAM client
account; or
<PAGE>
(3) was purchased or sold by a Fund or a MAM client
account within the most recent 15 days.
Additionally, no access person shall engage in a transaction,
directly or indirectly, that involves an opportunity that a Fund could utilize,
unless one of the persons indicated in EXHIBIT A has confirmed, on behalf of the
Funds, that the Funds do not wish to take advantage of the opportunity AND
approves such transaction.
These restrictions shall continue to apply until the
recommendation has been rejected or any authorization to buy or sell has been
completed or canceled. Knowledge of any such consideration, intention,
recommendation or purchase or sale is always a matter of strictest confidence.
These restrictions shall not apply to purchases or sales of
securities which receive the prior approval of a person indicated in EXHIBIT A
where that person, in his or her discretion, has determined that such purchases
or sales are only remotely potentially harmful to any Trust or its Funds or a
MAM client account, where they would be very unlikely to affect a highly
institutional market or where they are clearly not related economically to the
securities to be purchased, sold or held by a Fund or a MAM client account.
ADDITIONAL INVESTMENT POLICIES
1. NO INSIDER TRADING. Access persons are prohibited from
trading in or recommending that others trade in securities on the basis of
material non-public information about the issuers of such securities. Access
persons who obtain confidential information about a security should contact
MAM's General Counsel or Chief Compliance Officer immediately. MAM will not
provide any assistance to any individual who has acted improperly with regard to
confidential information about securities. If you have any doubt as to whether
you may trade particular securities or recommend particular securities for
purchase or sale, ask before you trade or make such a recommendation.
2. INVESTMENT THROUGH THE FUNDS ENCOURAGED. All access persons
are encouraged to make personal investments exclusively through the Funds or
other mutual funds, and to limit their investments in individual securities to
mutual funds or to Government Securities. No prior approval is needed to make
such investments.
3. NO TRADING. All individual security positions are expected
to be taken for INVESTMENT purposes. Securities trading as distinct from
investment is discouraged. If an access person desires to sell a position he or
she has held for less than six months (or desires to re-acquire a recently
liquidated position), the approval request must include an explanation of the
reason for the transaction (mutual funds and Government Securities excepted).
4. OWNERSHIP REPORTS AND NEW EMPLOYEES. Access persons who are
new employees of MAM shall submit the form attached as Exhibit F disclosing a
report of current security holdings WITHIN 10 DAYS of their employment
commencement and shall subsequently follow this Code of Ethics in receiving
approvals to liquidate or add to their security positions.
5. PRIVATE PLACEMENTS. Investments in private placements and
other individual securities that are not generally available to the public may
present conflicts of interest even though such securities may not be currently
eligible for acquisition by some or all of MAM's clients or Funds. Prior
approval must be obtained before buying or selling such investments, as with any
other individual security transaction. In addition, with respect to private
placements, the approval request must indicate that the investment is being
purchased (or liquidated) on terms that are substantially the same to the terms
available to other similarly situated private investors, and that the access
person does not have any specific knowledge of an imminent public offering or
any material nonpublic information about the issuer. It is expected that any
investment in a private placement or similar security will be held for at least
six months. If the security subsequently becomes eligible for investment by a
MAM client and/or a Fund and is, in fact, purchased by such client or Fund, any
access person who owns the security will be expected to continue to hold such
security for at least six months following its public offering.
6. PRIVATE INVESTMENT PARTNERSHIPS. Just as investments
through mutual funds are encouraged and investments in individual securities are
discouraged in order to minimize potential conflicts of interest and/or the
appearance of any conflict of interest, MAM likewise encourages access persons
to effect their venture investments through venture limited partnerships rather
than individual private placements. Although venture limited partnerships are
preferred over
<PAGE>
individual private placements, venture limited partnerships nevertheless can
present potential conflicts. Accordingly, while pre-approval is not required to
participate in a venture limited partnership, an access person will be expected
to report any transaction involving a venture limited partnership within 10 days
of the investment to one of the persons on EXHIBIT A.
7. TRADE THROUGH CHARLES SCHWAB & CO., INC. All access persons
are strongly encouraged to execute all of their securities transactions through
Charles Schwab & Co., Inc. ("Schwab") (unless Schwab cannot execute the trade
and/or custody the securities). Accounts with other brokerage firms should not
be maintained unless specific written approval regarding the maintenance of such
accounts has been given by one of the persons on EXHIBIT A. All brokers other
than Schwab maintaining accounts for MAM access persons shall be instructed to
provide duplicate confirmations of all transactions to MAM and it shall be the
responsibility of the access person to ensure that MAM receives such duplicate
confirmations.
8. NO DIRECTORSHIPS. No access person may serve on the board
of directors for any private or public operating company without prior written
approval from one of the persons on EXHIBIT A. Such directorships are generally
discouraged because of their potential for creating conflicts of interest.
Access persons should also restrict their activities on committees (E.G.,
advisory committees or shareholder/creditor committees). This restriction is
necessary because of the potential conflict of interest involved and the
potential impediment created for MAM's clients and the Funds. Access persons
serving on boards or committees of operating companies may obtain material
non-public information in connection with their directorship or position on a
committee that would effectively preclude the investment freedom that would
otherwise be available to MAM's clients and the Funds.
9. NO SPECIAL FAVORS. It goes without saying that no access
person may purchase or sell securities on the basis of material non-public
information or in reciprocity for allocating brokerage, buying securities in
MAM's client and Fund accounts, or any other business dealings with a third
party. Information on or access to PERSONAL investments as a favor for doing
business on behalf of MAM's clients or Funds -- regardless of what form the
favor takes - - is strictly prohibited. The APPEARANCE of a "special favor"
is also sufficient to make a personal transaction prohibited under this Code.
10. NON-CASH COMPENSATION. Every six months, access persons
shall complete and sign a Non-Cash Compensation Acknowledgement and
Certification form attached as Exhibit E. No access person shall directly or
indirectly accept or make payments or offers of payments of any non-cash
compensation except as provided below:
(a) gifts that do not exceed an annual amount
per access person or other person of $100
and are not preconditioned on achievement of
a sales target or volume of trades;
(b) an occasional meal, a ticket to a sporting
event or theater or comparable entertainment
which is neither so frequent nor so
extensive as to raise any question of
propriety and is not preconditioned on
achievement of a sales target or volume of
trades;
(c) payment or reimbursement in connection with
meetings held for the purpose of training or
education of access persons or other persons
provided that:
(i) (in the case of access persons only)
access persons obtain MAM's written
approval using the form attached as
EXHIBIT C to attend the meeting and
(in the case of access persons and
other persons) attendance by access
persons or other persons is not
preconditioned on the achievement of
a sales target or any other
incentives pursuant to a non-cash
compensation arrangement;
(ii) the location is appropriate for the
purpose of the meeting;
(iii) the payment or reimbursement is not
applied to the expenses of guests of
the access person or other person;
and
(iv) the payment or reimbursement is not
preconditioned on the achievement of
a sales target or volume of trades.
<PAGE>
11. NO HOT-ISSUES. No access person may purchase or receive a
hot issue in any of his or her accounts, including any accounts in which the
access person has a beneficial interest.
<PAGE>
REPORTING
1. Subject to the exceptions set forth below, every access
person shall report to the Trusts the information described in subsection 2
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 in the securities.
2. Every report shall be made not later than 10 days after the
end of the calendar quarter in which the transaction to which the report relates
was effected and shall be on the Form attached hereto as EXHIBIT D or on a form
that contains substantially the same information (I.E., a brokerage confirmation
statement) and shall contain the following information:
(a) the date of the transaction, the title and
the 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 at which the transaction was
effected; and
(d) the name of the broker, dealer or bank with
or through which the transaction was
effected.
3. Any such report may contain a statement that making such
report should not be construed as an admission that an access person has any
direct or indirect beneficial ownership in the security to which the report
relates.
4. Copies of bank statements or broker's advice containing the
information specified in subsection 2 above may be attached to the report
instead of listing the transactions.
EXCEPTIONS TO REPORTING REQUIREMENTS AND PROHIBITED SALES AND PURCHASES
Notwithstanding any other provision of this Code, an access
person need not make a report:
(a) with respect to transactions effected for
any account over which such person does not
have any direct or indirect influence;
(b) where the purchase or sale of securities
involves a trustee of any Trust who is not
an "interested person" (as defined in
Section 2(a)(19) of the 1940 Act) of the
Trust, provided such trustee neither knew
nor, in the ordinary course of fulfilling
his or her duties as a trustee, should have
known that during the 15-day period
immediately preceding or after the date of
the transaction such security was under
consideration for purchase or sale (or was
purchased or sold) by any Fund of the Trust;
and
The reporting provisions and prohibitions on sales and
purchases contained in this Code also shall not apply to:
(a) purchases or sales of securities which are
non-volitional on the part of either the
access person or the relevant Trust (E.G.,
receipt of gifts);
(b) purchases of securities which are part of an
automatic dividend reinvestment plan; and
(c) purchases of securities 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 the sales of
such rights so acquired.
<PAGE>
COMPLIANCE REVIEW
A designated compliance associate shall compare all reports of
personal securities transactions with completed and contemplated portfolio
transactions of each Fund to determine whether a violation of the Code of Ethics
may have occurred. No person shall review his or her own report. Before making
any determination that a violation has been committed by any person, the
designated compliance associate shall give such person an opportunity to supply
additional explanatory material.
If the designated compliance associate determines that a
violation of the Code of Ethics has or may have occurred, he or she shall,
following consultation with counsel to the Trusts, submit his or her written
determination, together with the transaction report, if any, and any additional
explanatory material provided by the individual, to the Compliance Director or
to the President who shall make an independent determination of whether a
violation has occurred.
If it is determined that a material violation has occurred, a
report of the violation shall be made to the Board of Trustees, and the trustees
shall determine the appropriate course of action. If a securities transaction of
the designated compliance associate is under consideration, the Chairman shall
act in all respects in the manner prescribed herein for the designated
compliance associate.
CONFIDENTIALITY
All reports of securities transactions and any other
information filed pursuant to this Code of Ethics shall be treated as
confidential, but are subject to review as provided herein and by personnel of
the Securities and Exchange Commission.
INTERPRETATION OF PROVISIONS
An annual written report will be provided to the Board of
Trustees by MAM, describing any material issues that arose during the previous
year under the Code. In addition, the Board of Trustees will certify that the
Trusts have adopted procedures reasonably necessary to prevent access persons
from violating the Code.
Any material changes to the Code must be approved by the Board
of Trustees within six months of such changes.
EXCEPTIONS
Exceptions to the requirements contained in this Code will be
permitted only in highly unusual circumstances. Any exception must be documented
and approved by one of the persons listed in EXHIBIT A.
ANNUAL CERTIFICATION AND OWNERSHIP STATEMENT
Each access person shall re-certify his or her familiarity
with this Code of Ethics and report all security holdings annually by using the
form attached as Exhibit F.
<PAGE>
EXHIBIT A
Persons Designated to Give Approval of Transactions:
Mark B. Geist
Dana E. Schmidt
<PAGE>
EXHIBIT B
MONTGOMERY ASSET MANAGEMENT
EMPLOYEE TRADING AUTHORIZATION
Please complete the information below to obtain authorization to purchase or
sell securities in your personal brokerage accounts. AUTHORIZATION, IF GRANTED,
WILL ONLY BE VALID FOR A PERIOD OF TWO BUSINESS DAYS FROM THE DATE BELOW.
<TABLE>
<S><C>
EMPLOYEE TO COMPLETE THIS SECTION.
---------------------------------------------------------------------------------------------------------------------------
Name ------------------------------------------------------------------ Ext. ---------------------------
---------------------------------------------------------------------------------------------------------------------------
Security ------------------------------------------------------
(IF AN OPTION, IS IT COVERED?)
---------------------------------------------------------------------------------------------------------------------------
Symbol & Exchange
------------------------------------------------------
(NYSE, NASDAQ, ASE, Pink Sheets, Private or other?)
Account # Schwab ----------------- DST ---------------------------------------------
(IF NEW DST ACCOUNT, ATTACH FUND APPLICATION)
Buy/Sell ---------------------------- If sell, date of purchase ----------------------
# of Shares or $ Amount of Fund ---------------------------------------------
Reason for trade: ------------------------------------------------------------------------------------------------
(IF "BUY" YOU ARE EXPECTED TO HOLD THE POSITION FOR AT LEAST 6 MONTHS, IN COMPLIANCE WITH MAM'S
CODE OF ETHICS.)
I have read and understood sections of the Code of Ethics related to insider
trading. This trade is not based on insider information as defined in the
policy.
Employee Signature -----------------------------------------
Date ----------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
COMPLIANCE TO COMPLETE THIS SECTION.
- ----------------------------------------------------------------------------------------------------------------------------
Is this security currently owned or under consideration for purchase or sale in
MAM advisory accounts?
Yes ------- No ------ Date of Last Trade -------------------------
If yes, attach trading details.
Portfolio Manager(s) contacted: -------------------------------------------------------
Approval Granted? Yes ------ Date -------------------------
If no, provide details.
Compliance Signature* ----------------------------------------------------------
Name
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*This Form may only be signed by Dana Schmidt or Mark Geist.
TRADES MUST BE EXECUTED WITHIN TWO BUSINESS DAYS OF THE
APPROVAL DATE! (No exceptions will be given for
unfilled limit orders.)
<PAGE>
EXHIBIT C
Name
---------------------------------------------------
Name of meeting or event
-------------------------------
Location
-----------------------------------------------
Sponsor
------------------------------------------------
I certify that attendance at this meeting or event is in compliance with the
following rules:
1. Attendance is not preconditioned on achievement of sales
targets or a certain volume of trades, or any other incentives
pursuant to a non-cash compensation arrangement.
2. The location of this event is appropriate (E.G., a resort or
other location suitable for corporate events) for the purpose
of the meeting.
3. No payment or reimbursement will be applied to the expenses of
spouses or guests of the access person.
4. No payment or reimbursement is preconditioned on the
achievement of sales targets or a certain volume of trades.
5. Approximate value of payment or reimbursement to access
person: $
-----------
Employee Signature: Date:
---------------------------------------------- ---------
Approved: Yes No
------------------ ---------------
Compliance Officer:
---------------------------------------------
<PAGE>
EXHIBIT D
PERSONAL SECURITY TRANSACTION REPORT
(A brokerage statement containing the same information may be submitted in lieu
of this Report.)
Person for whom
Report is being made: ____________________ Quarter Ending _______, 19__
There were NO securities transactions reportable by me during the above quarter,
except those listed below. NOTE: All transactions are reportable (regardless of
size) except purchases and sales of shares of registered open-end investment
companies, securities issued by the Government of the United States, short term
debt securities which are "government securities" within the meaning of Section
2(a)(16) of the Act, bankers acceptances, bank certificates of deposit and
commercial paper. Bank or brokers statements may be attached if desired instead
of listing the transactions. If necessary, continue on the reverse side. If the
transaction is not a sale or purchase, mark it with a cross and explain the
nature of each account in which the transaction took place, I.E., personal,
wife, children, charitable trust, etc.
PURCHASES
<TABLE>
<CAPTION>
Reviewing
Amount/No. Nature of Officers
Date Security of Shares Price Broker Account Initials
- ----------------- -------------- --------------- ------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
SALES
Date:
Signature:
EXPLANATORY NOTES
This report must be filled quarterly by the 10th day of the month following the
end of the quarter and cover all accounts in which you have an interest, direct
or indirect. This includes any account in which you have "beneficial ownership"
(unless you have no interest or control over it) and non-client accounts over
which you act in an advisory or supervisory capacity.
( ) Tick if you wish to claim that the reporting of the account of the
securities transaction shall not be construed as an admission that you have any
direct or indirect beneficial ownership in such account or securities.
<PAGE>
EXHIBIT E
MONTGOMERY ASSET MANAGEMENT
SEMI-ANNUAL NON-CASH COMPENSATION
ACKNOWLEDGEMENT AND CERTIFICATION
I hereby acknowledge and certify that I understand the rules and procedures
under the Montgomery Asset Management Code of Ethics regarding Non-Cash
Compensation.
I further certify that during the last six months I have not directly or
indirectly accepted or made payments or offers of payments of any non-cash
compensation, except for:
(a) gifts that do not exceed an annual amount per access person or other
person of $100 and are not preconditioned on achievement of a sales
target or volume of trades;
(b) an occasional meal, a ticket to a sporting event or theater or
comparable entertainment which is neither so frequent nor so extensive
as to raise any question of propriety and is not preconditioned on
achievement of a sales target or volume of trades;
(c) payment or reimbursement in connection with meetings held for the
purpose of training or education of access persons or other persons
provided that:
(i) the access person has obtained MAM's written approval to
attend the meeting and (in the case of access persons and
other persons) attendance by access persons or other persons
is not preconditioned on the achievement of a sales target or
any other incentives pursuant to a non-cash compensation
arrangement;
(ii) the location is appropriate for the purpose of the meeting;
(iii) the payment or reimbursement is not applied to the expenses of
guests of the access person or other person; and
(iv) the payment or reimbursement is not preconditioned on the
achievement of a sales target or volume of trades.
- -------------------------------- Date ----------------------------
Print Name
- ----------------------------
Signature
<PAGE>
EXHIBIT F
MONTGOMERY ASSET MANAGEMENT, LLC
- -------------------------------------------------------------------------------
ANNUAL EMPLOYEE CERTIFICATION & OWNERSHIP STATEMENT
INSTRUCTIONS: COMPLETE ALL SECTIONS OF FORM, IF NOT APPLICABLE, PLEASE INDICATE
N/A OR NONE. SIGN YOUR NAME & DATE.
NEW MAM EMPLOYEES: ATTACH A COPY OF YOUR MOST RECENT ACCOUNT STATEMENT FOR EACH
OF THE ACCOUNTS LISTED BELOW*
<TABLE>
<CAPTION>
<S><C>
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CHARLES SCHWAB ACCOUNTS
1. Account Name
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Account Number
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2. Account Name
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Account Number
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OUTSIDE ACCOUNTS (All other brokerage accounts holding securities or mutual funds)
1. Account Name
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Account Number
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Firm Name
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Are statements with confirms being sent to Compliance?
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2. Account Name
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Account Number
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Firm Name
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Are statements with confirms being sent to Compliance?
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ACCOUNTS MANAGED BY INVESTMENT ADVISORS
Name of Advisor
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Account Name/Number
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Are statements with confirms being sent to Compliance?
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PARTNERSHIPS (Limited and General)
Account Name
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Are you a limited or general partner?
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Can you make or influence securities investments by the partnership?
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Are statements with confirms being sent to Compliance?
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PRIVATE PLACEMENTS OR STOCK CERTIFICATES HELD AT HOME
Name of Security
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Private Placement or Stock Certificate?
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Acquisition Date
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Employee Name: ------------------------------- Signature: --------------------- Date: ----------------------------
</TABLE>
<PAGE>
*NEW MAM EMPLOYEES MUST SUBMIT A LIST OF ALL SECURITY HOLDINGS WITHIN 10 DAYS OF
THEIR EMPLOYMENT COMMENCEMENT.
<PAGE>
Page 1
ATTACHMENT 2
2/23/99
OECHSLE INTERNATIONAL ADVISORS, LLC
CODE OF ETHICS
The reputation of Oechsle International Advisors, LLC ("Oechsle") for integrity
and ethics is one of our most important assets. In order to safeguard this
reputation, we believe that it is essential not only to comply with relevant
federal and state laws and regulations, but also to maintain high standards of
personal and professional conduct. Oechsle's Code of Ethics (the "Code") is
designed to ensure that our conduct is at all times consistent with the highest
of ethical standards, with our fiduciary obligations to our clients, and with
industry and regulatory standards for investment managers.
The Code is based on the principle that the officers, directors, members, and
employees of Oechsle owe a fiduciary duty to our clients to:
Always place the interests of our clients first.
Conduct our personal securities transactions in a manner which
does not interfere with client transactions, create an actual
or potential conflict of interest with clients, or otherwise
take unfair advantage of our relationship with our clients.
Avoid even the appearance of impropriety in our personal actions.
Persons covered by this Code must adhere to this general principle as well as
comply with the Code's specific provisions. It bears emphasis that although the
Code provides guidance with respect to many common situations, it cannot address
every possible circumstance that could give rise to a conflict of interest,
potential conflict, or an appearance of impropriety. Regardless of whether a
specific provision of the Code applies, each of us at Oechsle must conduct his
or her activities in accordance with the general principles embodied in the Code
and in such a way as to avoid any actual or potential conflict of interest or
any abuse of an individual's position of trust and responsibility. Please
remember that even if our clients are not harmed, we cannot take inappropriate
advantage of information we learn through our position as fiduciaries. TECHNICAL
COMPLIANCE WITH THE PROCEDURES INCORPORATED IN THE CODE WILL NOT INSULATE FROM
SCRUTINY TRADES WHICH CONTRAVENE AN INDIVIDUAL'S DUTIES TO OECHSLE AND ITS
CLIENTS. Therefore, to protect yourself and Oechsle, please be alert for any
potential for conflicts of interest, and please consult the General Counsel
whenever questions arise concerning the application of the Code to a particular
situation.
<PAGE>
Page 2
PERSONS COVERED BY THE CODE
The provisions and requirements of the Code apply to all officers, directors,
members, and employees of Oechsle and its subsidiaries ("Oechsle employees"). IN
ADDITION, THE PROVISIONS AND REQUIREMENTS OF THE CODE, INCLUDING THE RULES
PERTAINING TO PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS, APPLY TO ALL
MEMBERS OF ANY EMPLOYEE'S "IMMEDIATE FAMILY." ANY FAMILY MEMBER WHO IS PRESENTLY
LIVING IN YOUR HOUSEHOLD, OR TO WHOSE FINANCIAL SUPPORT YOU MAKE A SIGNIFICANT
CONTRIBUTION, IS CONSIDERED TO BE A MEMBER OF YOUR IMMEDIATE FAMILY. Please bear
in mind that the Code applies to all securities accounts:
(i) in which any Oechsle employee or his or her immediate family have any
direct or indirect beneficial interest (e.g., family trust); or
(ii) over which any Oechsle employee or his or her immediate family
exercise any investment authority; or
(iii)which receive any investment advice from any Oechsle employee or his
or her immediate family.
Please remember that the term "beneficial interest" includes more than ordinary
ownership. In general, you may be deemed to have beneficial ownership under any
of the following circumstances:
1. You have the power to sell or transfer the security, or you have the
power to direct the sale or transfer; or
2. You have the power to vote the security or the power to direct the
vote; or
3. You have an economic interest in the security; or
4. You have the right to acquire, within 60 days, the power to sell, the
power to vote, or an economic interest in the security.
You should consider yourself as having beneficial ownership of a security in the
following situations (which also apply to your immediate family):
1. The security is held by you, whether in bearer form, registered in
your name, or otherwise;
2. The security is held by others for your benefit, such as a security
held for you by a bank, custodian, broker, relative, executor,
administrator, agent, or any other person;
3. The security is held by a trust of which you are the trustee, or in
which you have an economic interest, or where you participate in the
investment decisions or otherwise
<PAGE>
Page 3
have direct or indirect influence or control;
4. The security is held by a trust of which you are the settlor if you
have the power to revoke the trust without obtaining the consent of
all the beneficiaries;
5. The security is held by any partnership in which you are a general
partner, or with respect to which you have direct or indirect
influence or control;
6. The security is held in the name of another person if, by reason of
any contract, understanding, relationship, agreement, or other
arrangement, you obtain therefrom benefits substantially equivalent to
those of ownership;
7. The security is held in the name of another person, even though you do
not obtain therefrom benefits substantially equivalent to those of
ownership, if you can vest or revest title in yourself at any time.
Although persons who are not members of your "immediate family" are not required
to comply with the pre-clearance procedures contained in the Code, they also may
not take improper advantage of information that they may receive from you
regarding the activity or holdings of Oechsle clients. In addition, it would be
a violation of the Code, and, specifically of Oechsle's Insider Trading Policy,
for an Oechsle employee to arrange for a friend or relative to trade in a
security in which that Oechsle employee would be precluded from trading for his
or her own account, or for an Oechsle employee to give information about the
activity or holdings of Oechsle clients to any person for the purpose of
facilitating securities trading by that person.
GENERAL TERMS AND PROVISIONS
These provisions apply to all employees of Oechsle and its subsidiaries.
These provisions apply only to transactions in reportable securities.
A. REPORTABLE SECURITIES are ALL securities except:
(a) shares of registered, open-end investment companies (mutual funds) for
which Oechsle is not an advisor or sub-advisor;
(b) direct U.S. government obligations, such as Treasury bonds, notes, and
bills, and U.S. Savings Bonds;
(c) CDs, bankers' acceptances, and other money-market instruments;
(d) transactions in commodities and options and futures on commodities;
(e) investments in or by hedge funds and commingled funds managed by
Oechsle, in which Oechsle employees may have beneficial interests.
You do not need to report transfers of securities, stock splits, or other such
activity.
Thus, REPORTABLE SECURITIES include, but are not limited to:
<PAGE>
Page 4
(a) any type of equity or debt security (including, without limitation,
common and preferred stock and corporate and municipal bonds and debt
obligations issued by foreign governments);
(b) any rights relating to such a security, such as put and call options,
warrants, and convertible securities;
(c) ADRs;
(d) options and futures on security indexes.
B. COMPLIANCE OFFICER - the Oechsle officer assigned the responsibility of
administering this Code is the Compliance Officer, James Record, or in his
absence the General Counsel, Paula N. Drake.
C. PRE-CLEARANCE - of ALL personal securities transactions IN REPORTABLE
SECURITIES is required for all Oechsle employees.
D. BROKERAGE CONFIRMATIONS - copies of brokerage confirmations for each
pre-cleared transaction are required.
E. BLACKOUT PERIODS - for certain designated periods surrounding client trades
or while a transaction is being actively considered for a client.
F. EXCESSIVE SHORT-TERM TRADING - is discouraged and profits from such trading
may have to be disgorged.
G. QUARTERLY REPORTING - of personal securities transactions.
H. ANNUAL CERTIFICATION - that the employee has read and understood the Code.
PRE-CLEARANCE
1. GENERAL RULE:
Oechsle requires written pre-clearance of personal trades in reportable
securities.
2. PROCEDURES:
The pre-clearance requirement is satisfied by completing the Personal Securities
Transaction Pre-Trading Authorization Form (SEE EXHIBIT A). PRE-CLEARANCE IS
ONLY EFFECTIVE FOR THE SPECIFIC TRADE DATE (or for the next available market
session if same-date is not practicable due to foreign market constraints) AND
FOR A SPECIFIC NUMBER OF SHARES. TRADING INSTRUCTIONS GIVEN TO BROKERS MUST BE
FOR SAME DAY EXECUTION. You may not change the trade date, and you may not
increase the size of your order, without obtaining a new pre-clearance. You may,
however, decrease the size of your trade without obtaining a new pre-clearance.
Moreover, you need not place an order for which you have obtained pre-clearance.
If you choose not to place that order, you
<PAGE>
Page 5
must obtain a new pre-clearance if you change your mind and wish to enter the
order on a later date. In addition, you must inform the Compliance Officer in
writing if you decide not to execute a pre-cleared trade.
Generally, the date on which you initiate your trade instructions should be the
date on which the trade is actually executed. However, there are some
exceptions. For purposes of this Code, the trade date for a limit order or a
stop-loss order is the date on which you give the order to your broker, not the
date on which the order is finally executed in accordance with your
instructions. Therefore, if your limit or stop-loss order is entered with the
broker in accordance with the pre-clearance requirements and consistent with the
blackout period, the subsequent execution of that trade will satisfy the Code,
even if Oechsle subsequently enters trades for client accounts that are executed
on the same day as your order is executed.
Three signatures are required on the pre-clearance form:
1. The Compliance Officer or the General Counsel in the Boston office (in
the absence of the Compliance Officer), or the Compliance Officer of
the London office, in the case of that office.
2. The Trading Desk.
3. A Managing Principal.
As a general rule, no person may sign a pre-clearance form for himself or
herself. In order to ensure that all personal securities transactions are
conducted in accordance with the Code, the Compliance Officer of the Boston
office will retain copies of all pre-clearance forms in each employee's personal
securities transactions file.
The Compliance Officer and the Trading Desk will monitor trading in pre-cleared
securities among Oechsle clients to ensure that all applicable blackout periods
have been complied with and that there is otherwise no activity in such
securities that would raise questions regarding any conflicts or potential
conflicts.
EXEMPTIONS:
A. THIRD PARTY ACCOUNTS. If an Oechsle employee nominally has beneficial
ownership over a particular account, but does not exercise direct or
indirect influence or control over that account and provides no investment
advice with respect to the investment decisions made for the account, he or
she may apply to the General Counsel for a waiver from the pre-clearance
provisions of the Code. Waivers are not automatic, are made on a
case-by-case basis, and are conditioned, at a minimum, upon the following:
1. The Oechsle employee discloses to the General Counsel the existence of
the Third Party Account and allows the General Counsel to review, in
her discretion, the governing documents of such accounts.
2. The Oechsle employee establishes to the satisfaction of the General
Counsel that he or
<PAGE>
Page 6
she has no direct or indirect influence or control over the Third Party
Account or over investment decisions made for that account.
3. The Oechsle employee completes the Brokerage Account Certification (SEE
EXHIBIT B) on an annual basis.
4. The Oechsle employee does not disclose to any person with influence or
control over the Third Party Account any action that Oechsle may or may
not take, or has or has not taken, with respect to any security.
B. STOCK INDEX FUTURES AND OPTIONS. The pre-clearance requirements of the Code
do not apply to purchases and sales of stock index options and stock index
futures. However, such transactions must be reported on the employee's quarterly
personal securities transactions report.
PROHIBITED TRANSACTIONS
The following categories of transactions may NOT be engaged in by Oechsle
employees:
1. TRANSACTIONS IN CONJUNCTION WITH OECHSLE CLIENTS:
A. No Oechsle employee shall cause an Oechsle client to either take or not
take any action for such employee's personal benefit (or the personal
benefit of anyone else) rather than for the benefit of the client. For
example, an employee would violate this Code by causing a portfolio to
purchase a security he or she owned for the purpose of supporting or
increasing the price of that security. Causing a portfolio to refrain from
selling a security in an attempt to protect a personal investment, such as
an option on that security, also would violate this Code.
B. No Oechsle Employee shall use knowledge of Oechsle client transactions to
profit by the market effect of those transactions.
C. No Oechsle employee may use futures or options to take positions in
securities which the Code would prohibit if the positions were taken
directly.
D. No Oechsle employee may purchase a security with knowledge that it is being
contemplated for purchase, or will be purchased, for an Oechsle client. No
Oechsle portfolio manager, analyst or trader may buy or sell a security
within seven calendar days on either side of a date on which the security
is bought or sold for the account of any Oechsle client. As an example, if
such an account purchases a particular security on Day 8, all portfolio
managers, analysts and traders would be precluded from purchasing or
selling that security for his or her own account(s) from Day 1 through Day
15.
For all other Oechsle employees the blackout period is one day before and one
day after any trade by any Oechsle client.
<PAGE>
Page 7
If a previously-entered employee trade falls within the blackout period, the
employee must reverse the trade. Thus, for example, if an employee pre-clears a
trade and purchases the security on Day 1, and an Oechsle client purchases the
security on Day 2, the Oechsle employee must reverse the trade. If the trade can
be reversed prior to settlement, the employee should do so, with the cost of
reversal being borne by the employee. If the trade cannot be reversed prior to
settlement, the employee must engage in an offsetting transaction immediately.
If a loss results, the employee must bear the loss; if a profit results, the
employee must donate the profit to a charity of the employee's choice with
suitable evidence of such donation provided to the General Counsel, or forfeit
the profit to Oechsle.
EXEMPTIONS:
A. LARGE CAPITALIZATION STOCKS.
An Oechsle employee may purchase or sell shares of a security which is being
actively considered for purchase or sale, or which is being purchased or sold,
for Oechsle clients if, given the number of shares the employee is purchasing or
selling and the market capitalization (outstanding shares x current price per
share) of the issuer, the employee's trading could have no material impact on
the price of the security and if Oechsle were to trade in the security, such
trading could have no material impact on the price of the security. This
exemption is subject to prior written approval by the General Counsel, the
Trading Desk, and the Chief Operating Officer. YOU MUST SPECIFICALLY REQUEST
THIS PRIOR APPROVAL.
B OPTION EXERCISE BY OTHERS.
An Oechsle employee who has sold ("written") a put or call option in compliance
with the Code will not violate this or any other provision of the Code if the
put or call is exercised and the Oechsle employee must honor the contractual
commitment to purchase or sell the security, as the case may be.
C. MARGIN CALLS.
An Oechsle employee who maintains securities in a margin account with a
broker-dealer will not violate this provision of the Code if the securities are
sold by the broker-dealer pursuant to a bona fide margin call, provided,
however, that withdrawal of collateral by the employee was not a contributing
factor to the margin call.
D. DIVIDEND REINVESTMENT.
An Oechsle employee will not violate this provision of the Code by participating
in an automatic dividend reinvestment program offered by the issuer of a
publicly traded security.
E. CLIENT SMALL INVESTMENTS.
An Oechsle employee may engage in a transaction which would otherwise violate
this provision
<PAGE>
Page 8
of the Code if (a) the client buying the security, or for whom the security is
being considered, is engaged in an ongoing investment program to augment AN
existing position with relatively small regular increments of cash flow, (b) the
General Counsel, after consultation with investment personnel, determines that
neither the client's nor the employee's purchases will materially affect the
market price of the security, and (c) the General Counsel gives prior consent to
the transaction.
F. GIFTS.
Gifts of securities made to others, such as relatives or charities, are treated
as dispositions of beneficial ownership, and must be pre-cleared prior to
transfer of the securities. However, gifts of securities received, if
non-volitional on the Oechsle employees' part, need not be pre-cleared.
G. ACQUISITION AND EXERCISE OF CERTAIN RIGHTS.
The acquisition and exercise of rights that are offered PRO RATA to all
shareholders is not covered by the Code. Exercise of oversubscription rights,
however, does require pre-clearance.
H. STOCK INDEX FUTURES AND STOCK INDEX OPTIONS.
The purchase and sale of stock index futures and stock index options are not
subject to the blackout periods. However, such purchases and sales must be
reported in quarterly reports.
2. PUBLIC OFFERINGS:
No Oechsle employee may purchase equity and equity-related securities in initial
public offerings, whether or not Oechsle client accounts participate in the
offering, except as described below. Oechsle employees may purchase securities
that were the subject of a recent public offering after the offering is
completed, and then only at the prevailing market prices and subject to the
usual pre-clearance procedures. Oechsle employees may not receive special
allocations of "hot issues" from brokers which receive Oechsle business.
<PAGE>
Page 9
EXEMPTIONS:
A. Oechsle employees are permitted to purchase equity and equity-related
securities in secondary offerings if Oechsle client accounts do not hold
the security and if no Oechsle portfolio manager wishes to participate in
the offering for client accounts.
B. Oechsle employees are permitted to purchase equity and equity-related
securities in rights offerings if the opportunity to purchase is extended
equally to all holders of the company's common stock and the offer is
extended to the employee as a holder of the company's common stock.
C. Oechsle employees are permitted to purchase equity and equity-related
securities in an offering if they are entitled to such purchase by virtue
of being a citizen or resident of a country who qualifies for privatization
issues made available to the public in general.
Any purchase of any security in a public offering, even if permitted under these
rules, must be pre-cleared in writing by the General Counsel.
3. PRIVATE OFFERINGS:
No Oechsle employee may purchase a security in a private offering without first
obtaining a pre-clearance from the General Counsel. The employee should complete
and submit to the General Counsel a checklist in the form attached as EXHIBIT C
hereto.
Consideration of the prior approval request will take into account, among other
factors, whether the investment opportunity should be reserved for an Oechsle
client(s), and whether the opportunity is being offered to an individual as a
favor designed to influence that employee's judgment in the performance of his
or her job duties at Oechsle or as compensation for services of an investment
advisory nature rendered to the issuer. If approval is granted and the employee
has any material role in subsequent consideration by an Oechsle client of an
investment in the same, or a directly affiliated issuer, the employee must
disclose his or her interest in the private placement to the person making the
investment decision.
4. SHORT-TERM TRADING:
Excessive short-term trading increases the risk of conflict of interest, may
over time adversely affect an Oechsle employee's investment judgment on behalf
of Oechsle clients, and may unduly occupy an Oechsle employee's time and
thoughts during working hours. Oechsle employees are hired and compensated on
the assumption that their personal investing will generally be on a long-term
basis.
Therefore, while this Code does not impose an absolute prohibition on short-term
trading, excessive short-term trading is prohibited. Whether the extent of
short-term trading by an employee is "excessive" will be determined on a
case-by-case basis, taking into account all
<PAGE>
Page 10
relevant factors, including conditions prevailing in the securities markets and
the types of securities traded. Persons determined to be engaged in excessive
short-term trading will be subject to imposition of any or all of the sanctions
described at the end of this Code, including disgorgement of profits realized
from the short-term trade.
A short-term trade is any purchase and sale, or sale and purchase, of the same
(or equivalent) securities within 60 calendar days.
EXEMPTIONS:
A. OPTION EXERCISE BY OTHERS.
An Oechsle employee who has sold ("written") a put or call option in compliance
with this Code will not have effected a short-term trade if the put or call is
exercised and the Oechsle employee must honor the contractual commitment to
purchase or sell the security, as the case may be, within 90 days of selling the
option.
B. MARGIN CALLS. An Oechsle employee who maintains securities in a margin
account with a broker-dealer will not have effected a short-term trade if the
securities are sold by the broker-dealer pursuant to a bona fide margin call,
provided, however, that withdrawal of collateral by the employee was not a
contributing factor to the margin call.
5. TRANSACTIONS WITH OR INVOLVING OECHSLE CLIENTS:
No Oechsle employee may knowingly initiate a purchase from or sell to an Oechsle
client any securities or other property, nor engage in any transaction to which
an Oechsle client is a party or with which any Oechsle client has a significant
relationship.
6. GENERAL FIDUCIARY OBLIGATION TO CLIENTS; DISCLOSURE OF PERSONAL INTEREST:
As noted above, Oechsle and its employees have a fiduciary responsibility to
Oechsle's clients. Therefore we must avoid any conduct that would be detrimental
to their interests. In order to fulfill our duty, Oechsle employees must offer
all investment opportunities to Oechsle's clients BEFORE taking advantage of
such opportunities. Therefore, before trading in any security that is not
covered by an Oechsle analyst, you should ensure that the appropriate research
analyst or portfolio manager is aware that you have identified a security that
you believe would be a good investment, and explain the basis for your interest
in the security. If, after receiving that information, the analyst or portfolio
manager does not wish to recommend the security for investment by Oechsle
clients, you are free to trade, after securing the necessary pre-approvals. If
the analyst or portfolio manger expresses an interest in that security, however,
you must refrain from trading in that security until a decision has been made as
to whether to purchase that security for Oechsle clients and until any
applicable blackout period has expired.
In addition, if one of your personal securities holdings could create a conflict
of interest, or even a potential conflict of interest, with the interest of an
Oechsle client, you must disclose that
<PAGE>
Page 11
conflict or potential conflict to the appropriate analysts or portfolio managers
before participating in any decision that could affect the security you hold.
For example, if you are an analyst, and if you are recommending that Oechsle
should purchase for client accounts securities of any company whose securities
you hold personally, you must disclose the fact that you own the securities to
the portfolio manager(s) who will make that purchase decision before making your
recommendation. Similarly, if you are a portfolio manager and you want to
purchase for client accounts securities of any company whose securities you hold
personally, you must disclose the fact that you own the securities to someone
else involved in investment decisions BEFORE initiating the purchase. Please
bear in mind, that although not prohibited, as a general matter, Oechsle does
not expect that portfolio managers will hold the same securities as the Accounts
that they manage.
WAIVERS
A written request for a waiver from the prohibited transaction rules may
be granted by the General Counsel after consultation with the applicable
personnel, upon a determination that the waiver is warranted to avoid undue
hardship to the employee and that none of the abuses or potential abuses that
the Code is designed to prevent would occur. Seeking waivers is not encouraged
and waivers will not be granted routinely.
REPORTING
Each Oechsle employee is responsible for complying with the following
reporting requirements:
1. COPIES OF CONFIRMATIONS:
Each Oechsle employee must instruct each broker-dealer with whom he or she
maintains an account, and with respect to all other accounts as to which the
employee is deemed to have beneficial ownership, to send promptly to the
Compliance Officer a copy of all transaction confirmations generated for the
account. For your convenience, a form letter for requesting such confirmations
to be sent to Oechsle is attached as part of Exhibit A.
Confirmations must include the account description, trade date, security
description, number of shares or principal amount of each security, the nature
of the transaction (e.g., purchase, sale, etc.), the total price, and the name
of the institution (e.g., broker, bank, etc.) effecting the transaction.
Each brokerage confirmation received by Oechsle is cross-checked against
pre-clearance forms and quarterly securities transaction reports submitted by
each employee. Copies of all confirmations and associated pre-clearance forms
are retained by the Compliance Officer in the employee's personal securities
transaction file.
In order to ensure that brokerage confirmations are received for all employee
brokerage accounts, all employees are required to complete a Brokerage Account
Form (SEE EXHIBIT B) and
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Page 12
to submit an updated form (within 5 business days) whenever an account is added
or deleted. You and members of your immediate family must disclose promptly
every brokerage account that you maintain and every new brokerage account that
you open to the Compliance Officer. In addition, each employee is asked to
certify annually that the list of brokerage accounts that have been reported
previously remains complete and accurate.
2. TRANSACTION REPORTS:
Each Oechsle employee must file a Quarterly Securities Transaction Report (SEE
EXHIBIT D) with the Compliance Officer within 10 days after the end of each
quarter, whether or not the employee entered into any personal securities
transactions during that quarter. Quarterly reports are required by the SEC for
all investment company managers and enable Oechsle to double-check that all
personal securities transactions have been appropriately pre-cleared and
reported to Oechsle.
3. ANNUAL ACKNOWLEDGMENT:
By February 28 of each year, every Oechsle employee must sign an acknowledgment
stating that he or she has reviewed, understood, and complied with the
provisions of this Code (SEE EXHIBIT E).
OTHER CONFLICTS OF INTEREST
1. GIFTS OR OTHER PREFERENTIAL TREATMENT:
No Oechsle employee may seek or accept gifts, favors, preferential treatment, or
any special arrangement of material value from certain persons because of the
employee's association with Oechsle. This prohibition applies to anyone who does
business or is soliciting business with any Oechsle entity or Oechsle client, as
well as to any organization (such as any broker, dealer, or investment adviser)
engaged in the securities business.
This rule is intended to permit only the most proper type of customary business
amenities. Listed below are examples of items which would be permitted under
proper circumstances and which are prohibited under the intent of this rule.
These examples are illustrative and not all-inclusive. Notwithstanding these
examples, an Oechsle employee may not, under any circumstances, accept anything
which could lead to or create the appearance of any kind of conflict of
interest. For example, acceptance of any consideration is prohibited if it would
create the appearance of a "reward" or inducement for business conducted with
the person providing the consideration or his employer.
Among items not considered of "material value" which, under proper
circumstances, would be considered permissible are:
(a) Occasional lunches or dinners conducted for business purposes;
(b) Occasional cocktail parties or similar social gatherings conducted
for business
<PAGE>
Page 13
purposes;
(c) Occasional attendance at theater, sporting or other entertainment
events; and
(d) Small gifts, usually in the nature of reminder advertising, such as
pens, calendars, etc.
Among items of consideration of "material value" which are NOT permitted under
any circumstances are the following:
(a) Any gift over $250 in value, or any accumulation of gifts which in
aggregate exceeds $250 in value from one source in one calendar year;
(b) Entertainment of a recurring nature such as sporting events, theater,
golf games, etc.;
(c) The cost of transportation to a locality outside the Boston
metropolitan area, and lodging or meals while in another locality,
unless such attendance and reimbursement arrangements have been
approved in advance by the General Counsel;
(d) Personal loans to the Oechsle employee on terms more favorable than
those generally available for comparable credit standing and
collateral; and
(e) Preferential brokerage commissions or spreads or allocation of stock
in "hot issue" initial public offerings for the Oechsle employee's
personal trading account.
