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EXHIBIT (P)(3)
061600 Draft
CALLAHAN FINANCIAL SERVICES, INC.
CODE OF ETHICS
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Effective June 17, 1991
(as revised March 22, 1996 and July 10, 2000)
I. DEFINITIONS
A. "Access Person" means any director, officer or employee of the
Underwriter.
B. "Beneficial ownership" of a security shall be interpreted to include
any security in which an Access Person, directly or indirectly,
through any contract, arrangement, understanding, relationship, or
otherwise has or shares a direct or indirect pecuniary interest. The
term "pecuniary interest" with respect to any security shall mean the
opportunity, directly or indirectly, to profit or share in any profit
derived from a transaction in the security.
C. "Board of Trustees" means the board of trustees or directors,
including a majority of the disinterested trustees/directors, of any
Investment Company for which an Underwriter serves as a principal
underwriter.
D. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"). Section 2(a)(9) generally provides that
"control" means 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.
E. "Covered Security" means a security as defined in Section 2(a) (36) of
the Investment Company Act, except that it does not include: (1)
direct obligations of the Government of the United States; (2)
banker's acceptances, bank certificates of deposit, commercial paper
and high quality short-term debt instruments (any instrument having a
maturity at issuance of less than 366 days and that is in one of the
two highest rating categories of a nationally recognized statistical
rating organization), including repurchase agreements; and (3) shares
of registered open-end investment companies.
F. "Investment Company" means a company registered as such under the
Investment Company Act, or any series thereof, for which the
Underwriter is a principal underwriter.
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G. "Purchase or sale of Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security or any
security that is exchangeable for or convertible into another
security.
H. "Review Officer" means the officer of the Underwriter designated from
time to time by the Underwriter to receive and review reports of
purchases and sales by Access Persons. The term "Alternative Review
Officer" means the officer of the Underwriter designated from time to
time by the Underwriter to receive and review reports of purchases and
sales by the Review Officer, and who shall act in all respects in the
manner prescribed herein for the Review Officer.
I. 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.
J. A security is "held or to be acquired" if within the most recent 15
days it (1) is or has been held by an Investment Company, or (2) is
being or has been considered by an Investment Company for purchase.
K. "Underwriter" means Callahan Financial Services, Inc.
II. LEGAL REQUIREMENTS
Section 17(j) of the Investment Company Act provides, among other
things, that it is unlawful for any affiliated person of the Underwriter to
engage in any act, practice or course of business in connection with the
purchase or sale, directly or indirectly, by such affiliated person of any
security held or to be acquired by an Investment Company in contravention of
such rules and regulations as the Securities and Exchange Commission (the
"Commission") may adopt to define and prescribe means reasonably necessary to
prevent such acts, practices or courses of business as are fraudulent, deceptive
or manipulative. Pursuant to Section 17(j), the Commission has adopted Rule
17j-1 which provides, among other things, that it is unlawful for any affiliated
person of the Underwriter in connection with the purchase or sale, directly or
indirectly, by such person of a Covered Security held or to be acquired by an
Investment Company:
(1) To employ any device, scheme or artifice to defraud such
Investment Company;
(2) To make any untrue statement of a material fact to such
Investment Company or omit to state a material fact necessary in
order to make the statements made to such Investment Company, in
light of the circumstances under which they are made, not
misleading;
(3) To engage in any act, practice or course of business that
operates or would operate as a fraud or deceit upon any such
Investment Company; or
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(4) To engage in any manipulative practice with respect to such
Investment Company.
III. STATEMENT OF POLICY
It is the policy of the Underwriter that no Access Person shall engage in
any act, practice or course of conduct that would violate the provisions of Rule
17j-1. The fundamental position of the Underwriter is, and has been, that each
Access Person shall place at all times the interests of each Investment Company
and its shareholders first in conducting personal securities transactions.
Accordingly, private securities transactions by Access Persons of the
Underwriter must be conducted in a manner consistent with this Code and so as to
avoid any actual or potential conflict of interest or any abuse of an Access
Person's position of trust and responsibility. Further, Access Persons should
not take inappropriate advantage of their positions with, or relationship to,
any Investment Company, the Underwriter or any affiliated company.
