As filed with the Securities and Exchange Commission on
May 1, 2000
Securities Act File No. 33-27352
Investment Company Act File No. 811-5780
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
Post-Effective Amendment No. 30 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
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Amendment No. 33
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ENDEAVOR SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Are Code: (800) 854-8393
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Vincent J. McGuinness, Jr.
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President
Endeavor Series Trust
2101 East Coast Highway, Suite 300, Corona del Mar, California 92625
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(Name and Address of Agent for Service)
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Copies to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W. Washington, D.C. 20036
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It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b) on ____________ pursuant to
paragraph (b) 60 days after filing pursuant to paragraph (a)(1) on ____________
pursuant to paragraph (a)(1) 75 days after filing pursuant to paragraph (a)(2)
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<PAGE>
on ____________ pursuant to paragraph (a)(2) of Rule 485
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This post-effective amendment designates a new effective date for a
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previously filed post-effective amendment.
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The Registrant has previously filed a declaration of indefinite registration of
shares of beneficial interest of its Endeavor Money Market Portfolio, Endeavor
Asset Allocation Portfolio, T. Rowe Price International Stock Portfolio,
Endeavor Value Equity Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio, Endeavor Opportunity Value Portfolio, Endeavor
Enhanced Index Portfolio, Endeavor Select 50 Portfolio (now known as the
Endeavor Select Portfolio), Endeavor High Yield Portfolio and Endeavor Janus
Growth Portfolio pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended, (the "1940 Act"). Registrant's Rule 24f-2 Notice, on behalf of
its Endeavor Money Market Portfolio, Endeavor Asset Allocation Portfolio, T.
Rowe Price International Stock Portfolio, Endeavor Value Equity Portfolio,
Dreyfus Small Cap Value Portfolio, Dreyfus U.S. Government Securities Portfolio,
T. Rowe Price Equity Income Portfolio, T. Rowe Price Growth Stock Portfolio,
Endeavor Opportunity Value Portfolio, Endeavor Enhanced Index Portfolio,
Endeavor Select Portfolio, Endeavor High Yield Portfolio and Endeavor Janus
Growth Portfolio for the fiscal year ended December 31, 1999 was filed on March
30, 2000.
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<PAGE>
[FRONT COVER]
ENDEAVOR
Series Trust
Endeavor Money Market Portfolio
T. Rowe Price International Stock Portfolio
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Dreyfus Small Cap Value Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Endeavor Enhanced Index Portfolio
Endeavor Janus Growth Portfolio
Endeavor Select Portfolio
(formerly Endeavor Select 50 Portfolio)
Dreyfus U.S. Government Securities Portfolio
Endeavor High Yield Portfolio
Endeavor Asset Allocation Portfolio
Prospectus
May 1, 2000
Like all securities, these securities have not been approved
or disapproved by the Securities and Exchange Commission, nor
has the Securities and Exchange
Commission passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is
a criminal offense.
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<PAGE>
Table of Contents
INTRODUCTION..................................................... 3
Understanding the Trust............................................ 3
THE PORTFOLIOS......................................... 6
Investment Summary........................................ 6
Investment Objectives, Investment Strategies, Risks and Past Performance for:
Endeavor Money Market Portfolio.................. 8
T. Rowe Price International Stock Portfolio..................12
Endeavor Value Equity Portfolio............................16
Endeavor Opportunity Value Portfolio.....................20
Dreyfus Small Cap Value Portfolio......................24
T. Rowe Price Equity Income Portfolio....................27
T. Rowe Price Growth Stock Portfolio.....................30
Endeavor Enhanced Index Portfolio........................33
Endeavor Janus Growth Portfolio........................37
Endeavor Select Portfolio........................................39
Dreyfus U.S. Government Securities Portfolio................ .45
Endeavor High Yield Portfolio..........................................49
Endeavor Asset Allocation Portfolio........................ .53
Primary Risks of Investing in the Portfolios.......................... 59
Additional Investment Strategies....................................... 62
Management.............................................. 74
The Manager.............................................. 74
The Investment Advisers........................................ 74
Brokerage Enhancement Plan.................................... 81
Financial Highlights............................................ 83
YOUR INVESTMENT................................... 112
Shareholder Information......................................... 112
Dividends, Distributions and Taxes.............................. 112
Sales and Purchases of Shares.................................. 112
GLOSSARY OF INVESTMENT TERMS.......................................... 114
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FOR MORE INFORMATION..............................................Back Cover
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<PAGE>
INTRODUCTION
Understanding the Trust
Endeavor Series Trust (the "Trust") is an open-end management investment company
that offers a selection of thirteen managed investment portfolios or mutual
funds (the "Portfolios"). Each of these Portfolios has its own investment
objective designed to meet different investment goals. Please see the Investment
Summary section of this Prospectus for specific information on each Portfolio.