2. DIRECTORSHIPS AND TRUSTEESHIPS IN OUTSIDE ORGANIZATIONS:
No Oechsle employee may accept a directorship in an unaffiliated company without
the prior notification and written approval of the General Counsel. Persons such
as portfolio managers and analysts whose primary responsibilities include
recommending and selecting securities for the accounts of Oechsle clients will
not be granted approval to accept directorships in companies which might qualify
for investment by any Oechsle clients. Approval will be based upon the
determination that the board service would not be inconsistent with the
interests of Oechsle's clients. If board service is authorized, appropriate
procedures will be implemented to ensure that confidential information is not
obtained or used by either the employee or Oechsle.
No Oechsle employee may accept a position as trustee, executor, custodian, or as
any other fiduciary, or as a private investment adviser or counselor for any
outside account, without the prior notification and written approval of the
General Counsel.
3. PROVIDING INVESTMENT ADVICE TO OTHERS:
No Oechsle employee may provide investment advice to anyone or manage any
person's portfolio on a discretionary basis, other than for Oechsle clients or
members of the employee's immediate family. Thus, employees should not give
advice to anyone, other than immediate family members, concerning the purchase
or sale of any security. In particular, Oechsle employees may not provide
investment advice for compensation to anyone other than an Oechsle client,
unless the arrangement is disclosed and approved by Oechsle.
4. IMPROPER USE OF FUNDS:
<PAGE>
Page 14
No Oechsle employee may pay, or offer or commit to pay, any amount of
consideration which might be or appear to be a bribe, kickback, or other similar
improper use of funds.
5. GENERAL ANTI-FRAUD PROVISION:
No Oechsle employee may violate the anti-fraud provisions of the federal
securities laws and the rules and regulations promulgated thereunder. This
provision covers a broad range of conduct, including, without limitation, the
following:
A. AFFIRMATIVE DUTY TO DISCLOSE. Oechsle employees who own a security, or who
have decided to effect a personal transaction in a security, have an
affirmative duty to disclose this information in the course of any
communication about that security when the purpose or reasonable
consequence of such communication is to influence an Oechsle client to buy,
hold, or sell that security. The disclosure of ownership should be part of
the initial communication but need not be repeated in the case of
continuing communications directed to a specific person.
B. DISCLOSURE OF OECHSLE INFORMATION. No information regarding any Oechsle
client account or actual or proposed securities trading activities of any
Oechsle client may be disclosed outside the Oechsle organization unless the
information has been publicly announced or reported. Oechsle research
information must not be disclosed unnecessarily and never for personal
gain. Information generally about Oechsle and Oechsle clients is
confidential, and should not be disclosed without a valid business purpose.
C. USE OF INFORMATION. No Oechsle employee may use information from any source
in a manner contrary to the interest of, or in competition with, any
Oechsle client. In particular, an Oechsle employee may not invest in a
company which could reasonably be considered as a potential investment for
Oechsle clients and which has not been considered by Oechsle analysts until
determining with appropriate investment personnel that no portfolio
managers have a current interest in the company on behalf of an Oechsle
client. This rule is not intended to prohibit any Oechsle employees from
uncovering and capitalizing on new "investment ideas," but requires that
Oechsle have the first right to such ideas for its clients.
D. "INSIDE" INFORMATION AND INSIDER TRADING.
Neither Oechsle nor any Oechsle employee may utilize "inside" information
about any issuer of securities for personal benefit or the benefit of
clients. Inside information is material information not generally available
to the public. Information is considered "material" if there is a
substantial likelihood that a reasonable investor would consider it
important in making his or her investment decisions, or if it could
reasonably be expected to affect the price of a company's securities. It
need not be so important that it would have changed the investor's decision
to buy or sell. Information that has been disseminated in a way that makes
it available to investors generally (e.g., national business and financial
news
<PAGE>
Page 15
wire services, such as Dow Jones and Reuters; national news services, such
as New York Times; SEC reports; brokerage firm reports) is considered to
be public information. But, for example, information given by a company
director to an acquaintance of an impending takeover prior to a public
announcement would be "nonpublic."
No Oechsle employee may trade, either personally or on behalf of others, on
material, nonpublic information (insider trading), or communicate such
information to others who trade in violation of the law (tipping). Although the
pre-clearance, reporting, and trade restriction requirements of this Code apply
only to Oechsle employees and their immediate family members, the insider
trading and tipping restrictions reach beyond to prohibit Oechsle employees from
illegally profiting or from funneling illegal profits to any other person. They
also prohibit Oechsle from insider trading or tipping in client accounts.
No Oechsle employee may solicit inside information from any company, whether or
not Oechsle clients own stock of the company or Oechsle analysts follow the
company. In addition, please note that the SEC has adopted a rule specifically
prohibiting trading while in possession of material information about a
prospective tender offer before it is publicly announced or trading during a
tender officer if in possession of information which one has reason to know is
not yet public.
PROCEDURES TO BE FOLLOWED WHEN RECEIVING INSIDE INFORMATION:
Whenever an Oechsle employee receives information that he or she believes to be
material, nonpublic information, he or she should not trade on his or her own
behalf or on behalf of Oechsle clients in the securities to which the
information relates, tip the information to others, or recommend for purchase or
sale such securities, so long as the information remains nonpublic. In addition,
the employee should contact the General Counsel immediately and should refrain
from disclosing the information to anyone else, including persons within the
Oechsle organization, unless specifically advised to do so by the General
Counsel.
SANCTIONS
Failure to comply with this Code may adversely affect an Oechsle employee's
performance evaluation, may require the employee to give up any benefit derived
from the violation, may require the employee to refrain from personal trading
for a period, and may lead to termination of employment in appropriate cases.
Penalties under the federal securities laws are also possible in certain
circumstances.
SANCTIONS may include:
1. CAUTION: Administered by the General Counsel;
2. WARNING: Administered by the General Counsel;
3. FINE: Assessed by the General Counsel, the Chief Operating Officer,
and the Chief
<PAGE>
Page 16
Investment Officer;
4. DISMISSAL: Determined by the Executive Committee;
5. CIVIL REFERRAL TO THE SEC OR OTHER CIVIL REGULATORY AUTHORITIES:
Determined by the Executive Committee;
6. CRIMINAL REFERRAL: Determined by the Executive Committee.
PROCEDURES:
When potential violations of the Code come to the attention of the General
Counsel, she will investigate the matter. This investigation may include a
meeting with the employee. Upon completion of the investigation, if necessary,
the General Counsel may meet with senior management (the Chief Operating Officer
and/or the Chief Investment Officer) or other appropriate parties, and a
determination will be made as to whether any sanction should be imposed. The
employee will be informed of any sanction deemed to be appropriate. If the
employee believes that such sanction is unwarranted, the employee must provide
the General Counsel with a written explanation of such belief within 30 days of
being informed after such determination. The General Counsel will then arrange
for a review by senior management or other appropriate party and will advise the
employee as to whether the sanction will be imposed, modified, or withdrawn. The
employee will be given an opportunity to submit a written statement to senior
management and may be represented by counsel of his or her own choosing, at his
or her own expense, at his or her election.
The General Counsel will maintain a written record of all exceptions granted
from prohibited transactions under this Code.
<PAGE>
Page 17
EXHIBIT A
PERSONAL SECURITIES TRANSACTION PRE-CLEARANCE FORM
NAME OF EMPLOYEE: ____________________________
ACCOUNT NAME AND NUMBER: ____________________________
DATE OF TRANSACTION: ____________________________
SECURITY NAME: ____________________________
SECURITY ID NUMBER (CUSIP/SEDOL): ___________________________
COUNTRY: _______________ TYPE OF SECURITY: ______________
NUMBER OF SHARES: ___________ PRICE: ___________________
BUY: ____________ SELL: _________________
IS THIS A LIMIT ORDER OR STOP-LOSS ORDER TRADE: YES / NO
NAME/ADDRESS OF BROKER: _________________________
_________________________
_____________________________________________________________
I hereby certify that I am familiar with Oechsle's Code of Ethics, and
that this transaction complies in all material respects with Oechsle's policies.
I am not aware of any material, non-public information concerning this issuer or
the market for its securities, or any pending plans or consideration to purchase
these securities for Oechsle clients.
SIGNATURE: _________________________________ DATE: _______________
AUTHORIZATION
TRADING DESK: _________________________ DATE: ____________
MANAGING PRINCIPAL ___________________ DATE: ____________
COMPLIANCE OFFICER: __________________ DATE: ____________
*IF THIS PRE-CLEARED TRADE IS NOT EXECUTED, PLEASE WRITE CANCELED ACROSS IT AND
SUBMIT A COPY OF THIS CANCELED FORM TO THE COMPLIANCE OFFICER.
<PAGE>
Page 18
EXHIBIT A
PERSONAL SECURITIES TRANSACTION PRE-CLEARANCE FORM - (LONDON)
NAME OF EMPLOYEE: ____________________________
ACCOUNT NAME AND NUMBER: ____________________________
DATE OF TRANSACTION: ____________________________
SECURITY NAME: ____________________________
SECURITY ID NUMBER (CUSIP/SEDOL): ___________________________
COUNTRY: _______________ TYPE OF SECURITY: ______________
NUMBER OF SHARES: ___________ PRICE: ___________________
BUY: ____________ SELL: _________________
IS THIS A LIMIT ORDER OR STOP-LOSS ORDER TRADE: YES / NO
NAME/ADDRESS OF BROKER: _________________________
_________________________
_____________________________________________________________
I hereby certify that I am familiar with Oechsle's Code of Ethics, and
that this transaction complies in all material respects with Oechsle's policies.
I am not aware of any material, non-public information concerning this issuer or
the market for its securities, or any pending plans or consideration to purchase
these securities for Oechsle clients.
SIGNATURE: _________________________________ DATE: _______________
AUTHORIZATION
TRADING DESK: ___________________________ DATE: ____________
MANAGING PRINCIPAL: ____________________ DATE: ____________
COMPLIANCE OFFICER: ____________________ DATE: ____________
*IF THIS PRE-CLEARED TRADE IS NOT EXECUTED, PLEASE WRITE CANCELED ACROSS IT AND
SUBMIT A COPY OF THIS CANCELED FORM TO THE COMPLIANCE OFFICER.
<PAGE>
Page 19
EXHIBIT A
SAMPLE LETTER TO SEND TO YOUR BROKER
TO REQUEST DUPLICATE ACCOUNT INFORMATION
[Broker-Dealer Name]
[Broker-Dealer Address]
RE: Account Number(s)
Dear [Broker]:
Please send a duplicate copy of all trade confirmations (NOT the monthly
statements) relating to the account(s) listed above to:
James Record
Compliance Officer
Oechsle International Advisors, LLC
One International Place, 23rd Floor
Boston, MA 02110
Very truly yours,
[Employee Name]
<PAGE>
Page 20
ATTACHMENT 2
2/23/99
EXHIBIT B
LIST OF BROKERAGE ACCOUNTS IN WHICH YOU HAVE DIRECT OR
INDIRECT BENEFICIAL OWNERSHIP*
ANNUAL CERTIFICATION
<TABLE>
<CAPTION>
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
NAME OF
BROKER NAME BROKER ADDRESS ACCOUNT NUMBER ACCOUNT HOLDER RELATIONSHIP
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
- ------------------------ -------------------------------------- ----------------------- ---------------------- ---------------------
</TABLE>
Name of Employee
---------------------------------------------------------
(Print)
I certify that I have disclosed to Oechsle all brokerage accounts in which I
have a direct or indirect beneficial interest.
Signature
----------------------------------------------------------------
*Beneficial ownership is explained in the Code of Ethics.
<PAGE>
Page 21
ATTACHMENT 2
2/23/99
EXHIBIT C
PRIVATE PLACEMENT APPROVAL REQUEST
EMPLOYEE NAME: ___________________________ DATE: ______________
1. COMPANY NAME: ______________________________________
2. Business Operations Summary:
3. Who contacted you regarding this investment? _______________________
4. Which firm/company employs this individual? _______________________
5. Does this individual or firm have a relationship with Oechsle or Oechsle
clients? If so, please explain.
___________________________________________________________________
6. What is the individual's role within the company? ________________________
7. What is your relationship to the individual? _____________________________
8. What is the total amount of the private placement? _______________________
9. What is the value of your proposed investment? ___________________________
10. Does this company have publicly traded securities? ______________________
11. Is this investment suitable for Oechsle clients? Yes ______ No _______
If not, please explain.
___________________________________________________________________
___________________________________________________________________
_____________________________________
Employee Signature
Approved _______ Disapproved ______
Managing Principal _______________________ Date: ______________
General Counsel Signature _______________ Date: ______________
<PAGE>
Page 22
ATTACHMENT 2
2/23/99
EXHIBIT D
QUARTERLY TRANSACTION REPORT
October 1 - December 31, XXXX
The following is a record of every transaction in which I had, or by reason of
which I acquired, any direct or indirect beneficial ownership in securities from
October 1 - December 31, XXXX excluding transactions which do not have to be
reported under Oechsle's Code of Ethics.
I had no securities transactions for the quarter: __
I had the following transactions:
<TABLE>
<CAPTION>
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
Account Name / Trade Buy / Sell # of Price Name and Description (ID # ) Broker/Dealer
(Number) Date shares of Security
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
- ----------------- ----------- ------------ ----------- ----------- -------------------------------- --------------------------
</TABLE>
- ------------------------------ ------------------------------
Signature Date
- ----------------------------
Print Name
<PAGE>
Page 23
EXHIBIT E
OECHSLE INTERNATIONAL ADVISORS, LLC
CODE OF ETHICS
ANNUAL CERTIFICATION
I have received a copy of Oechsle International Advisors, LLC's Code of Ethics,
dated February 23, 1999, I have read it and understand it.
I understand that, as a condition of my employment, I am required to comply with
the Code of Ethics. I agree to comply with all provisions of the Code of Ethics,
including, but not limited to, those governing personal securities transactions.
I certify that to the best of my knowledge I have complied with the terms of the
Code of Ethics during the most recent calendar year.
I authorize Oechsle to furnish the information contained in any report of
securities transactions filed by me with the General Counsel or the Compliance
Officer to such federal, state, and self-regulatory authorities as may be
required by law or by applicable rules and regulations.
I certify that I have disclosed to Oechsle all brokerage accounts in which I
have a beneficial interest, and that I have authorized each such brokerage firm
to send directly to Oechsle duplicate copies of all transaction confirmations
for such accounts.
- --------------------------------
Date
- ---------------------------------
Name (Print)
- ----------------------------------
Signature of Employee
<PAGE>
PIMCO CODE OF ETHICS
Effective as of March 31, 2000
INTRODUCTION
GENERAL PRINCIPLES
This Code of Ethics is based on the principle that you, as a director,
officer or other Advisory Employee of Pacific Investment Management Company
("PIMCO"), owe a fiduciary duty to, among others, the shareholders of the Funds
and other clients (together with the Funds, the "Advisory Clients") for which
PIMCO serves as an advisor or subadvisor. Accordingly, you must avoid
activities, interests and relationships that might interfere or appear to
interfere with making decisions in the best interests of our Advisory Clients.
At all times, you must observe the following GENERAL RULES:
1. YOU MUST PLACE THE INTERESTS OF OUR ADVISORY CLIENTS FIRST. In
other words, as a fiduciary you must scrupulously avoid
serving your own personal interests ahead of the interests of
our Advisory Clients. You must adhere to this general
fiduciary principle as well as comply with the Code's specific
provisions. Technical compliance with the Code's procedures
will not automatically insulate from scrutiny any trades that
indicate an abuse of your fiduciary duties or that create an
appearance of such abuse.
Your fiduciary obligation applies not only to your personal
trading activities but also to actions taken on behalf of
Advisory Clients. In particular, you may not cause an Advisory
Client to take action, or not to take action, for your
personal benefit rather than the benefit of the Advisory
Client. For example, you would violate this Code if you caused
an Advisory Client to purchase a Security or Futures Contract
you owned for the purpose of increasing the value of that
Security or Futures Contract. If you are a portfolio manager
or an employee who provides information or advice to a
portfolio manager or helps execute a portfolio manager's
decisions, you would also violate this Code if you made a
personal investment in a Security or Futures Contract that
might be an appropriate investment for an Advisory Client
without first considering the Security or Futures Contract as
an investment for the Advisory Client.
2. YOU MUST CONDUCT ALL OF YOUR PERSONAL INVESTMENT TRANSACTIONS
IN FULL COMPLIANCE WITH THIS CODE, THE PIMCO ADVISORS L.P.
INSIDER TRADING POLICY AND PROCEDURES (THE "INSIDER TRADING
POLICY"), AND THE PIMCO ADVISORS L.P. POLICY REGARDING SPECIAL
TRADING PROCEDURES FOR SECURITIES OF PIMCO
<PAGE>
ADVISORS L.P. (THE "SPECIAL TRADING PROCEDURES")(1) AND IN
SUCH A MANNER AS TO AVOID ANY ACTUAL OR POTENTIAL CONFLICT
OF INTEREST OR ANY ABUSE OF YOUR POSITION OF TRUST AND
RESPONSIBILITY. PIMCO encourages you and your family to
develop personal investment programs. However, those
investment programs must remain within boundaries reasonably
necessary to ensure that appropriate safeguards exist to
protect the interests of our Advisory Clients and to avoid
even the APPEARANCE of unfairness or impropriety. Accordingly,
YOU MUST COMPLY WITH THE POLICIES AND PROCEDURES SET FORTH IN
THIS CODE UNDER THE HEADING PERSONAL INVESTMENT TRANSACTIONS.
In addition, you must comply with the policies and procedures
set forth in the INSIDER TRADING POLICY AND SPECIAL TRADING
PROCEDURES, which are attached to this Code as Appendix II and
III, respectively. Doubtful situations should be resolved in
favor of our Advisory Clients and against your personal
trading.
3. YOU MUST NOT TAKE INAPPROPRIATE ADVANTAGE OF YOUR POSITION.
The receipt of investment opportunities, perquisites, gifts or
gratuities from persons seeking business with PIMCO directly
or on behalf of an Advisory Client could call into question
the independence of your business judgment. Accordingly, you
must comply with the policies and procedures set forth in this
Code under the heading GIFTS AND SERVICE AS A DIRECTOR.
Doubtful situations should be resolved against your personal
interest.
THE GENERAL SCOPE OF THE CODE'S
APPLICATIONS TO PERSONAL INVESTMENT ACTIVITIES
The Code reflects the fact that PIMCO specializes in the management of
fixed income portfolios. The vast majority of assets PIMCO purchases and sells
on behalf of its Advisory Clients consist of corporate debt Securities, U.S. and
foreign government obligations, asset-backed Securities, money market
instruments, foreign currencies, and futures contracts and options with respect
to those instruments. For its StocksPLUS Funds, PIMCO also purchases futures and
options on the S & P 500 index and, on rare occasions, may purchase or sell
baskets of the stocks represented in the S & P 500. For its Convertible Bond
Fund and other Advisory Clients, PIMCO purchases convertible securities that may
be converted or exchanged into underlying shares of common stock. Other PIMCO
Funds may also invest in convertible securities. The Convertible Bond Fund and
other Advisory Clients may also invest a portion of their assets in common
stocks.
Rule 17j-1 under the Investment Company Act of 1940 requires REPORTING
of all personal transactions in Securities (other than certain Exempt
Securities) by certain persons, whether or not they are Securities that might be
purchased or sold by PIMCO on behalf of its Advisory Clients. The Code
implements that reporting requirement.
- ---------------------------
(1) PIMCO expects Allianz of America ("AZOA") to acquire a majority interest in
PIMCO Advisors L.P. ("PALP") in the second quarter of 2000. When that
acquisition is consummated, the Special Trading Procedures for PALP securities
will no longer apply since PALP securities will not be publicly owned or traded.
2
<PAGE>
However, since the purpose of the Code is to avoid conflicts of
interest arising from personal trading activities in Securities and other
instruments that are held or might be acquired on behalf of our Advisory
Clients, this Code only places RESTRICTIONS on personal trading activities in
such investments. As a result, this Code does not place restrictions (beyond
reporting) on personal trading in most individual equity Securities. Except for
the small number of Portfolio Employees who are responsible for PIMCO's
Municipal Bond Fund, this Code also does not place restrictions (beyond
reporting) on personal trading in Tax-Exempt Municipal Bonds. Although equities
and Tax-Exempt Municipal Bonds are Securities, they are not purchased or sold by
PIMCO on behalf of the vast majority of PIMCO's Advisory Clients and PIMCO has
established special procedures to avoid conflicts of interest that might
otherwise arise from personal trading in those Securities. On the other hand,
this Code does require reporting and restrict trading in certain Futures
Contracts which, although they are not Securities, are instruments in which
PIMCO frequently trades for many of its Advisory Clients.
This Code applies to PIMCO's officers and directors as well as to all
of its Advisory Employees. The Code recognizes that portfolio managers and the
investment personnel who provide them with advice and who execute their
decisions occupy more sensitive positions than other Advisory Employees and that
it is appropriate to subject their personal investment activities to greater
restrictions.
THE ORGANIZATION OF THE CODE
The remainder of this Code is divided into three sections. The first
section concerns PERSONAL INVESTMENT TRANSACTIONS. The second section describes
the restrictions on GIFTS AND SERVICE AS A DIRECTOR. The third section
summarizes the methods for ensuring COMPLIANCE under the Code. In addition, the
following APPENDICES are also a part of this Code:
I. Definitions of Capitalized Terms.
II. The PIMCO Advisors L.P. Insider Trading Policy and Procedures.
III. The PIMCO Advisors L.P. Policy Regarding Special Trading Procedures for
Securities of PIMCO Advisors L.P.
IV. Form for Acknowledgment of Receipt of this Code.
V. Form for Annual Certification of Compliance with this Code.
VI. Form for Initial Report of Accounts.
VII. Form for Quarterly Report of Investment Transactions.
VIII. Form for Annual Holdings Report.
IX. Preclearance Request Form
X. List of PIMCO Compliance Officers.
QUESTIONS
Questions regarding this Code should be addressed to a Compliance
Officer listed on Appendix X. Those Compliance Officers compose the PIMCO
Compliance Committee.
3
<PAGE>
PERSONAL INVESTMENT TRANSACTIONS
IN GENERAL
Subject to the limited exceptions described below, you are required to
report all Investment Transactions in SECURITIES AND FUTURES CONTRACTS made by
you, a member of your Immediate Family or a trust in which you have an interest,
or on behalf of any account in which you have an interest or which you direct.
In addition, you must PRECLEAR certain Investment Transactions in SECURITIES AND
FUTURES CONTRACTS THAT PIMCO HOLDS OR MAY ACQUIRE ON BEHALF OF AN ADVISORY
CLIENT, INCLUDING CERTAIN INVESTMENT TRANSACTIONS IN RELATED SECURITIES.
The details of these reporting and preclearance requirements are
described below. This Code uses a number of capitalized terms, E.G. Advisory
Employee, Beneficial Ownership, Designated Equity Security, Exempt Security,
Fixed Income Security, Fund, Futures Contract, Immediate Family, Initial Public
Offering, Investment Transaction, Municipal Bond Portfolio Employee, Personal
Account, Portfolio Employee, Private Placement, Qualified Foreign Government,
Related Account, Related Security, and Security. The definitions of these
capitalized terms are set forth in Appendix I. TO UNDERSTAND YOUR
RESPONSIBILITIES UNDER THE CODE, IT IS IMPORTANT THAT YOU REVIEW AND UNDERSTAND
THE DEFINITIONS IN APPENDIX I.
REPORTING OBLIGATIONS
NOTIFICATION OF REPORTING OBLIGATIONS
As an Advisory Employee, you are required to report accounts and
Investment Transactions in accordance with the requirements of this Code.
USE OF BROKER-DEALERS AND FUTURES COMMISSION MERCHANTS
Unless you are an independent director, YOU MUST USE A REGISTERED
BROKER-DEALER OR REGISTERED FUTURES COMMISSION MERCHANT to engage in any
purchase or sale of a publicly-traded Security or Publicly-Traded Futures
Contract. This requirement also applies to any purchase or sale of a
publicly-traded Security or of a Publicly-Traded Futures Contract in which you
have, or by reason of the Investment Transaction will acquire, a Beneficial
Ownership interest. Thus, as a general matter, any Investment Transaction in
publicly-traded Securities or Publicly-Traded Futures Contracts by members of
your Immediate Family will need to be made through a registered broker-dealer or
futures commission merchant.
INITIAL REPORT
Within 10 days after commencing employment or within 10 days of any
event that causes you to become subject to this Code (E.G. promotion to a
position that makes you an Advisory Employee), you shall supply to a Compliance
Officer copies of the most recent statements for each and every Personal Account
and Related Account that holds or is likely to hold a Security or a Futures
Contract in which you have a Beneficial Ownership interest, as well as copies of
confirmations for any and all Investment Transactions subsequent to the
effective date of those
4
<PAGE>
statements. These documents shall be supplied to the Compliance Officer by
attaching them to the form appended hereto as Appendix VI.
On that same form you shall supply the name of any broker, dealer, bank
or futures commission merchant and the number for any Personal Account and
Related Account that holds or is likely to hold a Security or a Futures Contract
in which you have a Beneficial Ownership interest for which you cannot supply
the most recent account statement. You shall also certify, where indicated on
the form, that the contents of the form and the documents attached thereto
disclose all such Personal Accounts and Related Accounts.
In addition, you shall also supply, where indicated on the form, the
following information for each Security or Futures Contract in which you have a
Beneficial Ownership interest, to the extent that this information is not
available from the statements attached to the form:
1. A description of the Security or Futures Contract, including
its name or title;
2. The quantity (E.G. in terms of numbers of shares, units or
contracts) and principal amount (in dollars) of the Security
or Futures Contract; and
3. The name of any broker, dealer, bank or futures commission
merchant with which you maintained an account in which the
Security or Futures Contract was held.
NEW ACCOUNTS
Immediately upon the opening of a NEW Personal Account or a Related
Account that holds or is likely to hold a Security or a Futures Contract, you
shall supply a Compliance Officer with the name of the broker, dealer, bank or
futures commission merchant for that account, the identifying number for that
Personal Account or Related Account, and the date the account was established.
TIMELY REPORTING OF INVESTMENT TRANSACTIONS
You must cause each broker, dealer, bank or futures commission merchant
that maintains a Personal Account or a Related Account that holds a Security or
a Futures Contract in which you have a Beneficial Ownership interest to provide
to a Compliance Officer, on a timely basis, duplicate copies of trade
confirmations of all Investment Transactions in that account and of periodic
statements for that account ("duplicate broker reports").
In addition, you must report to a Compliance Officer, on a timely
basis, any Investment Transaction in a Security or a Futures Contract in which
you have or acquired a Beneficial Ownership interest that was established
without the use of a broker, dealer, bank or futures commission merchant.
QUARTERLY CERTIFICATIONS AND REPORTING
At the end of the first, second and third calendar quarters, a
Compliance Officer will provide you with a list of all accounts that you have
previously identified to PIMCO as a Personal Account or a Related Account that
holds or is likely to hold a Security or Futures
5
<PAGE>
Contract. Within 10 days after the end of that calendar quarter, you shall make
any necessary additions, corrections or deletions to that list and return it to
a Compliance Officer with a certification that: (a) the list, as modified (if
necessary), represents a complete list of the Personal Accounts and Related
Accounts that hold Securities or Futures Contracts in which you have or had a
Beneficial Ownership interest and for which PIMCO should have received or will
receive timely duplicate broker reports for the calendar quarter just ended, and
(b) the broker, dealer, bank or futures commission merchant for each account on
the list has been instructed to send a Compliance Officer timely duplicate
broker reports for that account.
You shall provide, on a copy of the form attached hereto as Appendix
VII, the following information for each Investment Transaction during the
calendar quarter just ended, to the extent that the duplicate broker reports for
that calendar quarter did not supply this information to PIMCO:
1. The date of the Investment Transaction, the title, the
interest rate and maturity date (if applicable), the number of
shares or contracts, and the principal amount of each Security
or Futures Contract involved;
2. The nature of the Investment Transaction (I.E. purchase, sale
or any other type of acquisition or disposition);
3. The price of the Security or Futures Contract at which the
transaction was effected; and
4. The name of the broker, dealer, bank, or futures commission
merchant with or through which the transaction was effected.
You shall provide similar information for the fourth calendar quarter on a copy
of the form attached hereto as Appendix VIII, which form shall also be used for
the Annual Holdings Report described below.
ANNUAL HOLDINGS REPORTS
Beginning with calendar year 2000, a Compliance Officer will provide to
you, promptly after the end of the calendar year, a list of all accounts that
you have previously identified to PIMCO as a Personal Account or a Related
Account that held or was likely to hold a Security or Futures Contract during
that calendar year. Within 10 days after the end of that calendar year, you
shall make any necessary additions, corrections or deletions to that list and
return it to a Compliance Officer with a certification that: (a) the list, as
modified (if necessary), represents a complete list of the Personal Accounts and
Related Accounts that held Securities or Futures Contracts in which you had a
Beneficial Ownership interest as of the end of that calendar year and for which
PIMCO should have received or will receive an account statement of holdings as
of the end of that calendar year, and (b) the broker, dealer, bank or futures
commission merchant for each account on the list has been instructed to send a
Compliance Officer such an account statement.
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You shall provide, on a copy of the form attached hereto as Appendix
VIII, the following information for each Security or Futures Contract in which
you had a Beneficial Ownership interest, as of the end of the previous calendar
year, to the extent that the previously referenced account statements have not
supplied or will not supply this information to PIMCO:
1. The title, quantity (E.G. in terms of numbers of shares, units
or contracts) and principal amount of each Security or Futures
Contract in which you had any Beneficial Ownership interest;
and
2. The name of any broker, dealer, bank or futures commission
merchant with which you maintain an account in which any such
Securities or Futures Contracts have been held or are held for
your benefit.
In addition, you shall also provide, on that same form, Investment Transaction
information for the fourth quarter of the calendar year just ended. This
information shall be of the type and in the form required for the quarterly
reports described above.
RELATED ACCOUNTS
The reporting and certification obligations described above also apply
to any Related Account (as defined in Appendix I) and to any Investment
Transaction in a Related Account.
It is important for you to recognize that the definitions of "Related
Account" and "Beneficial Ownership" in Appendix I may require you to provide, or
to arrange for the broker, dealer, bank or futures commission merchant to
furnish, copies of reports for any account used by or for a member of your
Immediate Family or a trust in which you or a member of your Immediate Family
has any vested interest, as well as for any other accounts in which you may have
the opportunity, directly or indirectly, to profit or share in the profit
derived from any Investment Transaction in that account.
EXEMPTIONS FROM REPORTING
You need not report Investment Transactions in any account over which
neither you nor an Immediate Family Member has or had any direct or indirect
influence or control.
You also need not report Investment Transactions in Exempt Securities
(as defined in Appendix I) nor need you furnish, or require a broker, dealer,
bank or futures commission merchant to furnish, copies of confirmations or
periodic statements for accounts that hold only Exempt Securities. This includes
accounts that only hold U.S. Government Securities, money market interests, or
shares in open-end mutual funds. This exemption from reporting shall end
immediately, however, at such time as there is an Investment Transaction in that
account in a Futures Contract or in a Security that is not an Exempt Security.
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PROHIBITED INVESTMENT TRANSACTIONS
INITIAL PUBLIC OFFERINGS OF EQUITY SECURITIES
If you are a Portfolio Employee (as defined in Appendix I), you may not
acquire Beneficial Ownership of any equity Security in an Initial Public
Offering.
PRIVATE PLACEMENTS AND INITIAL PUBLIC OFFERING OF DEBT SECURITIES
If you are a Portfolio Employee, you may not acquire a Beneficial
Ownership interest in any Security through a Private Placement (or subsequently
sell it), or acquire a Beneficial Ownership interest in any debt Security in an
Initial Public Offering unless you have received the prior written approval of
the Chief Executive Officer of PIMCO or of a Compliance Officer listed on
Appendix X. Approval will not be given unless a determination is made that the
investment opportunity should not be reserved for one or more Advisory Clients,
and that the opportunity to invest has not been offered to you by virtue of your
position with PIMCO.
If, after receiving the necessary approval, you have acquired a
Beneficial Ownership interest in Securities through a Private Placement, you
must DISCLOSE that investment when you play a part in any consideration of any
investment by an Advisory Client in the issuer of the Securities, and any
decision to make such an investment must be INDEPENDENTLY REVIEWED by a
portfolio manager who does not have a Beneficial Ownership interest in any
Securities of the issuer.
PIMCO ADVISORS L.P.
You may not engage in any Investment Transaction in interests in PIMCO
Advisors L.P. ("PALP"), except in compliance with the Special Trading Procedures
applicable to such transactions.(2)
PRECLEARANCE
All Investment Transactions in Securities and Futures Contracts in a
Personal Account or Related Account, or in which you otherwise have or will
acquire a Beneficial Ownership interest, must be precleared by a Compliance
Officer unless an Investment Transaction, Security or Futures Contract falls
into one of the following categories that are identified as "exempt from
preclearance."
PRECLEARANCE PROCEDURE
Preclearance shall be requested by completing and submitting a copy of
the preclearance request form attached hereto as Appendix IX to a Compliance
Officer. No Investment Transaction subject to preclearance may be effected prior
to receipt of written authorization of the transaction by a Compliance Officer.
The authorization and the date of authorization will be
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(2) As indicated in note 1, above, those procedures will expire and no longer
be effective after AZOA completes its acquisition of a majority interest in
PALP.
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reflected on the preclearance request form. Unless otherwise specified, that
authorization shall be effective, unless revoked, until the earlier of: (a) the
close of business on the day the authorization is given, or (b) until you
discover that the information on the preclearance request form is no longer
accurate.
The Compliance Officer from whom authorization is sought may undertake
such investigation as he or she considers necessary to determine that the
Investment Transaction for which preclearance has been sought complies with the
terms of this Code and is consistent with the general principles described at
the beginning of the Code.
Before deciding whether to authorize an Investment Transaction in a
particular Security or Futures Contract, the Compliance Officer shall determine
and consider, based upon the information reported or known to that Compliance
Officer, whether within the most recent 15 days: (a) the Security, the Futures
Contract or any Related Security is or has been held by an Advisory Client, or
(b) is being or has been considered for purchase by an Advisory Client. The
Compliance Officer shall also determine whether there is a pending BUY or SELL
order in the same Security or Futures Contract, or in a Related Security, on
behalf of an Advisory Client. If such an order exists, authorization of the
personal Investment Transaction shall not be given until the Advisory Client's
order is executed or withdrawn. This prohibition may be waived by a Compliance
Officer if he or she is convinced that: (a) your personal Investment Transaction
is necessary, (b) your personal Investment Transaction will not adversely affect
the pending order of the Advisory Client, and (c) provision can be made for the
Advisory Client trade to take precedence (in terms of price) over your personal
Investment Transaction.
EXEMPTIONS FROM PRECLEARANCE
Preclearance shall NOT be required for the following Investment
Transactions, Securities and Futures Contracts. They are exempt only from the
Code's preclearance requirement, and, unless otherwise indicated, remain subject
to the Code's other requirements, including its reporting requirements.
INVESTMENT TRANSACTIONS EXEMPT FROM PRECLEARANCE
Preclearance shall NOT be required for any of the following Investment
Transactions:
1. Any transaction in a Security or Futures Contract in an
account that is managed or held by a broker, dealer, bank,
futures commission merchant, investment adviser, commodity
trading advisor or trustee and over which you do not exercise
investment discretion, have notice of transactions prior to
execution, or otherwise have any direct or indirect influence
or control. There is a presumption that you can influence or
control accounts held by members of your Immediate Family
sharing the same household. This presumption may be rebutted
only by convincing evidence.
2. Purchases of Securities under dividend reinvestment plans.
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3. Purchases of Securities by exercise of rights issued to the
holders of a class of Securities PRO RATA, to the extent they
are issued with respect to Securities in which you have a
Beneficial Ownership interest.
4. Acquisitions or dispositions of Securities as the result of a
stock dividend, stock split, reverse stock split, merger,
consolidation, spin-off or other similar corporate
distribution or reorganization applicable to all holders of a
class of Securities in which you have a Beneficial Ownership
interest.
SECURITIES EXEMPT FROM PRECLEARANCE
REGARDLESS OF TRANSACTION SIZE
Preclearance shall NOT be required for an Investment Transaction in the
following Securities or Related Securities, regardless of the size of that
transaction:
1. All "Exempt Securities" defined in Appendix I, I.E. U.S.
Government Securities, shares in open-end mutual funds, and
high quality short-term debt instruments.
2. All closed-end mutual funds (other than PIMCO Commercial
Mortgage Securities Trust, Inc.), and rights distributed to
shareholders in closed-end mutual funds.
3. All options on any index of equity Securities.
4. All Fixed Income Securities issued by agencies or
instrumentalities of, or unconditionally guaranteed by, the
Government of the United States.
5. All options on foreign currencies or baskets of foreign
currencies (whether or not traded on an exchange or board of
trade).
6. EXCEPT FOR DESIGNATED EQUITY SECURITIES (as defined in
Appendix I and discussed below), all equity Securities or
options, warrants or other rights to equity Securities.
7. EXCEPT FOR MUNICIPAL BOND PORTFOLIO EMPLOYEES (as defined in
Appendix I), all Tax-Exempt Municipal Bonds.
SECURITIES EXEMPT FROM PRECLEARANCE
DEPENDING ON TRANSACTION SIZE
Preclearance shall NOT be required for an Investment Transaction in the
following Securities or Related Securities if they do not exceed the specified
transaction size thresholds:
1. Purchases or sales of up to $1,000,000 (in market value or
face amount whichever is greater) per calendar month per
issuer of Fixed Income Securities issued by a Qualified
Foreign Government.
2. Purchases or sales of up to $100,000 (in market value or face
amount, whichever is greater) per calendar month per issuer of
corporate debt Securities, mortgage-
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backed and other asset-backed Securities, structured notes and
loan participations, and foreign government debt Securities
issued by non-qualified foreign governments.
PRECLEARANCE OF DESIGNATED EQUITY SECURITIES
If a Compliance Officer receives notification from a Portfolio Employee
that an equity Security or an option, warrant or other right to an equity
Security is being considered for purchase or sale by PIMCO on behalf of one of
its Advisory Clients, the Compliance Officer will send you an e-mail message or
similar transmission notifying you that this equity Security or option, warrant
or other right to an equity Security is now a "Designated Equity Security." A
current list of Designated Equity Securities (if any) will also be available on
the PIMCO intranet site. You must preclear any Investment Transaction in a
Designated Equity Security or a Related Security during the period when that
designation is in effect.
FUTURES CONTRACTS EXEMPT FROM PRECLEARANCE
REGARDLESS OF TRANSACTION SIZE
Preclearance shall NOT be required for an Investment Transaction in the
following Futures Contracts, regardless of the size of that transaction (as
indicated in Appendix I, for these purposes a "Futures Contract" includes a
futures option):
1. Currency Futures Contracts.
2. U.S. Treasury Futures Contracts.
3. Eurodollar Futures Contracts.
4. Futures Contracts an any index of equity Securities.
5. Futures Contracts on physical commodities or indices thereof
(E.G. contracts for future delivery of grain, livestock, fiber
or metals whether for physical delivery or cash).
6. Privately-Traded Contracts.
FUTURES CONTRACTS EXEMPT FROM PRECLEARANCE
DEPENDING ON TRANSACTION SIZE
Preclearance shall NOT be required for an Investment Transaction in the
following Futures Contracts if the total number of contracts purchased or sold
during a calendar month does not exceed the specified limitations:
1. Purchases or sales of up to 50 PUBLICLY-TRADED FUTURES
CONTRACTS to acquire Fixed Income Securities issued by a
particular Qualified Foreign Government.
2. Purchases or sales of up to 10 OF EACH OTHER INDIVIDUAL
PUBLICLY-TRADED FUTURES CONTRACT if the open market interest
for such Futures Contract as
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reported in THE WALL STREET JOURNAL on the date of your
Investment Transaction (for the previous trading day) is at
least 1,000 contracts. Examples of Futures Contracts for which
this exemption would be available include a Futures Contract
on a foreign government debt Security issued by a
non-qualified foreign government as well as a 30-day federal
funds Futures Contract.
For purposes of these limitations, a Futures Contract is defined by its
expiration month. For example, you need not obtain preclearance to purchase 50
December Futures Contracts on German Government Bonds and 50 March Futures
Contracts on German Government Bonds. Similarly, you may roll over 10 September
Fed Funds Futures Contracts by selling those 10 contracts and purchasing 10
October Fed Funds Futures Contracts since the contracts being sold and those
being purchased have different expiration months. On the other hand, you could
not purchase 10 January Fed Funds Future Contracts if the open interest for
those contracts was less than 1,000 contracts, even if the total open interest
for all Fed Funds Futures Contracts was greater than 1,000 contracts.
ADDITIONAL EXEMPTIONS FROM PRECLEARANCE
The Compliance Committee may exempt other classes of Investment
Transactions, Securities or Futures Contracts from the Code's preclearance
requirement upon a determination that they do not involve a realistic
possibility of violating the general principles described at the beginning of
the Code.
PRECLEARANCE REQUIRED
Given the exemptions described above, preclearance shall be required
for Investment Transactions in:
1. Designated Equity Securities.
2. Tax-Exempt Municipal Bonds by Municipal Bond Portfolio
Employees.
3. More than $100,000 per calendar month per issuer of corporate
debt Securities, mortgage-backed and other asset-backed
Securities, taxable municipal debt Securities, structured
notes and loan participations, and foreign government debt
Securities issued by non-qualified foreign governments.
4. More than $1,000,000 per calendar month in debt Securities of
a Qualified Foreign Government.
5. Related Securities that are exchangeable for or convertible
into one of the Securities requiring preclearance under (1),
(2), (3) or (4) above.
6. More than 50 Publicly-Traded Futures Contracts per calendar
month to acquire Fixed Income Securities issued by a
particular Qualified Foreign Government.
7. More than 10 of any other individual Publicly-Traded Futures
Contract or any Publicly-Traded Futures Contract for which the
open market interest as reported
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in THE WALL STREET JOURNAL on the date of your Investment
Transaction (for the previous trading day) is less than 1,000
contracts, unless the Futures Contract is exempt from
preclearance regardless of transaction size.
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8. Any other Security or Publicly-Traded Futures Contract that is
not within the "exempt" categories listed above.
9. PIMCO Commercial Mortgage Securities Trust, Inc.
SHORT-TERM TRADING PROFITS
You may not profit from the purchase and sale, or the sale and
purchase, within 60 calendar days, of FIXED INCOME SECURITIES OR RELATED
SECURITIES. Portfolio Employees may not profit from the purchase and sale, or
the sale and purchase, within 60 calendar days, of DESIGNATED EQUITY SECURITIES
and Municipal Bond Portfolio Employees may not profit from the purchase and
sale, or the sale and purchase, within 60 calendar days, of TAX-EXEMPT MUNICIPAL
BONDS. Any such short-term trade must be unwound, or if that is not practical,
the profits must be contributed to a charitable organization.
This ban does NOT apply to Investment Transactions in U.S. Government
Securities, most equity Securities, mutual fund shares, index options or Futures
Contracts. This ban also does not apply to a purchase or sale in connection with
one of the four categories of Investment Transactions Exempt From Preclearance
described on pages 9-10, above.
You are considered to profit from a short-term trade if Securities in
which you have a Beneficial Ownership interest are sold for more than their
purchase price, even though the Securities purchased and the Securities sold are
held of record or beneficially by different persons or entities.
BLACKOUT PERIODS
You MAY NOT purchase or sell a Security, a Related Security or a
Futures Contract at a time when you intend or know of another's intention to
purchase or sell that Security or Futures Contract on behalf of any Advisory
Client.
As noted previously in the description of the Preclearance Process, a
Compliance Officer may not preclear an Investment Transaction in a Security or a
Futures Contract at a time when there is a pending BUY OR SELL order in the same
Security or Futures Contract, or a Related Security, until that order is
executed or withdrawn.
These prohibitions do not apply to Investment Transactions in any
Futures Contracts that are exempt from preclearance regardless of transaction
size.
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GIFTS AND SERVICE AS A DIRECTOR
GIFTS
You MAY NOT accept any investment opportunity, gift, gratuity or other
thing of more than nominal value from any person or entity that does business,
or desires to do business, with PIMCO directly or on behalf of an Advisory
Client (a "Giver"). You MAY, however, accept gifts from a single Giver so long
as their aggregate annual value does not exceed $500, and you MAY attend
business meals, sporting events and other entertainment events at the expense of
a Giver (without regard to their aggregate annual value), so long as the expense
is reasonable and both you and the Giver are present.