Without limiting in any manner the fiduciary duty owed by Access Persons to
the Investment Companies or the provisions of this Code, it should be noted that
the Underwriter and the Investment Companies consider it proper that purchases
and sales be made by Access Persons in the marketplace of securities owned by
the Investment Companies; provided, however, that such securities transactions
comply with the spirit of, and the specific restrictions and limitations set
forth in, this Code. Such personal securities transactions should also be made
in amounts consistent with the normal investment practice of the person involved
and with an investment, rather than a trading, outlook. Not only does this
policy encourage investment freedom and result in investment experience, but it
also fosters a continuing personal interest in such investments by those
responsible for the continuous supervision of the Investment Companies'
portfolios. It is also evidence of confidence in the investments made. In
making personal investment decisions with respect to any security, however,
extreme care must be exercised by Access Persons to ensure that the prohibitions
of this Code are not violated. Further, personal investing by an Access Person
should be conducted in such a manner so as to eliminate the possibility that the
Access Person's time and attention is being devoted to his or her personal
investments at the expense of time and attention that should be devoted to
management of an Investment Company's portfolio. It bears emphasis that
technical compliance with the procedures, prohibitions and limitations of this
Code will not automatically insulate from scrutiny personal securities
transactions which show a pattern of abuse by an Access Person of his or her
fiduciary duty to any Investment Company.
IV. EXEMPTED TRANSACTIONS
The Statement of Policy set forth above shall be deemed not to be violated
by and the prohibitions of Section V of this Code shall not apply to:
A. Purchases or sales of securities effected for, or held in, any account
over which the Access Person has no direct or indirect influence or
control;
B. Purchases or sales of securities which are not eligible for purchase
or sale by an Investment Company;
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C. Purchases or sales of securities which are non-volitional on the part
of either the Access Person or an Investment Company;
D. Purchases or sales of securities which are part of an automatic
dividend reinvestment, cash purchase or withdrawal plan provided that
no adjustment is made by the Access Person to the rate at which
securities are purchased or sold, as the case may be, under such a
plan during any period in which the security is being considered for
purchase or sale by an Investment Company;
E. 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
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extent such rights were acquired from such issuer, and sales of such
rights so acquired;
F. Tenders of securities pursuant to tender offers which are expressly
conditioned on the tender offer's acquisition of all of the securities
of the same class;
G. Purchases or sales of publicly-traded shares of companies that have a
market capitalization in excess of $10 billion; and
H. Other purchases or sales which, due to factors determined by the
Underwriter, only remotely potentially impact the interests of an
Investment Company because the securities transaction involves a small
number of shares of an issuer with a large market capitalization and
high average daily trading volume or would otherwise be very unlikely
to affect a highly institutional market.
V. PROHIBITED PURCHASES AND SALES
A. While the scope of actions which may violate the Statement of Policy
set forth above cannot be exactly defined, such actions would always
include at least the following prohibited activities:
(1) No Access Person shall purchase or sell, directly or indirectly,
any Covered Security in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
and which to his or her actual knowledge at the time of such
purchase or sale the Covered Security:
(i) is being considered for purchase or sale by an Investment
Company; or
(ii) is being purchased or sold by an Investment Company.
(2) No Access Person shall reveal to any other person (except in the
normal course of his or her duties on behalf of an Investment
Company) any information regarding securities transactions by an
Investment Company or consideration by an Investment Company
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or the Underwriter of any such securities transaction.
(3) No Access Person shall engage in, or permit anyone within his or
her control to engage in, any act, practice or course of conduct
which would operate as a fraud or deceit upon, or constitute a
manipulative practice with respect to, an Investment Company or
an issuer of any security owned by an Investment Company.
(4) No Access Person shall enter an order for the purchase or sale of
a Covered Security which an Investment Company is purchasing or
selling or considering for purchase or sale until the later of
(i) the day after the Investment Company's transaction in that
Covered Security is completed or (ii) after the Investment
Company is no longer considering the security for purchase or
sale, unless the Review Officer determines that it is clear that,
in view of the nature of the Covered Security and the market for
such Covered Security, the order of the Access Person will not
adversely affect the price paid or received by the Investment
Company. Any securities transactions by an Access Person in
violation of this Subsection (4) must be unwound, if possible,
and the profits, if any, will be subject to disgorgement based on
the assessment of the appropriate remedy as determined by the
Underwriter.
(5) No Access Person shall, in the absence of prior approval by the
Review Officer, sell any Covered Security that was purchased, or
purchase a Covered Security that was sold, within the prior 30
calendar days (measured on a last-in first-out basis).
(6) No Access Person shall accept any gift or personal benefit valued
in excess of such de minimis amount established by the
Underwriter from time to time in its discretion (currently this
amount is $100 annually) from any single person or entity that
does business with or on behalf of an Investment Company. Gifts
of a de minimis value (currently these gifts are limited to gifts
whose reasonable value is no more than $100 annually from any
single person or entity), and customary business lunches, dinners
and entertainment at which both the Access Person and the giver
are present, and promotional items of de minimis value may be
accepted. Any solicitation of gifts or gratuities is
unprofessional and is strictly prohibited.