Certain terms are defined in the Glossary of Investment Terms in the back of
this Prospectus.
Investing Through a Variable Insurance Contract
Each Portfolio currently sells its shares only to separate accounts of
PFL Life Insurance Company and certain of its affiliates ("PFL") and, in the
future, may sell its shares to qualified pension and profit sharing plans. PFL
created the separate accounts to fund different insurance contracts
("Contracts") including:
o variable life insurance policies (scheduled premium, flexible premium
and single premium)
o variable annuity contracts
As a Contract owner, your premium payments are allocated to one or more of these
Portfolios in accordance with your Contract.
[SIDE BAR:
--------
Please see the Contracts prospectus that accompanies this Prospectus
for a detailed explanation of your Contract.]
Understanding The Portfolios
After this Introduction you will find an Investment Summary for each Portfolio.
Each Investment Summary presents important facts about a Portfolio, including
information about its investment objective, principal investment strategy,
primary risks and past performance.
As the following table indicates, each of the thirteen Portfolios of
the Trust falls into one of five categories of funds. A particular type of
Portfolio may be more appropriate for you depending upon your investment needs.
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<PAGE>
Type of Fund Portfolio
Money Market Endeavor Money Market Portfolio
International Equity T. Rowe Price International Stock Portfolio
Domestic Equity Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Dreyfus Small Cap Value Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Endeavor Enhanced Index Portfolio
Endeavor Janus Growth Portfolio
Global Equity Endeavor Select Portfolio
Fixed Income Dreyfus U.S. Government Securities Portfolio
Endeavor High Yield Portfolio
Balanced Endeavor Asset Allocation Portfolio
(Equity and Fixed Income)
Description of Types of Funds:
Money Market Funds
Money market funds try to maintain a share price of $1.00 while paying
income to shareholders. Money market funds must follow strict rules as to the
investment quality, maturity, diversification and other features of the
securities they purchase and the average remaining maturity of the securities
cannot be greater than 90 days.
Equity Funds
Although they may involve more risk, historically, equity securities
such as common stocks have offered higher returns than bonds or other
investments over the long term.
Fixed Income Funds
Fixed income securities are securities that pay a specified rate of
return. Historically, fixed income funds are not as volatile as equity funds.
These funds may lend stability to a portfolio made up primarily of stocks. These
funds, other than those which invest substantially all of their assets in high
yield, high risk securities, may also be a good choice if you are a fairly
cautious investor.
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<PAGE>
Balanced Funds
Balanced funds are generally "middle-of-the-road" investments that seek
to provide some combination of growth, income, and conservation of capital by
investing in a mix of stocks, bonds, and/or money market instruments. Because
the prices of stocks and bonds do not tend to move in lockstep, balanced funds
are able to use rewards from one type of investment to help offset the risks
from another.
-8-
<PAGE>
THE PORTFOLIOS
Investment Summary
Each Portfolio's summary discusses the following :
o Investment Objective
What is the Portfolio's investment goal?
o Principal Investment Strategy
How does the Portfolio attempt to achieve its investment goal?