SERVICE AS A DIRECTOR
If you are an Advisory Employee, you may not serve on the board of
directors or other governing board of a publicly traded entity, other than of a
Fund for which PIMCO is an advisor or subadvisor, unless you have received the
prior written approval of the Chief Executive Officer and the Chief Legal
Officer of PIMCO. Approval will not be given unless a determination is made that
your service on the board would be consistent with the interests of our Advisory
Clients. If you are permitted to serve on the board of a publicly traded entity,
you will be ISOLATED from those Advisory Employees who make investment decisions
with respect to the Securities of that entity, through a "Chinese Wall" or other
procedures.
COMPLIANCE
CERTIFICATIONS
UPON RECEIPT OF THIS CODE
Upon commencement of your employment or the effective date of this
Code, whichever occurs later, you shall be required to acknowledge receipt of
your copy of this Code by completing and returning a copy of the form attached
hereto as Appendix IV. By that acknowledgment, you will also agree:
1. To read the Code, to make a reasonable effort to understand
its provisions, and to ask questions about those provisions
you find confusing or difficult to understand.
2. To comply with the Code, including its general principles, its
reporting requirements, its preclearance requirements, and its
provisions regarding gifts and service as a director.
3. To advise the members of your Immediate Family about the
existence of the Code, its applicability to their personal
trading activity, and your responsibility to assure that their
personal trading activity complies with the Code.
4. To cooperate fully with any investigation or inquiry by or on
behalf of a Compliance Officer to determine your compliance
with the provisions of the Code.
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In addition, your acknowledgment will recognize that any failure to comply with
the Code and to honor the commitments made by your acknowledgment may result in
disciplinary action, including dismissal.
ANNUAL CERTIFICATE OF COMPLIANCE
You are required to certify on an annual basis, on a copy of the form
attached hereto as Appendix V, that you have complied with each provision of
your initial acknowledgment (see above). In particular, your annual
certification will require that you certify that you have read and that you
understand the Code, that you recognize you are subject to its provisions, that
you complied with the requirements of the Code during the year just ended and
that you have disclosed, reported, or caused to be reported all Investment
Transactions required to be disclosed or reported pursuant to the requirements
of the Code.
POST-TRADE MONITORING
The Compliance Officers will review the duplicate broker reports and
other information supplied to them concerning your personal Investment
Transactions so that they can detect and prevent potential violations of the
Code. The Compliance Officers will perform such investigation and make such
inquiries as they consider necessary to perform this function. You agree to
cooperate with any such investigation and to respond to any such inquiry. You
should expect that, as a matter of course, the Compliance Officers will make
inquiries regarding any personal Investment Transaction in a Security or Futures
Contract that occurs on the same day as a transaction in the same Security or
Futures Contract on behalf of an Advisory Client.
REMEDIAL ACTIONS
If you violate this Code, you are subject to remedial actions, which
may include, but are not limited to, disgorgement of profits, imposition of a
fine, censure, demotion, suspension or dismissal. As part of any sanction, you
may be required to reverse an Investment Transaction and to forfeit any profit
or to absorb any loss from the transaction.
The Compliance Committee shall have the ultimate authority to determine
whether you have violated the Code and, if so, the remedial actions it considers
appropriate. In making its determination, the Compliance Committee shall
consider, among other factors, the gravity of your violation, the frequency of
your violations, whether any violation caused harm or the potential of harm to
any Advisory Client, your efforts to cooperate with their investigation, and
your efforts to correct any conduct that led to a violation.
REPORTS TO DIRECTORS AND TRUSTEES
REPORTS OF SIGNIFICANT REMEDIAL ACTIONS
The General Counsel of PIMCO Advisors L.P. and the directors or
trustees of any affected Fund that is an Advisory Client will be informed on a
timely basis of each SIGNIFICANT REMEDIAL ACTION taken in response to a
violation of this Code. For this purpose, a significant remedial action will
include any action that has a significant financial effect on the violator.
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REPORTS OF MATERIAL CHANGES TO THE CODE
PIMCO will promptly advise the directors or trustees of any Fund that
is an Advisory Client if PIMCO makes any material change to this Code.
ANNUAL REPORTS
PIMCO's management will furnish a written report annually to the
General Counsel of PIMCO Advisors L.P. and to the directors or trustees of each
Fund that is an Advisory Client. Each report, at a minimum, will:
1. Describe any significant issues arising under the Code, or
under procedures implemented by PIMCO to prevent violations of
the Code, since management's last report, including, but not
limited to, information about material violations of the Code
or those procedures and sanctions imposed in response to
material violations; and
2. Certify that PIMCO has adopted procedures reasonably necessary
to prevent Advisory Employees from violating the Code.
RECORDKEEPING
Beginning on the effective date of this Code, PIMCO will maintain, at
its principal place of business, the following records, which shall be available
to the Securities and Exchange Commission or any representative of the
Commission at any time and from time to time for reasonable periodic, special or
other examination:
1. PIMCO's Chief Compliance Officer shall maintain, in any easily
accessible place:
(a) a copy of PIMCO's current Code and of each
predecessor of that Code that was in effect at any
time within the previous five (5) years;
(b) a record of any violation of the Code, and of any
action taken as a result of the violation, for at
least five (5) years after the end of the fiscal year
in which the violation occurred;
(c) a copy of each report made by an Advisory Employee
pursuant to this Code, including any duplicate broker
report submitted on behalf of that Advisory Employee,
for at least two (2) years after the end of the
fiscal year in which that report was made or that
information was provided;
(d) a record of all persons, currently or within the past
five (5) years, who are or were required to make
reports pursuant to this Code or who are or were
responsible for reviewing such reports; and
(e) a copy of each report to the General Counsel of PIMCO
Advisors L.P. or to the directors or trustees of each
Fund that is an Advisory Client for at
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least two (2) years after the end of the fiscal year
in which that report was made.
2. PIMCO shall also maintain the following additional records:
(a) a copy of each report made by an Advisory Employee
pursuant to this Code, including any duplicate broker
report submitted on behalf of that Advisory Employee,
for at least five (5) years after the end of the
fiscal year in which that report was made or that
information was provided;
(b) a copy of each report to the General Counsel of PIMCO
Advisors L.P. or to the directors or trustees of each
Fund that is an Advisory Client for at least five (5)
years after the end of the fiscal year in which that
report was made; and
(c) a record of any decision, and the reasons supporting
the decision, to approve the acquisition by a
Portfolio Employee of a Beneficial Ownership interest
in any Security in an Initial Public Offering or in a
Private Placement for at least five (5) years after
the end of the fiscal year in which such approval was
granted.
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APPENDIX I
DEFINITIONS OF CAPITALIZED TERMS
The following definitions apply to the capitalized terms used in the
Code:
ADVISORY EMPLOYEE
The term "Advisory Employee" means: (1) a director, officer, general
partner or employee of PIMCO who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of a Security or Futures Contract by PIMCO on behalf of an
Advisory Client, or whose functions relate to the making of any recommendations
with respect to such purchases or sales, or (2) or a natural person in a control
relationship to PIMCO, or an employee of any company in a control relationship
to PIMCO, who: (a) makes, participates in, or obtains information regarding the
purchase or sale of a Security by a Fund that is an Advisory Client, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales, or (b) obtains information concerning recommendations to a
Fund with regard to the purchase or sale of a Security by the Fund.
BENEFICIAL OWNERSHIP
As a GENERAL MATTER, you are considered to have a "Beneficial
Ownership" interest in a Security or a Futures Contract if you have the
opportunity, directly or indirectly, to profit or share in any profit derived
from an Investment Transaction in that Security or Futures Contract. YOU ARE
PRESUMED TO HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES
CONTRACT HELD, INDIVIDUALLY OR JOINTLY, BY YOU OR A MEMBER OF YOUR IMMEDIATE
FAMILY (AS DEFINED BELOW). In addition, unless specifically excepted by a
Compliance Officer based on a showing that your interest in a Security or
Futures Contract is sufficiently attenuated to avoid the possibility of
conflict, you will be considered to have a Beneficial Ownership interest in a
Security or Futures Contract held by: (1) a JOINT ACCOUNT to which you are a
party, (2) a PARTNERSHIP in which you are a general partner, (3) a LIMITED
LIABILITY COMPANY in which you are a manager-member, or (4) a TRUST in which you
or a member of your Immediate Family has a vested interest.
As a TECHNICAL MATTER, the term "Beneficial Ownership" for purposes
of this Code shall be interpreted in the same manner as it would be under SEC
Rule 16a-1(a)(2) (17 C.F.R. Section 240.16a-1(a)(2)) in determining whether a
person has a beneficial ownership interest in a Security for purposes of
Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
DESIGNATED EQUITY SECURITY
The term "Designated Equity Security" shall mean any equity Security,
option, warrant or other right to an equity Security designated as such by a
Compliance Officer, after receiving notification from a Portfolio Employee that
said Security is being considered for purchase or sale by PIMCO on behalf of one
of its Advisory Clients.
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EXEMPT SECURITY
The term "Exempt Security" shall mean any Security not included within
the definition of Covered Security in SEC Rule 17j-l(a)(4) (17 C.F.R. Section
17j-1(a)(4)), including:
1. Direct obligations of the Government of the United States;
2. Shares issued by open-end Funds; and
3. Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements. For these purposes, a "high quality
short-term debt instrument" means any instrument having a
maturity at issuance of less than 366 days and that is rated
in one of the two highest rating categories by a Nationally
Recognized Statistical Rating Organization.
FIXED INCOME SECURITY
For purposes of this Code, the term "Fixed Income Security" shall mean
a fixed income Security issued by an agency or instrumentality of, or
unconditionally guaranteed by, the Government of the United States, a corporate
debt Security, a mortgage-backed or other asset-backed Security, a taxable fixed
income Security issued by a state or local government or a political subdivision
thereof, a structured note or loan participation, a foreign government debt
Security, or a debt Security of an international agency or a supranational
agency. For purposes of this Code, the term "Fixed Income Security" shall not be
interpreted to include a U.S. Government Security or any other Exempt Security
(as defined above) nor shall it be interpreted to include a Tax-Exempt Municipal
Bond (as defined below).
FUND
The term "Fund" means an investment company registered under the
Investment Company Act.
FUTURES CONTRACT
The term "Futures Contract" includes (a) a futures contract and an
option on a futures contract traded on a United States or foreign board of
trade, such as the Chicago Board of Trade, the Chicago Mercantile Exchange, the
London International Financial Futures Exchange or the New York Mercantile
Exchange (a "Publicly-Traded Futures Contract"), as well as (b) a forward
contract, a swap, a cap, a collar, a floor and an over-the-counter option (other
than an option on a foreign currency, an option on a basket of currencies, an
option on a Security or an option on an index of Securities) (a
"Privately-Traded Contract"). Consult with a Compliance Officer prior to
entering into a transaction in case of any doubt. For purposes of this
definition, a Publicly-Traded Futures Contract is defined by its expiration
month, I.E. a Publicly-Traded Futures Contract on a U.S. Treasury Bond that
expires in June is treated as a separate Publicly-Traded
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Futures Contract, when compared to a Publicly-Traded Futures Contract on a U.S.
Treasury Bond that expires in July.
IMMEDIATE FAMILY
The term "Immediate Family" means any of the following persons who
RESIDE IN YOUR HOUSEHOLD OR DEPEND ON YOU FOR BASIC LIVING SUPPORT: your spouse,
any child, stepchild, grandchild, parent, stepparent, grandparent, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including any adoptive relationships.
INITIAL PUBLIC OFFERING
The term "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933 (15 U.S.C. Section 77a), 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 (15 U.S.C. Section 78m or Section 78o(d)).
INVESTMENT TRANSACTION
For purposes of this Code, the term "Investment Transaction" means any
transaction in a Security or Futures Contract in which you have, or by reason of
the transaction will acquire, a Beneficial Ownership interest, and includes,
among other things, the writing of an option to purchase or sell a Security.
MUNICIPAL BOND PORTFOLIO EMPLOYEE
The term "Municipal Bond Portfolio Employee" shall mean any Portfolio
Employee (as defined below) who makes investment decisions for the PIMCO
Municipal Bond Fund or any other Advisory Client that purchases or sells
Tax-Exempt Municipal Bonds. Municipal Bond Portfolio Employees shall be subject
to "Chinese Wall' arrangements that will preclude them from sharing information
with other Advisory Employees concerning their investment decisions relating to
Tax-Exempt Municipal Bonds or their analyses or opinions regarding individual
Tax-Exempt Municipal Bonds.
PERSONAL ACCOUNT
The term "Personal Account" means the following accounts that hold or
are likely to hold a Security (as defined below) or a Futures Contract (as
defined above) in which you have a Beneficial Ownership interest: any account in
your individual name; any joint or tenant-in-common account in which you have an
interest or are a participant; any account for which you act as trustee,
executor, or custodian; any account over which you have investment discretion or
otherwise can exercise control (other than non-related clients' accounts over
which you have investment discretion), including the accounts of entities
controlled directly or indirectly by you; and any other account in which you
have a Beneficial Ownership interest (other than such accounts over which you
have no investment discretion and cannot otherwise exercise control).
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PORTFOLIO EMPLOYEE
The term "Portfolio Employee" means: (1) a portfolio manager or any
employee of PIMCO (or of any company in a control relationship with PIMCO) who,
in connection with his or her regular functions or duties, makes or participates
in making recommendations regarding the purchase or sale of securities by a
Fund, or (2) any natural person who controls PIMCO and who obtains information
concerning recommendations made to a Fund that is an Advisory Client regarding
the purchase or sale of Securities by the Fund. For these purposes, "control"
has the same meaning as in Section 2(a)(9) of the Investment Advisers Act (15
U.S.C. Section 80a-2(a)(9)).
PRIVATE PLACEMENT
The term "Private Placement" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2) or
Section 4(6) (15 U.S.C. Section 77d(2) or Section 77d(6)) or pursuant to SEC
Rules 504, 505 or 506 (17 C.F.R. Sections 230.504, 230.505, or 230.506) under
the Securities Act of 1933.
QUALIFIED FOREIGN GOVERNMENT
The term "Qualified Foreign Government" means a national government of
a developed foreign country with outstanding Fixed Income Securities in excess
of fifty billion dollars. A list of Qualified Foreign Governments will be
prepared as of the last business day of each calendar quarter, will be available
from the Chief Compliance Officer, and will be effective for the following
calendar quarter.
RELATED ACCOUNT
The term "Related Account" means any account, other than a Personal
Account, that holds a Security or Futures Contract in which you have a
Beneficial Ownership interest.
RELATED SECURITY
The term "Related Security" shall mean any option to purchase or sell,
and any Security convertible into or exchangeable for, a Security that is or has
been held by PIMCO on behalf of one of its Advisory Clients or any Security that
is being or has been considered for purchase by PIMCO on behalf of one of its
Advisory Clients.
SECURITY
As a GENERAL MATTER, the term "Security" shall mean any stock, note,
bond, debenture or other evidence of indebtedness (including any loan
participation or assignment), limited partnership interest or investment
contract OTHER THAN AN EXEMPT SECURITY (as defined above). The term "Security"
includes an option on a Security, on an index of Securities, on a currency or on
a basket of currencies, including such an option traded on the Chicago Board of
Options Exchange or on the New York, American, Pacific or Philadelphia Stock
Exchanges, as well as
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such an option traded in the over-the-counter market. The term "Security" shall
not include a Futures Contract or a physical commodity (such as foreign exchange
or a precious metal).
As a TECHNICAL MATTER, the term "Security" shall have the meaning set
forth in Section 2(a)(36) of the Investment Company Act of 1940 (15 U.S.C.
SECTION 80a-2(a)(36)), which defines a Security to mean:
Any note, stock, treasury stock, bond debenture, evidence of
indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, preorganization certificate of
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security (including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value thereof), or
any put, call, straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency, or, in general, any interest
or instrument commonly known as a "security", or any certificate of interest or
instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, warrant or right to subscribe to or purchase, any of the foregoing, except
that the term "Security" shall not include any Security that is an Exempt
Security (as defined above), a Futures Contract or a physical commodity (such as
foreign exchange or precious metal).
TAX-EXEMPT MUNICIPAL BOND
The term "Tax-Exempt Municipal Bond" shall mean any Fixed Income
Security exempt from federal income tax that is issued by a state or local
government or a political subdivision thereof.
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APPENDIX II
INSIDER TRADING POLICY AND PROCEDURES
PIMCO ADVISORS L.P.
EFFECTIVE AS OF MAY 1, 1996
SECTION I. POLICY STATEMENT ON INSIDER TRADING.
A. POLICY STATEMENT ON INSIDER TRADING.
PIMCO ADVISORS L.P. ("PALP"), ITS AFFILIATED SUBPARTNERSHIPS,
PIMCO PARTNERS, G.P. ("PIMCO GP") AND PIMCO FUNDS DISTRIBUTORS LLC ("PFD")
(collectively the "Company" or "PIMCO Advisors") FORBID ANY OF THEIR OFFICERS,
DIRECTORS OR EMPLOYEES FROM TRADING, EITHER PERSONALLY OR ON BEHALF OF OTHERS
(such as, mutual funds and private accounts managed by PALP or its affiliated
Subpartnerships), ON THE BASIS OF MATERIAL, NON-PUBLIC INFORMATION OR
COMMUNICATING MATERIAL, NON-PUBLIC INFORMATION TO OTHERS IN VIOLATION OF THE
LAW. THIS CONDUCT IS FREQUENTLY REFERRED TO AS "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,
non-public information to trade in securities or to communications of material,
non-public information to others in breach of a fiduciary duty.
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, non-public
information; or
(2) trading by a non-insider, while in possession of material,
non-public information, where the information was disclosed to the
non-insider in violation of an insider's duty to keep it
confidential; or
(3) communicating material, non-public information to others in breach
of a fiduciary duty.
This communication applies to every such officer, director and employee
and extends to activities within and outside their duties at PIMCO Advisors.
Every officer, director and employee must read and retain this policy statement.
Any questions regarding this policy statement and the related procedures set
forth herein should be referred to a Compliance Officer of PALP or the
applicable subpartnership.
The remainder of this memorandum discusses in detail the elements of
insider trading, the penalties for such unlawful conduct and the procedures
adopted by the Company to implement its policy against insider trading.
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1. TO WHOM DOES THIS POLICY APPLY?
This Policy applies to all employees, officers and directors (direct or
indirect) of the Company ("Covered Persons"), as well as to any transactions in
any securities participated by family members, trusts or corporations controlled
by such persons. In particular, this Policy applies to securities transactions
by:
- the Covered Person's spouse;
- the Covered Person's minor children;
- any other relative living in the Covered Person's household;
- a trust in which the Covered Person has a beneficial interest,
unless such person has no direct or indirect control over the trust;
- a trust as to which the Covered Person is a trustee;
- a revocable trust as to which the Covered Person is a settlor;
- a corporation of which the Covered Person is an officer, director or
10% or greater stockholder; or
- a partnership of which the Covered Person is a partner (including
most investment clubs), unless the Covered Person has no direct or
indirect control over the partnership.
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.
Although there is no precise, generally accepted definition of
materiality, information is likely to be "material" if it relates to significant
changes affecting such matters as:
dividend or earnings expectations;
write-downs or write-offs of assets;
additions to reserves for bad debts or contingent liabilities;
expansion or curtailment of company or major division operations;
proposals or agreements involving a joint venture, merger,
acquisition, divestiture, or leveraged buy-out;
new products or services;
exploratory, discovery or research developments;
criminal indictments, civil litigation or government investigations;
disputes with major suppliers or customers or significant changes in
the relationships with such parties;
labor disputes including strikes or lockouts;
substantial changes in accounting methods;
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major litigation developments;
major personnel changes;
debt service or liquidity problems;
bankruptcy or insolvency;
extraordinary management developments;
public offerings or private sales of debt or equity securities;
calls, redemptions or purchases of a company's own stock;
issuer tender offers; or
recapitalizations.
Information provided by a company could be material because of its
expected effect on a particular class of the company's securities, all of the
company's securities, the securities of another company, or the securities of
several companies. Moreover, the resulting prohibition against the misuses of
"material" information reaches all types of securities (whether stock or other
equity interests, corporate debt, government or municipal obligations, or
commercial paper) as well as any option related to that security (such as a put,
call or index security).
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 reporter for THE WALL STREET JOURNAL 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.
3. WHAT IS NON-PUBLIC INFORMATION?
In order for issues concerning insider trading to arise,
information must not only be "material," it must be "NON-PUBLIC." "Non-public"
information is information which has not been made available to investors
generally. Information received in circumstances indicating that it is not yet
in general circulation or where the recipient knows or should know that the
information could only have been provided by an "insider" is also deemed
"non-public" information.
At such time as material, non-public information has been
effectively distributed to the investing public, it is no longer subject to
insider trading restrictions. However, for "non-public" information to become
public information, it must be disseminated through recognized channels of
distribution designed to reach the securities marketplace.
To show that "material" information is public, you should be able
to point to some fact verifying that the information has become generally
available, for example, disclosure in a national business and financial wire
service (Dow Jones or Reuters), a national news service (AP or UPI), a national
newspaper (THE WALL STREET JOURNAL or THE NEW YORK TIMES), or a publicly
disseminated disclosure document (a proxy statement or prospectus). The
circulation of rumors or "talk on the street," even if accurate, widespread and
reported in the media, does not constitute the requisite public disclosure. The
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information must not only be publicly disclosed, there must also be adequate
time for the market as a whole to digest the information. Although timing may
vary depending upon the circumstances, a good rule of thumb is that information
is considered non-public until the third business day after public disclosure.
Material, non-public information is not made public by selective
dissemination. Material information improperly disclosed only to institutional
investors or to a fund analyst or a favored group of analysts retains its status
as "non-public" information which must not be disclosed or otherwise misused.
Similarly, partial disclosure does not constitute public dissemination. So long
as any material component of the "inside" information possessed by the Company
has yet to be publicly disclosed, the information is deemed "non-public" and may
not be misused.
INFORMATION PROVIDED IN CONFIDENCE. Occasionally, one or more
directors, officers, or employees of companies in PIMCO Advisors may become
temporary "insiders" because of a fiduciary or commercial relationship. For
example, personnel at PALP or a subpartnership may become insiders when an
external source, such as a company whose securities are held by one or more of
the accounts managed by PALP or a subpartnership, entrusts material, non-public
information to the Company portfolio managers or analysts with the expectation
that the information will remain confidential.
As an "insider," the Company has a fiduciary responsibility not to
breach the trust of the party that has communicated the "material, non-public"
information by misusing that information. This fiduciary duty arises because the
Company has entered or has been invited to enter into a commercial relationship
with the client or prospective client and has been given access to confidential
information solely for the corporate purposes of that client or prospective
client. This obligation remains whether or not the Company ultimately
participates in the transaction.
INFORMATION DISCLOSED IN BREACH OF A DUTY. Analysts and portfolio
managers at PIMCO Advisors must be especially wary of "material, non-public"
information disclosed in breach of a corporate insider's fiduciary duty. Even
where there is no expectation of confidentiality, a person may become an
"insider" upon receiving material, non-public information in circumstances where
a person knows, or should know, that a corporate insider is disclosing
information in breach of the fiduciary duty he or she owes the corporation and
its shareholders. Whether the disclosure is an improper "tip" that renders the
recipient a "tippee" depends on whether the corporate insider expects to benefit
personally, either directly or indirectly, from the disclosure. In the context
of an improper disclosure by a corporate insider, the requisite "personal
benefit" may not be limited to a present or future monetary gain. Rather, a
prohibited personal benefit could include a reputational benefit, an expectation
of a QUID PRO QUO from the recipient or the recipient's employer by a gift of
the "inside" information.
A person may, depending on the circumstances, also become an "insider"
or "tippee" when he or she obtains apparently material, non-public information
by happenstance, including information derived from social situations, business
gatherings, overheard conversations, misplaced documents, and "tips" from
insiders or other third parties.
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4. IDENTIFYING MATERIAL INFORMATION?
Before trading for yourself or others, including investment companies
or private accounts managed by PALP or its affiliated Subpartnerships, in the
securities of a company about which you may have potential material, non-public
information, ask yourself the following questions:
i. Is this information that an investor could consider important in making
his or her investment decisions? Is this information that could
substantially affect the market price of the securities if generally
disclosed?
ii. 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.
Given the potentially severe regulatory, civil and criminal sanctions
to which you and PIMCO Advisors and its personnel could be subject, any
director, officer and employee uncertain as to whether the information he or she
possesses is "material, non-public" information should immediately take the
following steps:
i. Report the matter immediately to a Compliance Officer or the Chief
Executive Officer of PALP;
ii. Do not purchase or sell the securities on behalf of yourself or others,
including investment companies or private accounts managed by PALP or
the applicable affiliated subpartnership; and
iii.Do not communicate the information inside or outside the Company, other
than to a Compliance Officer or the Chief Executive Officer of PALP.
After a Compliance Officer or the Chief Executive Officer has reviewed
the issue, you will be instructed to continue the prohibitions against trading
and communication or will be allowed to trade and communicate the information.
5. PENALTIES FOR INSIDER TRADING.
Penalties for trading on or communicating material, non-public
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 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.
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In addition, any violation of this policy statement can be expected to
result in serious sanctions by PIMCO Advisors, including dismissal of the
persons involved.
SECTION II. PROCEDURES TO IMPLEMENT PIMCO ADVISORS' POLICY.
A. PROCEDURES TO IMPLEMENT THE POLICY AGAINST INSIDER TRADING.
The following procedures have been established to aid the officers,
directors and employees of PIMCO Advisors in avoiding insider trading, and to
aid the Company in preventing, detecting and imposing sanctions against insider
trading. Every officer, director and employee of PIMCO Advisors must follow
these procedures or risk serious sanctions, including dismissal, substantial
personal liability and criminal penalties.
TRADING RESTRICTIONS AND REPORTING REQUIREMENTS
1. No employee, officer or director of the Company who possesses material,
non-public information relating to the Company or any of its affiliates
or subsidiaries, may buy or sell any securities of the Company or
engage in any other action to take advantage of, or pass on to others,
such material, non-public information.
2. No employee, officer or director of the Company who obtains material,
non-public information which relates to any other company or entity in
circumstances in which such person is deemed to be an insider or is
otherwise subject to restrictions under the federal securities laws may
buy or sell securities of that company or otherwise take advantage of,
or pass on to others, such material, non-public information.
3. No employee, officer or director of the Company shall engage in a
securities transaction with respect to the securities of PIMCO
Advisors, EXCEPT in accordance with the specific procedures published
from time to time by the company.
4. Each employee, officer or director of the Company shall submit reports
of every securities transaction involving securities of PIMCO Advisors
to a Compliance Officer in accordance with the terms of the Company's
Code of Ethics as they relate to any other securities transaction.
5. No Employee (as such term is defined in the applicable Code of Ethics)
shall engage in a securities transaction with respect to any securities
of any other company, EXCEPT in accordance with the specific procedures
set forth in the Company's Code of Ethics.
6. Employees shall submit reports concerning each securities transaction
in accordance with the terms of the Code of Ethics and verify their
personal ownership of securities in accordance with the procedures set
forth in the Code of Ethics.
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7. Because even inadvertent disclosure of material, non-public information
to others can lead to significant legal difficulties, officers,
directors and employees of the Company should not discuss any
potentially material, non-public information concerning the Company or
other companies, including other officers, employees and directors,
except as specifically required in the performance of their duties.
B. CHINESE WALL PROCEDURES.
The Insider Trading and Securities Fraud Enforcement Act requires
the establishment and strict enforcement of procedures reasonably designed to
prevent the misuse of "inside" information.(1) Accordingly, you should not
discuss material, non-public information about the Company or other companies
with anyone, including other employees, except as required in the performance
of your regular duties. In addition, care should be taken so that such
information is secure. For example, files containing material, non-public
information should be sealed; access to computer files containing material,
non-public information should be restricted.
C. RESOLVING ISSUES CONCERNING INSIDER TRADING.
The federal securities laws, including the laws governing insider
trading, are complex. If you have any doubts or questions as to the materiality
or non-public nature of information in your possession or as to any of the
applicability or interpretation of any of the foregoing procedures or as to the
propriety of any action, you should contact a Compliance Officer. Until advised
to the contrary by a Compliance Officer, you should presume that the information
is material and non-public and you should NOT trade in the securities or
disclose this information to anyone.
(1) The antifraud provisions of United States securities laws reach insider
trading or tipping activity worldwide which defrauds domestic securities
markets. In addition, the Insider Trading and Securities Fraud Enforcement Act
specifically authorizes the SEC to conduct investigations at the request of
foreign governments, without regard to whether the conduct violates United
States law.
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APPENDIX III
PIMCO ADVISORS L.P.
POLICY REGARDING SPECIAL TRADING PROCEDURES
FOR SECURITIES OF PIMCO ADVISORS L.P.
EFFECTIVE AS OF MAY 1, 1996
INTRODUCTION
- ------------
PIMCO Advisors L.P. (as defined below) has adopted an Insider Trading
Policy and Procedures applicable to all personnel which prohibits insider
trading in any securities, and prohibits all employees from improperly using or
disclosing material, non-public information, a copy of which has been supplied
to you.
For the purposes of this memorandum, the term the "Company" shall
include PIMCO Advisors L.P. ("PALP"), PIMCO Partners, G.P. ("PIMCO GP"), PIMCO
Funds Distributors LLC ("PFD") and any entity in relation to which PALP acts as
a general partner or owns 50% or more of one the issued and outstanding stock.
PERSONS TO WHOM THIS SPECIAL TRADING POLICY APPLIES
- ---------------------------------------------------
This Policy applies to all employees of the Company and, in the case of
PALP, the inside members of the Operating Board and the Equity Board ("Covered
Persons"), as well as to any transactions in securities participated in by
family members, trusts or corporations controlled by a Covered Person. In
particular, this Policy applies to securities transactions by:
a. the Covered Person's spouse;
b. the Covered Person's minor children;
c. any other relatives living in the Covered Person's household;
d. a trust in which the Covered Person has a beneficial interest, unless
such Covered Person has no direct or indirect control over the trust;
e. a trust as to which the Covered Person is a trustee;
f. a revocable trust as to which the Covered Person is a settlor;
g. a corporation of which the Covered Person is an officer, director or
10% or greater stockholder; or
h. a partnership of which the Covered Person is a partner (including most
investment clubs), unless the Covered Person has no direct or indirect
control over the partnership.
The family members, trust and corporations listed above are hereinafter
referred to as "Related persons."
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SECURITIES TO WHICH THIS SPECIAL TRADING POLICY APPLIES
- -------------------------------------------------------
Unless stated otherwise, the following Special Trading Procedures apply
to all transactions by Covered Persons and their Related Persons involving any
class or series of units of limited partner interest of PALP or other securities
of PALP, including options and other derivative securities (such as a put, call
or index security) in relation to such securities (the "PALP Securities").
SPECIAL TRADING PROCEDURES RELATING TO SECURITIES OF PIMCO ADVISORS L.P.
- ------------------------------------------------------------------------
1. TRADING WINDOWS
There are times when the Company may be engaged in a material
non-public development or transaction. Even if you are not aware of this
development or transaction, if you trade PALP's Securities before such
development or transaction is disclosed to the public, you might expose yourself
and the Company to a charge of insider trading that could be costly and
difficult to refute. In addition, such a trade by you could result in adverse
publicity to you or the company.
THEREFORE, THE FOLLOWING RULE SHALL APPLY: EACH COVERED PERSON AND ALL
OF SUCH PERSON'S RELATED PERSONS MAY ONLY PURCHASE OR SELL PALP SECURITIES
DURING FOUR "TRADING WINDOWS" THAT OCCUR EACH YEAR. THE FOUR TRADING WINDOWS
CONSIST OF THE MONTHS OF FEBRUARY, MAY, AUGUST AND NOVEMBER. TRADING ON THE
BASIS OF MATERIAL NON-PUBLIC INFORMATION OR COMMUNICATING MATERIAL NON-PUBLIC
INFORMATION TO OTHERS AT ANY TIME, INCLUDING IN A TRADING WINDOW, IS A VIOLATION
OF THE LAW AND A VIOLATION OF THIS POLICY.
In accordance with the procedure for waivers described below, in
special circumstances a waiver may be given to allow a trade to occur outside of
a trading window.
Employees of PALP should be aware that there are potential tax
consequences for such employees resulting from the ownership of PALP Securities.
Each such employee contemplating purchasing PALP Securities should discuss the
matter with such employee's tax advisor.
The exercise of options to purchase PALP Securities for cash are not
Covered to the procedures outlined above, but the securities so acquired may not
be sold except during a trading window and after all other requirements of this
policy have been satisfied.
2. POST-TRADE REPORTING
All Covered Persons shall submit to a Compliance Officer a report of
EVERY SECURITIES TRANSACTION IN PALP SECURITIES in which they and any of their
Related Persons have participated as soon as practicable following the
transaction and in any event not later than the fifth day after the end of the
month in which the transaction occurred. The report shall include: (1) the date
of the transaction and the title and number of shares or principal amount of
each security involved; (2) the nature of the transaction
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(i.e., purchase, sale or any other type of acquisition or disposition); (3) the
price at which the transaction was effected; and (4) the name of the
broker/dealer with or through whom the transaction was effected. In addition, on
an annual basis, each Covered Person must confirm the amount of PALP Securities
which such person and his her Related Persons beneficially own.
Each Covered Person (and not the Company) is personally responsible for
insuring that his or her transactions comply fully with any and all applicable
securities laws, including, but not limited to, the restrictions imposed under
Section 16(b) of the Securities and Exchange Act of 1934 and Rule 144 under the
Securities Act of 1933.
3. RESOLVING ISSUES CONCERNING INSIDER TRADING
If you have any doubts or questions as to whether information is
material or non-public, or as to the applicability or interpretation of any of
the foregoing procedures, or as to the propriety of any action, you should
contact a Compliance Officer before trading or communicating the information to
anyone. Until these doubts or questions are satisfactorily resolved, you should
presume that the information is material and non-public and you should NOT trade
in the securities or communicate this information to anyone.
4. MODIFICATIONS AND WAIVERS
The Company reserves the right to amend or modify this policy statement
at any time. Waiver of any provision of this policy statement in a specific
instance may be authorized in writing by a Compliance Officer and either the
Chief Executive Officer of PALP or any member of the Operating Committee of
PALP, and any such waiver shall be reported to the Equity and Operating Boards
of PALP at the next regularly scheduled meeting of each.
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APPENDIX IV
ACKNOWLEDGMENT OF RECEIPT
OF THE
CODE OF ETHICS
AND THE
INSIDER TRADING POLICY AND PROCEDURES OF
PACIFIC INVESTMENT MANAGEMENT COMPANY
I hereby certify that I have received the attached Code of Ethics and
Insider Trading Policy and Procedures. I hereby agree to read the Code, to make
a reasonable effort to understand its provisions and to ask questions about
those provisions I find confusing or difficult to understand. I also agree to
comply with the Code, including its general principles, its reporting
requirements, its preclearance requirements, and its provisions regarding gifts
and service as a director. I also agree to advise members of my Immediate Family
about the existence of the Code of Ethics, its applicability to their personal
trading activity, and my responsibility to assure that their personal trading
activity complies with the Code of Ethics. Finally, I agree to cooperate fully
with any investigation or inquiry by or on behalf of a Compliance Officer to
determine my compliance with the provisions of the Code. I recognize that any
failure to comply in all aspects with the Code and to honor the commitments made
by this acknowledgment may result in disciplinary action, including dismissal.
Date:
------------------------------ ----------------------------------
Signature
----------------------------------
Print Name
<PAGE>
APPENDIX V
ANNUAL CERTIFICATION OF COMPLIANCE
WITH THE
CODE OF ETHICS OF
PACIFIC INVESTMENT MANAGEMENT COMPANY
I hereby certify that I have complied with the requirements of the Code
of Ethics and Insider Trading Policy and Procedures that have applied to me
during the year ended December 31, 200_. In addition, I hereby certify that I
have read the Code and understand its provisions. I also certify that I
recognize that I am subject to the provisions of the Code and that I have
disclosed, reported, or caused to be reported all transactions required to be
disclosed or reported pursuant to the requirements of the Code. I recognize that
any failure to comply in all aspects with the Code and that any false statement
in this certification may result in disciplinary action, including dismissal.
Date:
------------------------------ ----------------------------------
Signature
----------------------------------
Print Name
<PAGE>
APPENDIX VI
INITIAL REPORT OF ACCOUNTS
PURSUANT TO THE
CODE OF ETHICS OF
PACIFIC INVESTMENT MANAGEMENT COMPANY
In accordance with the Code of Ethics, I have attached to this form
copies of the most recent statements for each and every Personal Account and
Related Account that holds or is likely to hold a Security or Futures Contract
in which I have a Beneficial Ownership interest, as well as copies of
confirmations for any and all Investment Transactions subsequent to the
effective dates of those statements.(1)
In addition, I hereby supply the following information for each and
every Personal Account and Related Account in which I have a Beneficial
Ownership interest for which I cannot supply the most recent account statement:
(1) Name of employee:
---------------------------
(2) If different than #1, name of the person
in whose name the account is held:
---------------------------
(3) Relationship of (2) to (1):
---------------------------
(4) Firm(s) at which Account is maintained:
---------------------------
---------------------------
---------------------------
---------------------------
(5) Account Number(s):
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
(6) Phone number(s) of Broker or Representative:
---------------------------
---------------------------
---------------------------
---------------------------
- -------------------------
(1) The Code of Ethics uses various capitalized terms that are defined
in Appendix I to the Code. The capitalized terms used in this Report have the
same definitions.
<PAGE>
(7) Account holdings:
<TABLE>
<CAPTION>
<S><C>
Name of Security Quantity Principal Amount Custodian
1. ___________________ ______________ _______________ ___________________
2. ___________________ ______________ _______________ ___________________
3. ___________________ ______________ _______________ ___________________
4. ___________________ ______________ _______________ ___________________
5. ___________________ ______________ _______________ ___________________
</TABLE>
(Attach additional sheets if necessary)
I also supply the following information for each and every Security or
Futures Contract in which I have a Beneficial Ownership interest, to the extent
this information is not available elsewhere on this form or from the statements
and confirmations attached to this form. This includes Securities or Futures
Contracts held at home, in safe deposit boxes, or by an issuer.
<TABLE>
<CAPTION>
<S><C>
Person Who Description
Owns the Security of the Security
Or Futures Contract Or Futures Contract Quantity Principal Amount Custodian
------------------- ------------------- -------- ---------------- ---------
1. ___________________ _________________ _________________ _________________ _________________
2. ___________________ _________________ _________________ _________________ _________________
3. ___________________ _________________ _________________ _________________ _________________
4. ___________________ _________________ _________________ _________________ _________________
5 ___________________ _________________ _________________ _________________ _________________
</TABLE>
(Attach additional sheets if necessary.)
I hereby certify that this form and the attachments (if any) identify
all of the Personal Accounts, Related Accounts, Securities and Futures Contracts
in which I have a Beneficial Ownership interest as of this date.
----------------------------------
Signature
----------------------------------
Print Name
Date:
------------------
Attachments
<PAGE>
APPENDIX VII
PACIFIC INVESTMENT MANAGEMENT COMPANY
PIMCO FUNDS DISTRIBUTORS LLC
QUARTERLY REPORT OF INVESTMENT TRANSACTIONS
FOR THE QUARTER ENDED _______, 2000
================================================================================
Please mark one of the following:
/ / No reportable Investment Transactions have occurred.
/ / Except as indicated below, all reportable Investment Transactions
were made through Personal Accounts and Related Accounts identified on the
attached list, which, except as indicated, represents a complete list of the
Personal Accounts and Related Accounts that hold Securities or Futures Contracts
in which I have or had a Beneficial Ownership interest and for which PIMCO
should have received or will receive timely duplicate broker reports for the
calendar quarter just ended.(1) I hereby certify that the broker, dealer, bank
or futures commission merchant for each such account has been instructed to send
a Compliance Officer timely duplicate broker reports for that account.
The following information for Investment Transactions during the calendar
quarter just ended does not appear on the duplicate broker reports referenced
above.
<TABLE>
<S><C>
Transaction Title, Interest Rate and Maturity Number of Shares or Contracts Nature of Transaction
Date Date of Security or Futures Contract And Principal Amount (i.e., Buy or Sell)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Transaction Broker, Dealer,
Price Bank or FCM
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
</TABLE>
SPECIAL NOTE TO PIMCO FUNDS DISTRIBUTORS LLC REGISTERED REPS AND ACCESS PERSONS:
You will not have to fill out an extra form for each quarter for PIMCO Funds
Distributors LLC.
SIGNED:
----------------------------------
PRINT NAME:
----------------------------------
DATE:
----------------------------------
- -----------------------
(1) The Code of Ethics uses various capitalized terms that are defined
in Appendix I to the Code. The capitalized terms used in this Report have the
same definitions.
<PAGE>
1. Please see the CODE OF ETHICS for a full description of the Investment
Transactions that must be reported.
2. TRANSACTION DATE. In the case of a market transaction, state the trade
date (not the settlement date).
3. TITLE OF SECURITY OR FUTURES CONTRACT. State the name of the issuer and
the class of the Security (E.G., common stock, preferred stock or
designated issue of debt securities). For Fixed Income Securities,
please provide the Security's interest rate and maturity date. For a
Futures Contract, state the title of any Security subject to the
Futures Contract and the expiration date of the Futures Contract.
4. NUMBER OF SHARES OR CONTRACTS AND PRINCIPAL AMOUNT. State the number of
shares of Securities, the face amount of Fixed Income Securities or the
units of other securities. For options, state the amount of securities
subject to the option. Provide the principal amount of each Security or
Futures Contract. If your ownership interest was through a spouse,
relative or other natural person or through a partnership, trust, other
entity, state the entire quantity of Securities or Futures Contracts
involved in the transaction. You may indicate, if you wish, the extent
of your interest in the transaction.
5. NATURE OF TRANSACTION. Identify the nature of the transaction (E.G.,
purchase, sale or other type of acquisition or disposition).
6. TRANSACTION PRICE. State the purchase or sale price per share or other
unit, exclusive of brokerage commissions or other costs of execution.
In the case of an option, state the price at which it is currently
exercisable. No price need be reported for transactions not involving
cash.
7. BROKER, DEALER, BANK OR FCM EFFECTING TRANSACTION. State the name of
the broker, dealer, bank or FCM with or through which the transaction
was effected.
8. SIGNATURE. Sign and date the report in the spaces provided.
9. FILING OF REPORT. A report should be filed NOT LATER THAN 10 CALENDAR
DAYS after the end of each calendar quarter with:
PIMCO
ATTN: Compliance Officer
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
10. DUPLICATE BROKER REPORTS. Please remember that duplicates of all trade
confirmations, purchase and sale reports, and periodic statements must
be sent to the firm by your broker. You should use the address above.
<PAGE>
APPENDIX VIII
PACIFIC INVESTMENT MANAGEMENT COMPANY
PIMCO FUNDS DISTRIBUTORS LLC
ANNUAL HOLDINGS REPORT AND
FOURTH QUARTER REPORT OF INVESTMENT TRANSACTIONS
================================================================================
FOR THE YEAR AND QUARTER ENDED DECEMBER 31, 2000
================================================================================
I hereby certify that, except as indicated below, all Securities or
Futures Contracts in which I had a Beneficial Ownership interest at the end of
the 2000 calendar year were held in Personal Accounts or Related Accounts
identified on the attached list, for which PIMCO should have received or will
receive an account statement of holdings as of the end of that calendar year.(1)
I hereby certify that the broker, dealer, bank or futures commission merchant
for each such account has been instructed to send a Compliance Officer timely
duplicate broker reports, including a statement of holdings in that account as
of the end of the calendar year.
The following information describes other Securities or Futures Contracts in
which I had a Beneficial Ownership interest as of the end of the 2000 calendar
year:
<TABLE>
<S><C>
Title, Interest Rate and Maturity Number of Shares or Contracts Broker, Dealer,
Date of Security or Futures Contract And Principal Amount Bank or FCM
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Code of Ethics uses various capitalized terms that are defined
in Appendix I to the Code. The capitalized terms used in this Report have the
same definitions.