VI. BROKERAGE ACCOUNTS
Access Persons are required to direct their brokers to supply for the
Review Officer on a timely basis duplicate copies of confirmations of all
securities transactions in which the Access Person has a beneficial ownership
interest and related periodic statements, whether or not one of the exemptions
listed in Section IV applies. If an Access Person is unable to arrange for
duplicate
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copies of confirmations and periodic account statements to be sent to the Review
Officer, he or she must immediately notify the Review Officer.
VII. REPORTING
A. Every Access Person shall report to the Review Officer the information
(1) described in Section VII-C of this Code with respect to
transactions in any Covered Security in which such Access Person has,
or by reason of such transaction acquires or disposes of, any direct
or indirect beneficial ownership in the Covered Security or (2)
described in Sections VII-D or VII-E of this Code with respect to
securities holdings beneficially owned by the Access Person.
B. Notwithstanding Section VII-A(1) of this Code, an Access Person need
not make a quarterly transaction report if the report would duplicate
information contained in broker trade confirmations or account
statements received by the Review Officer in the time period required
by Section VII-C and all of the information required by Section VII-C
is contained in such confirmations or account statements. The
quarterly transaction reports required under Section VII-A(1) shall be
deemed made with respect to (1) any account where the Access Person
has made provision for transmittal of all daily trading information
regarding the account to be delivered to the designated Review Officer
for his or her review or (2) any account maintained with the
Underwriter or an affiliate.
C. Quarterly Transaction Reports. Unless quarterly transaction reports
are deemed to have been made under Section VII-B of this Code, every
quarterly transaction 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, the title, the interest rate and
maturity date (if applicable), class and the number of shares,
and the principal amount of each Covered Security involved;
(2) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(3) The price of the Covered Security at which the transaction was
effected;
(4) The name of the broker, dealer or bank with or through whom the
transaction was effected;
(5) The date that the report was submitted by the Access Person;
and
(6) With respect to any account established by an Access Person in
which any securities were held during the quarter for the direct
or indirect benefit of the Access Person:
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(1) The name of the broker, dealer or bank with whom the Access
Person established the account;
(2) The date the account was established; and
(3) The date that the report was submitted by the Access Person.
D. Initial Holdings Reports. No later than 10 days after becoming an
Access Person, each Access Person must submit a report containing the
following information:
(1) 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;
(2) The name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were
held for the direct or indirect benefit of the Access Person
as of the date the person became an Access Person; and
(3) The date that the report is submitted by the Access Person.
E. Annual Holdings Reports. Between January 1st and January 30th of each
calendar year, every Access Person shall submit the following
information (which information must be current as of a date no more
than 30 days before the report is submitted):
(1) The title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct
or indirect beneficial ownership;
(2) 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
(3) The date that the report is submitted by the Access Person.
F. If no transactions in any securities required to be reported under
Section VII-A(1) were effected during a quarterly period by an Access
Person, such Access Person shall report to the Review Officer not
later than 10 days after the end of such quarterly period stating that
no reportable securities transactions were effected.
G. These reporting requirements shall apply whether or not one of the
exemptions listed in Section IV applies except that an Access Person
shall not be required to make a report with respect to securities
transactions effected for, and any Covered
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Securities held in, any account over which such Access Person does not
have any direct or indirect influence or control.
H. Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that (1) he
or she has or had any direct or indirect beneficial ownership in the
Covered Security to which the report relates (a "Subject Security") or
(2) he or she knew or should have known that the Subject Security was
being purchased or sold, or considered for purchase or sale, by an
Investment Company on the same day.
VIII. APPROVAL OF CODE OF ETHICS AND AMENDMENTS TO THE CODE OF ETHICS
The Board of Trustees of each Investment Company shall approve this Code
of Ethics. Any material amendments to this Code of Ethics must be approved by
the Board of Trustees of each Investment Company no later than six months after
the adoption of the material change. Before their approval of this Code of
Ethics and any material amendments hereto, the Underwriter shall provide a
certification to the Board of Trustees of each such Investment Company that the
Underwriter has adopted procedures reasonably necessary to prevent Access
Persons from violating the Code of Ethics.
IX. ANNUAL CERTIFICATION OF COMPLIANCE
Each Access Person shall certify to the Review Officer annually on the
form annexed hereto as Form A that he or she (A) has read and understands this
Code of Ethics and any procedures that are adopted by the Underwriter relating
to this Code, and recognizes that he or she is subject thereto; (B) has complied
with the requirements of this Code of Ethics and such procedures; (C) has
disclosed or reported all personal securities transactions and beneficial
holdings in Covered Securities required to be disclosed or reported pursuant to
the requirements of this Code of Ethics and any related procedures.