What types of investments does it contain? What style of
investing and investment philosophy does it follow?
o Primary Risks
What are the specific risks of investing in the Portfolio?
o Past Performance
How well has the Portfolio performed over time?
In addition to its principal investment strategy, each Portfolio may invest in
various types of securities and engage in various investment techniques and
practices which are not the principal focus of the Portfolio and therefore are
not described in this section of the Prospectus. These other securities and
investment techniques and practices in which a Portfolio may engage, together
with their risks, are briefly discussed in "Additional Investment Strategies" in
this Prospectus.
[SIDE BAR: A Portfolio's investment adviser may sell a portfolio security when
the value of the investment reaches or exceeds its estimated fair value, when
the issuer's investment fundamentals begin to deteriorate, when the Portfolio
must meet redemptions, or for other investment reasons.]
Following the Investment Summary is the section entitled "Primary Risks of
Investing in the Portfolios" which lists some of the factors that may affect the
value of a Portfolio's investments. Shares of a Portfolio are not deposits or
obligations of, or guaranteed by, any bank, and are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency of the U.S. government.
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<PAGE>
The Statement of Additional Information provides more detailed information
regarding the various types of securities that a Portfolio may purchase and
certain investment techniques and practices of its investment adviser. For
details about how to obtain a copy of the Statement of Additional Information
and other reports and information, see the back cover of this Prospectus.
[SIDE BAR: Each Portfolio in this Prospectus is a mutual fund: a pooled
investment that is professionally managed and that gives you the opportunity to
participate in financial markets. Each Portfolio strives to reach its stated
investment objective, which can be changed without shareholder approval. As with
all mutual funds, there is no guarantee that a Portfolio will achieve its
investment objective. You could lose money investing in a Portfolio, but you
also have the potential to make money.]
A NOTE ON FEES
As an investor in any of the Portfolios, you will incur various
operating costs, including management expenses. You also will incur fees
associated with the Contracts which you purchase. Detailed information about the
cost of investing in a Portfolio is presented in the "Annuity Policy Fee Table"
section of the accompanying prospectus for the Contracts through which Portfolio
shares are offered to you.
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<PAGE>
[Left side:]
---------
Endeavor Money Market Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o A conservative investment
o Current income
o Preservation of capital]
Investment Objective
To provide current income, preservation of capital and liquidity
through investment in short-term money market securities.
Principal Investment Strategy
The Portfolio invests in the following types of high quality money
market securities that present minimal credit risks:
o U.S. government securities, including Treasuries and bonds and
notes issued by government agencies or government-sponsored
entities such as the Federal Home Loan Bank, Government
National Mortgage Association (GNMA or "Ginnie Mae"), Federal
National Mortgage Association (FNMA or "Fannie Mae") and
Student Loan Marketing Association (SLMA or "Sallie Mae")
o certificates of deposit, bankers' acceptances and other obligations
issued or guaranteed by bank holding companies in the U.S. and their
subsidiaries
o U.S. dollar-denominated obligations ("Eurodollar obligations") of bank
holding companies in the U.S., their subsidiaries and their foreign
branches or of the World Bank
o commercial paper and other short-term obligations issued by U.S. and
foreign corporations
o repurchase agreements
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<PAGE>
The Portfolio invests in money-market securities with remaining
maturities of 13 months or less and with a dollar-weighted average maturity of
90 days or less. The Portfolio's investments are limited to those securities
that meet maturity, quality and diversification standards with which money
market funds must comply. In selecting securities for investment, the investment
adviser seeks to invest in those securities that it believes entail reasonable
risk considered in relation to the Portfolio's investment policies.
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[Right Side:]
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Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return to decrease or could cause the
Portfolio's yield to fluctuate:
o Interest rate risk
o Credit risk
o Foreign investment risk
In addition, an investment in the Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is still possible to lose money by investing in the
Portfolio.