<PAGE>
Except as indicated below, all reportable Investment Transactions during
the quarter ended DECEMBER 31, 2000, were made through Personal Accounts and
Related Accounts identified on the attached list, which, except as indicated,
represents a complete list of the Personal Accounts and Related Accounts that
hold Securities or Futures Contracts in which I have or had a Beneficial
Ownership interest and for which PIMCO should have received or will receive
timely duplicate broker reports for the calendar quarter just ended.
The following information for Investment Transactions during the calendar
quarter just ended does not appear on the duplicate broker reports referenced
above.
<TABLE>
<S><C>
Transaction Title, Interest Rate and Maturity Number of Shares or Contracts Nature of Transaction
Date Date of Security or Futures Contract And Principal Amount (i.e., Buy or Sell)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Transaction Broker, Dealer,
Price Bank or FCM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL NOTE TO PIMCO FUNDS DISTRIBUTORS LLC REGISTERED REPS AND ACCESS PERSONS:
You will not have to fill out an extra form for each year for PIMCO Funds
Distributors LLC.
SIGNED:
------------------------------
PRINT NAME:
------------------------------
DATE:
------------------------------
<PAGE>
1. Please see the CODE OF ETHICS for a full description of the Investment
Transactions that must be reported.
2. TRANSACTION DATE. In the case of a market transaction, state the trade
date (not the settlement date).
3. TITLE OF SECURITY OR FUTURES CONTRACT. State the name of the issuer and
the class of the Security (e.g., common stock, preferred stock or
designated issue of debt securities). For Fixed Income Securities,
please provide the Security's interest rate and maturity date. For a
Futures Contract, state the title of any Security subject to the
Futures Contract and the expiration date of the Futures Contract.
4. NUMBER OF SHARES OR CONTRACTS AND PRINCIPAL AMOUNT. State the number of
shares of Securities, the face amount of Fixed Income Securities or the
units of other securities. For options, state the amount of securities
subject to the option. Provide the principal amount of each Security or
Futures Contract. If your ownership interest was through a spouse,
relative or other natural person or through a partnership, trust, other
entity, state the entire quantity of Securities or Futures Contracts
involved in the transaction. You may indicate, if you wish, the extent
of your interest in the transaction.
5. NATURE OF TRANSACTION. Identify the nature of the transaction (E.G.,
purchase, sale or other type of acquisition or disposition).
6. TRANSACTION PRICE. State the purchase or sale price per share or other
unit, exclusive of brokerage commissions or other costs of execution.
In the case of an option, state the price at which it is currently
exercisable. No price need be reported for transactions not involving
cash.
7. BROKER, DEALER, BANK OR FCM EFFECTING TRANSACTION. State the name of
the broker, dealer, bank or FCM with or through which the transaction
was effected.
8. SIGNATURE. Sign and date the report in the spaces provided.
9. FILING OF REPORT. A report should be filed NOT LATER THAN 10 CALENDAR
DAYS after the end of each calendar quarter with:
PIMCO
ATTN: Compliance Officer
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
10. DUPLICATE BROKER REPORTS. Please remember that duplicates of all trade
confirmations, purchase and sale reports, and periodic statements must
be sent to the firm by your broker. You should use the address above.
<PAGE>
Appendix IX
PRECLEARANCE REQUEST FORM
-------------------------
This form must be submitted to a Compliance Officer before executing
any Investment Transaction for which preclearance is required under the PIMCO
Code of Ethics. Before completing this form, you should review the PIMCO Code,
including the terms defined in that Code. The capitalized terms used in this
form are governed by those definitions. In addition, the Code provides
information regarding your preclearance obligations under the Code, and
information regarding the Transactions, Securities and Futures Contracts that
are exempt from the Code's preclearance requirement.(1)
No Investment Transaction subject to preclearance may be effected prior
to receipt of written authorization of that Investment Transaction by a
Compliance Officer. Unless otherwise specified, that authorization shall be
effective, unless revoked, until the earlier of (a) the close of business on the
date authorization is given, or (b) until you discover that information on this
preclearance request form is no longer accurate.
<TABLE>
<S><C>
(1) Your Name: _____________________________________
(2) If the Investment Transaction will be in someone else's name or
in the name of a trust, the name of that person or trust: _____________________________________
The relationship of that person or trust to you: _____________________________________
(3) Name of the firm (E.G., broker, dealer, bank, futures commission
merchant) through which the Investment Transaction will be
executed: ____________________________________
The relevant account number at that firm: ____________________________________
(4) Issuer of the Security or identity of the Futures Contract for
which preclearance is requested: ____________________________________
The relevant CUSIP number or call symbol: ____________________________________
(5) The maximum number of shares, units or contracts for which
preclearance is requested, or the market value or face amount of
the Fixed Income Securities for which preclearance is requested: ____________________________________
(6) The type of Investment Transaction for which preclearance is
requested (check all that apply): ____ Purchase ___ Sale ____ Market
Order
____ Limit Order (Price Of Limit Order:_______)
PLEASE ANSWER THE FOLLOWING QUESTIONS TO THE BEST OF YOUR KNOWLEDGE AND BELIEF:
(a) Do you possess material nonpublic information regarding the Security or
Futures Contract identified above or regarding the issuer of that
Security? ____ Yes ____ No
(b) Is the Security or Futures Contract identified above held by any PIMCO
Advisory Client or is it a Related Security (as defined in the PIMCO
Code)? ____ Yes ____ No
</TABLE>
- --------------------------
(1) Preclearance is required for any Investment Transaction in Securities,
Related Securities or Futures Contracts in a Personal Account or a Related
Account in which you have or will acquire a Beneficial Ownership interest.
<PAGE>
<TABLE>
<S><C>
(c) Is there a pending buy or sell order on behalf of a PIMCO Advisory Client
for the Security or Futures Contract identified above or for a
Security for which the Security identified above is a Related Security? ____ Yes ____ No
(d) Do you intend or do you know of another's intention to purchase or sell the
Security or Futures Contract identified above, or a Security for which the
Security identified above is a Related Security, on behalf of a PIMCO
Advisory Client? ____ Yes ____ No
(e) Has the Security or Futures Contract identified above or a Related Security
been considered for purchase by a PIMCO Advisory Client within the most
recent 15 days? (Note: rejection of any opportunity to purchase the
Security or Futures Contract for an Advisory Client would require an
affirmative response to this question.) ____ Yes ____ No
(f) If you are a Portfolio Employee, is the Security being acquired in an
Initial Public Offering?(2) ____ Yes ____ No
(g) If you are a Portfolio Employee, are you acquiring or did you acquire
Beneficial Ownership of the Security in a Private Placement?(3) ____ Yes ____ No
(h) If you are seeking preclearance of a purchase or sale of Securities, have
you purchased or sold the same or similar Securities, or have you acquired
or disposed of a Beneficial Ownership interest in the same or similar
Securities, within the past 60 calendar days?(4) ____ Yes ____ No
BY EXECUTING THIS FORM, YOU HEREBY CERTIFY THAT YOU HAVE REVIEWED THE PIMCO CODE
OF ETHICS AND BELIEVE THAT THE INVESTMENT TRANSACTION FOR WHICH YOU ARE
REQUESTING PRECLEARANCE COMPLIES WITH THE GENERAL PRINCIPLES AND THE SPECIFIC
REQUIREMENTS OF THE PIMCO CODE.
---------------------------------------------------
Employee Signature
---------------------------------------------------
Print or Type name
---------------------------------------------------
Date Submitted
</TABLE>
(2) Under the PIMCO Code, Portfolio Employees generally are not permitted to
acquire Securities in an Initial Public Offering.
(3) The PIMCO Code applies special rules to the acquisition of Securities
through a Private Placement and to the disposition of Securities acquired
through a Private Placement.
(4) Under the PIMCO Code, you may not profit from short-term trades in Fixed
Income Securities. A Portfolio Employee may not profit from short-term trades in
Designated Equities Securities and a Municipal Bond Portfolio Employee may not
profit from short-term trades in Tax-Exempt Municipal Bonds. This rule does not
apply to transactions in U.S. Government Securities, mutual fund shares, index
options or Futures Contracts.
<PAGE>
You are authorized to execute the Investment Transaction described above. Unless
indicated otherwise below, this authorization remains effective, unless revoked,
until: (a) the close of business today, or (b) until you discover that the
information on this request form is no longer accurate.
-------------------------------------------------
Compliance Officer
-------------------------------------------------
Date of Authorization
<PAGE>
APPENDIX X
COMPLIANCE OFFICERS
PACIFIC INVESTMENT MANAGEMENT COMPANY
March 31, 2000
PIMCO's Compliance Officers, as of March 31, 2000, are:
Denise C. Seliga
(Chief Compliance Officer)
Mohan V. Phansalkar
Ernest L. Schmider
Richard M. Weil
<PAGE>
SMITH BARNEY ASSET MANAGEMENT
CODE OF ETHICS AND
PERSONAL TRADING POLICIES
I. STATEMENT OF PRINCIPLES
Employees of Smith Barney Asset Management ("SBAM") owe a duty to SBAM's
mutual funds and managed account clients. Employees must place the interests
of those funds and clients first and avoid activities, interests and
relationships that might interfere with the duty to make decisions in the
best interest of fund shareholders and managed account clients. In their
personal securities transactions, employees must not take inappropriate
advantage of their positions. All securities transactions shall adhere to the
requirements of this Code and shall be conducted in such a manner as to avoid
any actual or potential conflict of interest, the appearance of such a
conflict, or the abuse of an individual's position of trust and
responsibility.
II. APPLICABILITY
This Code applies to all employees of Smith Barney Inc. ("SB") and its advisory
affiliates(1) assigned or reporting to SBAM. Each employee subject to this code
is considered an "advisory employee" and must comply with all of the Code's
terms unless otherwise indicated. Certain advisory employees also are considered
"mutual fund covered persons" and are subject to certain additional restrictions
outlined in the codes of ethics of the mutual funds for which they are
considered "covered persons.(2)" Certain advisory employees who are unlikely to
have knowledge of trades in client accounts also may be identified as
"administrative employees," and, as such, will be eligible to rely upon certain
exceptions outlined in this Code. SBAM's Compliance Department will notify
employees as to whether they are advisory employees, administrative employees,
or mutual fund covered persons.
The personal trading policies, procedures and restrictions outlined below
also apply to an employee's spouse and minor children. The policies also
apply to any other account over which the employee is deemed to have
BENEFICIAL OWNERSHIP. This includes accounts of any immediate family members
sharing the same household as the employee and any account over which the
employee may be deemed to have control. For a more detailed description of
beneficial ownership, see Exhibit A.
These policies place certain restrictions on the ability of an employee to
purchase or sell securities that are being or have been purchased or sold by an
SBAM advised account or fund. The restrictions also apply to securities that are
"related" to a security being purchased or sold by an SBAM advised account or
fund. A "related security" is one the value of which is based upon the value of
another security (E.G., a warrant, option, unit, convertible).
Employees are reminded that they also are subject to other Salomon Smith Barney
("SSB") policies, including policies on insider trading and the purchase and
sale of securities listed on the SSB restricted list. EMPLOYEES MUST NEVER TRADE
IN A SECURITY OR COMMODITY WHILE IN POSSESSION OF MATERIAL, NON-PUBLIC
INFORMATION ABOUT THE ISSUER OR THE MARKET FOR THOSE SECURITIES OR COMMODITIES,
EVEN IF THE EMPLOYEE HAVE SATISFIED ALL OTHER REQUIREMENTS OF THIS CODE.
- ----------------------------
(1) Advisory affiliates include, but are not limited to, Smith Barney Global
Capital Management, Travelers Investment Management Company, Mutual
Management Corp., Smith Barney Strategy Advisors, and Travelers Investment
Adviser.
(2) Each covered person is required to read and be familiar with the mutual
fund codes of ethics adopted by the funds for which the employee is deemed
a covered person. To the extent that the mutual funds' codes of ethics and
personal trading policies are stricter than this Code, the mutual funds'
codes of ethics shall also apply. For ease of reference, the standard Smith
Barney Mutual Fund Code of Ethics restrictions have been incorporated into
this Code.
<PAGE>
III. ENFORCEMENT
In the first instance, it is the responsibility of each employee to act in
accordance with a high standard of conduct and to comply with the policies and
procedures set forth in this Code of Ethics. The firm takes seriously its
obligation to monitor the personal trading activities of asset management
employees. Any violation of this Code of Ethics will be considered serious, and
may result in disciplinary action, which may include disgorgement of profits,
monetary fine, or censure, suspension or termination of employment.
IV. PERSONAL TRADING POLICIES, PROCEDURES AND RESTRICTIONS
A. BROKERAGE ACCOUNTS AT SSB. All employee brokerage accounts (including
spouse accounts, accounts for which the employee is deemed to have
beneficial ownership, and other accounts over which the employee and/or
spouse exercise control) must be maintained at SSB. For spouses or other
persons who by reason of their employment are required to conduct their
securities, commodities or other financial transactions in a manner
inconsistent with this policy, or in other exceptional circumstances,
employees may submit a written request for an exemption to the SBAM
Compliance Department. If approval is granted, copies of trade
confirmations and monthly statements must be sent to the employee's
designated supervisor or compliance officer ("Compliance Coordinator").
(3) REMINDER: PRE-APPROVAL OF SECURITIES TRANSACTIONS IN THE
SPOUSE'S ACCOUNT AND OTHER ACCOUNTS FOR WHICH THE EMPLOYEE IS DEEMED TO
HAVE BENEFICIAL OWNERSHIP ARE REQUIRED UNDER SECTION IV.C. BELOW.
The following types of accounts need not be maintained at SSB, nor are they
subject to the pre-approval, trading and other restrictions of this Code:
1. Accounts at outside mutual funds that hold only fund shares purchased
directly from that fund company.
2. Estate or trust accounts in which an employee or related person has a
beneficial interest, but no power to affect investment decisions. THE
EMPLOYEE MUST DIRECT THE TRUSTEE/BANK TO FURNISH COPIES OF
CONFIRMATIONS AND STATEMENTS TO THE EMPLOYEE'S COMPLIANCE COORDINATOR.
3. Fully discretionary accounts managed by an external registered
investment adviser are permitted to be custodied away from SSB if (i)
the employee receives permission from SBAM's Director of Compliance
and SBAM's CAO, and (ii) there is no communication between the manager
and the employee with regard to investment decisions prior to
execution. The employee must designate that copies of trade
confirmations and monthly statements be sent to the employee's
Compliance Coordinator.(4)
4. Employees may participate in direct investment programs which allow
the purchase of securities directly from the issuer without the
intermediation of a broker/dealer provided that the timing and size
of the purchases are established by a pre-arranged, regularized
schedule (E.G., dividend reinvestment plans). Employees must provide
documentation of these arrangements and direct periodic (monthly or
quarterly) statements to their Compliance Coordinator.
B. SECURITY HOLDING PERIOD. Securities purchased must be for investment
purposes rather than for the generation of short-term trading profits.
Consequently, securities purchased must be held for at least 60 days,
calculated on a First In, First Out ("FIFO") basis. If an employee sells a
security in violation of this 60-day holding period, the trade may be
canceled. On a canceled trade, the employee will be required to absorb any
loss and disgorge any profit. In addition, the employee may be subject to
disciplinary action.
- ----------------------------
(3) SBAM's Compliance Department will notify each employee of his or her
applicable Compliance Coordinator.
(4) The provisions of this Code also will not apply to fully discretionary
employee managed accounts custodied at SSB if (i) the employee receives
permission from SBAM's Director of Compliance, and (ii) there is no
communication between the employee and the manager with regard to
investment decisions prior to execution.
2
<PAGE>
- Exceptions to the 60-day holding period may be granted upon the
approval of both SBAM's CAO and Director of Compliance upon proof of
(i) unusual and/or unforeseen circumstances relating to the employee
(E.G., medical bills, personal hardship), or (ii) extenuating
circumstances relating to the security (E.G., a sharp decline in the
price of the security or a change in SSB's research rating from a buy
to a sell).
C. PRE-APPROVAL/CERTIFICATION
1. Every employee of SBAM is required to file with his or her Compliance
Coordinator either a pre-approval or pre-certification form prior to
effecting any personal securities transactions. The type of form to be
filed depends upon the employee's position within SBAM:
- PRE-APPROVAL FORM FOR ADVISORY EMPLOYEES: Attached as Exhibit B, this
form is to be used for personal securities transactions for all
advisory employees, other than mutual fund covered persons and
administrative employees. Employees filing this form may not trade
in a security until this form has been approved by the Compliance
Coordinator. Persons required to use this form will be identified
by SBAM's Compliance Department.
- PRE-APPROVAL FORM FOR MUTUAL FUND COVERED PERSONS: Attached as Exhibit
C, this form is to be used for all mutual fund covered persons. The
employee may not trade in a security until this form has been approved
by the Compliance Coordinator. Persons required to use this form will
be identified by SBAM's Compliance Department.
- ADMINISTRATIVE EMPLOYEE TRADE CERTIFICATION: Attached as Exhibit D,
this form may be used by administrative employees. This form must be
submitted to the Compliance Coordinator prior to engaging in a
transaction. Persons eligible to use this form will be identified by
SBAM's Compliance Department.
2. The pre-approval/pre-certification is valid for the day of approval
only. New forms must be filed for transactions on each subsequent day.
3. Any trade that violates the pre-approval/pre-certification process may
be broken at the employee's expense, and the employee will be required to
absorb any resulting loss and to disgorge any resulting profit.
D. CONFLICTS/BLACKOUT PERIODS
1. For trades by all advisory employees other than administrative
employees, the Compliance Coordinator will determine whether any relevant
conflicts exist as described below, depending upon the employee's role and
location.(5) For mutual fund covered persons and all portfolio managers,
the Compliance Coordinator will determine whether any blackout periods
apply. For all advisory employees to which no blackout periods apply (other
than administrative employees), the Compliance Coordinator will ensure that
the employee does not pay/receive a better price for the security on that
day than the average price paid/received by accounts identified by the SBAM
Compliance Department as within the employee's range of potential conflict
(E.G., accounts managed in the program to which the employee is assigned or
in the same geographical vicinity as the employee's work station or
office). Notwithstanding pre-approval, if subsequent to the employee's
purchase or sale it is determined that the employee paid/received a price
better than the average price paid/received by such accounts on the same
day as the employee's transaction, the employee will be required to pay the
difference.
- EXCEPTION: An employee will not be required to pay the difference
between his or her price and the average price paid by clients if
the difference is DE MINIMIS. For purposes of this paragraph, DE
MINIMIS means the GREATER of (i) $50 or (ii) 1% of the excess of
the average price over the
- ----------------------
(5) The Compliance Coordinator shall take whatever steps he or she deems
necessary to determine whether any conflicts exist, including contracting
the appropriate trading desks.
3
<PAGE>
price paid by the employee.
2. A Mutual Fund Covered Person may not effect transactions involving
securities in which the applicable Fund (the Fund for which he or she is
considered a "Covered Person") is effecting transactions, for a period of
one business day before or after the Fund's transaction. Any violation of
this provision will require the employee's trade to be unwound, with the
employee disgorging any resulting profit.
3. In addition, a portfolio manager may not effect transactions involving a
security in which any account that he or she manages (MUTUAL FUND or
MANAGED ACCOUNT) is effecting transactions for a period of seven calendar
days before or after the date of the account's transaction. Any violation
of this provision will require the portfolio manager's trade to be unwound,
with the portfolio manager absorbing any resulting loss and disgorging any
resulting profit.
4. No advisory employee shall recommend or effect any securities
transaction for any client account (including mutual funds) without having
disclosed to the appropriate legal group (E.G., mutual funds legal,
investment advisory legal), which will take further action as necessary,
his or her interest, if any, in such securities or the issuer thereof,
including without limitation:
(1) his or her direct or indirect beneficial ownership of any
securities of such issuer;
(2) any contemplated transaction by such person in such securities;
(3) any position with such issuer or its affiliates;
(4) any present or proposed business relationship between such issuer
or its affiliates and such person or any party in which such
person has significant interests; and
(5) any factors about the transaction that are potentially relevant
to a conflict of interest analysis.
E. EXCEPTIONS
1. EXCEPTED SECURITIES: Sections IV.C and IV.D of this Code (pre-approval,
pre-certification, blackouts and conflicts) do not apply to transactions in
the following types of securities: open-end mutual funds, unit investment
trusts, U.S. government securities, bankers' acceptances, bank certificates
of deposit, commercial paper and other money market instruments.
PRE-APPROVAL/CERTIFICATION ALWAYS IS REQUIRED FOR CLOSED-END FUNDS.
2. LARGE CAP/DE MINIMIS: Section IV.D of this Code (blackouts and
conflicts) shall not apply to any purchase or sale, or series of related
transactions involving the same or related securities, involving 500 or
fewer shares in the aggregate, if the issuer has a market capitalization
(outstanding shares multiplied by the current price per share) greater than
$3 billion and is listed on a U.S. stock exchange or NASDAQ.
PRE-APPROVAL/CERTIFICATION IS STILL REQUIRED.
- Under certain circumstances, the Compliance Department may
determine that an employee may not rely upon the Large Cap/De
Minimus exemption. In such a case, the employee will be notified
prior to or at the time the pre-clearance request is made.
3. OTHER EXCEPTIONS: Exceptions to Section IV other than those described
above will be granted only in rare circumstances, and then only with the
written approval of the SBAM Director of Compliance and the SBAM Chief
Investment Officer or designee (and, in the case of mutual funds, the
Chairman of the Board of Directors of the applicable fund). Exceptions may
be granted only when the SBAM Director of Compliance and the SBAM Chief
Investment Officer or designee (and, as applicable, the Chairman of the
applicable fund) believe that the potential for conflict is remote. The
SBAM Compliance Department will maintain copies of all written approvals,
which should describe the circumstances surrounding and the justification
for granting the exception. Fund boards should be notified at least
annually regarding any exceptions that have been granted for mutual fund
covered persons.
4
<PAGE>
F. PROHIBITED TRANSACTIONS: TRANSACTIONS IN OPTIONS AND FUTURES (6)
1. The following are PROHIBITED transaction:
a. Day trading.
b. The purchase of private placements (any exception requires approval by
SBAM's Chief Administrative Officer or designee and the SBAM General
Counsel).
c. The purchase of new issues of corporate securities (including IPOs
and hot issue syndicate offerings) on the offering are prohibited.
(New issues of municipal debt securities may be purchased subject to
the other requirements of this code (E.G. preclearance)). This
provision is not intended to prevent an employee from purchasing
shares issued by a bank or insurance company as a result of
demutualization, if the employee is entitled to purchase shares by
virtue of being a depositer or policyholder.
2. Employees may buy or sell derivative instruments such as individual
stock options, options and futures on indexes and options and futures
on fixed-income securities, and may buy or sell physical commodities
and forwards on such commodities. Transactions in these products must
be effected through accounts maintained at SSB. These transactions
must comply with all of the policies and restrictions described in
this Code, including blackout periods, and the 60-day holding period.
The 60-day holding period does not apply to individual stock options
that are a part of a hedged position where the underlying stock has
been held for more than 60-days.
G. DIRECTORSHIPS. Directorships (other than related to civic, religious or
charitable activities) are prohibited. Permission to sit on a board of
directors (other than a civic, religious or charitable board) must be
obtained from the SSB Corporate Compliance Department. Directorships on
condominium/residential co-op boards are permitted without prior approval.
Mutual fund "covered persons" may hold directorships in "covered companies"
as defined in the applicable mutual fund code of ethics.(7)
H. GIFTS. No person subject to this Code shall accept or allow a close family
member to accept a gift of more than $100 per donor year, or a favor or
preferential treatment, from any person or entity that does business with
SBAM or does business with or on behalf of any mutual fund advised by SBAM
or its affiliates.
V. TRAVELERS GROUP INC. SECURITIES
A. Employees may purchase securities of Travelers Group at any time so long as
the employee does not have any material non-public information about
Travelers Group at the time of the trade. Employees may purchase for
investment purposes only. Accordingly, all purchases are subject to the
60-day holding period.
B. The following are PERMITTED TRANSACTIONS with respect to Travelers Group
securities:
1. Short sales against the box.
2. The use of puts and calls as part of a strategy to hedge a long
position.
3. Purchases of calls and sales of puts.
C. The following are PROHIBITED TRANSACTIONS with respect to Travelers Group
securities:
1. Short sales (other than against the box).
2. Sales of naked call options.
- ------------------------------
(6) See Section V of these Policies for permitted and prohibited transactions
with respect to Travelers Group securities.
(7) Covered companies generally are the Smith Barney mutual funds. Smith Barney
Inc., Mutual Management Corp., and any of Smith Barney's subsidiaries or
affiliates that acts as advisor for Smith Barney mutual funds.
5
<PAGE>
3. Purchases of puts for speculative purposes.
4. Any transactions related to the hedging of unvested CAP shares.
VI. UNIT TRUST CODE (APPLICABLE TO ALL UNIT TRUST EMPLOYEES)
In addition to the personal trading policies indicated in Sections IV and V
above, all employees assigned to the Unit Trust Department are prohibited from
transacting in any security when a SSB-sponsored Unit Trust portfolio is buying
the same (or related) security, until seven business days after the later of the
completion of the accumulation period or the public announcement of the trust
portfolio. Similarly, all UIT employees are prohibited from transacting in any
security held in a UIT (or a related security) seven business days prior to the
liquidation period of the trust.
- LARGE CAP/DE MINIMIS EXCEPTION: The blackout provisions of this
section VI shall not apply to any purchase or sale, or series of
related transactions involving the same or related securities,
involving 500 fewer shares in the aggregate, if the issuer has a
market capitalization (outstanding shares multiplied by the current
price or share) greater than $3 billion and is listed on a U.S. stock
exchange or NASDAQ. PRE-APPROVAL IS STILL REQUIRED.
- Under certain circumstances, the Compliance Department may
department that an employee may not rely upon the Large Cap/De
Minimis exemption. In such a case, the employee will be notified
prior to or at the time the pre-clearance request is made.
VII. HANDLING OF DISGORGED PROFITS
Any amounts that are paid by an employee under this policy shall be paid by SBAM
over to one or more charities. Amounts paid may be aggregated by SBAM and paid
to such charity or charities at the end of each year.
VIII. ACKNOWLEDGMENT
All new SBAM employees shall certify that they have received a copy of this
Code, and have read and understood its provisions. All SBAM employees will be
asked annually to certify that they have read and understood this Code, compiled
with its principles, and disclosed or reported all personal securities
transactions which are required by this Code to be disclosed or reported.
IX. CONFIDENTIALITY
All information obtained from any person covered by this Code of Ethics shall be
kept in strict confidence, except that such information will be made available
to the Securities or Exchange Commission or any other regulatory or
self-regulatory organization to the extent required by law or regulation.
X. OTHER LAWS, RULES AND STATEMENTS OF POLICY
Nothing contained in this Code shall be interpreted as relieving any person
subject hereto from acting in accordance with the provision of any applicable
law, rule or regulation or any other statement of policy or procedure governing
the conduct of such person adopted by SSB, its affiliates and subsidiaries.
XI. RETENTION OF RECORDS
All pre-approval forms and other records relating to personal securities
transactions should be maintianed for a total of six years, the first two
on-site.
XII. QUESTIONS
Any questions about this Code of Ethics should be directed either to the
applicable Compliance Coordinator or SBAM's Director of Compliance.
(5/98)
6
<PAGE>
EXHIBIT A
EXPLANATION OF BENEFICIAL OWNERSHIP
You are considered to have "Beneficial Ownership" of Securities if you have
or share a direct or indirect "PECUNIARY INTEREST" in the Securities.
You have a "Pecuniary Interest" in Securities if you have the opportunity,
directly or indirectly to profit or share in any profit derived from a
transaction in the Securities.
The following are examples of an indirect Pecuniary Interest in Securities:
1. Securities held by members of your IMMEDIATE FAMILY sharing the same
household; however, this presumption may be rebutted by convincing
evidence that profits derived from transactions in these Securities
will not provide you with any economic benefit.
"Immediate family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and includes any adoptive relationship.
2. Your interest as a general partner in Securities held by a general or
limited partnership.
3. Your interest as a manager-member in the Securities held by a limited
liability company.
You do NOT have an indirect Pecuniary Interest in Securities held by a
corporation, partnership, limited liability company or other entity in which you
hold an equity interest, UNLESS you are a controlling equityholder or you have
or share investment control over the Securities held by the entity.
The following circumstances constitute Beneficial Ownership by you of
Securities held by a trust:
1. Your ownership of Securities as a trustee where either you or members
of your immediate family have a vested interest in the principal or
income of the trust.
2. Your ownership of a vested interest in a trust.
3. Your status as a settlor of a trust, unless the consent of all of the
beneficiaries is required in order for you to revoke the trust.
The foregoing is a summary of the meaning of "beneficial ownership." For
purposes of the attached Code, "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.
<PAGE>
EXHIBIT B
SMITH BARNEY ASSET MANAGEMENT ("SBAM")
EMPLOYEE TRADE
PRE-APPROVAL FORM FOR ADVISORY EMPLOYEES(1)
(PAGE 1)
INSTRUCTIONS:
- - ALL ADVISORY EMPLOYEES SHOULD SUBMIT THIS FORM TO THEIR COMPLIANCE
COORDINATOR PRIOR TO PLACING A TRADE. THE COMPLIANCE COODINATOR WILL NOTIFY
THE EMPLOYEE AS TO WHETHER OR NOT PRE-CLEARANCE IS GRANTED. PRE-CLEARANCE
IS EFFECTIVE ONLY ON THE DATE GRANTED.
- - PORTFOLIO MANAGERS MUST COMPLETE BOTH SIDES OF THIS FORM. ALL OTHER
EMPLOYEES NEED ONLY COMPLETE THIS SIDE.
1. EMPLOYEE INFORMATION
- --------------------------------------------------------------------------------
EMPLOYEE NAME
- --------------------------------------------------------------------------------
EMPLOYEE PHONE NUMBER
- --------------------------------------------------------------------------------
ACCOUNT TITLE
- --------------------------------------------------------------------------------
ACCOUNT NUMBER:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
II. SECURITY INFORMATION
<S><C>
- -------------------------------------------------------------------------------------------------------
SECURITY TYPE (E.G., IF SALE, DATE NO. LARGE CAP
SECURITY NAME COMMON STOCK TICKER BUY/SELL BOUGHT(2) SHARES/UNITS STOCK?(3)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
III. Are you a Portfolio Manager?
/ / Yes (Complete Reverse Side) / / No (Complete Certification Below)
IV. CERTIFICATION
I certify that I will not effect the transaction(s) described above until and
unless pre-clearance approval is obtained from the Compliance Coordinator. I
further certify that, except as described on an attached page, to the best of
my of my knowledge, the proposed transaction(s) will not result in a conflict
of interest with any account managed by SBAM. The proposed transaction(s)
are consistent with all firm policies regarding employee personal securities
transactions.
- -------------------------------------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
FOR USE BY THE COMPLIANCE DEPARTMENT
- --------------------------------------------------------------------------------
PRE-CLEARANCE GRANTED? / / YES / / NO TIME: DATE:
- --------------------------------------------------------------------------------
SIGNATURE:
- --------------------------------------------------------------------------------
- ---------------------------
(1) Other than Mutual Fund Covered Persons and Administrative Employees.
(2) All securities sold must have been held for at least 60 days.
(3) For purposes of SBAM's personal trading policies, a large cap stock is one
that is listed on a U.S. stock exchange or NASDAQ and whose issuer has a market
capitalization (outstanding shares multiplied by current price) of more than $3
billion.
<PAGE>
EXHIBIT B
SMITH BARNEY ASSET MANAGEMENT ("SBAM")
PAGE 2 - PORTFOLIO MANAGER CERTIFICATION
ALL PORTFOLIO MANAGERS MUST ANSWER THE FOLLOWING QUESTIONS IN ORDER TO OBTAIN
PRECLEARANCE. ALL QUESTIONS MUST BE ANSWERED OR THE FORM WILL BE RETURNED. IF A
QUESTION IS NOT APPLICABLE, PLEASE INDICATE "N/A."
1. Do you intend to purchase or sell the securities listed (or related
securities) for any client accounts in the next seven calendar days?
Yes / / No / /
2. Have your client accounts purchased or sold the securities (or related
securities) in the past seven calendar days?
Yes / / No / /
3. Do any of your client accounts currently own the securities (or related
securities)? Yes / / No / /
3a. If yes, and you are selling the securities for your personal account,
please explain why the sale of the securities was rejected for client
accounts but is appropriate for your personal account:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4. Have you, in the past 7 calendar days, CONSIDERED purchasing the securities
(or related securities) for your client accounts?
Yes / / No / /
4a. If yes, and you are purchasing securities for you personal account,
please explain why the purchase of the securities is appropriate for your
account but has been rejected for your client accounts:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4b. If no, and you are purchasing securities for your personal account,
please explain why the purchase of the securities has not been considered
for your client accounts:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
CERTIFICATION
I certify that I will not effect the transaction(s) described above until and
unless pre-clearance approval is obtained from the Compliance Coordinator. I
further certify that, except as described on an attached page, to the best of
my knowledge, the proposed transaction(s) will not result in a conflict of
interest with any account managed by SBAM. The proposed transaction(s) are
consistent with all firm policies regarding employee personal securities
transactions.
- --------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
FOR USE BY THE COMPLIANCE DEPARTMENT
- --------------------------------------------------------------------------------
PRE-CLEARANCE GRANTED? YES / / NO / / TIME: DATE:
- --------------------------------------------------------------------------------
SIGNATURE:
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT C
SMITH BARNEY ASSET MANAGEMENT ("SBAM")
EMPLOYEE TRADE
PRE-APPROVAL FORM FOR
MUTUAL FUND COVERED PERSONS
(PAGE 1)
INSTRUCTIONS:
- - ALL MUTUAL FUND COVERED PERSONS SHOULD SUBMIT THIS FORM TO THEIR
COMPLIANCE COORDINATOR PRIOR TO PLACING A TRADE. THE COMPLIANCE COORDINATOR
WILL NOTIFY THE EMPLOYEE AS TO WHETHER OR NOT PRE-CLEARANCE IS GRANTED.
PRE-CLEARANCE IS EFFECTIVE ONLY ON THE DATE GRANTED.
- - PORTFOLIO MANAGERS MUST COMPLETE BOTH SIDES OF THIS FORM. ALL OTHER
EMPLOYEES NEED ONLY COMPLETE THIS SIDE.
<TABLE>
<CAPTION>
I. EMPLOYEE INFORMATION
<S><C>
- -------------------------------------------------------------------------------------------------------
EMPLOYEE NAME: PHONE NUMBER:
- -------------------------------------------------------------------------------------------------------
ACCOUNT TITLE:
- -------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER:
- -------------------------------------------------------------------------------------------------------
FUND(S) FOR WHICH EMPLOYEE IS A COVERED PERSON:
II. SECURITY INFORMATION
- -------------------------------------------------------------------------------------------------------
SECURITY TYPE (E.G., IF SALE, DATE NO. LARGE CAP
SECURITY NAME COMMON STOCK, ETC.) TICKER BUY SELL BOUGHT(1) SHARES/UNITS STOCK?(2)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
III. Are you a Portfolio Manager?
/ / Yes (Complete Reverse Side) / / No (Complete Certification Below)
IV. CERTIFICATION
I certify that I will not effect the transaction(s) described above until and
unless pre-clearance approval is obtained from the Compliance Coordinator. I
further certify that, except as described on an attached page, to the best of my
knowledge, the proposed transaction(s) will not result in a conflict of interest
with any account managed by SBAM (including mutual funds managed by SBAM or any
of its affiliates ("SB Mutual Funds")). I further certify that, to the best my
knowledge, there are no pending orders for any security listed above or any
related securities for any SB Mutual Fund for which I am considered a Covered
Person. The proposed transaction(s) are consistent with all firm policies
regarding personal securities transactions (including the SB Mutual Funds Code
of Ethics).
- --------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
FOR USE BY THE COMPLIANCE DEPARTMENT
- --------------------------------------------------------------------------------
PRE-CLEARANCE GRANTED? YES / / NO / / TIME: DATE:
- --------------------------------------------------------------------------------
SIGNATURE:
- --------------------------------------------------------------------------------
- ----------------------------
(1) All securities must have been held for at least 60 days.
(2) For purposes of SBAM's personal trading policies, a large cap stock is one
that is listed on a U.S. stock exchange or NASDAQ and whose issuer has a
market capitalization (outstanding shares multiplied by current price) of
more than $3 billion.
<PAGE>
EXHIBIT C
SMITH BARNEY ASSET MANAGEMENT ("SBAM")
PAGE 2 - PORTFOLIO MANAGER CERTIFICATION
ALL PORTFOLIO MANAGERS MUST ANSWER THE FOLLOWING QUESTIONS IN ORDER TO OBTAIN
PRECLEARANCE. ALL QUESTIONS MUST BE ANSWERED OR THE FORM WILL BE RETURNED. IF A
QUESTION IS NOT APPLICABLE, PLEASE INDICATE "N/A."
1. Do you intend to purchase or sell the securities listed (or related
securities) for any client accounts in the next seven calendar days?
Yes / / No / /
2. Have your client accounts purchased or sold the securities (or related
securities) in the past seven calendar days?
Yes / / No / /
3. Do any of your client accounts currently own the securities (or related
securities)? Yes / / No / /
3a. If yes, and you are selling the securities for your personal account,
please explain why the sale of the securities was rejected for client
accounts but is appropriate for your personal account:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4. Have you, in the past 7 calendar days, CONSIDERED purchasing the securities
(or related securities) for your client accounts?
Yes / / No / /
4a. If yes, and you are purchasing securities for you personal account,
please explain why the purchase of the securities is appropriate for your
account but has been rejected for your client accounts:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4b. If no, and you are purchasing securities for your personal account,
please explain why the purchase of the securities has not been considered
for your client accounts:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
CERTIFICATION
I certify that I will not effect the transaction(s) described above until and
unless pre-clearance approval is obtained from the Compliance Coordinator. I
further certify that, except as described on an attached page, to the best of my
knowledge, the proposed transaction(s) will not result in a conflict of interest
with any account managed by SBAM (including mutual funds managed by SBAM or any
of its affiliates ("SB Mutual Funds")). I further certify that, to the best my
knowledge, there are no pending orders for any security listed above or any
related securities for any SB Mutual Fund for which I am considered a Covered
Person. The proposed transaction(s) are consistent with all firm policies
regarding personal securities transactions (including the SB Mutual Funds Code
of Ethics).
- --------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
FOR USE BY THE COMPLIANCE DEPARTMENT
- --------------------------------------------------------------------------------
PRE-CLEARANCE GRANTED? YES / / NO / / TIME: DATE:
- --------------------------------------------------------------------------------
SIGNATURE:
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT D
SMITH BARNEY ASSET MANAGEMENT ("SBAM")
ADMINISTRATIVE EMPLOYEE TRADE CERTIFICATION
INSTRUCTIONS: THIS FORM MAY BE USED ONLY BY CERTAIN ADMINISTRATIVE EMPLOYEES OF
SBAM AS DETERMINED BY THE SBAM COMPLIANCE DEPARTMENT. THIS FORM MUST BE
SUBMITTED TO THE COMPLIANCE COORDINATOR PRIOR TO EXECUTING A TRADE.
<TABLE>
<CAPTION>
I. EMPLOYEE INFORMATION
<S><C>
- ------------------------------------------------------------------------------------------------------
EMPLOYEE NAME
- ------------------------------------------------------------------------------------------------------
EMPLOYEE PHONE NUMBER
- ------------------------------------------------------------------------------------------------------
ACCOUNT TITLE
- ------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER
- ------------------------------------------------------------------------------------------------------
II. SECURITY INFORMATION
- ------------------------------------------------------------------------------------------------------
SECURITY TYPE (E.G., IF SALE, DATE MAX. NO.
SECURITY NAME COMMON STOCK, ETC.) TICKER BUY/SELL BOUGHT SHARES/UNITS
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
III. EMPLOYEE QUESTIONNAIRE AND CERTIFICATION
- ------------------------------------------------------------------------------------------------------
1. To your knowledge, are there any outstanding purchase or sell orders for these
securities or related securities(1) by any advisory client (including mutual Yes No
funds) of SBAM? / / / /
- ------------------------------------------------------------------------------------------------------
2. To your knowledge, are the securities or related securities being considered for Yes No
purchase or sale by any advisory client (including mutual funds) of SBAM? / / / /
- ------------------------------------------------------------------------------------------------------
3. Are the securities being acquired in an offering of new corporate securities Yes No
(e.g., an IPO)? (Note: Purchases of IPOs generally are prohibited.) / / / /
- ------------------------------------------------------------------------------------------------------
4. Are the securities being acquired in a private placement? Yes No
/ / / /
- ------------------------------------------------------------------------------------------------------
5. If this transaction involves a sale of securities, have the securities been held Yes No
for less than 60 days?(2) / / / /
- ------------------------------------------------------------------------------------------------------
IF YOU HAVE ANSWERED "YES" TO ANY QUESTION ABOVE, YOU CANNOT USE THIS FORM. PLEASE SEE YOUR COMPLIANCE
COORDINATOR.
</TABLE>
CERTIFICATION
I certify that I have truthfully answered all the questions above and that the
contemplated transactions are consistent with all SBAM policies regarding
employee personal trading.
- --------------------------------------------------------------------------------
SIGNATURE DATE
- ------------------------------------------------------------------
COMPLIANCE COORDINATOR INITIALS: DATE:
- ------------------------------------------------------------------
- -------------------------------------
(1) Securities issued by the same entity as the issuer of the security, and all
derivative instruments such as options and warrants.
(2) All securities sold must have been held for at least 60 days.
<PAGE>
CODE OF ETHICS
OF
SANFORD C. BERNSTEIN & CO., INC.
EFFECTIVE APRIL, 2000
<PAGE>
TABLE OF CONTENTS
GENERAL PRINCIPLES.............................................................1
PERSONAL TRADING RULES.........................................................2
You May Trade Only at Bernstein..............................................2
General Statement of Policy..............................................2
Outside Accounts Must Be Transferred To Bernstein........................3
Initial Disclosure Upon Commencing Employment............................3
Outside Trades Permitted Only in Very Limited Circumstances..............4
Heightened Disclosure Requirements For Outside Accounts..................5
Pre-Approval Required For All Trades By All Staff Members....................6
General Statement of Policy..............................................6
Steps in the Pre-Approval Process........................................6
Step One: Order Ticket / Memo Request................................7
Step Two: Approval by Your Supervisor or Other Authorized Person.....7
Step Three: Approval of Trading Desk.................................8
Exception: Trades in Authorized Outside Accounts................8
Our Trading Desk Will Not Permit You to Trade Ahead of Clients...........9
General Statement of Policy...........................................9
Limited Exception.....................................................9
Other Reasons For Trading Desk Disapproval..............................10
Prohibition Against Insider Trading.........................................11
Restrictions On Participating In:
IPOs....................................................................12
Private Securities Transactions and Other
Investment Opportunities of Limited Availability........................12
No Short-Term Trading.......................................................13
Special Restrictions For:
Decisionmakers..........................................................14
Others with Access to Decisions.........................................14
i
<PAGE>
Contrary Trading Restrictions For Members of:
Investment Policy Groups................................................15
Global Equity Portfolio Management Department...........................15
(Including All Domestic and International Equity Portfolio
Management Groups and Investment Management Trading).................15
Investment Management Research Department...............................15
(Including All Domestic and International Equity
Research Departments)................................................15
Fixed Income Department.................................................15
Other Special Restrictions For:
Investment Management Research Analysts.................................16
Investment Management Research Associates...............................16
Fixed Income Staff Performing Research..................................16
Special Restrictions For:
Institutional Research Analysts.........................................17
Institutional Research Associates.......................................17
Other Special Restrictions Imposed By Your Department.......................18
OTHER CONDUCT RULES...........................................................19
Gifts.......................................................................19
Gifts Received By Staff Members.........................................19
Entertaining Clients....................................................19
Gifts Given By Staff Members............................................20
Compensation to Certain Employees of Others.............................20
Financial Interest..........................................................21
Awarding Contracts..........................................................21
Outside Directorships & Officerships and Other Outside Activities...........22
No Recommendation or Sale of Products Other Than Bernstein Products.........22
ii
<PAGE>
Proprietary Information.....................................................23
Identity of Companies on Our Restricted Lists...........................23
Clients'Proprietary Information.........................................23
Our Research............................................................23
Other...................................................................23
Rumors......................................................................24
Communication With Clients & the Public.....................................24
Reportable Events Involving Staff Members...................................25
ADMINISTRATION................................................................26
Annual Report and Certification.............................................26
Ongoing Supervisory Oversight...............................................26
Education & Training........................................................26
Reporting of Violations.....................................................26
SANCTIONS.....................................................................27
OVERSIGHT BY BOARD OF DIRECTORS...............................................28
Establishment and Oversight of This Code....................................28
Our Annual Report and Certification to the Board............................28
RECORD-KEEPING................................................................29
The Legal Department is Responsible For:....................................29
The Brokerage Operations Department is Responsible For:.....................30
iii
<PAGE>
GENERAL PRINCIPLES
This Code of Ethics is based on the following general principles that will
govern your conduct while a member of the Bernstein staff:
- YOU MUST PLACE THE INTERESTS OF OUR CLIENTS FIRST;
- YOU MUST CONDUCT YOUR PERSONAL SECURITIES AND COMMODITIES TRANSACTIONS
AND PERFORM YOUR JOB DUTIES IN KEEPING WITH THIS CODE OF ETHICS AND IN
A MANNER SO AS TO AVOID ANY ACTUAL OR POTENTIAL CONFLICTS OF INTEREST
OR ANY ABUSE OF YOUR POSITION OF TRUST AND RESPONSIBILITY;
- YOU MUST NOT TAKE INAPPROPRIATE ADVANTAGE OF YOUR POSITION WITH OUR
FIRM;
- YOU MUST COMPLY WITH ALL APPLICABLE LAWS, RULES AND REGULATIONS, AND
MAKE A GOOD FAITH EFFORT TO COMPLY WITH THE SPIRIT AND INTENT OF ALL
SUCH LAWS, RULES AND REGULATIONS; AND
- YOU MUST COMPLY WITH ALL OTHER POLICIES AND PROCEDURES OF OUR FIRM,
SUCH AS THOSE IN OUR COMPLIANCE MANUAL AND IN BERNSTEIN & YOU, OUR
EMPLOYEE HANDBOOK.