X. CONFIDENTIALITY
All reports of securities transactions, holding reports and any other
information filed with the Underwriter pursuant to this Code shall be treated as
confidential, except that reports of securities transactions and holdings
reports hereunder will be made available to the Investment Companies and to the
Commission or any other regulatory or self-regulatory organization to the extent
required by law or regulation or to the extent the Underwriter considers
necessary or advisable in cooperating with an investigation or inquiry by the
Commission or any other regulatory or self-regulatory organization.
XI. REVIEW OF REPORTS
A. The Review Officer shall be responsible for the review of the
quarterly transaction reports required under VII-C and VII-F, and the
initial and annual holdings reports required under Sections VII-D and
VII-E, respectively, of this Code of Ethics. In
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connection with the review of these reports, the Review Officer or the
Alternative Review Officer shall take appropriate measures to
determine whether each reporting person has complied with the
provisions of this Code of Ethics and any related procedures adopted
by the Underwriter.
B. On an annual basis, the Review Officer shall prepare for the Board of
Trustees of each Investment Company and the Board of Trustees of each
Investment Company shall consider:
(1) A report on the level of compliance during the previous year by
all Access Persons with this Code and any related procedures adopted
by the Underwriter, including without limitation the percentage of
reports timely filed and the number and nature of all material
violations and sanctions imposed in response to material violations.
An Alternative Review Officer shall prepare reports with respect to
compliance by the Review Officer;
(2) A report identifying any recommended changes to existing
restrictions or procedures based upon the Underwriter's experience
under this Code, evolving industry practices and developments in
applicable laws or regulations; and
(3) A report certifying to the Board of Trustees that the Underwriter
has adopted procedures that are reasonably necessary to prevent Access
Persons from violating this Code of Ethics.
XII. SANCTIONS
Upon discovering a violation of this Code, the Underwriter may impose such
sanction(s) as it deems appropriate, including, among other things, a letter of
censure, suspension or termination of the employment of the violator and/or
restitution to the affected Investment Company of an amount equal to the
advantage that the offending person gained by reason of such violation. In
addition, as part of any sanction, the Underwriter may require the Access Person
or other individual involved to reverse the trade(s) at issue and forfeit any
profit or absorb any loss from the trade. It is noted that violations of this
Code may also result in criminal prosecution or civil action. All material
violations of this Code and any sanctions imposed with respect thereto shall be
reported periodically to the Board of Trustees of the Investment Company with
respect to whose securities the violation occurred.
XIII. INTERPRETATION OF PROVISIONS
The Underwriter may from time to time adopt such interpretations of this
Code as it deems appropriate.
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XIV. IDENTIFICATION OF ACCESS PERSONS AND INVESTMENT PERSONNEL
The Underwriter shall identify all persons who are considered to be Access
Persons, and shall inform such persons of their respective duties and provide
them with copies of this Code and any related procedures adopted by the
Underwriter.
XV. EXCEPTIONS TO THE CODE
Although exceptions to the Code will rarely, if ever, be granted, the
President of the Underwriter, after consultation with the Review Officer, may
make exceptions on a case by case basis, from any of the provisions of this Code
upon a determination that the conduct at issue involves a negligible opportunity
for abuse or otherwise merits an exception from the Code. All such exceptions
must be received in writing by the person requesting the exception before
becoming effective. The Review Officer shall report any exception to the Board
of Trustees of the Investment Company with respect to which the exception
applies at its next regularly scheduled Board meeting.
XVI. RECORDS
The Underwriter 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) and Rule 17j-1 under the Investment Company Act
and shall be available for examination by representatives of the Commission.
A. 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 for a
period of not less than five years in an easily accessible place;
B. 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;
C. A copy of each initial holdings report, annual holdings report and
quarterly transaction report made by an Access Person pursuant to this
Code (including any brokerage confirmation or account statements
provided in lieu of the reports) 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;
D. A list of all persons who are, or within the past five years have
been, required to make initial holdings, annual holdings or quarterly
transaction reports pursuant to this Code shall be maintained in an
easily accessible place;
E. A list of all persons, currently or within the past five years who are
or were responsible for reviewing initial holdings, annual holdings or
quarterly transaction reports shall be maintained in an easily
accessible place; and
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F. A copy of each report required by Section XI-B of this Code shall be
maintained for at least five years after the end of the fiscal year in
which it was made, the first two years in an easily accessible plan.
XVII. SUPPLEMENTAL COMPLIANCE AND REVIEW PROCEDURES
The Underwriter may establish, in its discretion, supplemental compliance
and review procedures (the "Procedures") that are in addition to those set forth
in this Code in order to provide additional assurance that the purposes of this
Code are fulfilled and/or assist the Underwriter in the administration of this
Code. The Procedures may be more, but shall not be less, restrictive than the
provisions of this Code. The Procedures, and any amendments thereto, do not
require the approval of the Board of Trustees of an Investment Company.
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