Past Performance:
- ----------------
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (4/8/91) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
2.90% 2.19% 3.41% 5.54% 4.91% 5.07% 4.96% 4.75%
92 93 94 95 96 97 98 99
High Quarter: 2nd- 1995 +1.53%
Low Quarter: 1st - 1993 +0.53%
The table below sets forth the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period, and since inception through
12/31/99.
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<PAGE>
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year 5 Year Inception
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4.75% 5.04% 4.30%
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For up-to-date yield information, please call 1-800-525-6205.
[SIDE BAR:
--------
Portfolio Management:
o Morgan Stanley Asset Management
see page 72
o For financial highlights see page 81]
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[Left Side:]
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T. Rowe Price International Stock Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o To diversify your domestic stock portfolio by adding
foreign investments and are comfortable with the
risks accompanying these investments
o Long-term growth of capital]
Investment Objective
Provide long-term growth of capital through investments primarily in the
common stocks of established non-U.S. companies.
Principal Investment Strategy
The Portfolio's investment adviser expects to invest substantially all
of the Portfolio's assets in established companies located outside the United
States and to diversify broadly among developed and emerging countries
throughout the world. Stock selection reflects a growth style. The investment
adviser may purchase the equity securities (primarily common stocks) of
companies of any size, but the focus will typically be on large- and, to a
lesser extent, medium-sized companies.
The investment adviser employs in-depth fundamental research in an
effort to identify companies capable of achieving and sustaining above-average,
long-term earnings growth. The investment adviser seeks to purchase such stocks
at reasonable prices in relation to present or anticipated earnings, cash flow,
or book value, and valuation factors, such as price/earnings and price/cash flow
ratios. Valuation factors often influence the investment adviser's allocations
among large- or mid-cap companies.
While the investment adviser invests with an awareness of the global
economic backdrop and its outlook for individual countries, bottom-up stock
selection is the focus of decision-making. Country allocation is driven largely
by stock selection, though investments may be limited in markets that appear to
have poor overall prospects.
[SIDE BAR:
--------
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<PAGE>
When investment advisers use a "bottom-up" approach, they look
primarily at individual companies against the context of broader market or
country factors.]
[SIDE BAR:
--------
Market capitalization is the most commonly used measure of the size and
value of a company. It is the total value of a company's stock in the
marketplace and is computed by multiplying the current market price of a share
of the company's stock by the total number of its shares outstanding. Generally,
large-cap companies have market capitalizations in excess of $5 billion; mid-cap
companies have market capitalizations ranging from $1.5 billion to $5 billion;
and small-cap companies have market capitalizations ranging from $150 million to
$1.5 billion.]
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[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Foreign investment risk
o Market capitalization risk
o Investment style risk
In addition, investments in emerging markets include all of the risks
of investments in foreign securities and are subject to abrupt and severe price
declines. The economic and political structures of developing nations, in most
cases, do not compare favorably with the U.S. or other developed countries in
terms of wealth and stability, and their financial markets often lack liquidity.