For purposes of this Code, we use the term "client" to include all
institutional brokerage, investment advisory and investment management clients
of Bernstein, including each portfolio of the Sanford C. Bernstein Fund, Inc.
and any other investment company for which we provide investment management
services.
When we refer to "you" in this Code and "your" obligations to abide by this
Code's personal trading restrictions, we also mean any other person, including
your spouse or other family member, whose investment decisions you control or
influence.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
1
<PAGE>
PERSONAL TRADING RULES
YOU MAY TRADE ONLY AT BERNSTEIN
GENERAL STATEMENT OF POLICY
In order to monitor adherence to the trading rules described in this Code
of Ethics, we require you to maintain at Bernstein all of your securities
accounts and the accounts that you control, and we restrict you from controlling
or influencing any securities or commodities trades outside Bernstein without
our special permission. This means, for example:
- Your securities (including options) accounts must be here;
- The securities accounts of your spouse and other immediate family
members sharing your household must be here if you control the
selection of investments for those accounts;
- You must obtain approval from the firm to maintain a commodities
account with a futures commission merchant;
- You may not control or influence any securities or commodities trade
outside Bernstein without our permission;
- Your IRA or 401(k) account must be here if you can control the
selection of particular stocks for the account;
- You may not trade securities "online;"
- You may not participate directly or indirectly in any investment club
in which members pool their funds and invest;
- If you have a financial interest in a trust, and you control the
selection of securities for the trust, the trust account must be here;
and
- The accounts of charities must be here if you control the selection of
investments for those accounts.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
2
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PERSONAL TRADING RULES - YOU MAY TRADE ONLY AT BERNSTEIN (CONTINUED)
OUTSIDE ACCOUNTS MUST BE TRANSFERRED TO BERNSTEIN
Beginning on your first day as our staff member, you may not control or
influence the trading of securities or commodities in any outside account. You
must transfer to us all outside accounts as soon as possible unless we give you
permission to maintain the accounts outside Bernstein (as explained on the next
page). You can obtain from the Legal Department the forms for transferring
accounts and for opening accounts at Bernstein.
INITIAL DISCLOSURE UPON COMMENCING EMPLOYMENT
In order for us to monitor and facilitate your transfer of accounts to us
and to otherwise help us to implement this Code, you must report to us within 10
days of joining our firm the information described below. The Personnel
Department will provide you with the forms for making this report.
- Information about all securities and commodities accounts you control
or influence (including accounts with brokers, dealers, banks or
mutual fund companies). You will need to attach the most recent
account statements.
- Information about stock certificates you hold.
- Information about all private placements, limited partnership
interests and other private investments that you control or influence.
- Information about all positions you hold as an employee, officer or
director of any business organization outside Bernstein.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
3
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PERSONAL TRADING RULES - YOU MAY TRADE ONLY AT BERNSTEIN (CONTINUED)
OUTSIDE TRADES PERMITTED ONLY IN VERY LIMITED CIRCUMSTANCES
We may, in our sole discretion, approve the following requests to execute
trades outside Bernstein:
- You want to trade commodities (such as futures). Since we do not
provide those services, we might allow you to maintain an outside
account for this type of trading, but you will need to obtain our
permission before each trade in accordance with procedures established
by the Legal Department.
- You want to maintain elsewhere a managed account (also known as a
discretionary account) in which an investment manager or other
fiduciary has the authority to make trading decisions on your behalf.
In reviewing your request to maintain an outside managed account, we
might ask for written confirmation that you have no power to choose or
recommend securities to trade for the account. Requests of this type
from principals or shareholders of Bernstein are generally denied.
- You want to hold or trade mutual funds outside Bernstein. If you hold
the mutual fund account directly with a mutual fund company and
without utilizing the services of a broker, you will simply need to
report the account to our Legal Department on a form that we will
supply to you. If you hold the mutual funds in a brokerage account, we
may approve your request if you agree not to trade anything other than
mutual funds in the account.
- You have stock options granted to you by a former employer under an
employee stock option plan. The employer may have a program in place
to facilitate your exercise of options through a broker other than
Bernstein, and you want to participate in that program.
- You have a dividend reinvestment plan that you opened directly with an
issuer and not through a brokerage account. You want to maintain that
plan. You may simply need to report the plan to our Legal Department
on a form that we will supply to you. However, you will need to seek
our permission before selling the securities.
- You have a 401(k) plan through your former employer. You have the
ability to choose certain funds for investment, for example a
"balanced fund," or a "growth fund." You do not have the ability to
choose a "self-directed" option or otherwise to choose particular
securities in which to invest.
- You want to purchase Treasury Notes, Treasury Bonds or Treasury Bills
directly from (or sell directly to) the Federal Reserve Bank, or you
want to hold certificates of deposit ("CDs") at a bank. These do not
fall within the definition of "securities" for purposes of this Code.
- You want to participate in a private placement. You will need to seek
our approval in accordance with the policy described on page 12 of
this Code. If and when the issuer later becomes a public company, you
will need to transfer your investment to a brokerage account at
Bernstein if you wish to sell it.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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PERSONAL TRADING RULES - YOU MAY TRADE ONLY AT BERNSTEIN (CONTINUED)
HEIGHTENED DISCLOSURE REQUIREMENTS FOR OUTSIDE ACCOUNTS
For any securities or commodities accounts we give you permission to
maintain, control or influence outside of Bernstein, you must arrange for a copy
of the confirmation of each transaction and a copy of each monthly statement to
be provided promptly to our Legal Department. (The only exception is for mutual
funds held directly with a mutual fund company and not purchased utilizing the
services of a broker). Whenever possible, you must arrange for these copies to
be sent directly by the other firm where the account is held.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
5
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
PRE-APPROVAL REQUIRED FOR ALL TRADES BY ALL STAFF MEMBERS
GENERAL STATEMENT OF POLICY
Each time you want to place a securities or commodities trade in an account
you control or influence (whether at Bernstein or outside of Bernstein as
permitted by the Legal Department), you will first need to obtain our permission
in accordance with the three-step set of procedures described below. These
procedures do NOT apply to:
- trades in open-end mutual fund shares;
- non-volitional trading (for example: stocks splits or dividend
reinvestment plans); or
- trades in managed accounts in which Bernstein or another investment
manager is selecting securities or commodities to trade.
We will disapprove your trade in our sole discretion if we believe that it
would violate this Code, that the frequency or nature of your trading activity
may distract you from your job responsibilities, or that the trade may otherwise
be inappropriate or may raise the appearance of a possible conflict of interest.
STEPS IN THE PRE-APPROVAL PROCESS
You will need to take three steps in order to place a typical trade. The
three steps are summarized in the chart below, and each step is explained on the
following pages. Other pre-approval requirements will apply if you are seeking
to trade options or if you are seeking to participate in an investment
opportunity of limited availability.
------------------ -------------------- --------------------
STEP ONE: STEP TWO: STEP THREE:
--------- -- > --------- -- > -----------
COMPLETE OBTAIN APPROVAL BY OBTAIN APPROVAL OF
ORDER TICKET/ SUPERVISOR OR OTHER TRADING DESK
MEMO REQUEST AUTHORIZED PERSON
------------------ -------------------- --------------------
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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PERSONAL TRADING RULES - PRE-APPROVAL REQUIRED FOR ALL TRADES BY ALL STAFF
MEMBERS (CONTINUED)
STEP ONE: ORDER TICKET / MEMO REQUEST
Before placing a securities trade AT BERNSTEIN, you will need to fill out a
trade order ticket. You can obtain these tickets from the Legal Department or
the trading desk. From time to time, we will distribute instructions for filling
out the trade order ticket.
Before placing a securities or commodities trade OUTSIDE BERNSTEIN (in the
limited circumstances where outside trading is permitted), you will need to
describe the proposed trade in a written memo. You can obtain a form of
memoranda from the Legal Department.
STEP TWO: APPROVAL BY YOUR SUPERVISOR OR OTHER AUTHORIZED PERSON
You must take your trade order ticket (or your memo, in the case of trades
in authorized outside accounts) to your supervisor or other person authorized to
approve trades. The Legal Department will maintain and distribute periodically a
current list of supervisors and other persons who have authority to approve
personal trades. That person must place his or her initials and the date on the
order ticket (or memo) to document the appropriate approval.
Approval to conduct a personal trade will remain effective only for the day
in which it is granted. If you fail or decline to complete the trade that day
for any reason (including that the trading desk holds your order pending a
client transaction), you must obtain a new approval to place the trade on
another day.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
7
<PAGE>
PERSONAL TRADING RULES - PRE-APPROVAL REQUIRED FOR ALL TRADES BY ALL STAFF
MEMBERS (CONTINUED)
STEP THREE: APPROVAL OF TRADING DESK
After you have obtained approval from your supervisor or other authorized
person to place a trade, you will still need to obtain the approval of our
trading desk. From time to time, we will distribute procedures for obtaining
trading desk approval. The trading desk, if it approves your proposed
transaction, will place the trade for you, and we will send you a confirmation
in the mail.
EXCEPTION: TRADES IN AUTHORIZED OUTSIDE ACCOUNTS
The only exception is for trades in authorized outside accounts such
as commodities accounts. For these outside trades, you will need to bring your
memo (reflecting the approval of your supervisor or other authorized person) to
the Legal Department before you place the trade outside. The Legal Department
will obtain any additional approvals required and will retain a copy of your
memorandum.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
8
<PAGE>
PERSONAL TRADING RULES - PRE-APPROVAL REQUIRED FOR ALL TRADES BY ALL STAFF
MEMBERS (CONTINUED)
OUR TRADING DESK WILL NOT PERMIT YOU TO TRADE AHEAD OF CLIENTS
GENERAL STATEMENT OF POLICY
In order to minimize the potential for conflicts of interest between
you and our clients, our trading desks will not permit you to trade under the
following circumstances:
- Related client orders are pending; or
- A large volume of client orders is forthcoming (e.g., the
security is listed as a "priority purchase," "priority sale,"
"trim" or "established tax trade").
Under certain circumstances, your trade might be delayed for several days or
even weeks until the pending or anticipated client orders are completed.
LIMITED EXCEPTION
Our trading desk may grant you an exception under the circumstances
set forth below. This exception will not be available to you if you are a member
of the Fixed Income Department (with respect to fixed income trades), or if you
are a member of an equity IPG or any Equity Portfolio Management Department,
including Investment Management Trading (with respect to equity trades).
- Your trade involves a relatively insignificant number of
shares, typically less than 500 shares or securities
convertible into less than 500 shares, or less than 25 bonds
or securities convertible into less than 25 bonds;
AND
- The security you are seeking to buy is not part of a large
buy program for client accounts, or the security you are
seeking to sell is not part of a large sell program for
client accounts;
AND
- Clients are waiting for a better price before trading. For
equities, pending client orders typically must be awaiting
prices that differ from the market price by at least a 1/2
point. For fixed income securities, pending client orders
typically must be awaiting prices that differ from the
market price by at least 10 basis points in yield.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
9
<PAGE>
PERSONAL TRADING RULES - PRE-APPROVAL REQUIRED FOR ALL TRADES BY ALL STAFF
MEMBERS (CONTINUED)
OTHER REASONS FOR TRADING DESK DISAPPROVAL
In addition, our trading desks will not permit you to trade if, for
example:
- Our firm has agreed to participate in the underwriting for new
securities of an issuer and your order is for securities of that
issuer.
- Our Institutional Research Department is initiating research
coverage of a company or has reached a research recommendation
about the company that has not yet been disseminated, and you
want to trade securities related to that company.
- Our Institutional Research Department has just disseminated a
research report initiating coverage of a company or changing a
recommendation regarding a company, and you want to trade
securities related to that company. Our trading desks will not
execute for you any personal trades relating to that company
until 48 hours following the dissemination of our research.
- You want to buy a security that our firm has purchased for
clients. It is a security that our firm still would want to
purchase for clients but cannot do so because of regulatory or
policy restrictions limiting the ownership interest in an issuer
that we can acquire for ourselves or our clients.
Moreover, our trading desks may from time to time establish rules for
employee personal trading designed to ensure that we do not divert to our
employees the resources needed to serve our clients. For example, our trading
desk may prohibit personal trading by staff members during certain times of the
day during which the desk tends to be particularly busy with client trades.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
10
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
PROHIBITION AGAINST INSIDER TRADING
The securities laws and our policies prohibit persons or entities from
acting on inside information, in other words information that is "material" and
"nonpublic." Information may be material and nonpublic if there is a substantial
likelihood that a reasonable investor would consider the information important
in making his or her investment decision and the information is not generally
available to ordinary investors in the marketplace. The information may come
from the company itself, or may come from other sources such as investment
bankers.
- You may not trade while in possession of inside information. This
is true regardless of how you learned about the information.
- If you believe that you have received inside information, you
must immediately cease contact with the source and consult an
attorney in the Legal Department. You must not communicate the
inside information to your supervisor, to anyone in the Portfolio
Management Department, or to anyone other than attorneys in the
Legal Department. The Legal Department will determine whether and
to what extent we should impose trading restrictions on you
and/or us. Also, you should speak with the Legal Department if
you believe that other staff members have communicated or traded
upon inside information. The Legal Department, to the extent
practicable, will keep your identity confidential in any
resulting investigation.
- While in possession of inside information, you may not recommend
the purchase or sale of a security to our firm or to any other
individual or entity. You also may not make any comment that
could be construed as a recommendation to purchase or sell the
security, or take any other action with respect to that security.
- In the course of our syndicate activities, meaning where the Firm
has agreed to participate in an underwriting, we may come into
possession of inside information regarding a company issuing or
planning to issue securities. On those occasions, the Syndicate
Department must establish a "Chinese Wall," which is the name
given to procedures designed to prevent the disclosure of such
information to other departments of our Firm. Our Compliance
Manual sets forth our Chinese Wall procedures. If you are a
member of the Syndicate Department or are otherwise instructed by
the Legal Department to create a Chinese Wall, you must
familiarize yourself with these procedures.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
11
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
RESTRICTIONS ON PARTICIPATING IN:
|X| IPOS
|X| PRIVATE SECURITIES TRANSACTIONS AND OTHER INVESTMENT
OPPORTUNITIES OF LIMITED AVAILABILITY
You must obtain the approval of your supervisor and the Legal
Department before you directly or indirectly participate in either of the
following activities:
- INITIAL PUBLIC OFFERINGS. In order to ensure our firm's
compliance with NASD rules, we prohibit our staff members from
directly or indirectly acquiring an interest in an IPO except
under very limited circumstances. For example, if you hold a
passbook savings account at a savings & loan, our Legal
Department might permit you (subject to certain conditions) to
participate as an account holder in a conversion of the savings &
loan to a public company, so long as our firm is not
participating in the conversion.
- LIMITED OFFERINGS. This includes any private securities
transaction or other investment opportunity of limited
availability, including new offerings or other investments not
registered with the SEC (for example private real estate limited
partnerships, investments in family-owned businesses and hedge
fund investments). In responding to these requests, we will
consider, among other things, whether your investment is passive,
whether the investment opportunity should be reserved for our
clients, and whether the opportunity is being offered to you by
virtue of your position here.
You can obtain from the Legal Department forms for requesting approval. The
Legal Department and your supervisor will approve or disapprove your request in
their discretion.
BERNSTEIN PRINCIPALS AND SHAREHOLDERS SHOULD CONSULT THEIR PRINCIPALS'
AGREEMENT AND SHAREHOLDERS' AGREEMENT RESPECTIVELY FOR ADDITIONAL RESTRICTIONS.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
12
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
NO SHORT-TERM TRADING
- You may not buy a security if you have sold the same or equivalent
security within the prior thirty (30) calendar days.
- You may not sell a security if you have bought the same or equivalent
security within the prior thirty (30) calendar days.
- This rule does not apply to Treasuries or derivatives on Treasuries,
although even for this limited category of securities you may not
trade on an intra-day basis.
- Exemptions from this rule will be granted only in rare instances, such
as in cases of financial hardship. To obtain an exemption, you must
make a written request for approval from your supervisor and the Legal
Department.
- If you profit from a short-term trade in violation of this section,
you will be required to disgorge your profits to charity.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
13
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
SPECIAL RESTRICTIONS FOR:
|X| DECISIONMAKERS
|X| OTHERS WITH ACCESS TO DECISIONS
- INVESTMENT MANAGEMENT. You may not trade in a security if you
participate in, or have reason to know about, our firm's consideration
of the security for the accounts of our investment management clients.
This restriction will continue throughout the implementation of any
resulting major buy or sell program. The following examples illustrate
this policy:
>> You are seriously considering recommending a security to our
applicable investment policy group ("IPG") for purchase or
sale for clients' accounts, or you are a member of an IPG
where discussions of such a recommendation are taking place.
You may not trade in the security. You may trade, if
otherwise consistent with this Code, only after the IPG has
considered and rejected your recommendation, or after the
IPG has accepted your recommendation and client orders have
been completed.
>> You know (for example, because you overheard a conversation)
that our firm intends in the reasonably foreseeable future
to place orders to purchase a security for our clients'
accounts. You may not purchase the security. You may trade,
if otherwise consistent with this Code, only after we have
decided not to purchase the security for clients, or after
all client orders have been filled.
Moreover, you must disclose to the chairperson of the applicable IPG
any of your direct or indirect holdings in a security when you are
participating in our firm's determination of whether to buy or sell
the security for our clients.
- INSTITUTIONAL SERVICES. You may not trade in a security if you have
reason to know that our firm is intending to recommend the security to
clients of our institutional services business, or that any of those
clients are intending in the reasonably foreseeable future to place
orders in the security. The following examples illustrate this policy:
>> You become aware of a forthcoming research recommendation of
an institutional research analyst prior to its dissemination
(whether with respect to initiating coverage or to changing
a previously-issued recommendation). You may not trade in
that security until 48 hours after the research report has
been disseminated.
>> You learn that a client of our institutional services
business intends to place an order to purchase a security.
You may not trade in the security until the client's orders
have been filled.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
14
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
CONTRARY TRADING RESTRICTIONS FOR MEMBERS OF:
|X| INVESTMENT POLICY GROUPS
|X| GLOBAL EQUITY PORTFOLIO MANAGEMENT DEPARTMENT
(INCLUDING ALL DOMESTIC AND INTERNATIONAL EQUITY PORTFOLIO MANAGEMENT
GROUPS AND INVESTMENT MANAGEMENT TRADING)
|X| INVESTMENT MANAGEMENT RESEARCH DEPARTMENT
(INCLUDING ALL DOMESTIC AND INTERNATIONAL EQUITY RESEARCH DEPARTMENTS)
|X| FIXED INCOME DEPARTMENT
- GENERAL STATEMENT OF POLICY. If you work in one of these areas, you
may not make any trades that are contrary to the action our firm is
taking, or is contemplating taking in the reasonably foreseeable
future, for our managed accounts in that area. There is only one
exception - if we are holding a stock for clients solely for purposes
of diversification to control the portfolio's tracking error versus
its benchmark index, then the contrary trading policy would not
restrict you from selling the stock.
- ILLUSTRATIONS OF POLICY. For example, if our firm is buying or holding
a fixed income security for clients' accounts, then you may not sell
the security if you are a member of the fixed income department or you
serve as a member of an investment policy group that encompasses fixed
income securities. Similarly, if our firm has just completed a sell
program for an equity security, you may not buy the security if you
are a member of the Global Equity Portfolio Management Department or
Investment Management Research Department, or if you serve as a member
of an investment policy group that encompasses equity securities.
Generally, staff member purchases more than seven (7) days after we
have completed our sell program for clients will not be considered
contrary trading under this policy.
- EXEMPTIONS. To obtain an exemption from this policy, you will need the
written approval of your supervisor and the Legal Department, which
may consider such factors as the length of your holding period, the
size of your holding in absolute terms and relative to your other
holdings, and the reasons for the proposed trade.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
15
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
OTHER SPECIAL RESTRICTIONS FOR:
|X| INVESTMENT MANAGEMENT RESEARCH ANALYSTS
|X| INVESTMENT MANAGEMENT RESEARCH ASSOCIATES
|X| FIXED INCOME STAFF PERFORMING RESEARCH
- - If you are a staff member in one of these positions, you must sell all
holdings in a security upon your initiation of research coverage of that
security or before otherwise recommending the security for purchase for
managed accounts. The Director of Investment Management Research, or the
Chief Investment Officer or Director of Global Fixed Income Investments (as
applicable), may grant discretionary exceptions to this policy (in
consultation with the Legal Department) based on factors including:
>> the length of time since your last purchase of the security,
>> your intent regarding future holding of the security,
>> reasons for your original purchase,
>> the liquidity, capitalization and volatility of the security, and
>> the size of your holding (in both absolute terms and relative to
your overall portfolio).
We might condition an exception on your agreement to hold the security
until our clients have sold it.
- - You may not trade options of any kind in securities you cover.
- - You may not "short" securities you cover.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
16
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
SPECIAL RESTRICTIONS FOR:
|X| INSTITUTIONAL RESEARCH ANALYSTS
|X| INSTITUTIONAL RESEARCH ASSOCIATES
- You must sell all holdings in a security upon your initiation of
research coverage of that security. In other words, you may not
recommend purchase of a security that you hold. The applicable
Director of Institutional Research may grant discretionary exceptions
to this policy (in consultation with the Legal Department) based on
factors including:
>> the length of time since your last purchase of the security,
>> your intent regarding future holding of the security,
>> reasons for your original purchase,
>> the liquidity, capitalization and volatility of the
security, and
>> the size of your holding (in both absolute terms and
relative to your overall portfolio).
The Director might condition an exception on your agreement to hold
the security until we have disseminated to our institutional clients a
recommendation that the security is rated "underperform." The Director
also might grant limited exceptions for new employees with respect to
securities purchased before joining us.
- With respect to securities you cover, you may purchase only securities
that you rate "outperform," and you may sell only securities that you
rate "underperform." You may neither buy nor sell securities that you
rate "marketperform." To obtain an exemption from this policy, you
will need the written approval of your supervisor and the Legal
Department, which might consider such factors as the length of your
holding period, the size of your holding in absolute terms and
relative to your other holdings, and the reasons for the proposed
trade.
- You may not trade options of any kind in securities you cover.
- You may not "short" securities you cover.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
17
<PAGE>
PERSONAL TRADING RULES (CONTINUED)
OTHER SPECIAL RESTRICTIONS IMPOSED BY YOUR DEPARTMENT
From time to time, any department in our firm may establish rules for
personal trading that cover staff members in that department and that take into
consideration the particular functions and duties of those staff members. Any
personal trading rules issued by your department managers will be in addition to
the rules in this Code.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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<PAGE>
OTHER CONDUCT RULES
GIFTS
The following policies do not apply to personal gifts between staff
members, or to personal gifts between a staff member and a family member or
personal friend that are given or received outside of a business related
setting.
GIFTS RECEIVED BY STAFF MEMBERS
You may not accept any gift (including gifts of tickets to sporting events
or theatre where the person providing the entertainment is not present) other
than gifts of nominal value (under $100) from any one person in any one year.
Under no circumstances may you accept a gift of cash.
ENTERTAINING CLIENTS
You may engage in normal and customary business entertainment (such as
business meals, sporting events and shows) provided that you are present for the
event.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
19
<PAGE>
OTHER CONDUCT RULES--GIFTS (CONTINUED)
GIFTS GIVEN BY STAFF MEMBERS
You may not give or permit to be given anything of value, including
gratuities, in excess of $100 per individual per year to any person where such
payment or gratuity is in relation to the business of the recipient's employer.
This limit applies, for example, to a gift of tickets to an event if you will
not be accompanying the recipient to the event. The maximum is $50 if the
recipient is a principal, officer or employee of the NYSE or its subsidiaries.
You may give gifts of securities to charity, and we permit you to choose
the securities you wish to give from any type of securities account. Please note
the following regarding the charity's subsequent sale of those securities. If
the charity's account is a managed account held at Bernstein, and the charity
wishes to sell the gifted security, then the charity's account will compete
equally (for allocation purposes) with the managed accounts of our other
clients. If the charity's account is one for which you have the power to control
the choice of securities to trade (and thus the charity's account is a brokerage
account held at Bernstein), then the charity will be required to wait for client
orders to be completed before selling the securities that it received from you.
COMPENSATION TO CERTAIN EMPLOYEES OF OTHERS
Bernstein is permitted by applicable regulations to pay for services of up
to $200 per person per year to certain specified operations persons with the
prior written consent of a Senior Vice President or Vice President of
Operations. Such permitted recipients include a telephone clerk on the New York
Stock Exchange floor who provides courtesy telephone relief to the Firm's floor
clerk or handles orders for the Firm. Please refer to the Firm's Compliance
Manual for detailed procedures regarding compensation of this type.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
20
<PAGE>
OTHER CONDUCT RULES (CONTINUED)
FINANCIAL INTEREST
You may not act on the firm's behalf in any transaction involving persons
or entities with whom you or your family has any significant connection or
financial interest without prior written approval from our Board of Directors.
You should direct to the office of the General Counsel any requests for approval
from the Board of Directors. For purposes of this policy, your family includes
parents, parents-in-law, spouse, siblings, siblings-in-law, children,
children-in-law, or a person to whom you provide material support.
AWARDING CONTRACTS
We must award orders, contracts and commitments to suppliers strictly based
on merit and without favoritism. The Legal Department must review and approve
all contracts for goods or services before execution, and an authorized Firm
officer must sign each contract. The officer signing the contract must provide a
copy of the final, signed version to the Legal Department for retention.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
21
<PAGE>
OTHER CONDUCT RULES (CONTINUED)
OUTSIDE DIRECTORSHIPS & OFFICERSHIPS AND OTHER OUTSIDE ACTIVITIES
Whether or not in connection with your duties and responsibilities at
Bernstein, you may not accept the following without prior written approval from
the Board of Directors:
- A directorship or officership of any company or organization (other
than a charitable organization), regardless of whether you receive
compensation, or
- Outside employment or remuneration from any source for any services
performed (for example, consulting fees or finder's fees).
You must submit any requests for such approval in writing to the General
Counsel. In a rare instance in which we grant your request to serve as a board
member of a public company, we may require that you be isolated from making any
decisions for our clients with respect to investing in that company.
You may not use the firm's name in connection with any outside activity
without prior written approval from our Board of Directors. You must submit any
request for approval in writing to the General Counsel.
NO RECOMMENDATION OR SALE OF PRODUCTS OTHER THAN BERNSTEIN PRODUCTS
You may not recommend to clients that they participate in any securities
transaction (including any private transaction) other than a Bernstein product.
And, you may not receive "selling" or other compensation in connection with any
securities transaction (including any private transaction) other than a
Bernstein product.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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OTHER CONDUCT RULES (CONTINUED)
PROPRIETARY INFORMATION
IDENTITY OF COMPANIES ON OUR RESTRICTED LISTS
Our firm maintains lists of securities relating to companies for which we
have agreed to participate in an underwriting, or about which we intend to
publish a research recommendation. You may not disclose outside our Firm the
identity of securities on these lists, since the fact that we have listed a
security may signal the market that we know of a significant development which
may affect the price of the security.
CLIENTS' PROPRIETARY INFORMATION
You must never disclose confidential business or personal information,
including names of clients, client account balances, financial information
obtained from a client, or anticipated changes in the management or financial
condition of a client, outside the normal and necessary course of the firm's
business. This policy does not preclude you from sharing information about a
client with his or her lawyers, accountants or other advisors upon the client's
request.
OUR RESEARCH
Our firm gathers and develops information that we use to service our
clients. For example, our Institutional Research Analysts publish "Black Book"
reports. You may not disclose this information outside the firm except as
required to perform your job duties. Also, any material marked "Not for External
Distribution," including research prepared by investment management research
analysts, should not be distributed outside the firm.
OTHER
During the course of your employment, you may have access to information
relating to our business, including information that provides our firm with a
competitive advantage. This confidential information may include, for example,
information relating to our investment strategies, our investment management
processes or systems, our existing or anticipated corporate activity, our
financial condition or performance, or compensation paid to our staff. You may
not disclose confidential information to anyone outside Bernstein except in the
course of the proper exercise of your job duties.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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OTHER CONDUCT RULES (CONTINUED)
RUMORS
New York Stock Exchange rules, as well as our policy, prohibit the
circulation of rumors concerning the affairs of any company, as well as the
affairs of other NYSE member organizations, since rumors can influence
securities prices. If a rumor comes to your attention, you must contact the
Legal Department immediately and refrain from spreading the rumor.
COMMUNICATION WITH CLIENTS & THE PUBLIC
Our Compliance Manual sets forth our policies and procedures regarding our
communications with clients or other members of the public, with which you must
comply. Also, you must comply with sections of our Compliance Manual governing
our review of incoming and outgoing correspondence of certain staff members. In
addition, when communicating with clients or the public, truthfulness and good
taste are always required.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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OTHER CONDUCT RULES (CONTINUED)
REPORTABLE EVENTS INVOLVING STAFF MEMBERS
We are required to notify regulatory authorities in the event that a staff
member is involved in or is the subject of a "reportable event," for the most
part when a staff member faces actual or potential disciplinary action or finds
him or herself in some other kind of legal or regulatory trouble. While we are
likely to become aware of certain types of reportable events in the course of
our supervision of staff members, we may not necessarily be aware of all
reportable events without your disclosure. In order to facilitate our firm's
compliance with these requirements, you are required to notify the Legal
Department immediately in the event you, or a person under your supervision,
comes under scrutiny by our firm or any outside person or entity or engages in
conduct warranting a higher level of supervisory oversight by our firm. For
example, you must notify the our Legal Department if you, or a person under your
supervision:
- violates a law or regulation, or any agreement with or rule or
standard of any government agency, self-regulatory organization or
business or professional organization;
- is the subject of any customer complaint;
- is named as a defendant or respondent in any proceeding;
- is denied registration or membership or is disciplined by any
regulatory or self-regulatory organization;
- makes any false or misleading statement, or omits a fact required to
be disclosed, in connection with any matter involving a regulatory
agency, whether in connection with an application, report, proceeding
or otherwise;
- is arrested, or is charged with, convicted of, pleads guilty to, or
pleads no contest to, any criminal offense (other than minor traffic
violations);
- has any association with an entity or person which was disciplined,
suspended, expelled or had its registration denied or revoked by any
agency, jurisdiction or organization, or which was convicted of, or
pleaded no contest to, any criminal offense;
- makes a compromise with creditors, files a bankruptcy petition or is
the subject of an involuntary bankruptcy petition;
- is or may become the subject of any internal disciplinary action;
- violates rules of our firm including this Code.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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ADMINISTRATION
ANNUAL REPORT AND CERTIFICATION
Annually, we will require you to certify on a form provided by the Legal
Department that you have read and understand this Code and have complied with
all applicable requirements. On the same form, we will require you to certify
the accuracy of our records regarding any accounts or investments you control or
influence outside of Bernstein and any outside business activities.
ONGOING SUPERVISORY OVERSIGHT
The Legal Department and your department manager will receive information
about your personal trading and will investigate any aberrational trading
activity, trades that appear to violate this Code, or trades that otherwise
raise the appearance of impropriety. In addition to our procedures for
monitoring securities and commodities transactions and holdings, we also will,
in connection with our supervisory responsibilities, endeavor to monitor your
conduct to ensure compliance with other conduct rules in this Code.
EDUCATION & TRAINING
We will periodically hold education and training programs in order to,
among other things, highlight the requirements of this Code. You are required to
attend the programs that we hold for you. In addition, if you are a "registered"
staff member, you are responsible for your compliance with continuing education
requirements of the regulatory authorities.
REPORTING OF VIOLATIONS
All departments must promptly report to the Legal Department any violations
of this Code. All departments should consult with the Legal Department before
imposing any sanctions for violations.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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SANCTIONS
To ensure compliance with the letter and spirit of this Code and with all
applicable laws, we reserve the right in our sole and absolute discretion to:
- Cancel any trade with or without notice to you at your expense;
- Require you to forfeit any profit you have made;
- In the case of an approved outside account, instruct you to cancel the
trade at your expense; and/or
- Suspend or revoke your trading privileges at any time for violations
of the letter or spirit of this Code or any applicable law, in
addition to any other disciplinary action or sanction.
If we discover a violation of this Code, we will respond appropriately,
which may include sanctions such as a letter of censure and/or a fine, or
suspension or termination of employment. Certain violations of this Code may
also expose a staff member (as well as the Firm) to regulatory disclosure
requirements, criminal prosecution and claims for damages.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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OVERSIGHT BY BOARD OF DIRECTORS
ESTABLISHMENT AND OVERSIGHT OF THIS CODE
The Board of Directors has approved this Code of Ethics and is responsible
for overseeing its operation, including but not limited to approving any
amendments to this Code as may be necessary or appropriate in light of any
violations of this Code and changing circumstances. In approving this Code of
Ethics, our Board of Directors has determined that:
- Personal investing by our staff members does not conflict with the
interests of our clients provided that our staff members comply with
the policies, procedures and restrictions set forth in this Code; and
- In light of the nature of our business, this Code contains provisions
reasonably necessary to prevent conflicts of interest between our
staff members and our clients.
OUR ANNUAL REPORT AND CERTIFICATION TO THE BOARD
At least once a year, we will provide the Boards of Directors of the
Sanford C. Bernstein Fund, Inc. and any other registered investment companies
for which we provide investment management services with a written report
describing any issues arising under this Code of Ethics or related procedures
since the last report, including, but not limited to:
- Information about material violations of the Code or procedures, or
violations that are material in the aggregate;
- Sanctions imposed in response to those violations;
- Information about any other significant conflicts of interest that
arose involving our personal investment policies;
- Procedures initiated or changes made to this Code since the last
report; and
- Amendments and modifications to the Code that we propose to make.
In connection with the annual report, we will also certify to each investment
company's Board of Directors that we have adopted and implemented such
procedures as we believe are reasonably necessary to prevent violations of this
Code of Ethics.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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RECORD-KEEPING
THE LEGAL DEPARTMENT IS RESPONSIBLE FOR:
- Maintaining (or causing another department to maintain) copies of the
initial holdings reports and annual certifications for at least five
years after the end of the calendar year in which the report is made,
the first two years in an easily accessible place.
- Maintaining the original of each staff member memorandum requesting
permission to conduct a trade in an outside account, each of which
reflects the initials of the supervisor or other authorized person who
approved the trade and the date of that approval, for at least five
years after the end of the calendar year in which the memorandum was
approved, the first two in an easily accessible place.
- Maintaining copies of each broker trade confirmation for each
transaction in approved outside accounts, if any, and a copy of each
monthly or quarterly statement for those accounts, for at least five
years after the end of the calendar year in which the information is
provided, the first two years in an easily accessible place.
- Maintaining (or causing another department to maintain) records of all
persons, currently or within the past five years, required to make
reports of holdings and/or account activity, and of the persons
responsible for reviewing those reports, in an easily accessible
place.
- Maintaining records of all approvals of, and the rationale supporting,
participations in IPOs, private placements and other investment
opportunities of limited availability, for at least five years after
the end of the calendar year in which the approval is granted.
- Maintaining in an easily accessible place a current copy of this Code
of Ethics and a copy of each Code of Ethics effective for the
preceding five-year period.
- Maintaining records of any violations of this Code and sanctions for
such violations in an easily accessible place for at least five years
after the end of the calendar year in which the violations occurred.
- Maintaining copies of our reports to Boards of Directors regarding
this Code for at least five years after the end of the calendar year
in which they are made, the first two years in an easily accessible
place.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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RECORD-KEEPING (CONTINUED)
THE BROKERAGE OPERATIONS DEPARTMENT IS RESPONSIBLE FOR:
- Maintaining records of all trade order tickets for the trades at
Bernstein in accounts controlled by staff members, each of which
reflects the initials of the supervisor or other authorized officer
who approved the trade and the date of that approval, for at least
five years after the end of the calendar year in which the trade was
effected, the first two years in an easily accessible place.
- Maintaining copies of all brokerage statements for accounts at
Bernstein controlled by staff members for at least five years after
the end of the calendar month to which they pertain, the first two
years in an easily accessible place.
IT IS YOUR RESPONSIBILITY TO READ AND UNDERSTAND THIS CODE. PLEASE DIRECT ANY
QUESTIONS ABOUT THIS CODE TO YOUR SUPERVISOR OR TO THE LEGAL DEPARTMENT.
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[GRAPHIC OMITTED]
CODE OF ETHICS
--------------
SECURITY CAPITAL GLOBAL CAPITAL MANAGEMENT GROUP INCORPORATED
SECURITY CAPITAL REAL ESTATE MUTUAL FUNDS INCORPORATED
SECURITY CAPITAL PREFERRED GROWTH INCORPORATED
This Code of Ethics supplements the Compliance Procedures section of
the Security Capital Group Incorporated Company Policy Online Manual and the
Security Capital Markets Group Incorporated and Security Capital Global Capital
Management Group Incorporated Supervisory Procedures Manual, each available
electronically and in print.
The Code of Ethics sets forth both general principles and specific
prohibitions that you will be required to comply with.
Please review the Code of Ethics carefully and return a signed copy of
the Access Person Certification Form to the Chief Compliance Officer. Questions
regarding the Code of Ethics should be directed to the Chief Compliance Officer.
SEPTEMBER 1999
<PAGE>
[GRAPHIC OMITTED]
CODE OF ETHICS
--------------
FOR ACCESS PERSONS OF
SECURITY CAPITAL GLOBAL CAPITAL MANAGEMENT GROUP INCORPORATED
SECURITY CAPITAL REAL ESTATE MUTUAL FUNDS INCORPORATED
SECURITY CAPITAL PREFERRED GROWTH INCORPORATED
I. OVERVIEW.
A. GOVERNANCE.
This Code of Ethics (the "Code") has been adopted by
the Boards of Directors of Security Capital Global Capital
Management Group Incorporated ("GCMG"), Security Capital Real
Estate Mutual Funds Incorporated ("SC-REMFs"), and Security
Capital Preferred Growth Incorporated ("SC-PG") (together, the
"Companies"). The Code establishes rules of conduct for all
"Access Persons", as defined below.
B. SUPPLEMENTAL TO POLICY MANUAL AND SUPERVISORY PROCEDURES
MANUAL.
The Code supplements, and does not supersede, the
Security Capital Group Incorporated ("Security Capital")
Company Policy Online Manual and the Security Capital Markets
Group Incorporated and GCMG Supervisory Procedures Manual
("Supervisory Procedures Manual") (together, where applicable,
the "Manuals"). Notwithstanding the foregoing, the time during
which Access Persons can buy or sell securities of any
publicly traded real estate company managed or controlled,
directly or indirectly, by Security Capital or its affiliates
is governed by the Code and not the Manuals. The Manuals
hereby are incorporated by reference.
C. APPLICABILITY.
INDEPENDENT DIRECTORS OF SC-REMFS AND SC-PG (TOGETHER, THE
"FUNDS") MUST COMPLY WITH SECTION III. OF THE CODE (PROHIBITED
TRANSACTIONS AND PRACTICES), BUT ARE NOT SUBJECT TO SECTION
IV. (CONDITIONAL TRANSACTIONS), SECTION VI. (PRECLEARANCE OF
CERTAIN CONDITIONAL TRANSACTIONS), OR SECTION VIII. (SHARE
OWNERSHIP REPORT) OF THE CODE. Furthermore, the Code does not
apply to the directors, officers and general partners of
entities for which GCMG serves as a subadviser.
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II. STATEMENT OF GENERAL PRINCIPLES.
A. DEFINITION OF "ACCESS PERSON".
In general, an Access Person is (i) an employee of
any of the Companies (or a company in a control relationship
with any of the Companies) who generally makes or participates
in decisions or obtains information regarding securities
transactions on behalf of any of the Companies or their
investors, (ii) an officer or director of any of the
Companies, (iii) a natural person in a control relationship
with any of the Companies or their investors who obtains
information concerning recommendations regarding securities
transactions, or (iv) any other person designated by the Chief
Compliance Officer. Persons who solely assist in the
preparation of public reports or receive public reports, while
not having information regarding CURRENT recommendations or
trading, or who inadvertently and infrequently obtain
knowledge of current recommendations or trading, do not
constitute Access Persons. A list of Access Persons is
attached as an exhibit to the Supervisory Procedures Manual.
B. GENERAL PRINCIPLES.
The general fiduciary principles that govern the
personal trading activities of Access Persons are as follows:
o - All purchases or sale of securities, whether by an Access
Person or his/her "Immediate Family"(1) ("Securities
Transactions"), must be conducted in a manner which does
not interfere with portfolio transactions on behalf of any
clients of GCMG or GCMG (Europe) ("Advisory Clients") or
investors in the Funds so as to avoid any actual or
potential conflict of interest or any abuse of an
individual's position of trust and responsibility.
- At all times the interests of Advisory Clients and
investors in the Funds must be placed first.
- The fundamental standard that Access Persons should not
take inappropriate or unfair advantage of their
relationship with Advisory Clients or investors in the
Funds is paramount.
Access Persons must adhere to these general
principles as well as comply with the Code's specific
provisions.
III. PROHIBITED TRANSACTIONS AND ACTIVITIES.
- -------------------
(1) "Immediate Family" includes any of the following persons residing in the
same household as the Access Person: child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law.
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A. ACCESS PERSONS WHO ARE NOT INDEPENDENT DIRECTORS.
An Access Person who is not an independent director MAY NOT:
1. Purchase or sell, directly or indirectly, any security in
which he/she has, or by reason of such transaction acquires,
any direct "Beneficial Interest", as defined below, and which
he/she knows at the time of such transaction is being
purchased or sold or considered for purchase or sale on behalf
of an Advisory Client or by a Fund. A security is "being
considered for purchase or sale" when a recommendation to
purchase or sell a security has been made and communicated
and, with respect to the person making the recommendation,
when such person receives information that would lead such
person in his/her normal course of business to consider making
such a recommendation.
A person generally is deemed to have a Beneficial
Interest in securities if: (i) the 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,
the securities, AND/OR (b) investment power, which includes
the power to dispose of, or to direct the disposition of, the
securities; AND (ii) the person, directly or indirectly,
through any contract, arrangement, understanding, relationship
or otherwise, has or shares a direct or indirect pecuniary
interest in the securities. A person is deemed to have voting
and/or investment power with respect to securities if the
person has the right to acquire a Beneficial Interest in the
security within 60 days, including any right to acquire the
security through the exercise of any option, warrant or right;
the conversion of a security; pursuant to the power to revoke
a trust, discretionary account or similar arrangement; or
pursuant to the automatic termination of a trust,
discretionary account or similar arrangement.