Such countries may have relatively unstable governments, immature economic
structures, national policies restricting investments by foreigners and
economies based on only a few industries. For these reasons, all of the risks of
investing in foreign securities are heightened by investing in emerging markets
countries. The markets of developing countries have been more volatile than the
markets of developed countries with more mature economies. These markets often
have provided significantly higher or lower rates of return than developed
markets, and significantly greater risks, to investors.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (4/8/91) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
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<TABLE>
<CAPTION>
Year-by-Year Total Return as of 12/31 of Each Year
<S> <C> <C> <C> <C> <C> <C> <C>
(3.61)% 18.48% (5.67)% 10.37% 15.23% 2.54% 15.44% 32.35 %
92 93 94 95 96 97 98
99
</TABLE>
High Quarter: 4th - 1999 + 23.26 %
Low Quarter: 3rd - 1998 -14.19%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period, and from inception through
12/31/99 with the MSCI EAFE Index, a widely recognized index measuring the broad
market performance of equity securities throughout Europe, Australia and the Far
East, and with the Lipper VA International Index, an equally weighted
performance index of international funds underlying 30 variable annuities. An
index does not include transaction costs associated with buying and selling
securities or any mutual fund expenses. It is not possible to invest directly in
an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year 5 Year Inception
--------------------------------------
Portfolio 32.35% 14.79% 9.78%
MSCI EAFE Index 26.96% 12.83% 13.11%*
Lipper VA International 36.66% 14.12% 15.46%**
Index
* From 3/31/91
** Since Index's inception on 12/31/91
[SIDE BAR:
--------
Portfolio Management
o Rowe Price-Fleming International, Inc.
see page 74
o For financial highlights see page 81]
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[Left Side:]
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Endeavor Value Equity Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o A relatively conservative equity investment
o Long-term growth of capital]
Investment Objective
To provide long-term capital growth through investment in securities of
"large cap" companies that are believed by the investment adviser to be
undervalued in the marketplace.
Principal Investment Strategy
The Portfolio invests mainly in equity securities (at least 65% of its
total assets under normal market conditions) of U.S. and foreign issuers that
the investment adviser believes are undervalued in the marketplace. Most of the
Portfolio's investments in equity securities will consist of common stock.
Although there is no limit on foreign securities, the Portfolio's investment in
foreign securities will normally not exceed 20% of its total assets.
[SIDE BAR:
--------
The Portfolio can also buy debt securities for liquidity and cash
management purposes, such as money market instruments. Normally, such
investments will not exceed approximately 20% of the Portfolio's total assets.]
In selecting securities for purchase or sale by the Portfolio, the
Portfolio's investment adviser uses a "value" approach to investing, and
searches for securities of companies it believes to be undervalued in the
marketplace, in relation to factors such as a company's assets, earnings, growth
potential, and cash flows. While this process and the inter-relationship of the
factors used may change over time and its implementation may vary in particular
cases, in general the selection process involves the following techniques:
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<PAGE>
o A bottom-up analytical approach using fundamental research to evaluate
a company's characteristics, financial results and management
o Selection of securities of companies believed to be
undervalued and having a high return on capital, strong
management committed to shareholder value and positive cash
flows
o Ongoing monitoring of issuers for fundamental changes in the
company that might alter the investment adviser's initial
expectations about the security
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<PAGE>
[Right Side:]
------------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Credit risk
o Interest rate risk
o Foreign investment risk
o Market capitalization risk
o Investment style risk
Past Performance:
- ----------------
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/27/93) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
4.09% 34.59% 23.84% 24.81% 7.56% (3.06)%
94 95 96 97 98 99
High Quarter: 4th - 1998 +14.89%
Low Quarter: 3rd - 1998 -15.72%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period, and since inception through
12/31/99 with the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index"), a
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<PAGE>
widely recognized unmanaged index that measures the stock performance of 500
large- and medium-sized publicly traded companies and is often used to indicate
the performance of the overall stock market, and with the Lipper VA Capital
Appreciation Index, an equally weighted performance index of capital
appreciation funds underlying 30 variable annuities. An index does not include
transaction costs associated with buying and selling securities or any mutual
fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year 5 Year Inception
------- ------ ---------
-------------------------------------
Portfolio (3.06)% 16.74% 13.61%
S&P 500 Index 21.05% 28.54% 27.36%*
Lipper VA Capital
Appreciation
Index 38.57% 24.77% 19.13%*
* From 5/31/93
[SIDE BAR:
--------
Portfolio Management
o OpCap Advisors
see page 74
o For financial highlights see page 81]
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[Left Side:]
---------
Endeavor Opportunity Value Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o Growth of capital over the long term and are willing to assume the risk
of short-term share price fluctuations]
Investment Objective
To seek growth of capital.
Principal Investment Strategy
The Portfolio can invest in a variety of equity and debt securities.
Under normal conditions, the Portfolio normally invests mainly in equity
securities, primarily common stocks, but also securities convertible into common
stocks, of U.S. and foreign issuers that the Portfolio's investment adviser
believes are undervalued in the marketplace. The Portfolio can invest in equity
securities without limit. Although there is no limit on foreign securities, the
Portfolio's investments in foreign securities will normally not exceed 35% of
its total assets.
The Portfolio does not limit its investments in equity securities to
issuers having a market capitalization of a specified size or range, and
therefore may invest in securities of small-, mid- and large-capitalization
issuers. Normally, most of the Portfolio's equity investments will be in the
securities of large-capitalization issuers. At times, the Portfolio may focus
its equity investments in securities of one or more capitalization ranges, based
upon the investment adviser's judgment of where are the best market
opportunities to seek the Portfolio's objective.
In selecting securities for purchase or sale by the Portfolio, the
investment adviser uses a "value" approach to investing, and searches for
securities of companies believed to be undervalued in the market place, in
relation to factors such as a company's assets, earnings, growth potential, and
cash flows. While this process and the inter-relationship of the factors used
may change over time and its implementation may vary in particular cases, in
general the selection process includes the following techniques:
-23-
<PAGE>
o A "bottom up" analytical approach using fundamental research to evaluate
a company's characteristics, financial results and management
o Selection of securities of companies believed to be
undervalued and having a high return on capital, strong
management committed to shareholder value and positive cash
flows
o Ongoing monitoring of issuers for fundamental changes in the
company that might alter the investment adviser's initial
expectations about the security
The investment adviser allocates the Portfolio's investments among
equity and debt securities after assessing the relative values of these
different types of investments under prevailing market conditions. The Portfolio
might hold stocks, bonds, and money market instruments in different combinations
at different times. The investment adviser might buy bonds and other fixed
income securities, instead of stocks, when it believes that:
o common stocks in general appear to be overvalued,
o debt securities present meaningful capital growth opportunities relative to
common stocks, or
o pending investment in other securities with capital growth opportunities.
[SIDE BAR:
--------
Although current income is not an objective of the Portfolio, the
Portfolio can invest up to 100% of its assets in bonds and other debt
securities. Most of the Portfolio's investments in debt securities will be in
money market obligations, securities issued or guaranteed by the U.S.
government, federal agencies and government- sponsored entities, and short-term
debt obligations of U.S. and foreign issuers.]
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<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Interest rate risk
o Credit risk
o Foreign investment risk
o Market capitalization risk
o Investment style risk
Past Performance:
- ----------------
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (11/18/96) and indicates how it has varied
from year to year. The Portfolio can also experience short-term performance
swings as indicated in the high and low quarter information at the bottom of the
chart.
Year-by-Year Total Return as of 12/31 of Each Year
16.81% 5.18% 4.79%
97 98 99
High Quarter: 4th - 1998 +11.60%
Low Quarter: 3rd- 1998 -13.85%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/99 with
the S&P 500
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<PAGE>
Index, a widely recognized index that measures the stock performance of 500
large-and medium-sized publicly traded companies and is often used to indicate
the performance of the overall stock market, and with the Lipper VA Flexible
Portfolio Index, an equally weighted performance index of flexible portfolio
funds underlying 30 variable annuities. An index does not include transaction
costs associated with buying and selling securities or any mutual fund expenses.