2. Recommend any Securities Transaction to an Advisory Client
or with respect to a Fund without having disclosed his/her
interest, if any, in such securities or the issuer of the
securities, including without limitation:
(i). such person's direct or indirect Beneficial
Interest in any securities of such issuer;
(ii). any contemplated transaction by such person in such
securities;
(iii). any position with such issuer or its affiliates; OR
(iv). any present or proposed business relationship
between such issuer or its affiliates and such
person or any party in which such person has a
significant interest.
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3. Directly or indirectly in connection with the purchase or
sale of any securities held or to be acquired by an Advisory
Client or with respect to a Fund:
(i). employ any device, scheme or artifice to defraud an
Advisory Client or the Fund;
(ii). make any untrue statement of a material fact, or
omit to state 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 an Advisory Client or a Fund.
4. Purchase securities offered in an initial public offering
or a private placement without the prior approval of Security
Capital's Legal Department.
5. Purchase or sell securities of any public real estate
company (whether traded on an exchange within or outside the
United States), except as set forth in Section IV.A.1 below
and the Manuals.
B. INDEPENDENT DIRECTORS.
Independent directors of the Funds may not purchase
securities issued by Security Capital or its affiliates.
IV. CONDITIONAL TRANSACTIONS.
A. TRADING BY ACCESS PERSONS.
Access Persons may engage in the following trading activities:
1. Purchase securities of any public real estate company
managed or controlled, directly or indirectly, by Security
Capital, upon the condition that:
(i). preclearance is obtained from the Chief Compliance
Officer;
(ii). such purchase occurs only during a period of time
stipulated by such affiliated company (window
periods) (in addition, Access Persons with titles of
Senior Vice President and above and their respective
assistants also must obtain prior clearance from
Security Capital's Legal Department); AND
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(iii). within five (5) business days following the date of
such purchase, a copy of the trade confirmation or
comparable documentation is provided to the Chief
Compliance Officer.
2. Sell securities of any public real estate company managed
or controlled, directly or indirectly, by Security Capital
upon the condition that:
(i). preclearance is obtained from the Chief Compliance
Officer;
(ii). such sale occurs only during a period of time
stipulated by such affiliated company (window
periods) (in addition, Access Persons with titles of
Senior Vice President and above and their respective
assistants also must obtain prior clearance from
Security Capital's Legal Department); AND
(iii). within five (5) business days following the date of
such sale a copy of the trade confirmation or
comparable documentation is provided to the Chief
Compliance Officer.
V. EXEMPT TRANSACTIONS.
The prohibitions and conditions described in Sections III. and IV.
above shall not apply to:
A. Purchases or sales of SC-REMFs shares.
B. Purchases or sales effected in any account over which the
Access Person (i) has no direct or indirect influence or control,
OR (ii) has given discretionary investment authority to an independent
third party.
C. Purchases or sales that are non-volitional on the part of the
Access Person.
D. Purchases that are part of an automatic dividend reinvestment
plan.
E. 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 the issuer, and sales of such rights so
acquired.
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VI. PRECLEARANCE OF CERTAIN CONDITIONAL TRANSACTIONS.
A. REQUEST FOR PRECLEARANCE.
In order to attempt to obtain preclearance from the Chief
Compliance Officer, an Access Person must submit in writing a completed
and executed Access Person Preclearance Request Form (Appendix 1),
which shall set forth the details of the proposed transaction.
Preclearance of the transaction as described on such Form shall be
evidenced by the signature of the Chief Compliance Officer thereon. The
Chief Compliance Officer shall retain a copy with all required
signatures and a copy placed in the Access Person's file.
B. CONDITIONS TO BE SATISFIED.
Upon written request from an Access Person as provided in
Section VI.A. above, the Chief Compliance Officer shall have the sole
discretion to preclear a personal Securities Transaction, without being
required to specify any reason for such determination. The Chief
Compliance Officer shall make such determination in accordance with the
following:
1. Purchases or sales effected in any account over which the
Access Person (i) has no direct or indirect influence or
control, OR (ii) has given discretionary investment authority
to an independent third party.
2. Purchases or sales that are non-volitional on the part of
the Access Person.
3. Purchases that are part of an automatic dividend
reinvestment plan.
4. 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 the issuer, and
sales of such rights so acquired.
Purchases and sales of SC-REMFs shares are expressly permitted
and need not be precleared with the Chief Compliance Officer.
C. ADDITIONAL FACTORS TO BE CONSIDERED.
In addition to the factors set forth in Section VI.B. above,
the Chief Compliance Officer may take into account, among other
factors, each of the following:
1. Whether the amount or nature of the transaction is likely
to affect the price or market for the security.
2. Whether the Access Person making the proposed purchase or
sale is likely to benefit from purchases or sales being made
or being considered by an Advisory Client or a Fund.
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3. Whether the investment opportunity is being offered to the
Access Person by virtue of the Access Person's position with
one of the Companies.
D. COMPLIANCE WITH SECTION 17(j).
Preclearance shall be granted by the Compliance Officer only
if a purchase or sale of securities is consistent with the purposes of
this Code and Section 17(j) of the Investment Company Act of 1940, as
amended (the "Act"). To illustrate, a purchase or sale may be
considered consistent with those purposes if such purchase or sale is
only remotely potentially harmful to a Fund because such purchase or
sale would be unlikely to affect a highly institutional market, or
because such purchase or sale is clearly not related economically to
the securities held, purchased or sold by a Fund.
E. DISCLOSURE BY ACCESS PERSON.
If preclearance is granted to an Access Person in accordance
with this Code to engage in a Securities Transaction, the Access Person
is under an affirmative obligation to disclose that position if such
Access Person plays a material role in a subsequent investment decision
regarding the same issuer. In such circumstances, investment personnel
with no personal interest in the issuer shall review the investment
decision to purchase such securities.
Preclearance granted to an Access Person in accordance with
this Code is only effective for five (5) business days from (and
including) the date of such preclearance. If the trade is not made
within five (5) business days, a new clearance must be obtained.
VII. TRANSACTION REPORTING.
Every Access Person must submit to the Chief Compliance Officer within
five (5) business days a copy of the trade confirmation or comparable
documentation relating to any trade that, pursuant to this Code (i) is required
to be reported to the Chief Compliance Officer, OR (ii) for which preclearance
was required.
In addition, Access Persons (other than independent directors) shall be
required to notify the Chief Compliance Officer, or his or her designee, in
writing, prior to opening a securities account or placing an initial order for
the purchase or sale of securities with any foreign or domestic brokerage firm.
Copies of account statements and confirmations with respect to any outside
account must be forwarded to the Chief Compliance Officer, or his or her
designee, by such brokerage firm. Please refer to the Supervisory Procedures
Manual or contact the Chief Compliance Officer with any questions.
An independent director of a Fund must file a personal securities
quarterly transaction report if he/she knows, or in the ordinary course of
fulfilling his/her duties should know, that during the 15-day period before or
after the director purchases or sells a security, a Fund
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purchased or sold the same security or such purchase or sale was considered by a
Fund or GCMG.
Finally, beginning with the fourth quarter of 1999, Access Persons
(other than independent directors) that do not engage in trading activities
during a calendar quarter must provide the Chief Compliance Officer with report
confirming such fact.
VIII. SHARE OWNERSHIP REPORTING.
Access Persons must provide the Chief Compliance Officer with the
following reports, at such times as set forth below.
A. INITIAL HOLDINGS REPORT.
Access Persons who became affiliated with any of the Companies
on or after October 1, 1999 must provide the Chief Compliance Officer
with an executed Initial Holdings Report (Appendix 2) no later that 10
days after becoming an Access Person. The Initial Holdings Report must
disclose the title, number of shares and principal amount of each
security (excluding mutual and money market funds, bank certificates of
deposit and direct obligations of the U.S. Government) beneficially
owned by such person, as well as the name of the broker or bank which
maintains the Access Person's account.
B. ANNUAL HOLDINGS REPORT.
All Access Persons must provide the Chief Compliance Officer
with an executed Annual Holdings Report (Appendix 3) on or before
December 31st of each year. The information contained in the Report
must be current as of a date no more than 30 days before the Report is
submitted. The Annual Holdings Report must disclose the title, number
of shares and principal amount of each security (excluding mutual and
money market funds, bank certificates of deposit and direct obligations
of the U.S. Government) beneficially owned by such person, as well as
the name of the broker or bank which maintains the Access Person's
account.
IX. ADMINISTRATION AND PROCEDURAL MATTERS.
A. REVIEW BY THE CHIEF COMPLIANCE OFFICER.
The Chief Compliance Officer shall:
1. Furnish a copy of this Code to each Access Person and
notify each Access Person of his/her obligation to file
reports as provided by this Code.
2. Supervise the implementation and enforcement of this Code.
8
<PAGE>
3. Determine whether any particular Securities Transaction
should be exempted pursuant to the provisions of this Code.
4. Issue either personally or with the assistance of counsel
as may be appropriate, any interpretation of this Code that
may appear consistent with the objectives of Rule 17j-1 of the
Act and this Code.
5. Conduct such inspections or investigations as shall
reasonably be required to detect and report any apparent
violations of this Code.
6. Cause to be maintained in an easily accessible place, the
following records:
(i). a copy of any Code adopted to Rule 17j-1 of the
Act which has been in effect during the past five
(5) years;
(ii). a copy of any preclearance, trade confirmation, or
report required to be made by any Access Person
(during the past five (5) years);
(iii). a copy of each report made by the Chief
Compliance Officer during the past five (5) years
with respect to the Code;
(iv). a copy of each Initial Holdings Report and Annual
Holdings Report prepared during the past five (5)
years;
(v). a record of any violation of the Code and of any
action taken as a result of such violation (during
the past five (5) years); and
(vi). a record of all exceptions granted from the Code
during the past five (5) years.
B. REVIEW OF THE CODE.
The Code will be reviewed at least once a year, in light of
legal and business developments and experience in implementing the
Code, and the Chief Compliance Officer will prepare an annual report to
the Boards of Directors of the Companies that:
1. Summarizes existing procedures concerning personal
investing and any changes in the procedures made during the
past year.
2. Identifies any violation of the Code, or the procedures
instituted to prevent violations of the Code, requiring
significant remedial action during the past year and the
remedial action imposed.
3. Identifies any exceptions to the Code granted during the
past year.
9
<PAGE>
4. Identifies any recommended changes in existing restrictions
or procedures based on its experience under the Code, evolving
industry practices, or developments in applicable laws or
regulations.
5. Certifies that the Company has adopted procedures
reasonably necessary to prevent Access Persons from violating
the Code.
X. SANCTIONS.
A. IMPOSITION OF SANCTIONS.
If a determination is made that an Access Person has committed
a violation of the Code, sanctions may be imposed, or other actions
taken, including a letter of caution or warning, suspension of personal
trading rights, suspension of employment (with or without
compensation), fine, civil referral to the Securities and Exchange
Commission ("SEC"), criminal referral, and termination of the
employment of the violator for cause. An Access Person also may be
required to reverse the trade(s) in question and forfeit any profit or
absorb any loss derived therefrom. The amount of profit shall be
calculated and shall be forwarded to a charitable organization.
B. AUTHORITY.
The Chief Compliance Officer has sole authority to determine
the remedy for any violation of the Code, including appropriate
disposition of any moneys forfeited pursuant to this provision. Failure
to promptly abide by a directive to reverse a trade or forfeit profits
may result in the imposition of additional sanctions.
C. BOARD OF DIRECTORS REPORT.
Whenever it is determined that an Access Person has committed
a violation of this Code that merits significant remedial action, a
report will be presented at the next regularly scheduled meeting of the
relevant Board of Directors, providing information relating to the
investigation of the violation, including any sanctions as they deem
appropriate. Such Board shall have access to all information considered
in relation to the case. The Chief Compliance Officer may determine
whether to delay the imposition of any sanctions pending review by the
applicable Board of Directors.
XI. CONFIDENTIALITY.
All information obtained from any Access Person hereunder shall be kept
in strict confidence, except that reports of Securities Transactions hereunder
will be made available to the SEC or any other regulatory or self-regulatory to
the extent required by law or regulation.
10
<PAGE>
XII. OTHER LAWS, RULES AND STATEMENTS OF POLICY.
Nothing contained in this Code shall be interpreted as relieving any
Access Person from acting in accordance with the provision of any applicable
law, rule or regulation or any other statement of policy or procedure governing
the conduct of such person.
XIII. FURTHER INFORMATION.
If any person has any question with regard to the applicability of the
provisions of this Code generally or with regard to any Securities Transaction,
he/she should consult the Chief Compliance Officer.
XIV. EXCEPTIONS.
Although exceptions to the Code will rarely, if ever, be granted, the
Chief Compliance Officer may grant exceptions to the requirements of the Code on
a case by case basis on a finding that the proposed conduct involves negligible
opportunity for abuse.
XV. CERTIFICATION BY ACCESS PERSONS.
All Access Persons must submit an Access Person Certification Form
(Appendix 4) documenting that they have read and understand this Code and
recognize that as an Access Person they are subject to the terms of this Code.
All Access Persons shall agree to certify on an annual basis that they have
complied with the requirements of this Code and that they have disclosed or
reported all personal Securities Transactions required to be disclosed or
reported pursuant to the requirements of this Code.
Dated: September 1999
11
<PAGE>
APPENDIX 1
[GRAPHIC OMITTED]
ACCESS PERSON PRECLEARANCE REQUEST FORM
Chief Compliance Officer:
On each of the dates proposed below, I hereby request permission to
effect a transaction in the securities indicated below on behalf of myself, my
Immediate Family (as defined in the Code of Ethics dated September 1999 (the
"Code") adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940,
as amended, trusts of which I am trustee or another account in which I have a
beneficial interest or legal title, and which are required to be pre-approved
pursuant to the Code.
(Use approximate dates and amounts of proposed transactions.)
<TABLE>
<CAPTION>
NATURE OF
PROPOSED TRANSACTION
NAME OF DATE OF NO. OF SHARES OR DOLLAR AMOUNT (PURCHASE, SALE, BROKER/DEALER OR
SECURITY TRANSACTION PRINCIPAL AMOUNT OF TRANSACTION OTHER) BANK PRICE
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
<S> <C> <C> <C> <C> <C> <C>
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
- -------------- --------------- --------------------- ----------------- ------------------- -------------------- --------
</TABLE>
Name:______________________________
Title:_____________________________
Entity:____________________________
Date:__________________________ Signature:_________________________
Permission Granted / / Permission Denied / /
Date:__________________________ Signature:_________________________
Chief Compliance Officer
<PAGE>
APPENDIX 2
[GRAPHIC OMITTED]
ACCESS PERSON INITIAL HOLDINGS REPORT
Chief Compliance Officer:
As a condition of my being an Access Person of Security Capital Global
Capital Management Group Incorporated, and as required by the Securities and
Exchange Commission, the following is a list of all securities (excluding mutual
and money market funds, bank certificates of deposit and direct obligations of
the U.S. Government) in which I have a direct or indirect beneficial interest.
<TABLE>
<CAPTION>
STOCK SYMBOL
NAME OF (IF APPLICABLE NUMBER OF PRINCIPAL NAME OF ENTITY
SECURITY AND KNOWN) SHARES AMOUNT HOLDING THE SECURITY ACCOUNT NUMBER
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
- -------------------------- ----------------- ------------ -------------- ---------------------- ---------------
</TABLE>
Please use additional pages if necessary. THIS REPORT MUST BE DATED NO LATER
THAN 10 DAYS AFTER BECOMING EMPLOYED.
Name:____________________________
Title:___________________________
Signature: ______________________
Date:____________________________
- -------------------------------------------------------------------------------
ACKNOWLEDGED AND APPROVED THIS ______ DAY OF ________, ________.
- ------------------------------
<PAGE>
APPENDIX 3
[GRAPHIC OMITTED]
ACCESS PERSON ANNUAL HOLDINGS REPORT
Chief Compliance Officer:
As a condition of my being an Access Person of Security Capital Global
Capital Management Group Incorporated, and as required by the Securities and
Exchange Commission, the following is a list of all securities (excluding mutual
and money market funds, bank certificates of deposit and direct obligations of
the U.S. Government) in which I have a direct or indirect interest. ALL
INFORMATION MUST BE CURRENT AS OF A DATE NO MORE THAN 30 DAYS BEFORE THE REPORT
IS SUBMITTED.
" I HOLD NO SECURITIES REQUIRING DISCLOSURE (PLEASE MARK BOX AND SIGN BELOW).
<TABLE>
<CAPTION>
STOCK SYMBOL NAME OF ENTITY HOLDING
NAME OF (IF APPLICABLE NUMBER OF PRINCIPAL THE SECURITY ACCOUNT NUMBER
SECURITY AND KNOWN) SHARES AMOUNT
- --------------------------- ---------------- -------------- ------------- ------------------------- ----------------
<S> <C> <C> <C> <C> <C>
- --------------------------- ---------------- -------------- ------------- ------------------------- ----------------
- --------------------------- ---------------- -------------- ------------- ------------------------- ----------------
- --------------------------- ---------------- -------------- ------------- ------------------------- ----------------
- --------------------------- ---------------- -------------- ------------- ------------------------- ----------------
- --------------------------- ---------------- -------------- ------------- ------------------------- ----------------
</TABLE>
Please use additional pages if necessary.
Name:____________________________
Title:___________________________
Signature: ______________________
Date:____________________________
- -------------------------------------------------------------------------------
ACKNOWLEDGED AND APPROVED THIS ______ DAY OF ________, ________.
- ------------------------------
<PAGE>
APPENDIX 4
[GRAPHIC OMITTED]
ACCESS PERSON CERTIFICATION FORM
Security Capital Group Incorporated
11 South LaSalle Street, Second Floor
Chicago, Illinois 60603
Attention: Chief Compliance Officer:
[Access Person] hereby certifies that:
I have read and understand the Code of Ethics dated September 1999 (the
"Code"). I hereby agree to certify on an annual basis that I have complied with
the requirements of the Code and that I have disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant to the
requirements of the Code.
___________________________
Access Person Signature
___________________________
Print Name
Dated:_______________________
<PAGE>
STANDISH AYER & WOOD, INC.
STANDISH INTERNATIONAL MANAGEMENT CO., LLC
CODE OF ETHICS
A. STATEMENT OF POLICY.
This Code of Ethics is based upon the principle that the officers,
directors and employees of Standish, Ayer & Wood, Inc. and Standish
International Management Co., LLC (each, the "Adviser") owe a fiduciary
duty to the investment companies registered under the Investment Company
Act of 1940 (each a "Fund") and other clients for which the Adviser acts as
investment adviser or subadviser. Accordingly, each officer, director and
employee of the Adviser should conduct personal trading activities in a
manner that does not interfere with a client's portfolio transactions or
take advantage of a relationship with any client. Persons covered by
this Code of Ethics must adhere to these general principles as well as the
Code's specific requirements.
The fundamental position of the Adviser is that in effecting personal
securities transactions personnel of the Adviser must place at all times
the interests of clients ahead of their own pecuniary interests. All
personal securities transactions by these persons must be conducted in
accordance with this Code of Ethics and in a manner to avoid any actual or
potential conflict of interest or any abuse of any person's position of
trust and responsibility. Further, these persons should not take
inappropriate advantage of their positions with or on behalf of a client.
Without limiting the foregoing, it is the intention of the Adviser that
this Code of Ethics not prohibit personal securities transactions by the
Adviser's personnel made in accordance with the letter and the spirit of
the Code.
B. DEFINITIONS.
For purposes of this Code of Ethics, the following definitions will apply:
1. ACCESS PERSON. The term "ACCESS PERSON" means any director, officer or
advisory person (as defined below) of the Adviser.
2. ACQUISITION. The term "acquisition" or "acquire" includes the receipt of
any gift of COVERED SECURITIES.
3. ADVISORY PERSON. The term "ADVISORY PERSON" means
(a) Every employee or on-site independent contractor of the Adviser
(or of any company in a control relationship to the Adviser) who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding, the purchase or
sale of COVERED SECURITIES (as defined below) by a Fund or other
client, or whose functions relate to the making of any
Adviser Code Draft: February 18, 2000
<PAGE>
recommendations concerning the purchase or sale of COVERED SECURITIES
by a Fund or other client; and
(b) Every natural person in a control relationship to the Adviser who
obtains information concerning recommendations made to a Fund
concerning the purchase or sale of a COVERED SECURITY and every other
employee or on-site independent contractor of the Adviser designated
as an ACCESS PERSON by the CODE OF ETHICS SUPERVISOR.
4. BENEFICIAL OWNERSHIP. The term "BENEFICIAL OWNERSHIP" means a direct or
indirect "pecuniary interest" (as defined in subparagraph (a)(2) of Rule
16a-1 under the Securities Exchange Act of 1934 (the "1934 Act")) that is
held or shared by a person directly or indirectly (through any contract,
arrangement, understanding, relationship or otherwise) in a security. While
the definition of "pecuniary interest" in subparagraph (a)(2) of Rule 16a-1
is complex, this term generally means the opportunity directly or
indirectly to profit or share in any profit derived from a transaction in a
security. An indirect pecuniary interest in securities by a person would be
deemed to exist as a result of:
(a) ownership of securities by any of that person's immediate family
members sharing the same household (including a child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-or father-in-law, sister-or brother-in-law, and son-or
daughter-in-law);
(b) the person's partnership interest in the portfolio securities held
by a general or limited partnership which such person controls;
(c) the person's right to receive dividends from a security if this
right is separate or separable from the underlying securities;
(d) the person's interest in securities held by a trust under certain
circumstances; and
(e) the person's right to acquire securities through the exercise or
conversion of a "derivative security" (which term excludes (i) a
broad-based index option or future, (ii) a right with an
exercise or conversion privilege at a price that is not fixed, and
(iii) a security giving rise to the right to receive another
security only PRO RATA and by virtue of a merger, consolidation or
exchange offer involving the issuer of the first security).
5. CODE OF ETHICS SUPERVISOR. The term "CODE OF ETHICS SUPERVISOR" means
the officer of the Adviser designated from time to time by the Adviser's
compliance officer to (a) authorize or deny permission to purchase or sell
COVERED SECURITIES, (b) receive and review reports of purchases and sales
by ACCESS PERSONS and (c) receive and review other reports that may be
required from time to time. The term "ALTERNATIVE CODE OF ETHICS
SUPERVISOR" means the officer of the Adviser designated from time to time
by the Adviser to perform the duties of the Code of Ethics Supervisor in
connection with personal transactions by the CODE OF ETHICS SUPERVISOR or
in the absence of the CODE OF ETHICS SUPERVISOR.
Adviser Code Draft: February 18, 2000 Page 2 of 11
<PAGE>
6. CONFLICTS COMMITTEE. The term "CONFLICTS COMMITTEE" means any committee
designated as such by the management of the Adviser or any successor
committee or person that performs substantially the same functions as the
CONFLICTS COMMITTEE.
7. CONTROL. The term "CONTROL" has the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides that CONTROL
means the power to exercise a controlling influence over the management or
policies of the Adviser, unless such power is solely the result of an
official position with the Adviser.
8. COVERED SECURITY. The term "COVERED SECURITY" means a security as
defined in Section 2(a)(36) of the 1940 Act, except that it does not
include:
(a) Direct obligations of the government of the United States.
(b) Bankers' acceptances, bank certificates of deposit, commerical
paper and high quality short-term debt instruments, including
repurchase agreements.
(c) Shares issued by open-end management investment companies
registered under the 1940 Act.
(d) Any other security determined by the Securities and Exchange
Commission ("SEC") or its staff to be excluded from the definition of
"COVERED SECURITY" contained in Rule 17j-1 under the 1940 Act.
9. DISPOSITION. The term "disposition" or "dispose" includes the making of
any personal or charitable gift of COVERED SECURITIES.
10. FAMILY ACCOUNT. The term "FAMILY ACCOUNT" means any brokerage or other
account containing securities (including but not limited to COVERED
SECURITIES)(1) in which an immediate family member of the ACCESS PERSON not
sharing the same household has BENEFICIAL OWNERSHIP and (2) over which the
ACCESS PERSON exercises direct or indirect, sole or shared, investment
control.
11. FUND. The term "FUND" has the meaning designated in the preamble
hereto.
12. INITIAL PUBLIC OFFERING. The term "INITIAL PUBLIC OFFERING" means an
offering of securities registered under the Securities Act of 1933, as
amended (the "1933 Act"), by an issuer, which immediately before
registration, was not subject to reporting requirements of Section 13 or
15(d) of the 1934 Act.
13. INVESTMENT DECISION MAKER. The term "INVESTMENT DECISION MAKER" means
any portfolio manager of the Adviser and any other ADVISORY PERSON who
assists a portfolio manager in making investment decisions for a Fund or
other client, including, but not limited to, all analysts of the Adviser or
of any company in a control relationship to the Adviser.
Adviser Code Draft: February 18, 2000 Page 3 of 11
<PAGE>
14. LIMITED OR PRIVATE OFFERING. The term "LIMITED OR PRIVATE OFFERING"
means an offering that is exempt from registration under Section 4(2) or
4(6) of the 1933 Act or Rule 504, 505 or 506 thereunder.
15. 1940 ACT. The term "1940 ACT" means the Investment Company Act of 1940
and the rules and regulations thereunder, both as amended from time to
time, and any order or orders thereunder which may from time to time be
applicable to any Fund.
16. PURCHASE. The term "PURCHASE" includes the writing of an option to
purchase.
17. SALE. The term "SALE" includes a short sale, the writing of an option
to sell and the making of a gift.
18. SECURITY BEING CONSIDERED FOR PURCHASE OR SALE. A security is "BEING
CONSIDERED FOR PURCHASE OR SALE" when a recommendation to purchase or sell
a security has been made and communicated and, with respect to the person
making the recommendation, when such person seriously considers making such
a recommendation.
19. SECURITY TO BE HELD OR ACQUIRED. The phrase "SECURITY HELD OR TO BE
ACQUIRED" means any COVERED SECURITY which, within the most recent 15 days,
is or has been held by a Fund or is being or has been considered by the
Adviser for purchase by a Fund or any option to purchase or sell and any
security convertible into, or exchangeable for, such COVERED SECURITY.
C. PROHIBITED AND RESTRICTED ACTIVITIES.
While the scope of actions which may violate the Statement of Policy set
forth above cannot be exactly defined, these actions would always include
at least the following prohibited activities.
1. COMPETING WITH CLIENT TRADES. No ACCESS PERSON may, directly or
indirectly, purchase or sell securities if the ACCESS PERSON knows, or
reasonably should know, that these securities transactions compete in the
market with actual or considered securities transactions for a client, or
otherwise personally act to injure a client's securities transactions.
2. PERSONAL USE OF CLIENT TRADING KNOWLEDGE. No ACCESS PERSON may use the
knowledge about securities purchased or sold by a client or securities
being considered for purchase or sale by a client to profit personally,
directly or indirectly, by the market effect of such transactions.
3. DISCLOSURE OF CLIENT TRADING KNOWLEDGE. No ACCESS PERSON may, directly
or indirectly, communicate to any person who is not an ACCESS PERSON any
non-public information relating to a client including, without limitation,
the purchase or sale or considered purchase or sale of a security on behalf
of a client, except to the extent necessary to effectuate securities
transactions on behalf of a client.
Adviser Code Draft: February 18, 2000 Page 4 of 11
<PAGE>
4. INITIAL PUBLIC OFFERINGS. No ACCESS PERSON may, directly or indirectly,
purchase any security sold in an INITIAL PUBLIC OFFERING, unless the
CONFLICTS COMMITTEE exempts the purchase because of special conditions
associated with the purchase.
5. LIMITED OR PRIVATE OFFERINGS. No ACCESS PERSON may, directly or
indirectly purchase any security issued pursuant to a LIMITED OR PRIVATE
OFFERING without obtaining prior written approval from the CONFLICTS
COMMITTEE. ACCESS PERSONS who have received authorization to purchase
securities in a LIMITED OR PRIVATE OFFERING must disclose their BENEFICIAL
OWNERSHIP of these securities when these ACCESS PERSONS are involved in
considering the purchase on behalf of a Fund or other client of securities
of the issuer of the privately placed securities. A decision to purchase
securities of this issuer must be independently reviewed by an investment
person with no personal interest in that issuer.
6. ACCEPTANCE OF GIFTS. No ACCESS PERSON may accept any gift or other thing
of more than DE MINIMIS value from any person or entity that does business
with or on behalf of the Adviser. The Compliance Committee will from time
to time specify the value which will be considered DE MINIMIS for purposes
of this restriction.
7. BOARD SERVICE; OUTSIDE EMPLOYMENT. No ACCESS PERSON may serve on the
board of directors or trustees of any organization, whether publicly traded
or otherwise, absent prior written authorization and determination by the
CONFLICT COMMITTEE that the board service would be consistent with the
interests of the Funds and other clients of the Adviser. If board service
is authorized, ACCESS PERSONS serving as directors or trustees of issuers
may not take part in an investment decision on behalf of the Funds or other
clients concerning securities of these issuers. Likewise, no access person
may accept any outside employment absent the prior written authorization of
the CONFLICTS COMMITTEE.
8. TRANSACTIONS DURING BLACKOUT PERIOD. NO INVESTMENT DECISION MAKER may,
directly or indirectly, (a) purchase or sell any COVERED SECURITY in which
he or she has any BENEFICIAL OWNERSHIP or (b) purchase any COVERED SECURITY
if that purchase would cause the INVESTMENT DECISION MAKER to aquire any
BENEFICIAL OWNERSHIP, in each case within a period of seven (7) calendar
days before and after any Fund or other client as to which he or she is an
INVESTMENT DECISION MAKER has purchased or sold such COVERED SECURITY.
9. SHORT-TERM TRADING. No ACCESS PERSON may puchase and sell, or sell and
purchase, the same (or equivalent) COVERED SECURITIES within a 60 calendar
day period. The CONFLICTS COMMITTEE may, upon request, exempt an ACCESS
PERSON from this prohibition if the CONFLICTS COMMITTEE determines that
extenuating circumstances warrant the exemption.
10. DISCLOSURE OF PERSONAL INTEREST. No INVESTMENT DECISION MAKER may
recommend any securities transaction by a client without having previously
disclosed any BENEFICIAL OWNERSHIP in these securities or the issuer
thereof to the Adviser, including without limitation:
Adviser Code Draft: February 18, 2000 Page 5 of 11
<PAGE>
(a) That INVESTMENT DECISION MAKER'S BENEFICAL OWNERSHIP of any
securities of the issurer;
(b) Any contemplated transaction by that INVESTMENT DECISION MAKER in
these securities;
(c) Any position with the issuer or its affiliates; and
(d) Any present or proposed business relationship between the issuer
or its affiliates and that INVESTMENT DECISION MAKER or any party
in which the INVESTMENT DECISION MAKER has a significant
interest.
An interested INVESTMENT DECISION MAKER may not participate in a decision
to purchase and sell securities of the issuer on behalf of a Fund or any
other client.
11. "GOOD UNTIL CANCELLED" OR "LIMIT ORDERS." NO ACCESS PERSON may place
any "good until cancelled" or "limit" order that does not expire on the day
preclearance is granted.
D. EXEMPT TRANSACTIONS.
The following transactions are exempt from the preclearance requirements
and substantive prohibitions and restrictions of the Code, BUT ARE NOT
EXEMPT FROM THE REPORTING REQUIREMENTS IMPOSED BY SECTION 11 OF THIS CODE.
1. Purchases or sales for an account over which the ACCESS PERSON has no
direct or indirect influence or control;
2. Purchases or sales which are non-volitional on the part of the ACCESS
PERSON;
3. Purchases which are part of an automatic dividend reinvestment plan, but
only to the extent the access person makes no voluntary adjustment in the
rate or type of investment or divestment;
4. Purchases or sales for which the ACCESS PERSON has received prior
written approval from the CODE OF ETHICS SUPERVISOR. Prior approval will be
granted only if a purchase or sale of COVERED SECURITIES is consistent with
the purposes of this Code of Ethics, Section 17(j) of the 1940 Act and the
rules thereunder; and
5. Purchases in an INITIAL PUBLIC OFFERING if (a) the offering is part of
the "demutualization" or similar transaction of a mutual bank, insurance
company or similar issuer and the ACCESS PERSON'S ability to participate is
the direct result of the ACCESS PERSON'S ownership of insurance policies or
deposits issued or maintained by the issuer and (b) the allocation of
shares available for acquisition by the ACCESS PERSON is based on the
ACCESS PERSON'S ownership of these policies or deposits.
6. Transactions involving the disposition solely of fractional shares of
equity COVERED SECURITIES.
Adviser Code Draft: February 18, 2000 Page 6 of 11
<PAGE>
7. The RECEIPT of any gift of COVERED SECURITIES.
Subject to applicable law, the CONFLICTS COMMITTEE may, upon consideration
of all of the relevant facts and circumstances, grant a written exemption
from provisions of this Code of Ethics with respect to any transaction
based on a determination that the transaction does not conflict with the
interests of any Fund or client.
E. JOINT PARTICIPATION.
A specific provision of the 1940 Act prohibits ACCESS PERSONS, in the
absence of an order of the SEC, from effecting a transaction in which a
Fund is a "joint or a joint and several participant" with that ACCESS
PERSON. Any transaction which suggests the possibility of a question in
this area should be presented to the CODE OF ETHICS SUPERVISOR and the
legal counsel for review.
F. DUPLICATE BROKERAGE CONFIRMATIONS AND STATEMENTS.
Each ACCESS PERSON must direct the ACCESS PERSON'S brokers to supply to the
CODE OF ETHICS SUPERVISOR, on a timely basis and not less frequently than
every calendar quarter, duplicate copies of confirmations of and account
statements reflecting all COVERED SECURITIES transactions and holdings (1)
in which the ACCESS PERSON has or acquires a direct or indirect BENEFICIAL
OWNERSHIP interest and (2) that are included in a FAMILY ACCOUNT, in each
case whether or not one of the exemptions listed in Section D above
applies.
G. PRECLEARANCE PROCEDURES FOR TRANSACTIONS IN SECURITIES.
1. Every ACCESS PERSON must request and obtain preclearance from the CODE
OF ETHICS SUPERVISOR before effecting any personal securities
transactions in COVERED SECURITIES in or as to which the ACCESS PERSON
both: (a) has or acquires a BENEFICIAL OWNERSHIP AND (b) has direct or
indirect, sole or shared, investment control, except for exempt
transactions described in Section D above. The ACCESS PERSON must
submit to the CODE OF ETHICS SUPERVISOR a preclearance request on a
form designated by the CODE OF ETHICS SUPERVISOR from time to time for
each purchase or sale of a COVERED SECURITY on behalf of such ACCESS
PERSON prior to the execution of such transaction.
2. The CODE OF ETHICS SUPERVISOR will compare the proposed transaction to
the daily Restricted List maintained by the Adviser. Preclearance will
be denied if: (a) the Covered Security is being considered for
purchase or sale by a Fund or other client or (b) there is an order
pending for a Fund or other client with respect to such COVERED
SECURITY. The transaction may not be effected unless the CODE OF
ETHICS SUPERVISOR pre-clears the transaction in writing or orally (and
subsequently confirming the oral preclearance in writing).
Preclearance is valid only for the trading day on which it is issued.
Adviser Code Draft: February 18, 2000 Page 7 of 11
<PAGE>
H. REPORTING REQUIREMENTS.
Every ACCESS PERSON subject to this Section II must submit to the CODE OF
ETHICS SUPERVISOR, on forms designated by the CODE OF ETHICS SUPERVISOR,
the following reports as to (1) all COVERED SECURITIES and brokerage
accounts in which the ACCESS PERSON has, or by reason of a transaction,
acquires BENEFICIAL OWNERSHIP, whether or not the ACCESS PERSON had any
direct or indirect control over the COVERED SECURITIES or accounts and (2)
all FAMILY ACCOUNTS, IN EACH CASE, INCLUDING REPORTS COVERING SECURITIES
EXEMPTED BY SECTION D.
1. INITIAL HOLDINGS REPORTS. Not later than 10 days after an ACCESS
PERSON becomes an ACCESS PERSON, the following information:
(a) The title, number of shares and principal amount of each
COVERED SECURITY (x) in which the ACCESS PERSON had any direct or
indirect BENEFICIAL OWNERSHIP and (y) that was included in a
FAMILY ACCOUNT when the ACCESS PERSON became an ACCESS PERSON;
(b) The name of any broker, dealer or bank with whom the ACCESS
PERSON maintained (x) an account containing securities (including
but not limited to COVERED SECURITIES) in which the ACCESS PERSON
had any direct or indirect BENEFICIAL OWNERSHIP or (y) a FAMILY
ACCOUNT, each as of the date the ACCESS PERSON became an ACCESS
PERSON.
(c) The date the report is being submitted by the ACCESS PERSON.
2. QUARTERLY TRANSACTION REPORTS. Not later than 10 days after the end
of each calendar quarter, the following information:
(a) COVERED SECURITIES TRANSACTIONS. With respect to any
acquisition or disposition during the calendar quarter of a
COVERED SECURITY (x) in which the ACCESS PERSON had any direct or
indirect BENEFICIAL OWNERSHIP and (y) that was included in a
FAMILY ACCOUNT:
(i) The date of the acquisition or disposition, the title,
the interest rate and maturity date (if applicable),
the number of shares and the principal amount of each
COVERED SECURITY;
(ii) The nature of the acquisition or disposition (i.e.,
purchase, sale, gift or any other type of acquisition
or disposition)
(iii) The price of the Covered Security at which the
acquisition or disposition was effected;
(iv) The name of the broker, dealer or bank with or through
which the acquisition or disposition was effected; and
(v) The date the report is being submitted by the ACCESS
PERSON.
Adviser Code Draft: February 18, 2000 Page 8 of 11
<PAGE>
However, if no reportable transactions in any COVERED SECURITIES were
effected during a calendar quarter the affected ACCESS PERSON must
submit to the CODE OF ETHICS SUPERVISOR, within ten calendar days
after the end of the quarter, a report stating that no reportable
COVERED SECURITIES transactions were effected.
(b) BROKERAGE ACCOUNTS. With respect to (x) any account established by
the ACCESS PERSON containing securities (including but not limited to
COVERED SECURITIES) in which the person had a direct or indirect
BENEFICIAL OWNERSHIP and (y) a FAMILY ACCOUNT during the quarter:
(i) The name of the broker, dealer or bank with whom the ACCESS
PERSON established the account;
(ii) The date the account was established; and
(iii) The date the report is being submitted by the ACCESS
PERSON.
3. ANNUAL HOLDINGS REPORTS. By a date specified by the CODE OF ETHICS
SUPERVISOR and as of a date within 30 days before this reporting deadline,
the following information:
(a) The title, number of shares and principal amount of each COVERED
SECURITY (x) in which the ACCESS PERSON had any direct or indirect
BENEFICIAL OWNERSHIP and (y) that was included in a FAMILY ACCOUNT:;
(b) The name of any broker, dealer or bank with whom the ACCESS PERSON
maintained (x) an account containing securities in which the Access
Person had any direct or indirect BENEFICIAL OWNERSHIP and (y) a
FAMILY ACCOUNT.
(c) The date the report is being submitted by the ACCESS PERSON.
4. Every report concerning a COVERED SECURITIES transaction that would be
prohibited by Section C if an exemption were not available under Section D
must identify the exemption relied upon and describe the circumstances of
the transaction.
5. Notwithstanding subparagraph 2 of this Section H, an ACCESS PERSON need
not make quarterly transaction reports pursuant to this Code of Ethics if
the reported information would duplicate information reported pursuant to
Rule 204-2(a)(12) under the Investment Advisers Act of 1940 (the "Advisers
Act").
6. Any report submitted by an ACCESS PERSON in accordance with this Code
may contain a statement that the report will not be construed as an
admission by that person that he or she has any direct or indirect
BENEFICIAL OWNERSHIP in any COVERED SECURITY to which the report relates.
The existence of any report will not by itself be construed as an admission
that any event reported thereon constitutes a violation of this Code.
7. To the extent consistent with Rule 17j-1 under the 1940 Act, and Rule
204-2(a)(12) under the Advisers Act, the CODE OF ETHICS SUPERVISOR may
approve other alternative reporting procedures from time to time.
Adviser Code Draft: February 18, 2000 Page 9 of 11
<PAGE>
I. INITIAL AND ANNUAL CERTIFICATION OF COMPLIANCE.
1. Each ACCESS PERSON, within ten (10) days after becoming an ACCESS
PERSON, must certify, on a form designated by the CODE OF ETHICS
SUPERVISOR, that the Access Person:
(a) Has received, read and understands this Code of Ethics and
recognizes that the Access Person is subject hereto;
(b) Will comply with all the requirements of this Code of Ethics; and
(c) Has disclosed to the CODE OF ETHICS SUPERVISOR all holdings of
COVERED SECURITIES and all accounts required to be disclosed pursuant
to the requirements of this Code of Ethics.
2. Each ACCESS PERSON must also certify annually (by a date specified by
and on the form designated by the CODE OF ETHICS SUPERVISOR) that the
Access Person
(a) Has received, read and understand this Code of Ethics and
recognizes that the Access Person is subject hereto;
(b) Has complied with all the requirements of this Code of Ethics; and
(c) Has disclosed or reported all personal securities transactions,
holdings and accounts required to be disclosed or reported in
compliance with the requirements of this Code of Ethics.
J. CONFIDENTIALITY.
All information obtained from any ACCESS PERSON hereunder normally will be
kept in strict confidence by the Adviser, except that reports of
transactions and other information obtained hereunder may be made available
to the Securities and Exchange Commission or any other regulatory or
self-regulatory organization or other civil or criminal authority to the
extent required by law or regulation or to the extent considered
appropriate by senior management of the Adviser in light of all the
circumstances. In addition, in the event of violations or apparent
violations of the Code, this information may be disclosed to affected
clients.
K. IDENTIFICATION OF AND NOTICE TO ACCESS PERSONS.
The CODE OF ETHICS SUPERVISOR will identify all persons who are considered
to be "ACCESS PERSONS" and INVESTMENT DECISION MAKERS and inform these
persons of their respective duties and provide these persons with copies of
this Code of Ethics.
I. REVIEW OF REPORTS.
The CODE OF ETHICS SUPERVISOR will review the information to be compiled
under this Code of Ethics in accordance with such review procedures as the
CODE OF ETHICS
Adviser Code Draft: February 18, 2000 Page 10 of 11
<PAGE>
SUPERVISOR and senior management of the Adviser may from time to time
determine to be appropriate in light of the purposes of this Code of
Ethics.
M. SANCTIONS.
Any violation of this Code of Ethics will result in the imposition of such
sanctions as the Adviser may deem appropriate under the circumstances,
which may include, but are not limited to, a warning, disgorgement of
profits obtained in connection with a violation, the imposition of fines,
suspension, demotion, termination of employment or referral to civil or
criminal authorities.
N. RECORDKEEPING REQUIREMENTS.
The Adviser will maintain and preserve:
1. In an easily accessible place, a copy of this Code of Ethics (and any
prior code of ethics that was in effect at any time during the past five
years) for a period of five years;
2. In an easily accessible place, a record of any violation of this Code of
Ethics (and any prior code of ethics that was in effect at any time during
the past five years) and of any action taken as a result of such violation
for a period of five years following the end of the fiscal year in which
the violation occurs;
3. A copy of each report (or computer printout) submitted under this Code
of Ethics for a period of five years, provided that for the first two years
such reports must be maintained and preserved in an easily accessible
place;
4. In an easily accessible place, a list of all persons who are, or within
the past five years were, required to make or required to review, reports
pursuant to this Code of Ethics.
5. A copy of each report provided to any Fund as required by paragraph
(c)(2)(ii) of Rule 17j-1 under the 1940 Act or any successor provision for
a period of five years following the end of the fiscal year in which the
report is made, provided that for the first two years such record will be
preserved in an easily accessible place; and
6. A written record of any decision, and the reasons supporting any
decision, to approve the purchase by an ACCESS PERSON of any security in an
INITIAL PUBLIC OFFERING or in a LIMITED OR PRIVATE OFFERING for a period
of five years following the end of the fiscal year in which the approval is
granted.