It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year Inception
-------------------------------------
Portfolio 4.79% 8.65%
S&P 500 Index 21.03% 17.72%*
Lipper VA Flexible
Portfolio Index 11.86% 13.84%*
* From 11/30/96
[SIDE BAR:
--------
Portfolio Management
o OpCap Advisors
see page 74
o For financial highlights
see page 81]
-26-
<PAGE>
[Left Side:]
---------
Dreyfus Small Cap Value Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o Long-term growth of capital
o A less conservative investment with greater risk and
reward potential than a portfolio investing in
large-capitalization companies]
Investment Objective
To seek capital growth by investing in companies with a
median-capitalization of approximately $750 million, with at least 75% of the
Portfolio's investments in companies with capitalizations between $150 million
and $1.5 billion.
Principal Investment Strategy
The Portfolio normally invests in "value" companies. The investment
adviser uses its own research and computer models to identify by various
measures those companies that appear to be underpriced, but have good prospects
for capital growth and dividend growth.
In selecting investments, the investment adviser generally favors
companies with the following:
o relatively low price-to-book ratios
o low price-to-earnings ratios
o higher-than-average dividend payments in relation to price
Because a company could remain undervalued for years, value investors
search for factors that could trigger a rise in price, including new products or
markets, opportunities for greater market share and more effective management.
Most of the Portfolio's assets will be invested in equity securities,
primarily common stocks of U.S. issuers. Normally, the Portfolio will not invest
more than 20% of its total assets in foreign securities.
-27-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Foreign investment risk
o Market capitalization risk
o Investment style risk
The Portfolio's emphasis on stocks of established companies paying high
dividends and its potential investments in fixed income securities may limit its
potential for appreciation in a broad market advance. Such securities may also
decline in value when interest rates rise sharply. Also, a company may reduce or
eliminate its dividend.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/4/93) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
(1.79)% 14.05% 25.63% 25.56% (2.18)% 29.39%
94 95 96 97 98 99
High Quarter: 2nd -1999 +31.03%
Low Quarter: 3rd -1998 -27.73%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period, and since inception through
12/31/99 with
-28-
<PAGE>
the Russell 2000 Index, a widely recognized unmanaged index that measures small
company stock performance, and with the Lipper VA Small-Cap Index, an equally
weighted performance index of small cap funds underlying 30 variable annuities.
An index does not include transaction costs associated with buying and selling
securities or any mutual fund expenses. It is not possible to invest directly in
an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year 5 Year Inception
-------- ------ ---------
- ----------------------------------------------------
Portfolio 29.39% 17.88% 14.74%
Russell 2000 Index 21.26% 16.69% 14.66%*
Lipper VA Small-Cap
Index 43.03% 20.17% 16.57%*
* From 4/30/93
[SIDE BAR:
--------
Portfolio Management:
o The Dreyfus Corporation
see page 75
o For financial highlights
see page 81]
-29-
<PAGE>
[Left side:]
T. Rowe Price Equity Income Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o A relatively conservative equity investment
o Substantial dividend income along with long-term capital growth]
Investment Objective
To provide substantial dividend income as well as long-term growth of capital by
primarily investing in the dividend-paying common stocks of established
companies.
Principal Investment Strategy
The Portfolio's investment adviser primarily invests in common stocks of well-
established companies paying above-average dividends.
The investment adviser typically employs a "value" approach in selecting
investments. The investment adviser's in-house research team seeks companies
that appear to be undervalued by various measures and may be temporarily out of
favor, but have good prospects for capital appreciation and dividend growth.
In selecting investments, the investment adviser generally favors companies with
the following:
o an established operating history
o above-average dividend yield relative to the S&P 500 Index o low
price-to-earnings ratio relative to the S&P 500 Index o a sound balance sheet
and other positive financial characteristics
olow stock price relative to a company's underlying value as measured by assets,
cash flow or business franchises
Most of the Portfolio's assets will be invested in U.S. common stocks. However,
the Portfolio may also invest in foreign securities (up to 25% of total assets)
and other securities, including debt securities, in keeping with its investment
objective.