Approved: , 2000
----------------
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<PAGE>
CODE OF ETHICS
FOR ACCESS PERSONS OF
THE STRONG FAMILY OF MUTUAL FUNDS,
STRONG CAPITAL MANAGEMENT, INC.,
STRONG INVESTMENTS, INC.,
AND FLINT PRAIRIE, L. L. C.
[LOGO]
STRONG CAPITAL MANAGEMENT, INC.
October 22, 1999
<PAGE>
CODE OF ETHICS
For Access Persons of
The Strong Family of Mutual Funds,
Strong Capital Management, Inc.,
Strong Investments, Inc.,
and Flint Prairie, L. L. C.
Dated October 22, 1999
TABLE OF CONTENTS
I. INTRODUCTION...............................................................1
A. Fiduciary Duty....................................................1
1. Place the interests of Advisory Clients first............1
2. Avoid taking inappropriate advantage of their position...1
3. Conduct all Personal Securities Transactions in full
compliance with this Code including both the
preclearance and reporting requirements..................1
B. Appendices to the Code............................................1
1. Definitions..............................................2
2. Contact Persons..........................................2
3. Disclosure of Personal Holdings in Securities............2
4. Acknowledgment of Receipt of Code of Ethics and Limited
Power of Attorney........................................2
5. Preclearance Request for Access Persons..................2
6. Annual Code of Ethics Questionnaire......................2
7. List of Broad-Based Indices..............................2
8. Gift Policy..............................................2
9. Insider Trading Policy...................................2
10. Electronic Trading Authorization Form....................2
11. Social Security Number/Tax Identification Form...........2
C. Application of the Code to Independent Fund Directors.............2
D. Application of the Code to Funds Subadvised by SCM...............2
II. PERSONAL SECURITIES TRANSACTIONS..........................................2
A. Annual Disclosure of Personal Holdings by Access Persons..........2
B. Preclearance Requirements for Access Persons......................3
1. General Requirement......................................3
2. Transactions Exempt from Preclearance Requirements.......3
a. Mutual Funds....................................3
b. No Knowledge....................................3
c. Certain Corporate Actions.......................3
d. Rights..........................................3
e. Application to Commodities, Futures, Options on
Futures and Options on Broad-Based Indices......3
f. Miscellaneous...................................4
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TABLE OF CONTENTS (CONTINUED)
C. Preclearance Requests.............................................4
1. Trade Authorization Request Forms........................4
2. Review of Form...........................................4
3. Access Person Designees..................................4
D. Prohibited Transactions...........................................5
1. Prohibited Securities Transactions.......................5
a. Initial Public Offerings........................5
b. Pending Buy or Sell Orders......................5
c. Seven Day Blackout..............................5
d. Intention to Buy or Sell for Advisory Client....6
e. 60-Day Blackout.................................6
2. Always Prohibited Securities Transactions................6
a. Inside Information..............................6
b. Market Manipulation.............................6
c. Large Positions in Registered Investment
Companies.......................................6
d. Others..........................................6
3. Private Placements.......................................6
4. No Explanation Required for Refusals.....................7
E. Execution of Personal Securities Transactions.....................7
F. Length of Trade Authorization Approval............................7
G. Trade Reporting Requirements......................................7
1. Reporting Requirement....................................7
2. Disclaimers..............................................8
3. Quarterly Review.........................................8
4. Availability of Reports..................................8
III. FIDUCIARY DUTIES.........................................................9
A. Confidentiality...................................................9
B. Gifts.............................................................9
1. Accepting Gifts..........................................9
2. Solicitation of Gifts....................................9
3. Giving Gifts.............................................9
C. Payments to Advisory Clients......................................9
D. Corporate Opportunities...........................................9
E. Undue Influence..................................................10
F. Service as a Director............................................10
G. Involvement in Criminal Matters or Investment-Related Civil
Proceedings.....................................................10
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<PAGE>
TABLE OF CONTENTS (CONTINUED)
IV. COMPLIANCE WITH THIS CODE OF ETHICS......................................10
A. Code of Ethics Review Committee..................................10
1. Membership, Voting, and Quorum..........................10
2. Investigating Violations of the Code....................10
3. Annual Reports..........................................11
B. Remedies.........................................................11
1. Sanctions...............................................11
2. Sole Authority..........................................11
3. Review..................................................11
C. Exceptions to the Code...........................................12
D. Compliance Certification........................................12
E. Record Retention................................................12
1. Code of Ethics..........................................12
2. Violations..............................................12
3. Required Reports........................................12
4. Access Person List......................................12
F. Inquiries Regarding the Code.....................................12
iii
<PAGE>
CODE OF ETHICS
For Access Persons of
The Strong Family of Mutual Funds,
Strong Capital Management, Inc.,
Strong Investments, Inc.,
and Flint Prairie, L. L. C.
Dated October 22, 1999
TABLE OF APPENDICES
Appendix 1 (Definitions).....................................................13
Appendix 2 (Contact Persons).................................................16
Appendix 3 (Disclosure of Personal Holdings in Securities)...................17
Appendix 4 (Acknowledgment of Receipt of Code of Ethics and
Limited Power of Attorney)........................................18
Appendix 5 (Preclearance Request for Access Persons).........................19
Appendix 6 (Annual Code of Ethics Questionnaire).............................20
Appendix 7 (List of Broad-Based Indices).....................................23
Appendix 8 (Gift Policy).....................................................24
Appendix 9 (Insider Trading Policy)..........................................26
Appendix 10 (Electronic Trading Authorization Form) ..........................30
Appendix 11 (Social Security Number/Tax Identification Form) .................31
iv
<PAGE>
CODE OF ETHICS
For Access Persons of
The Strong Family of Mutual Funds,
Strong Capital Management, Inc.,
Strong Investments, Inc.,
and Flint Prairie, L. L. C.
Dated October 22, 1999
I. INTRODUCTION(1)
A. FIDUCIARY DUTY. This Code of Ethics is based upon the principle that
directors, officers and associates of Strong Capital Management, Inc. ("SCM"),
Strong Investments, Inc. ("the Distributor"), the Strong Family of Mutual Funds
("the Strong Funds") and Flint Prairie, L. L. C. ("Flint Prairie") have a
fiduciary duty to place the interests of clients ahead of their own. The Code
applies to all Access Persons and focuses principally on preclearance and
reporting of personal transactions in securities. Access Persons must avoid
activities, interests and relationships that might interfere with making
decisions in the best interests of the Advisory Clients of SCM.
As fiduciaries, Access Persons must at all times:
1. PLACE THE INTERESTS OF ADVISORY CLIENTS FIRST. Access Persons must
scrupulously avoid serving their own personal interests ahead of the
interests of the Advisory Clients of SCM. AN ACCESS PERSON MAY NOT INDUCE
OR CAUSE AN ADVISORY CLIENT TO TAKE ACTION, OR NOT TO TAKE ACTION, FOR
PERSONAL BENEFIT RATHER THAN FOR THE BENEFIT OF THE ADVISORY CLIENT. For
example, an Access Person would violate this Code by causing an Advisory
Client to purchase a Security he or she owned for the purpose of increasing
the price of that Security.
2. AVOID TAKING INAPPROPRIATE ADVANTAGE OF THEIR POSITION. The receipt
of investment opportunities, perquisites or gifts from persons seeking
business with the Strong Funds, SCM, the Distributor, Flint Prairie or
their clients could call into question the exercise of an Access Person's
independent judgment. Access persons may not, for example, use their
knowledge of portfolio transactions to profit by the market effect of such
transactions.
3. CONDUCT ALL PERSONAL SECURITIES TRANSACTIONS IN FULL COMPLIANCE
WITH THIS CODE INCLUDING BOTH THE PRECLEARANCE AND REPORTING REQUIREMENTS.
Doubtful situations should be resolved in favor of Advisory Clients.
Technical compliance with the Code's procedures will not automatically
insulate from scrutiny any trades that may indicate an abuse of fiduciary
duties.
- ----------
(1) Capitalized words are defined in Appendix 1.
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<PAGE>
B. APPENDICES TO THE CODE. The appendices to this Code are attached hereto,
are a part of the Code and include the following:
1. DEFINITIONS--capitalized words as defined in the Code
(Appendix 1),
2. CONTACT PERSONS, including the Preclearance Officer designees and
the Code of Ethics Review Committee (Appendix 2),
3. DISCLOSURE OF PERSONAL HOLDINGS IN SECURITIES (Appendix 3),
4. ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS AND LIMITED POWER OF
ATTORNEY (Appendix 4),
5. PRECLEARANCE REQUEST FOR ACCESS PERSONS (Appendix 5),
6. ANNUAL CODE OF ETHICS QUESTIONNAIRE (Appendix 6),
7. LIST OF BROAD-BASED INDICES (Appendix 7),
8. GIFT POLICY (Appendix 8),
9. INSIDER TRADING POLICY (Appendix 9)
10. Electronic Trading Authorization Form (Appendix 10), and
11. Social Security Number/Tax Identification Form (Appendix 11).
C. APPLICATION OF THE CODE TO INDEPENDENT FUND DIRECTORS. This Code
applies to Independent Fund Directors and requires Independent Fund Directors
and their Immediate Families to report Securities Transactions to the Compliance
Department in accordance with the trade reporting requirements (Section II.G.).
However, provisions of the Code relating to the disclosure of personal holdings
(Section II.A.), preclearance of trades (Section II.B.), prohibited transactions
(II.D.1.), large positions in registered investment companies (Section
II.D.2.c.), private placements (Section II.D.3.), restrictions on serving as a
director of a publicly-traded company (Section III.F.) and receipt of gifts
(Section III.B.) do not apply to Independent Fund Directors.
D. APPLICATION OF THE CODE TO FUNDS SUBADVISED BY SCM. This Code does not
apply to the directors, officers and general partners of Funds for which SCM
serves as a subadviser.
2
<PAGE>
II. PERSONAL SECURITIES TRANSACTIONS
A. ANNUAL DISCLOSURE OF PERSONAL HOLDINGS BY ACCESS PERSONS. Upon
designation as an Access Person, and thereafter on an annual basis, all Access
Persons must report on the Disclosure of Personal Holdings In Securities Form
(Appendix 3) (or a substantially similar form) all Securities, including
securities held in certificate form, in which they have a Beneficial Interest
and all Securities in non-client accounts for which they make investment
decisions (previously reported holdings, as well as those specifically excluded
from the definition of Security, need not be reported). This provision does not
apply to Independent Fund Directors.
B. PRECLEARANCE REQUIREMENTS FOR ACCESS PERSONS.
1. GENERAL REQUIREMENT. Except for the transactions set forth in
Section II.B.2., ALL SECURITIES TRANSACTIONS in which an Access Person or a
member of his or her Immediate Family has a Beneficial Interest MUST BE
PRECLEARED with the Preclearance Officer or his designee. This provision
does not apply to transactions of Independent Fund Directors and their
Immediate Families.
2. TRANSACTIONS EXEMPT FROM PRECLEARANCE REQUIREMENTS. The following
Securities Transactions are exempt from the preclearance requirements set
forth in Section II.B.1. of this Code:
a. MUTUAL FUNDS. Securities issued by any registered open-end
investment companies (including but not limited to the Strong Funds);
b. NO KNOWLEDGE. Securities Transactions where neither SCM, the
Access Person nor an Immediate Family member knows of the transaction
before it is completed (for example, Securities Transactions effected
for an Access Person by a trustee of a blind trust or discretionary
trades involving an investment partnership or investment club in which
the Access Person is neither consulted nor advised of the trade before
it is executed);
c. CERTAIN CORPORATE ACTIONS. Any acquisition or disposition of
Securities through stock dividends, dividend reinvestments, stock
splits, reverse stock splits, mergers, consolidations, spin-offs or
other similar corporate reorganizations or distributions generally
applicable to all holders of the same class of Securities. Odd-lot
tender offers are also exempt from the preclearance requirements;
however, all other tender offers must be precleared;
d. RIGHTS. Any acquisition or disposition of Securities through
the exercise of rights, options, convertible bonds or other
instruments acquired in compliance with this Code;
e. APPLICATION TO COMMODITIES, FUTURES, OPTIONS ON FUTURES AND
OPTIONS ON BROAD-BASED INDICES. Commodities, futures (including
currency futures and futures on securities comprising part of a
broad-based, publicly traded
3
<PAGE>
market based index of stocks), options on futures, options on
currencies and options on certain indices designated by the Compliance
Department as broad-based are not subject to preclearance or the seven
day black out, 60-day profit disgorgement and other prohibited
transaction provisions of Section II.D.1. of the Code but are subject
to transaction reporting requirements (Section II.G.). The options on
indices designated by the Compliance Department as broad-based may be
changed from time to time and are listed in Appendix 7.
THE OPTIONS ON INDICES THAT ARE NOT DESIGNATED AS BROAD-BASED ARE
SUBJECT TO THE PRECLEARANCE, SEVEN-DAY BLACKOUT, 60-DAY PROFIT
DISGORGEMENT, PROHIBITED TRANSACTION AND REPORTING PROVISIONS OF THE
CODE.
f. MISCELLANEOUS. Any transaction in the following: (1) bankers
acceptances; (2) bank certificates of deposit ("CDs"); (3) commercial
paper; (4) repurchase agreements (when backed by exempt securities);
(5) U.S. Government Securities; (6) the acquisition of equity
securities in dividend reinvestment plans ("DRIPs"), when the
acquisition is directly through the issuer or its non-broker agent;
(7) Securities of the employer of a member of the Access Person's
Immediate Family if such securities are beneficially owned through
participation by the Immediate Family member in a Profit Sharing plan,
401(k) plan, ESOP or other similar plan; and (8) other Securities as
may from time to time be designated in writing by the Code of Ethics
Review Committee on the grounds that the risk of abuse is minimal or
non-existent.
C. PRECLEARANCE REQUESTS.
1. TRADE AUTHORIZATION REQUEST FORMS. Prior to entering an order for
a Securities Transaction that requires preclearance, the Access Person must
complete, IN WRITING, a Preclearance Request For Access Persons Form
(Appendix 5) and submit the completed form to the Preclearance Officer (or
his or her designee). The Preclearance Request For Access Persons Form
requires Access Persons to provide certain information and to make certain
representations. Proposed Securities Transactions of the Preclearance
Officer that require preclearance must be submitted to his designee.
2. REVIEW OF FORM. After receiving the completed Preclearance
Request For Access Persons Form, the Preclearance Officer (or his or her
designee) will (a) review the information set forth in the form, (b)
independently confirm whether the Securities are held by any Funds or other
accounts managed by SCM and whether there are any unexecuted orders to
purchase or sell the Securities by any Fund or accounts managed by SCM and
(c) as soon as reasonably practicable, determine whether to clear the
proposed Securities Transaction. The authorization, date, and time of the
authorization must be reflected on the Preclearance Request For Access
Persons Form. The Preclearance Officer (or his or her designee) will keep
one copy of the completed form for the Compliance Department, send one copy
to the Access Person seeking authorization and send the third copy to the
Trading Department, which will cause the transaction to be
4
<PAGE>
executed. If the brokerage account is an Electronic Trading Account and the
Access Person has completed the Electronic Trading Authorization Form
(Appendix 10), the Access Person will execute the transaction on his or her
own behalf and will provide Compliance with a copy of the electronic
confirmation by the end of the next business day.
No order for a securities transaction for which preclearance authorization
is sought may be placed prior to the receipt of WRITTEN authorization of
the transaction by the preclearance officer (or his or her designee).
Verbal approvals are not permitted.
3. ACCESS PERSON DESIGNEES. If an Access Person is unable to
personally effect a personal Securities Transaction, such Access Person may
designate an individual at SCM to complete and submit for preclearance on
his or her behalf a Preclearance Request For Access Persons Form provided
the following requirements are satisfied:
a. The Access Person communicates the details of the trade and
affirms the accuracy of the representations and warranties contained
on the Form directly to such designated person; and
b. The designated person completes the Preclearance Request For
Access Persons Form on behalf of the Access Person in accordance with
the requirements of the Code and then executes the Access Person
Designee Certification contained in the Form. The Access Person does
not need to sign the Form so long as the foregoing certification is
provided.
D. PROHIBITED TRANSACTIONS.
1. PROHIBITED SECURITIES TRANSACTIONS. The following Securities
Transactions for accounts in which an Access Person or a member of his or
her Immediate Family have a Beneficial Interest, to the extent they require
preclearance under Section II.B. above, are prohibited and will not be
authorized by the Preclearance Officer (or his or her designee) absent
exceptional circumstances:
a. INITIAL PUBLIC OFFERINGS. Any purchase of Securities in an
initial public offering (other than a new offering of a registered
open-end investment company);
b. PENDING BUY OR SELL ORDERS. Any purchase or sale of
Securities on any day during which any Advisory Client has a pending
"buy" or "sell" order in the same Security (or Equivalent Security)
until that order is executed or withdrawn, unless the purchase or sale
is a Program Trade;
c. SEVEN DAY BLACKOUT. Purchases or sales of Securities by a
Portfolio Manager within seven calendar days of a purchase or sale of
the same Securities (or Equivalent Securities) by an Advisory Client
managed by that
5
<PAGE>
Portfolio Manager, unless the purchase or sale is a Program Trade. For
example, if a Fund trades in a Security on day one, day eight is the
first day the Portfolio Manager may trade that Security for an account
in which he or she has a beneficial interest;
d. INTENTION TO BUY OR SELL FOR ADVISORY CLIENT. Purchases or
sales of Securities at a time when that Access Person intends, or
knows of another's intention, to purchase or sell that Security (or an
Equivalent Security) on behalf of an Advisory Client. This prohibition
applies whether the Securities Transaction is in the same (E.G., two
purchases) or the opposite (a purchase and sale) direction of the
transaction of the Advisory Client, unless the purchase or sale is a
Program Trade; and
e. 60-DAY BLACKOUT. (1) Sales of a Security within 60 days of
the purchase of the Security (or an Equivalent Security) in which the
Access Person has a Beneficial Interest and (2) purchases of a
Security within 60 days of the sale of the Security (or an Equivalent
Security) in which the Access Person had a Beneficial Interest, unless
in each case, the Access Person agrees to give up all profits on the
transaction to a charitable organization as specified by remedies
involving sanctions (Section IV.B.1.).
2. ALWAYS PROHIBITED SECURITIES TRANSACTIONS. The following
Securities Transactions are prohibited and will not be authorized under any
circumstances:
a. INSIDE INFORMATION. Any transaction in a Security while in
possession of material nonpublic information regarding the Security or
the issuer of the Security (see Insider Trading Policy, Appendix 9);
b. MARKET MANIPULATION. Transactions intended to raise, lower,
or maintain the price of any Security or to create a false appearance
of active trading;
c. LARGE POSITIONS IN REGISTERED INVESTMENT COMPANIES.
Transactions in a registered investment company, including Strong
Funds, which result in the Access Person owning five percent or more
of any class of securities in such investment company (this
prohibition does not apply to Independent Fund Directors); and
d. OTHERS. Any other transactions deemed by the Preclearance
Officer (or his designee) to involve a conflict of interest, possible
diversion of corporate opportunity or an appearance of impropriety.
3. PRIVATE PLACEMENTS. Acquisitions of Beneficial Interests in
Securities in a private placement by an Access Person is strongly
discouraged. The Preclearance Officer (or his or her designee) will give
permission only after considering, among other facts, whether the
investment opportunity should be reserved for Advisory Clients and whether
6
<PAGE>
the opportunity is being offered to an Access Person by virtue of his or
her position as an Access Person. Access Persons who have been authorized
to acquire and have acquired securities in a private placement are required
to disclose that investment to the Compliance Department when they play a
part in any subsequent consideration of an investment in the issuer by an
Advisory Client. In such circumstances, the decision to purchase securities
of the issuer by an Advisory Client must be independently authorized by a
Portfolio Manager with no personal interest in the issuer. This provision
does not apply to Independent Fund Directors.
4. NO EXPLANATION REQUIRED FOR REFUSALS. In some cases, the
Preclearance Officer (or his or her designee) may refuse to authorize a
Securities Transaction for a reason that is confidential. The Preclearance
Officer is not required to give an explanation for refusing to authorize
any Securities Transaction.
E. EXECUTION OF PERSONAL SECURITIES TRANSACTIONS. Unless an exception is
provided in writing by the Compliance Department, all transactions in Securities
subject to the preclearance requirements for which an Access Person or a member
of his or her Immediate Family has a Beneficial Interest shall be executed by
the Trading Department. However, if the Access Person's brokerage account is an
Electronic Trading Account, the transaction may be placed by the Access Person.
IN ALL INSTANCES, THE TRADING DEPARTMENT MUST GIVE PRIORITY TO CLIENT TRADES
OVER ACCESS PERSON TRADES.
F. LENGTH OF TRADE AUTHORIZATION APPROVAL. The authorization provided by
the Preclearance Officer (or his or her designee) is effective until the earlier
of (1) its revocation; (2) the close of business on the second trading day after
the authorization is granted for transactions placed by the Trading Department
(for example, if authorization is provided on a Monday, it is effective until
the close of business on Wednesday); (3) the close of business of the SAME
TRADING DAY that the authorization is granted for transactions placed through an
Electronic Trading Account; or (4) the Access Person learns that the information
in the Trade Authorization Request Form is not accurate. If the order for the
Securities Transaction is not placed within that period, a new advance
authorization must be obtained before the Securities Transaction is placed. For
Securities Transactions placed by the Trading Deparment that have not been
executed within two trading days after the day the authorization is granted (for
example, in the case of a limit order or a Not Held Order), no new authorization
is necessary unless the person placing the original order for the Securities
Transaction amends it in any way.
G. TRADE REPORTING REQUIREMENTS.
1. REPORTING REQUIREMENT. EVERY ACCESS PERSON AND MEMBERS OF HIS OR
HER IMMEDIATE FAMILY (INCLUDING INDEPENDENT FUND DIRECTORS AND THEIR
IMMEDIATE FAMILIES) MUST ARRANGE FOR THE COMPLIANCE DEPARTMENT TO RECEIVE
DIRECTLY FROM ANY BROKER, DEALER OR BANK THAT EFFECTS ANY SECURITIES
TRANSACTION, DUPLICATE COPIES OF EACH CONFIRMATION FOR EACH SUCH
TRANSACTION AND PERIODIC STATEMENTS FOR EACH BROKERAGE ACCOUNT IN WHICH
SUCH ACCESS PERSON HAS A BENEFICIAL INTEREST. Additionally, securities held
in certificate form that are not included in the periodic
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statements, must also be reported. To assist in making these arrangements,
the Compliance Department will send a letter to each brokerage firm based
on the information provided by the Access Person in Appendix 3.
THE FOREGOING DOES NOT APPLY TO TRANSACTIONS AND HOLDINGS IN (1) OPEN-END
INVESTMENT COMPANIES INCLUDING BUT NOT LIMITED TO THE STRONG FUNDS, (2)
BANKERS ACCEPTANCES, (3) BANK CERTIFICATES OF DEPOSIT ("CDs"), (4)
COMMERCIAL PAPER, (5) REPURCHASE AGREEMENTS WHEN BACKED BY EXEMPT
SECURITIES, (6) U. S. GOVERNMENT SECURITIES, (7) THE ACQUISITION OF EQUITY
SECURITIES IN DIVIDEND REINVESTMENT PLANS ("DRIPs"), WHEN THE ACQUISITION
IS DIRECTLY THROUGH THE ISSUER OR ITS NON-BROKER AGENT; OR (8) SECURITIES
OF THE EMPLOYER OF A MEMBER OF THE ACCESS PERSON'S IMMEDIATE FAMILY IF SUCH
SECURITIES ARE BENEFICIALLY OWNED THROUGH PARTICIPATION BY THE IMMEDIATE
FAMILY MEMBER IN A PROFIT SHARING PLAN, 401(k) PLAN, ESOP OR OTHER SIMILAR
PLAN.
2. DISCLAIMERS. Any report of a Securities Transaction for the
benefit of a person other than the individual in whose account the
transaction is placed may contain a statement that the report should not be
construed as an admission by the person making the report that he or she
has any direct or indirect beneficial ownership in the Security to which
the report relates.
3. QUARTERLY REVIEW. At least quarterly, for Securities Transactions
requiring preclearance under this Code, the Preclearance Officer (or his or
her designee) shall compare the confirmations and periodic statements
provided pursuant to the trade reporting requirements (Section II.G.1.) to
the approved Trade Authorization Request Forms. Such review shall include:
a. Whether the Securities Transaction complied with this Code;
b. Whether the Securities Transaction was authorized in advance
of its placement;
c. Whether the Securities Transaction was executed within two
full trading days of when it was authorized;
d. Whether any Fund or accounts managed by SCM owned the
Securities at the time of the Securities Transaction, and;
e. Whether any Fund or separate accounts managed by SCM
purchased or sold the Securities in the Securities Transaction within
at least 10 days of the Securities Transaction.
4. AVAILABILITY OF REPORTS. All information supplied pursuant to
this Code will be available for inspection by the Boards of Directors of
SCM and SFDI; the Board of Directors of each Strong Fund; the Code of
Ethics Review Committee; the Compliance
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Department; the Access Person's department manager (or designee); any party
to which any investigation is referred by any of the foregoing, the SEC,
any self-regulatory organization of which the Strong Funds, SCM, the
Distributor or Flint Prairie is a member, and any state securities
commission; as well as any attorney or agent of the foregoing, the Strong
Funds, SCM, the Distributor or Flint Prairie.
III. FIDUCIARY DUTIES
A. CONFIDENTIALITY. Access Persons are prohibited from revealing
information relating to the investment intentions, activities or portfolios of
Advisory Clients except to persons whose responsibilities require knowledge of
the information.
B. GIFTS. The following provisions on gifts apply only to associates of
SCM, the Distributor and Flint Prairie.
1. ACCEPTING GIFTS. On occasion, because of their position with SCM,
the Distributor, the Strong Funds or Flint Prairie, associates may be
offered, or may receive without notice, gifts from clients, brokers,
vendors or other persons not affiliated with such entities. Acceptance of
extraordinary or extravagant gifts is not permissible. Any such gifts must
be declined or returned in order to protect the reputation and integrity of
SCM, the Distributor, the Strong Funds and Flint Prairie. Gifts of a
nominal value (i.e., gifts whose reasonable value is no more than $100 a
year), customary business meals, entertainment (E.G., sporting events) and
promotional items (E.G., pens, mugs, T-shirts) may be accepted. Please see
the Gift Policy (Appendix 8) for additional information.
If an associate receives any gift that might be prohibited under this
Code, the associate must inform the Compliance Department.
2. SOLICITATION OF GIFTS. Associates of SCM, the Distributor or
Flint Prairie may not solicit gifts or gratuities.
3. GIVING GIFTS. Associates of SCM, the Distributor or Flint Prairie
may not give any gift with a value in excess of $100 per year to persons
associated with securities or financial organizations, including exchanges,
other member organizations, commodity firms, news media or clients of the
firm. Please see the Gift Policy (Appendix 9) for additional information.
C. PAYMENTS TO ADVISORY CLIENTS. Access Persons may not make any payments
to Advisory Clients in order to resolve any type of Advisory Client complaint.
All such matters must be handled by the Legal Department.
D. CORPORATE OPPORTUNITIES. Access Persons may not take personal
advantage of any opportunity properly belonging to any Advisory Client, SCM, the
Distributor or Flint Prairie. This includes, but is not limited to, acquiring
Securities for one's own account that would otherwise be acquired for an
Advisory Client.
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E. UNDUE INFLUENCE. Access Persons may not cause or attempt to cause any
Advisory Client to purchase, sell or hold any Security in a manner calculated to
create any personal benefit to the Access Person. If an Access Person or
Immediate Family Member stands to materially benefit from an investment decision
for an Advisory Client that the Access Person is recommending or participating
in, the Access Person must disclose to those persons with authority to make
investment decisions for the Advisory Client, any Beneficial Interest that the
Access Person (or Immediate Family) has in that Security or an Equivalent
Security, or in the issuer thereof, where the decision could create a material
benefit to the Access Person (or Immediate Family) or the appearance of
impropriety. If the Access Person in question is a person with authority to make
investment decisions for the Advisory Client, disclosure must also be made to
the Compliance Department. The person to whom the Access Person reports the
interest, in consultation with the Compliance Department, must determine whether
the Access Person will be restricted in making investment decisions.
F. SERVICE AS A DIRECTOR. No Access Person, other than an Independent
Fund Director, may serve on the board of directors of a publicly-held company
not affiliated with SCM, the Distributor, the Strong Funds or Flint Prairie
absent prior written authorization by the Code of Ethics Review Committee. This
authorization will rarely, if ever, be granted and, if granted, will normally
require that the affected Access Person be isolated through "Chinese Wall" or
other procedures from those making investment decisions related to the issuer on
whose board the Access Person sits.
G. INVOLVEMENT IN CRIMINAL MATTERS OR INVESTMENT-RELATED CIVIL
PROCEEDINGS. Each Access Person must notify the Compliance Department, as soon
as reasonably practical, if arrested, arraigned, indicted or pleads no contest
to any criminal offense (other than minor traffic violations) or if named as a
defendant in any Investment-Related civil proceedings or any administrative or
disciplinary action.
IV. COMPLIANCE WITH THIS CODE OF ETHICS
A. CODE OF ETHICS REVIEW COMMITTEE.
1. MEMBERSHIP, VOTING, AND QUORUM. The Code of Ethics Review
Committee shall consist of Senior Officers of SCM. The Committee shall vote
by majority vote with two members serving as a quorum. Vacancies may be
filled; and in the case of extended absences or periods of unavailability,
alternates may be selected by the majority vote of the remaining members of
the Committee. However, in the event that the General Counsel or Deputy
General Counsel is unavailable, at least one member of the Committee shall
also be a member of the Compliance Department.
2. INVESTIGATING VIOLATIONS OF THE CODE. The General Counsel, or his
or her designee, is responsible for investigating any suspected violation
of the Code and shall report the results of each investigation to the Code
of Ethics Review Committee. The Code of Ethics Review Committee is
responsible for reviewing the results of any
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<PAGE>
investigation of any reported or suspected violation of the Code. Any
material violation of the Code by an associate of SCM, the Distributor or
Flint Prairie for which significant remedial action was taken will be
reported to the Boards of Directors of the Strong Funds at the next
regularly scheduled quarterly Board meeting.
3. ANNUAL REPORTS. The Code of Ethics Review Committee will review
the Code at least once a year, in light of legal and business developments
and experience in implementing the Code and will prepare an annual report
to the Boards of Directors of SCM, the Distributor and each Strong Fund
that:
a. Summarizes existing procedures concerning personal investing
and any changes in the procedures made during the past year;
b. Identifies any violation requiring significant remedial
action during the past year; and
c. Identifies any recommended changes in existing restrictions
or procedures based on its experience under the Code, evolving
industry practices or developments in applicable laws or regulations.
B. REMEDIES.
1. SANCTIONS. If the Code of Ethics Review Committee determines that
an Access Person has committed a violation of the Code, the Committee may
impose sanctions and take other actions as it deems appropriate, including
a letter of caution or warning, suspension of personal trading rights,
suspension of employment (with or without compensation), fine, civil
referral to the SEC, criminal referral and termination of employment for
cause. The Code of Ethics Review Committee may also require the Access
Person to reverse the trade(s) in question and forfeit any profit or absorb
any loss derived therefrom. The amount of profit shall be calculated by the
Code of Ethics Review Committee and shall be forwarded to a charitable
organization. No member of the Code of Ethics Review Committee may review
his or her own transaction.
2. SOLE AUTHORITY. The Code of Ethics Review Committee has sole
authority, subject to the review set forth in Section IV.B.3. below, to
determine the remedy for any violation of the Code, including appropriate
disposition of any moneys forfeited pursuant to this provision. Failure to
promptly abide by a directive to reverse a trade or forfeit profits may
result in the imposition of additional sanctions.
3. REVIEW. Whenever the Code of Ethics Review Committee determines
that an Access Person has committed a violation of this Code that merits
significant remedial action, it will report promptly to the Boards of
Directors of SCM and/or the Distributor (as appropriate), and no less
frequently than the quarterly meeting to the Boards of Directors of the
applicable Strong Funds, information relating to the investigation of the
violation, including any sanctions imposed. The Boards of Directors of SCM,
the
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<PAGE>
Distributor and the Strong Funds may modify such sanctions as they deem
appropriate. Such Boards may have access to all information considered by
the Code of Ethics Review Committee in relation to the case. The Code of
Ethics Review Committee may determine whether to delay the imposition of
any sanctions pending review by the applicable Boards of Directors.
C. EXCEPTIONS TO THE CODE. Although exceptions to the Code will rarely,
if ever, be granted, the General Counsel of SCM may grant exceptions to the
requirements of the Code on a case-by-case basis if he finds that the proposed
conduct involves negligible opportunity for abuse. All Material exceptions must
be in writing and must be reported as soon as practicable to the Code of Ethics
Review Committee and to the Boards of Directors of the SCM Funds at their next
regularly scheduled meeting after the exception is granted. Refer to Appendix 1
for the definition of "Material."
D. COMPLIANCE CERTIFICATION. At least annually, all Access Persons will
be required to certify on the Annual Code of Ethics Questionnaire set forth in
Appendix 6, or on a document substantially in the form of Appendix 6, that they
have complied with the Code in all respects.
E. RECORD RETENTION. SCM will, at its principal place of business,
maintain the following records in an easily accessible place, for at least six
years and will make records available to the SEC or any representative thereof
at any time:
1. CODE OF ETHICS. A copy of the Code of Ethics which is, or at any
time has been, in effect.
2. VIOLATIONS. A record of any violation of such Code of Ethics and
any action taken as a result of such violation.
3. REQUIRED REPORTS. A copy of each report made by an Access Person
pursuant to the Code of Ethics shall include records of the procedures
followed in connection with the preclearance and reporting requirements of
this Code and information relied on by the Preclearance Officer in
authorizing the Securities Transaction and in making the post-Securities
Transaction determination.
4. ACCESS PERSON LIST. A list of all persons who are, or have been,
required to make reports pursuant to the Code of Ethics.
F. INQUIRIES REGARDING THE CODE. The Compliance Department will answer
any questions about this Code or any other compliance-related matters.
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Appendix 1
DEFINITIONS
"ACCESS PERSON" means (1) every director, officer, and general partner of
SCM, the Distributor, the Strong Funds and Flint Prairie; (2) every associate of
SCM, the Distributor and Flint Prairie who, in connection with his or her
regular functions, makes, participates in, or obtains information regarding the
purchase or sale of a security by an Advisory Client's account; (3) every
associate of SCM, the Distributor and Flint Prairie who is involved in making
purchase or sale recommendations for an Advisory Client's account; (4) every
associate of SCM, the Distributor and Flint Prairie who obtains information
concerning such recommendations prior to their dissemination; and (5) such
agents of SCM, the Distributor, the Funds or Flint Prairie as the Compliance
Department shall designate who may be deemed an Access Person if they were an
associate of the foregoing. Any uncertainty as to whether an individual is an
Access Person should be brought to the attention of the Compliance Department.
Such questions will be resolved in accordance with, and this definition shall be
subject to, the definition of "Access Person" found in Rule 17j-1(e)(1)
promulgated under the Investment Company Act of 1940.
"ADVISORY CLIENT" means any client (including both investment companies and
managed accounts) for which SCM serves as an investment adviser or subadviser,
renders investment advice, makes investment decisions or places orders through
its Trading Department.
"BENEFICIAL INTEREST" means the opportunity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, to
profit or share in any profit derived from a transaction in the subject
Securities. An Access Person is deemed to have a Beneficial Interest in
Securities owned by members of his or her Immediate Family. Common examples of
Beneficial Interest include joint accounts, spousal accounts, UTMA accounts,
partnerships, trusts and controlling interests in corporations. Any uncertainty
as to whether an Access Person has a Beneficial Interest in a Security should be
brought to the attention of the Compliance Department. Such questions will be
resolved by reference to the principles set forth in the definition of
"beneficial owner" found in Rules 16a-1(a)(2) and (5) promulgated under the
Securities Exchange Act of 1934.
"CODE" means this Code of Ethics.
"COMPLIANCE DEPARTMENT" means the designated persons listed on Appendix 2,
as such Appendix shall be amended from time to time.
"THE DISTRIBUTOR" means Strong Investments, Inc.
"ELECTRONIC TRADING ACCOUNT" means a brokerage account held by an Access
Person where Securities Transactions are placed either electronically via the
Internet or the telephone. All such Securities Transactions must be precleared
by the Compliance Department.
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"EQUIVALENT SECURITY" means any Security issued by the same entity as the
issuer of a subject Security that is convertible into the equity Security of the
issuer. Examples include options but are not limited to rights, stock
appreciation rights, warrants and convertible bonds.
"FUND" means an investment company registered under the Investment Company
Act of 1940 (or a portfolio or series thereof) for which SCM serves as an
adviser or subadviser.
"IMMEDIATE FAMILY" of an Access Person means any of the following persons
who reside in the same household as the Access Person:
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
stepparent father-in-law
Immediate Family includes adoptive relationships and any other relationship
(whether or not recognized by law) which the General Counsel determines could
lead to the possible conflicts of interest, diversions of corporate opportunity,
or appearances of impropriety which this Code is intended to prevent.
"INDEPENDENT FUND DIRECTOR" means an independent director of an investment
company for which SCM serves as the advisor.
"LEGAL DEPARTMENT" means the SCM Legal/Compliance Department.
"MATERIAL" for purposes of this reporting requirement, shall mean the
following:
1. NUMBER OF SHARES - Any transaction for more than 1,000 shares shall
be deemed material and subject to reporting. Whether a transaction
of 1,000 shares or less is material shall be determined on a
case-by-case basis; in particular, the less liquid a security is,
the lower the threshold that should be used for the materiality
determination.
2. DOLLAR VALUE OF TRANSACTION - Any transaction with a dollar value in
excess of $25,000 shall be deemed material and subject to reporting.
Whether a transaction of $25,000 or less is material shall be
determined on a case-by-case basis.
3. NUMBER OF TRANSACTIONS IN A YEAR - The General Counsel may grant no
more than two exceptions per associate per year that are not subject
to reporting. For example, if the General Counsel has granted two
exceptions to an associate, ANY exception granted thereafter shall
be deemed material and subject to reporting (irrespective of the
number of shares or other circumstances of the transaction).
4. CONSULTATION WITH INDEPENDENT COUNSEL - In any case where the
General Counsel believes there is an issue of whether a proposed
exception is material and subject to reporting, he shall consult
with counsel to the independent directors for the Strong Funds.
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<PAGE>
"NOT HELD ORDER" means an order placed with a broker and ultimately
executed at the discretion of the broker.
"PORTFOLIO MANAGER" means a person who has or shares principal day-to-day
responsibility for managing the portfolio of an Advisory Client.
"PRECLEARANCE OFFICER" means the person designated as the Preclearance
Officer in Appendix 2 hereof.
"PROGRAM TRADE" is where a Portfolio Manager directs a trader to do trades
in either an index-type account or portion of account or, at a minimum, 25-30%
of the Securities in a non-index account. Program Trades for non-index type
accounts generally arise in any of three situations: (1) cash or other assets
are being added to an account and the Portfolio Manager instructs the trader
that new securities are to be bought in a manner that maintains the account's
existing allocations; (2) cash is being withdrawn from an account and the
Portfolio Manager instructs the trader that securities are to be sold in a
manner that maintains the account's current securities allocations; and (3) a
new account is established and the Portfolio Manager instructs the trader to buy
specific securities in the same allocation percentages as are held by other
client accounts.
"SEC" means the Securities and Exchange Commission.
"SECURITY" includes stock; notes, bonds, debentures and other evidences of
indebtedness (including loan participations and assignments); limited
partnership interests; investment contracts; all derivative instruments of the
foregoing, such as options and warrants; and other items mentioned in Section
2(a)(36) of the 1940 Act, not specifically exempted by Rule 17j-1. Items
excluded from the definition of "Security" by Rule 17j-1 are U. S. Government
Securities, bankers acceptances, bank certificates of deposit, commercial paper
and shares of open-end investment companies. In addition, security does not
include futures, commodities, currencies or options on the aforementioned, but
the purchase and sale of such instruments are nevertheless subject to the
reporting requirements of the Code.
"SECURITIES TRANSACTION" means a purchase or sale of Securities in which an
Access Person or a members of his or her Immediate Family has or acquires a
Beneficial Interest.
"SCM" means Strong Capital Management, Inc.
"STRONG FUNDS" means the investment companies comprising the Strong Family
of Mutual Funds.
"U. S. GOVERNMENT SECURITY" means any security issued or guaranteed as to
principal or interest by the United States or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States or any
certificate of deposit for any of the foregoing.
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Appendix 2
CONTACT PERSONS
PRECLEARANCE OFFICER
1. Stephen J. Shenkenberg, Deputy General Counsel and Chief Compliance
Officer of SCM
DESIGNEES OF PRECLEARANCE OFFICER
1. Thomas A. Hooker
2. Linda E. Meints
3. John S. Weitzer
4. Kelly M. Zeroth
COMPLIANCE DEPARTMENT
1. Stephen J. Shenkenberg
2. Thomas A. Hooker
3. Kathleen A. Flanagan
4. Linda E. Meints
5. Kelly M. Zeroth
CODE OF ETHICS REVIEW COMMITTEE
1. Stephen J. Shenkenberg, Deputy General Counsel and Chief Compliance
Officer of SCM
2. Thomas A. Hooker, Director of Compliance
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Appendix 3
PERSONAL HOLDINGS IN SECURITIES
In accordance with Section II.A. of the Code of Ethics, please provide a
list of all Securities (other than those specifically excluded from the
definition of Security), including physical certificates held, in which each
Access Person has a Beneficial Interest, including those in accounts of the
Immediate Family of the Access Person and all Securities in non-client accounts
for which the Access Person makes investment decisions.
(1) Name of Access Person: ____________________________
(2) If different than (1), name of the person
in whose name the account is held: ____________________________
(3) Relationship of (2) to (1): ____________________________
(4) Broker at which Account is maintained: ____________________________
(5) Account Number: ____________________________
(6) Contact person at Broker and phone number ____________________________
(7) For each account, attach the most recent account statement listing
Securities in that account. If the Access Person owns Beneficial
Interests in Securities that are not listed in an attached account
statement, or holds the physical certificate, list them below:
NAME OF SECURITY QUANTITY VALUE CUSTODIAN
1. ___________________________________________________________________________
2. ___________________________________________________________________________
3. ___________________________________________________________________________
4. ___________________________________________________________________________
5. ___________________________________________________________________________
6. ___________________________________________________________________________
(ATTACH SEPARATE SHEET IF NECESSARY.)
I certify that this form and the attached statements (if any) constitute
all of the Securities in which I have a Beneficial Interest, including those for
which I hold physical certificates, as well as those held in accounts of my
Immediate Family.
---------------------------------------
Access Person Signature
Dated:
------------------------- ----------------------------------------
Print Name
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Appendix 4
ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS
AND LIMITED POWER OF ATTORNEY
I acknowledge that I have received the Code of Ethics dated October 22,
1999, and represent that:
1. In accordance with Section II.A. of the Code of Ethics, I will
fully disclose the Securities holdings in which I have, or a member of my
Immediate Family has, a Beneficial Interest.*
2. In accordance with Section II.B.1. of the Code of Ethics, I will
obtain prior authorization for all Securities Transactions in which I have,
or a member of my Immediate Family has, a Beneficial Interest except for
transactions exempt from preclearance under Section II.B. 2. of the Code of
Ethics.*
3. In accordance with Section II.G.1. of the Code of Ethics, I will
report all Securities Transactions in which I have, or a member of my
Immediate Family has, a Beneficial Interest, except for transactions exempt
from reporting under Section II.G.1. of the Code of Ethics.
4. I will comply with the Code of Ethics in all other respects.
5. I agree to disgorge and forfeit any profits on prohibited
transactions in accordance with the requirements of the Code.*
I hereby appoint Strong Capital Management, Inc. as my attorney-in-fact for
the purpose of placing orders for and on my behalf to buy, sell, tender,
exchange, convert, and otherwise effectuate transactions in any and all stocks,
bonds, options, and other securities. I agree that Strong Capital Management,
Inc. shall not be liable for the consequences of any errors made by the
executing brokers in connection with such transactions.*
---------------------------------------
Access Person Signature
---------------------------------------
Print Name
Dated:
-------------------------
* Representations (1), (2) and (5) and the Limited Power of Attorney do not
apply to Independent Fund Directors.
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<TABLE>
<S><C>
Appendix 5
Ctrl. No:_________________________ Associate ID #_______________________________
STRONG CAPITAL MANAGEMENT, INC.
PRECLEARANCE REQUEST FOR ACCESS PERSONS
1. Name of Access Person (and trading entity, if different): _________________________________________________________________
2. Name and symbol of Security: _________________________________________________________________
3. Maximum quantity to be purchased or sold: _________________________________________________________________
4. Name, account # & phone # of broker to effect transaction: _______________________________________________________________
5. Check if applicable: Purchase ____ Market Order ____
Sale ____ Limit Order ____ (Limit Order Price: ___________)
Not Held Order ____
6. In connection with the foregoing transaction, I hereby make the following representations and warranties:
(a) I do not possess any material nonpublic information regarding the Security or the issuer of the Security.
(b) To my knowledge:
(1) The Securities or "equivalent" securities (I.E., securities issued by the same issuer) [ ARE / ARE NOT ] (CIRCLE ONE)
held by any investment companies or other accounts managed by SCM;
(2) There are no outstanding purchase or sell orders for this Security (or any equivalent security) by any investment
companies or other accounts managed by SCM; and
(3) None of the Securities (or equivalent securities) are actively being considered for purchase or sale by any investment
companies or other accounts managed by SCM.
(c) The Securities are not being acquired in an initial public offering.
(d) The Securities are not being acquired in a private placement or, if they are, I have reviewed Section II.D.3. of the Code
and have attached hereto a written explanation of such transaction.
(e) If I am a Portfolio Manager, none of the accounts I manage purchased or sold these Securities (or equivalent securities)
within the past seven calendar days and I do not expect any such client accounts to purchase or sell these Securities (or
equivalent securities) within seven calendar days of my purchase or sale.
(f) If I am purchasing these Securities, I have not directly or indirectly (through any member of my Immediate Family, any
account in which I have a Beneficial Interest or otherwise) sold these Securities (or equivalent securities) in the prior
60 days.
(g) If I am selling these Securities, I have not directly or indirectly (through any member of my Immediate Family, any account
in which I have a Beneficial Interest or otherwise) purchased these Securities (or equivalent securities) in the prior 60
days.
(h) I have read the SCM Code of Ethics within the prior 12 months and believe that the proposed trade fully complies with the
requirements of the Code.
- -------------------------------------------------------------- -------------------------------------------------------------
Access Person Print Name
CERTIFICATION OF ACCESS PERSON DESIGNEE
The undersigned hereby certifies that the above Access Person (a) directly instructed me to complete this form on his or her
behalf, (b) to the best of my knowledge, was out of the office at the time of such instruction and has not returned, and
(c) confirmed to me that the representations and warranties contained in this form are accurate.
- -------------------------------------------------------------- -------------------------------------------------------------
Access Person Designee Print Name
AUTHORIZATION
Authorized By:________________________________________________ Date:___________________ Time:_____________________________
PLACEMENT
Trader:_________________________ Date:________________ Time:__________________ Qty:_________________
EXECUTION
Trader:_________________________ Date:________________ Time:__________________ Qty:_________________ Price:_______________
(Original copy to Compliance Department, Yellow copy to Trading Department, Pink copy to Access Person)
revised 7/98
</TABLE>
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CONFIDENTIAL Appendix 6
ANNUAL CODE OF ETHICS QUESTIONNAIRE(1)
For ACCESS PERSONS of
The Strong Family of Mutual Funds,
Strong Capital Management, Inc.,
Strong Investments, Inc.
and Flint Prairie, L. L. C.
September 14, 1999
Associate: ____________________________(please print name)
I. Introduction
Access Persons(2) are required to answer the following questions FOR THE
YEAR SEPTEMBER 1, 1998, THROUGH AUGUST 31, 1999. ANSWERS OF "NO" TO ANY OF
THE QUESTIONS IN SECTIONS II AND III MUST BE EXPLAINED ON THE "ATTACHMENT"
ON PAGE 3. Upon completion, please sign and return the questionnaire by
Monday, September 20th, to Kelly Zeroth in the Compliance Department. All
information provided is kept confidential to the maximum extent possible.
If you have any questions, please contact Kelly at extension 3549.
II. Annual certification of compliance with the Code of Ethics
A. Have you OBTAINED PRECLEARANCE for all Securities(3) Transactions in
which you have, or a member of your Immediate Family has, a Beneficial
Interest, except for transactions exempt from preclearance under the
Code of Ethics? (Circle "Yes" if there have been no Securities
Transactions.)
YES NO (CIRCLE ONE)
B. Have you REPORTED all Securities Transactions in which you have, or a
member of your Immediate Family has, a Beneficial Interest, except for
transactions exempt from reporting under the Code of Ethics? (Reporting
requirements include arranging for the Compliance Department to
receive, directly from your broker, duplicate transaction confirmations
and duplicate periodic statements for each brokerage account in which
you have, or a member of your Immediate Family has, a Beneficial
Interest, as well as reporting securities held in certificate form(4).
Circle "Yes" if there are no reportable transactions.)
YES NO (CIRCLE ONE)
C. Do you understand that you are PROHIBITED from owning five percent or
more of any class of security of a registered investment company, and
have you so complied?
YES NO (CIRCLE ONE)
- ----------
(1) All definitions used in this questionnaire have the same meaning as those in
the Code of Ethics.
(2) Non-Access Persons and Independent Fund Directors of the Strong Funds must
complete a separate questionnaire.
(3) Security, as defined, does NOT include open-end investment companies,
including the Strong Funds.
(4) Please contact Kelly Zeroth if you are uncertain as to what confirmations
and statements you have arranged for the Compliance Department to receive.
20
<PAGE>
D. Have you notified the Compliance Department if you have been arrested,
arraigned, indicted, or have plead no contest to any criminal offense,
or been named as a defendant in any Investment-Related civil
proceedings, or administrative or disciplinary action? (Circle "Yes" if
you have not been arrested, arraigned, etc.)
YES NO (CIRCLE ONE)
E. Have you complied with the Code of Ethics in all other respects,
including the gift policy?
YES NO (CIRCLE ONE)
LIST ON THE ATTACHMENT ALL REPORTABLE GIFTS(5) GIVEN OR RECEIVED FOR THE
YEAR SEPTEMBER 1, 1998, THROUGH AUGUST 31, 1999, NOTING THE MONTH,
"COUNTERPARTY," GIFT DESCRIPTION, AND ESTIMATED VALUE.
III. Have you complied in all respects with the Insider Trading Policy dated
January 1, 1999?
YES NO (CIRCLE ONE)
ANSWERS OF "NO" TO ANY OF THE QUESTIONS IN SECTIONS II AND III MUST BE EXPLAINED
ON THE "ATTACHMENT" ON PAGE 3.
IV. Disclosure of directorships statement
A. Are you, or is any member of your Immediate Family, a director of any
for-profit, privately held companies(6)? (If "Yes," please list on the
Attachment each company for which you are, or a member of your
Immediate Family is, a director.)
YES NO (CIRCLE ONE)
B. If the response to IV.A. is "Yes," do you have knowledge that any of
the companies for which you are, or a member of your Immediate Family
is, a director will go public or be acquired within the next 12 months?
(If the answer is "YES," please be prepared to discuss this matter with
a member of the Compliance Department in the near future.)
YES NO (CIRCLE ONE)
I hereby represent that, to the best of my knowledge, the foregoing responses
are true and complete. I understand that any untrue or incomplete response may
be subject to disciplinary action by the firm.
- --------------------------------------
Access Person Signature
- -------------------------------------- ---------------------------------
Print Name Date
- ----------
(5) Associates are NOT required to report the following: (i) usual and customary
promotional items given to or received from vendors, (ii) items donated to
charity (through Legal), or (iii) food items consumed on the premises.
Entertainment - i.e., a meal or activity with the vendor present - does not
have to be reported.
(6) Per Section III.F. of the Code of Ethics, no Access Person, other than an
Independent Fund Director, may serve on the board of directors of a PUBLICLY
HELD company.
21
<PAGE>
ATTACHMENT TO
ANNUAL CODE OF ETHICS QUESTIONNAIRE
PLEASE EXPLAIN ALL "NO" RESPONSES TO QUESTIONS IN SECTIONS II AND III:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
PLEASE LIST EACH COMPANY FOR WHICH YOU ARE, OR A MEMBER OR YOUR IMMEDIATE FAMILY
IS, A DIRECTOR (SECTION IV):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
GIFTS FOR THE YEAR SEPTEMBER 1, 1998, THROUGH AUGUST 31, 1999:
MONTH GIFT GIVER / RECEIVER GIFT DESCRIPTION ESTIMATED VALUE
1. _____________________________________________________________________________
2. _____________________________________________________________________________
3. _____________________________________________________________________________
4. _____________________________________________________________________________
5. _____________________________________________________________________________
6. _____________________________________________________________________________
7. _____________________________________________________________________________
8. _____________________________________________________________________________
9. _____________________________________________________________________________
10. ____________________________________________________________________________
(CONTINUE ON AN ADDITIONAL SHEET IF NECESSARY.)
22
<PAGE>
Appendix 7
LIST OF BROAD-BASED INDICES
Listed below are the broad-based indices as designated by the Compliance
Department. See Section II.B.2.e. for additional information.
- ------------------------------------- --------------------- --------------------
DESCRIPTION OF OPTION SYMBOL EXCHANGE
- ------------------------------------- --------------------- --------------------
Computer Technology XCI AMEX
- ------------------------------------- --------------------- --------------------
Eurotop 100 ERT AMEX
- ------------------------------------- --------------------- --------------------
Biotechnology Index BTK AMEX
- ------------------------------------- --------------------- --------------------
Gold / Silver Index * AUX PHLX
- ------------------------------------- --------------------- --------------------
Hong Kong Option Index HKO AMEX
- ------------------------------------- --------------------- --------------------
Inter@ctive Wk. Internet Index INX CBOE
- ------------------------------------- --------------------- --------------------
Japan Index JPN AMEX
- ------------------------------------- --------------------- --------------------
Major Market Index * XMI AMEX
- ------------------------------------- --------------------- --------------------
Morgan Stanley High Tech Index MSH AMEX
- ------------------------------------- --------------------- --------------------
NASDAQ-100 NDX CBOE
- ------------------------------------- --------------------- --------------------
Oil Service Sector Index OSX PHLX
- ------------------------------------- --------------------- --------------------
Pacific High Tech Index XPI PSE
- ------------------------------------- --------------------- --------------------
Russell 2000 * RUT CBOE
- ------------------------------------- --------------------- --------------------
Semiconductor Sector SOX PHLX
- ------------------------------------- --------------------- --------------------
S & P 100 * OEX CBOE
- ------------------------------------- --------------------- --------------------
S & P 400 Midcap Index * MID CBOE
- ------------------------------------- --------------------- --------------------
S & P 500 * SPX CBOE
- ------------------------------------- --------------------- --------------------
Technology Index TXX CBOE
- ------------------------------------- --------------------- --------------------
Value Line Index * VLE PHLX
- ------------------------------------- --------------------- --------------------
Wilshire Small Cap Index WSX PSE
- ------------------------------------- --------------------- --------------------
* Includes LEAPs
- ------------------------------------- --------------------- --------------------
23
<PAGE>
Appendix 8
GIFT POLICY
The gift policy of Strong Capital Management, Inc., Strong Investments,
Inc. and Flint Prairie, L. L. C. covers both GIVING GIFTS TO and ACCEPTING GIFTS
FROM clients, brokers, persons with whom we do business or others (collectively,
"vendors"). It is based on the applicable requirements of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD") and is
included as part of the firm's Codes of Ethics.
Under our policy, associates may not give gifts to or accept gifts from
vendors with a value in excess of $100 PER PERSON PER YEAR and must report to
the firm annually if they accept certain types of gifts. The NASD defines a
"gift" to include any kind of gratuity. Since giving or receiving any gifts in a
business setting may give rise to an appearance of impropriety or may raise a
potential conflict of interest, we are relying on your professional attitude and
good judgment to ensure that our policy is observed to the fullest extent
possible. The discussion below is designed to assist you in this regard.
Questions regarding the appropriateness of any gift should be directed to
the Legal/Compliance Department.
1. GIFTS GIVEN BY ASSOCIATES
Under applicable NASD rules, an associate may not give any gift with a
value in excess of $100 per year to any person associated with a securities or
financial organization, including exchanges, broker-dealers, commodity firms,
the news media, or clients of the firm. Please note, however, that the firm may
not take a tax deduction for any gift with a value exceeding $25.
This memorandum is not intended to authorize any associate to give a gift
to a vendor -- appropriate supervisory approval must be obtained before giving
any gifts.
2. GIFTS ACCEPTED BY ASSOCIATES
On occasion, because of their position within the firm, associates may be
offered, or may receive without notice, gifts from vendors. Associates may not
accept any gift or form of entertainment from vendors (E.G., tickets to the
theater or a sporting event where the vendor does not accompany the associate)
other than gifts of NOMINAL VALUE, which the NASD defines as under $100 in total
from any vendor in any year (managers may, if they deem it appropriate for their
department, adopt a lower dollar ceiling). Any gift accepted by an associate
must be reported to the firm, subject to certain exceptions (see heading 4
below). In addition, note that our gift policy does not apply to normal and
customary business entertainment or to personal gifts (see heading 3 below).
Associates may not accept a gift of cash or a cash equivalent (E.G., gift
certificates) in ANY amount, and under no circumstances may an associate solicit
a gift from a vendor.
24
<PAGE>
Associates may wish to have gifts from vendors donated to charity,
particularly where it might be awkward or impolite for an associate to decline a
gift not permitted by our policy. In such case, the gift should be forwarded to
Legal, who will arrange for it to be donated to charity. Similarly, associates
may wish to suggest to vendors that, in lieu of an annual gift, the vendors make
a donation to charity. In either situation discussed in this paragraph, an
associate would not need to report the gift to the firm (see heading 4 below).
3. EXCLUSION FOR BUSINESS ENTERTAINMENT/PERSONAL GIFTS
Our gift policy does not apply to normal and customary business meals and
entertainment with vendors. For example, if an associate has a business meal and
attends a sporting event or show with a vendor, that activity would not be
subject to our gift policy, provided the vendor is present. If, on the other
hand, a vendor gives an associate tickets to a sporting event and the associate
attends the event without the vendor also being present, the tickets would be
subject to the dollar limitation and reporting requirements of our gift policy.
Under no circumstances may associates accept business entertainment that is
extraordinary or extravagant in nature.
In addition, our gift policy does not apply to usual and customary gifts
given to or received from vendors based on a personal relationship (E.G., gifts
between an associate and a vendor where the vendor is a family member or
personal friend).
4. REPORTING
The NASD requires gifts to be reported to the firm. Except as noted below,
associates must report annually all gifts given to or accepted from vendors
(Legal will distribute the appropriate reporting form to associates).
Associates are NOT required to report the following: (i) usual and
customary promotional items given to or received from vendors (E.G., hats, pens,
T-shirts, and similar items marked with a firm's logo), (ii) items donated to
charity through Legal, or (iii) food items consumed on the firm's premises
(E.G., candy, popcorn, etc.).
January 1, 1999
25
<PAGE>
Appendix 9
INSIDER TRADING POLICY AND PROCEDURES
DESIGNED TO DETECT AND PREVENT INSIDER TRADING
A. POLICY STATEMENT.
1. INTRODUCTION. Strong Capital Management, Inc., Strong
Investments, Inc., Heritage Reserve Development Corporation, Flint Prairie, L.
L. C. and such other companies which adopt these Policies and Procedures (all of
the foregoing entities are collectively referred to herein as "Strong") seek to
foster a reputation for integrity and professionalism. That reputation is a
vital business asset. The confidence and trust placed in Strong by clients is
something we should value and endeavor to protect. To further that goal, the
Policy Statement implements procedures to deter the misuse of material,
nonpublic information in securities transactions.
2. PROHIBITIONS. Accordingly, associates are prohibited from
trading, either personally or on behalf of others (including advisory clients),
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." This policy applies to every associate and
extends to activities within and outside their duties at Strong. Any questions
regarding this policy should be referred to the Compliance Department.
3. GENERAL SANCTIONS. Trading securities while in possession of
material, nonpublic information or improperly communicating that information to
others may expose you to stringent penalties. Criminal sanctions may include a
fine of up to $1,000,000 and/or ten years imprisonment. The SEC can recover the
profits gained or losses avoided through the violative trading, a penalty of up
to three times the illicit windfall and an order permanently barring you from
the securities industry. Finally, you may be sued by investors seeking to
recover damages for insider trading violations.
4. INSIDER TRADING DEFINED. 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 currently
understood that the law generally prohibits:
a. trading by an insider, while in possession of material,
nonpublic information;
b. 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;
c. recommending the purchase or sale of securities on the basis
of material, nonpublic information;
26
<PAGE>
d. communicating material, nonpublic information to others; or
e. providing substantial assistance to someone who is engaged
in any of the above activities.
The elements of insider trading and the penalties for such unlawful
conduct are described below. Any associate who, after reviewing these Policies
and Procedures has any question regarding insider trading should consult with
the Compliance Department. Often, a single question can forestall disciplinary
action or complex legal problems.
5. TENDER OFFERS. Tender offers represent a particular concern in
the law of insider trading for two reasons. First, tender offer activity often
produces extraordinary gyrations in the price of the target company's
securities. Trading during this time period is more likely to attract regulatory
attention (and produces a disproportionate percentage of insider trading cases).
Second, the SEC has adopted a rule which expressly forbids trading and "tipping"
while in possession of material, nonpublic information regarding a tender offer
received from the tender offeror, the target company or anyone acting on behalf
of either. Associates should exercise particular caution any time they become
aware of nonpublic information relating to a tender offer.
6. CONTACT THE COMPLIANCE DEPARTMENT. To protect yourself, our
clients, and Strong, you should contact the Compliance Department immediately if
you believe that you may have received material, nonpublic information.
B. PROCEDURES DESIGNED TO DETECT AND PREVENT INSIDER TRADING. The
following procedures have been established to aid Strong and all associates in
avoiding insider trading, and to aid Strong in preventing, detecting, and
imposing sanctions against insider trading. Every associate must follow these
procedures or risk serious sanctions, including dismissal, substantial personal
liability and criminal penalties. Any questions about these procedures should be
directed to the Compliance Department.
1. INITIAL QUESTIONS. Before trading in the Securities of a
company about which an associate may have potential inside information, an
associate, whether trading for himself or herself or others, should ask himself
or herself the following questions:
a. IS THE INFORMATION MATERIAL? 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?
b. IS THE INFORMATION NONPUBLIC? To whom has this information
been provided? Has the information been effectively communicated to
the market place by being published in Reuters, THE WALL STREET
JOURNAL or other publications of general circulation?
2. MATERIAL AND NONPUBLIC INFORMATION. If, after consideration of
the above, any associate believes that the information is material and
nonpublic, or if an associate has questions as to whether the information is
material and nonpublic, he or she should take the following steps:
27
<PAGE>
a. Report the matter immediately to the Compliance Department.
b. Do not purchase or sell the Securities either on the
associate's own behalf or on the behalf of others.
c. Do not communicate the information to anyone, other than to
the Compliance Department.
d. After the Compliance Department has reviewed the issue, the
associate will be instructed to continue the prohibitions against
trading and communication, or he or she will be allowed to trade and
communicate the information.
3. CONFIDENTIALITY. Information in an associate's possession that
is identified as material and nonpublic may not be communicated to anyone,
include persons within Strong, except as otherwise provided herein. In addition,
care should be taken so that such information is secure. For example, files
containing material, nonpublic information should be sealed, access to computer
files containing material, nonpublic information should be restricted and
conversations containing such information, if appropriate at all, should be
conducted in private (for example, not by cellular telephone to avoid potential
interception).
4. ASSISTANCE OF THE COMPLIANCE DEPARTMENT. If, after
consideration of the items set forth in Section B.2., doubt remains as to
whether information is material or nonpublic, or if there is any unresolved
question as to the applicability or interpretation of the foregoing procedures,
or as to the propriety of any action, it must be discussed with the Compliance
Department before trading or communicating the information to anyone.
5. REPORTING REQUIREMENT. In accordance with Strong's Code of
Ethics, every associate must arrange for the Compliance Department to receive
directly from the broker, dealer, or bank in question, duplicate copies of each
confirmation for each Securities Transaction and periodic statement for each
brokerage account in which such associate has a beneficial interest.
C. INSIDER TRADING EXPLANATIONS.
1. WHO IS AN INSIDER? The concept of "insider" is broad. It
includes officers, directors and associates 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 associates of such organizations. In addition, Strong
may become a temporary insider. According to the United States 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.
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
28
<PAGE>
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. It need not be important that it would have changed the investor's
decision to buy or sell. No simple "bright line" test exists to determine when
information is material; assessments of materiality involve a highly
fact-specific inquiry. For this reason, you should direct any question about
whether information is material to the Compliance Department.
Material information often relates to a company's results and
operations including, for example, dividend changes, earnings results, changes
in previously released earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation problems and
extraordinary management developments.
Material information also may relate to the market for a
company's securities. Information about a significant order to purchase or sell
securities may, in some contexts, be deemed material.
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 United
States 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 WALL STREET JOURNAL and whether those
reports would be favorable or unfavorable.
3. WHAT IS NONPUBLIC INFORMATION? Information is nonpublic until
it has been effectively disseminated broadly to investors in 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.
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: (a) civil injunctions;
(b) treble damages; (c) disgorgement of profits; (d) jail sentences; (e) 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 (f)
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 to the foregoing, any violation of this Policy
with Respect to Insider Trading can be expected to result in serious sanctions,
including dismissal of the person or persons involved.
January 1, 1999
29
<PAGE>
Appendix 10
ELECTRONIC TRADING AUTHORIZATION FORM
Authorization has been granted to __________________________ ("Access Person")
to open an Electronic Trading Account(1) at ________________ ("Brokerage Firm").
As a condition of approval, the Access Person agrees to the following
requirements, relating to all Securities Transactions:
1. All Securities Transactions as defined in the Code of Ethics, except
those specifically exempt, must be precleared by the Compliance
Department;
2. All Securities Transactions will be placed and executed by the close of
the SAME trading day that the authorization is granted, otherwise the
authorization will expire. This includes Limit Orders.
There will be no open "until filled" orders;
3. The Access Person will provide the Compliance Department with
documentation from the Internet Site that shows when the order was
placed and executed.
4. The Access Person will arrange for the Compliance Department to receive
directly from the Electronic Trading Firm, duplicate copies of each
confirmation for each Securities Transaction and periodic statements
for each brokerage account in which the Access Person has a Beneficial
Interest. THE ACCESS PERSON MAY NOT PLACE TRADES ON HIS OR HER OWN
BEHALF UNTIL THESE ARRANGEMENTS HAVE BEEN MADE.
5. The Access Person will comply with the Code of Ethics in all other
respects.
I hereby agree to the terms and conditions stated above. Any abuse of this
privilege may result in disciplinary action by the firm.
- -------------------------------------- --------------------------
Access Person Date
- --------------------------------------------------------------------------------
AUTHORIZATION
- -------------------------------------------- ---------------------------
Director of Compliance (or designee) Date
- --------------------------------------------------------------------------------
- ----------
(1) Electronic Trading Account includes brokerage accounts where Securities
Transactions are placed electronically via the Internet or the telephone.
30
<PAGE>
Appendix 11
TO: ALL ACCESS PERSONS
FROM: Director of Compliance
Subject: Social Security Number/Tax ID Information
Strong's Code of Ethics requires the Compliance Department to monitor the
personal investing activity of Access Persons, including investments in mutual
funds. To assist in this, we ask that you please provide your Social Security
Number, as well as the SSN of each member of your "IMMEDIATE FAMILY". In
addition, please list all accounts in which you may have a "BENEFICIAL
INTEREST".
(Please refer to your copy of the Code of Ethics for a definition of the
underlined words.)
Please complete this form return it to the Director of Compliance at your
earliest convenience. Thank you for your cooperation.
- ------------------------------------------------------------------------
(Print Name) (SSN/TIN)
- ------------------------------------------------------------------------
(Print Name) (SSN/TIN)
- ------------------------------------------------------------------------
(Print Name) (SSN/TIN)
- ------------------------------------------------------------------------
(Print Name) (SSN/TIN)
- ------------------------------------------------------------------------
(Print Name) (SSN/TIN)
- ------------------------------------------------------------------------
(Print Name) (SSN/TIN)
31
<PAGE>
TURNER INVESTMENT PARTNERS, INC.
PERSONAL TRADING POLICY/CODE OF ETHICS
February 17, 2000
A. Personal investments: An employee should consider himself the beneficial
owner of those securities held by him, his spouse, his minor children, a
relative who shares his house, or persons by reason of any contract,
arrangement, understanding or relationship that provides him with sole or
shared voting or investment power.
B. Employees are barred from purchasing any securities (to include Common
Stock and related Options, Convertible securities, Options, or Futures on
Indexes) in which the firm has either a long or short position. If an
employee owns a position in any security, he must get written pre-clearance
from the Chairman or President to add to or sell the position. ALL SECURITY
TRANSACTIONS (BUY OR SELL) REQUIRE WRITTEN CLEARANCE IN ADVANCE. Approval
is good for 48 hours; if a trade has not been executed, subsequent
approvals are necessary until the trade is executed. The Exception
Committee (the Chairman, Vice Chairman, President, and Director of
Compliance) must approve any exceptions to this rule.
C. Employees may not purchase initial public offerings. Private
placements/Limited partnerships require written pre-clearance. Mutual Fund
holdings are excluded from pre-clearance and reporting. IRA's, and Rollover
IRA's that are self-directed (i.e. stocks or bonds, not mutual funds), and
ESOP's (Employee stock ownership plans) require pre-clearance.
D. Blackout Restrictions: Employees are subject to the following restrictions
when their purchases and sales of securities coincide with trades of Turner
Clients (including investment companies):
1. Purchases and sales within three days FOLLOWING a client trade.
Employees are prohibited from purchasing or selling any security
within three calendar days after a client transaction in the same (or
a related) security. The Exception Committee must approve exceptions.
If an employee makes a prohibited transaction without an exception the
employee must unwind the transaction and relinquish any gain from the
transaction to charity.
2. Purchases within seven days BEFORE a client purchase. An employee who
purchases a security within seven calendar days before a client
purchases the same (or a related) security is prohibited from selling
the security of a period of six months following the client's trade.
The Exception Committee must approve exceptions. If an employee makes
a prohibited sale without an exception within the six month period,
the employee must relinquish any gain from the transaction to charity.
3. Sales within seven days BEFORE a client sale. An employee who sells a
security within seven days before a client sells the same (or a
related) security must relinquish to charity the difference between
the employee's sale price and the client's sale price (assuming the
employee's sale price is higher).
<PAGE>
TURNER INVESTMENT PARTNERS, INC.
PERSONAL TRADING POLICY/CODE OF ETHICS
February 17, 2000
Page 2
4. These restrictions do not apply to proprietary investment partnerships
for which the firm acts as an adviser in which the officers and
employees of the adviser have an equity interest of less than 50%.
These accounts may purchase the same or similar securities within the
black out period, if the partnership trades with the block or after
other clients. Where it is beneficial to client accounts and it is
possible to do so, they should be blocked with the partnership
account.
E. Short Term Trading Rule - Employees may not take PROFITS in any security in
less than 60 days (includes Options, Convertibles and Futures). If an
individual must trade with in this period, the Exception Committee must
grant approval or the employee must relinquish such profits to charity. The
closing of positions at a loss is not prohibited. Options that are out of
the money may be exercised in less than 60 days. The proprietary
partnerships may take profits in less than 60 days.
F. Reporting: Consistent with the requirements of the Investment Advisers Act
of 1940 Rule 204-2 (a)(2) and (a)(3) and with the provisions of Rule 17j-1
of the Investment Company Act of 1940 all employees must submit duplicate
statements/disclosures within 10 days following the calendar quarter.
Statements are reviewed by one of the firms Series 24 principals.
Brokerage, IRA's, Rollover IRA's (which are self-directed), ESOP's, private
placement and limited partnerships must all be reported as personal
trading. New employees are required to file initial holdings within 10 days
of hire.
G. Violation of the Personal Investments/Code of Ethics policy may result in
disciplinary action, up to and including termination of employment.
<PAGE>
WESTPEAK INVESTMENT ADVISORS, L.P.
Code of Ethics
Adopted as of April 1, 1998
It is important to remember at all times that the interests of our clients
and the shareholders of the funds that we advise must come first. In order to
maintain that priority, all personal securities transactions must be conducted
in a manner consistent with this Code of Ethics ("Code"). We must be vigilant in
maintaining the integrity of our business by avoiding any actual or potential
conflicts of interest or any abuse of our position of trust and responsibility.
All provisions of this Code will be interpreted in such a way as to give full
effect to the principles stated in this preamble.
I. DEFINITIONS
(A) "Access person" means any director, officer or advisory person of
Westpeak.
(B) "Advisory person" means (i) any employee of Westpeak (or of any
company in a control relationship to Westpeak) who, in connection with
his or her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a security by a
Fund, or whose functions relate to the making of any recommendations
with respect to such purchases or sales; and (ii) any natural person
in a control relationship to Westpeak who obtains information
concerning recommendations made to a Fund with regard to the purchase
or sale of a security.
(C) "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, as amended, and
the rules and regulations thereunder from time to time in effect,
except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or
acquires. In general, a Westpeak employee is deemed to have beneficial
ownership of securities owned by the employee's spouse, by children
residing in the employee's household or by children who are
financially dependent on the employee, or other securities over which
the employee has control. Refer to Appendix A attached to this Code
for a fuller explanation of the meaning of "beneficial ownership."
(D) "Compliance Officer" shall refer to the Westpeak officer holding this
title (currently Philip J. Cooper, Executive Vice President -
Portfolio Management) or, in the Compliance Officer's absence, Gerald
H. Scriver, President and Chief Executive Officer.
1
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(E) "Control" shall have the same meaning as set forth in Section 2(a)(9)
of the Investment Company Act of 1940 (the "1940 Act"). Section
2(a)(9) provides that "control" means, among other things, the power
to exercise a controlling influence over the management or policies of
a company, unless such power is solely the result of an official
position with such company.
(F) "Fund" means each investment company for which Westpeak Investment
Advisors, L.P. ("Westpeak" or the "Company") serves as investment
adviser or subadviser and each other client for which Westpeak
provides investment advisory services.
(G) "Purchase or sale of a security" includes, INTER ALIA, the writing of
an option to purchase or sell a security.
(H) "Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act, except that it shall not include securities issued by the
Government of the United States (including government money market
instruments of the type issued by agencies of the federal government
or guaranteed by the federal government or its agencies), bankers'
acceptances, bank certificates of deposit, commercial paper and shares
of registered open-end investment companies, or such other securities
as may be excepted under the provisions of Rule 17j-1 under the 1940
Act from time to time in effect.
(I) "Security held or to be acquired" by a Fund means any security which,
within the most recent fifteen days, (i) is or has been held by the
Fund, or (ii) is being or has been considered by Westpeak for purchase
by the Fund.
(J) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated or, with respect to the person making the recommendation,
when such person seriously considers making such a recommendation.
(K) A security is "being purchased or sold" by a Fund from the time when a
purchase or sale program has been communicated to the person who
places the buy and sell orders for the Fund until the time when such
program has been fully completed or terminated.
A person who normally only assists in the preparation of public reports, or
receives public reports but receives no information about current
recommendations or trading, is neither an "advisory person" nor an "access
person." A single instance or infrequent, inadvertent instances of obtaining
knowledge does not make one for all times an advisory person. Under the
definition of "advisory person" in the phrase "makes, participates in, or
obtains information regarding the purchase or sale of a security" means someone
who places orders or otherwise arranges transactions.
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II. OUTSIDE AFFILIATIONS
No access person (other than members of the Board of Directors of
Westpeak's general partner who are not Westpeak employees) shall become an
officer, trustee or director of any company whose shares are publicly traded
(except an investment company managed by the Company or an affiliate of the
Company) without the approval of the Compliance Officer. This restriction on
serving as an officer, trustee or director of a public company is designed to
prevent Westpeak from being deemed to possess inside information concerning a
company that an access person may learn in serving in one of those capacities.
Therefore, exceptions will be made by the Compliance Officer only in unusual
situations, with the advice of legal counsel, as appropriate.
No access person (other than members of the Board of Directors of
Westpeak's general partner who are not Westpeak employees) shall accept an
appointment as an executor, administrator, trustee, guardian or conservator
(other than in family situations) without approval by the Compliance Officer.
III. GIFTS TO OR FROM BROKERS OR CLIENTS
No access person shall accept or receive on his or her own behalf or on
behalf of the Company any gift or other accommodations from a business contact
or broker, securities salesman or client (a "business contact") that might
create a conflict of interest or interfere with the impartial discharge of his
or her responsibilities to Westpeak's clients or place the recipient or Westpeak
in a difficult or embarrassing position. This prohibition applies equally to
gifts to an access person's close relatives or to those who share the same
household as an access person.
No access person shall give on his or her own behalf or on behalf of the
Company any gift or other accommodation to a business contact that may be
construed as an improper attempt to influence the recipient.
In no event should gifts to or from any one business contact have a value
that exceeds the limitation on gifts established by the NASD from time to time
(currently $100). This prohibition does not apply to normal business
entertainment.
IV. USE OF INSIDE INFORMATION
Access persons agree to adhere to Westpeak's Statement of Policy on Inside
Information, which should be read in conjunction with this Code.
V. PERSONAL SECURITIES TRANSACTIONS
In furtherance of the principle set out in the preamble to this Code (i.e.,
that the interests of Westpeak's clients and the shareholders of the Funds
Westpeak advises come first), access persons will adhere to the following
restrictions and requirements with
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respect to their personal investing activity; PROVIDED, HOWEVER, that the
restrictions and requirements listed below in this Section V do not apply to any
member of the Board of Directors of Westpeak's general partner who is not a
Westpeak employee and who does not have actual knowledge of purchases or sales
of securities by any Fund, or recommendations with regard to purchases or sales
of securities by any Fund.
1. PRE-TRADE CLEARANCE
No access person will purchase or sell any security in which such person
has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership without the prior written approval of the Compliance
Officer. Any such approval will be valid for five business days from the date
approval is granted or such lesser time period as the Compliance Officer
determines. The Compliance Officer will maintain records documenting all
pre-trade clearance requests and approvals.
2. BROKERAGE CONFIRMATION AND STATEMENTS
Access persons will direct their brokers to routinely supply duplicate
copies of all confirmations and periodic account statements to the Compliance
Officer.
3. INVESTMENT OPPORTUNITIES OF LIMITED AVAILABILITY
If an access person learns of an investment opportunity of limited
availability that would be suitable for a client, the access person must make
the opportunity available to the client first, and may not invest in that
opportunity for his or her own account without the client's consent.
4. INITIAL PUBLIC OFFERINGS
No access person may acquire securities in an initial public offering.
5. PRIVATE PLACEMENTS
No access person may acquire securities in a private placement without the
express prior approval of the Compliance Officer.
Any access person who now or hereafter owns a privately-placed security
and who becomes involved in an investment decision involving the issuer of
the security shall disclose his or her ownership of the private placement to
the Compliance Officer as soon as practicable after becoming involved in the
decision-making process.
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Any access person who owns a private placement of an issuer must refrain
from deliberations regarding client purchases or sales of securities issued
by the same issuer.
6. BLACKOUT PERIODS
Except as set forth below, no access person may purchase or sell
securities on any day during which a buy or sell order in the same security
is pending for a Fund.
Except as set forth below, no access person may purchase or sell a
security purchased or sold by a Fund within seven calendar days before or
after the Fund buys or sells the security; PROVIDED, HOWEVER, that the
prohibition on a purchase or sale by an access person seven days BEFORE the
Fund buys or sells the same security does not apply if the access person does
not have actual knowledge that such security is being considered for purchase
or sale by the Company for a Fund.
Except as set forth below, no access person may buy and sell, or sell and
buy, the same securities (including options on securities) at a profit within
60 calendar days. Any profits realized by such access person on such
short-term trades shall be disgorged to a charitable organization selected by
the Company. The Compliance Officer may allow exceptions to this provision
only in cases where the security must be sold involuntarily (such as in the
case of a merger involving the issuer).
The pre-trade clearance and blackout period provisions of this Section
(Section V.1. and V.6.) do not apply to transactions in the following
securities:
- Securities that are not eligible (nor are convertible into or
exchangeable for securities that are eligible) for purchase by any of
the Funds.
- Securities issued or guaranteed by any government that is a member of
the Organization for Economic Cooperation and Development, or any
agency or authority thereof.
- Common or preferred stocks of a class that is publicly-traded, issued
by a company with a stock market capitalization in excess of five
billion U.S. dollars (or the equivalent in foreign currency).
- Futures and options contracts on indices.
- Commodity futures contracts, including futures contracts on interest
rate instruments or indices, and options on such contracts.
- Open-end investment management companies.
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The pre-trade clearance and blackout period provisions of this Section
(Section V.1. and V.6.) do not apply to the following transactions:
- Transactions that occur by operation of law or under any other
circumstance in which the access person does not exercise any
discretion to buy or sell.
- Purchases of securities pursuant to an automatic dividend reinvestment
plan.
- Purchases pursuant to the exercise of rights issued pro rata to all
holders of the class of securities held by the access person and
received by the access person from the issuer.
VI. ANNUAL CERTIFICATION
All access persons shall certify annually that they have read and
understand this Code and that they have complied with all its provisions. A copy
of the form of annual certification is attached hereto as Appendix B. Access
persons shall further certify that they have complied with the reporting
requirements of Part VII of this Code.
VII. REPORTING
(A) Every access person shall file with the Compliance Officer a report
containing the information described in Section VII(B) of this Code
with respect to transactions in any security in which such access
person has, or by reason of reason of such transaction acquires, any
direct or indirect beneficial ownership; PROVIDED, HOWEVER, that such
access person shall not be required to make a report with respect to
transactions effected for any account over which such person does not
have any direct or indirect influence or control, and PROVIDED,
FURTHER, that the term "security" does not include the savings or
demand deposit accounts of access persons with banks or thrifts.
(B) Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates
was effected, and shall contain the following information:
(1) The date of the transaction and the title and number of shares
and principal amount of each security involved;
(2) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition), including information
sufficient to establish
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any exemption from the restrictions listed in Section V on which
the access person has relied;
(3) The price at which the transaction was effected; and
(4) The name of the broker, dealer or bank with or through whom the
transaction was effected.
(C) The making of such 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, and the existence of any report shall not be construed as an
admission that any transaction reported constitutes a violation of
Section V hereof.
(D) Any person required to report a transaction under this Section may
satisfy his or her obligation hereunder by providing a duplicate
confirmation/ statement of such transaction to the Compliance Officer,
as required to be routinely furnished in Section V.2.
VIII. REVIEW AND ENFORCEMENT
(A) REVIEW
(1) The Compliance Officer shall cause the reported personal
securities transactions to be compared with completed and
contemplated portfolio transactions of the Funds to determine
whether any transactions subject to the restrictions in Section V
(each a "Reviewable Transaction") may have occurred.
(2) If the Compliance Officer determines that a Reviewable
Transaction may have occurred, he shall then determine whether a
violation of this Code may have occurred, taking into account of
the exemptions provided under Section V. Before making any
determination that a violation has been committed by a person,
the Compliance Officer shall give such person an opportunity to
supply additional information regarding the transaction in
question.
(B) ENFORCEMENT
(1) If the Compliance Officer determines that a violation of this
Code may have occurred, he shall promptly report the possible
violation to the President of Westpeak, who, together with the
Compliance Officer, shall take such actions as they consider
appropriate, including imposition of any sanctions that they
consider appropriate.
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(2) No person shall participate in a determination of whether he has
committed a violation of this Code or in the imposition of any
sanction against himself. If a securities transaction of the
Compliance Officer is under consideration, Westpeak's President
shall act in all respects in the manner prescribed herein for the
Compliance Officer, and, if a securities transaction of the
President is under consideration, the Compliance Officer shall
report the possible violation to the Chairman of the Board of
Directors of Westpeak's general partner.
IX. REPORTING REQUIREMENT TO INVESTMENT COMPANY CLIENTS
The Compliance Officer shall, with respect to each Fund that is an
investment company, annually furnish a written report to the board of trustees
of such Fund (i) describing issues arising under this Code since the last report
to the board, including information about violations of the Code, sanctions
imposed in response to such violations, changes made to the Code, and any
proposed changes to the Code; and (ii) certifying that Westpeak has adopted such
procedures as are reasonably necessary to prevent access persons from violating
the Code.
X. RECORDS
(A) Westpeak shall maintain records in the manner and to the extent set
forth below, which records may be maintained on microfilm under the
conditions described in Rule 31a-2(f)(1) under the 1940 Act and shall
be available for appropriate examination by representatives of the
Securities and Exchange Commission.
(1) A copy of this Code and any other Code which is, or at any time
within the past five years has been, in effect shall be preserved
in an easily accessible place.
(2) A record of any violation of this Code and of any action taken as
a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs.
(3) A copy of each report made pursuant to this Code by any access
person shall be preserved for a period of not less than five
years from the end of the fiscal year in which it is made, the
first two years in an easily accessible place.
(4) A list of all persons who are, or within the past five years have
been, required to make reports pursuant to this Code shall be
maintained in an easily accessible place.
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(B) CONFIDENTIALITY
All reports of securities transactions and any other information
collected or produced pursuant to this Code shall be treated as
confidential, except as regards appropriate examinations by
representatives of the Securities and Exchange Commission of any other
authorized governmental body or self-regulatory organization.
APPENDIX A
"BENEFICIAL OWNERSHIP"
For purposes of the Code of Ethics, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in such security.
You have a pecuniary interest in a security if you have the opportunity,
directly or indirectly, to profit or share in the profit derived from a
transaction in such security. You are deemed to have a pecuniary interest in any
securities held by members of your immediate family sharing your household.
"Immediate family" means your son or daughter (including your legally adopted
child) or any descendants of either, your stepson or stepdaughter, your father
or mother or any ancestor of either, your stepfather or stepmother and your
spouse. Also, you are deemed to have a pecuniary interest in securities held by
a partnership of which you are a general partner, and beneficial ownership of
the securities held by such partnership will be attributed to you in proportion
to the greater of your capital account or interest in the partnership at the
time of any transaction in such securities. You are also deemed to have a
pecuniary interest in the portfolio securities held by a corporation if you are
a controlling shareholder of such corporation and have or share investment
control over such portfolio securities. Additionally, certain
performance-related fees received by brokers, dealers, banks, insurance
companies, investment companies, investment advisors, trustees and others may
give rise to pecuniary interests in securities over which such persons have
voting or investment control.
Securities owned of record or held in your name generally are considered to
be beneficially owned by you if you have a pecuniary interest in such
securities. Beneficial ownership may include securities held by others for your
benefit regardless of record ownership (e.g., securities held for you or members
of your immediate family by agents, custodians, brokers, trustees, executors or
other administrators; securities owned by you but which have not been
transferred into your name on the books of a company; and securities which you
have pledged) if you have or share a pecuniary interest in such securities.
With respect to ownership of securities held in trust, beneficial ownership
includes the ownership of securities as a trustee in instances either where you
as trustee have, or where a member of your immediate family has, a pecuniary
interest in the securities held by the trust (e.g., by virtue of being a
beneficiary of the trust).
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The final determination of beneficial ownership is a question to be
determined in light of the facts of a particular case. Thus, while you may
include security holdings of other members of your family, you may nonetheless
disclaim beneficial ownership of such securities. Any uncertainty as to whether
you are the beneficial owner of a security should be brought to the attention of
the Compliance Officer.
APPENDIX B
ANNUAL CODE OF ETHICS CERTIFICATION
I acknowledge that I have received a copy and read the Westpeak Investment
Advisors, L.P. Code of Ethics, dated April 1, 1998. I understand my
responsibilities under this Code of Ethics and agree to comply with all of its
terms and conditions. I will retain a copy of this Code of Ethics for future
reference.
I hereby certify that I have complied with the requirements of the Westpeak
Investment Advisors, L.P. Code of Ethics, dated April 1, 1998, and I have
disclosed or reported all personal securities transactions required to be
disclosed or reported pursuant to such Code of Ethics.
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Dated
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Printed Name
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Signature
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