-30-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or more of
the following risks, which are described in detail on page 58, any of which
could cause the Portfolio's return or the price of its shares to decrease or
could cause the Portfolio's yield to fluctuate:
o Market risk
o Foreign investment risk
o Market capitalization risk
o Investment style risk
The Portfolio's emphasis on stocks of established companies paying high
dividends and its potential investments in fixed income securities may limit its
potential for appreciation in a broad market advance. Such securities may also
decline in value when interest rates rise sharply. In addition, a company may
reduce or eliminate its dividend.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume the reinvestment of dividends and distributions. Note that the
results in each table do not include the effect of Contract charges. If these
Contract charges had been included, performance would have been lower. As with
all mutual funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (1/3/95) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
30.50% 19.88% 28.27% 8.81% 3.47%
95 96 97 98 99
High Quarter: 2nd - 1999 +13.35%
Low Quarter: 3rd - 1999 -8.64%
-31-
<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/99 with the S&P 500 Index, a widely recognized unmanaged index of stock
performance of 500 large- and medium-sized publicly traded companies and is
often used to indicate the performance of the overall stock market, and with the
Lipper VA Equity Income Index, an index which measures the total returns earned
by 10 variable annuities investing in equity income funds. An index does not
include transaction costs associated with buying and selling securities or any
mutual fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year 5 year Inception
-------------------------------------
Portfolio 3.47% 17.69% 17.73%
S&P 500 Index 21.03% 28.53 % 28.53%*
Lipper VA Equity Income Index 5.41% N/A 15.20%**
* From 12/31/94
** Since Index's inception on 12/29/95
[SIDE BAR:
--------
Portfolio management:
o T. Rowe Price Associates, Inc.
see page 75
o For financial highlights
see page 81]
-32-
<PAGE>
[Left Side:]
---------
T. Rowe Price Growth Stock Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o A moderate risk investment
o Long-term growth of capital]
Investment Objective
To provide long-term capital growth and, secondarily, increasing
dividend income through investments in the common stocks of well-established
growth companies.
Principal Investment Strategy
The Portfolio invests primarily in the common stocks of a diversified
group of growth companies. The investment adviser normally (but not always)
seeks investments where dividends are expected to rise over time as earnings
increase. The investment adviser generally looks for companies with an
above-average rate of earnings growth and a lucrative niche in the economy that
gives them the ability to sustain earnings momentum even during times of slow
economic growth. As a growth investor, the investment adviser believes that when
a company's earnings grow faster than both inflation and the overall economy,
the market will eventually reward it with a higher stock price.
Most of the Portfolio's assets will be invested in U.S. common stocks.
The investment adviser may also invest in foreign securities (up to 30% of its
total assets).
-33-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Foreign investment risk
o Market capitalization risk
o Investment style risk
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (1/3/95) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
37.20% 20.77% 28.57% 28.67% 22.19%
95 96 97 98 99
High Quarter: 4th - 1998 +23.37%
Low Quarter: 3rd - 1998 -11.13%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/99 with the S&P 500 Index, a widely recognized unmanaged index that
measures the stock performance of 500 large- and medium-sized publicly traded
companies and is often used to indicate the performance of the overall stock
market, and with the Lipper VA Growth Index, an equally weighted performance
index of growth funds underlying 30 variable annuities. An index does not
include transaction costs associated with buying
-34-
<PAGE>
and selling securities or any mutual fund expenses. It is not possible to invest
directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year 5 Year Inception
-------- ------ ---------
---------------------------------------
Portfolio 22.19% 27.33% 27.38%
S&P 500 Index 21.03% 28.53% 28.53%*
Lipper VA Growth Index 25.78% 24.91% 24.91%*
* From 12/31/94
[SIDE BAR:
--------
Portfolio Management
o T. Rowe Price Associates, Inc.
see page 75
o For financial highlights see page 81]
-35-
<PAGE>
[Left Side:]
---------
Endeavor Enhanced Index Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o A slightly higher return than the S&P 500 Index
with a comparable level of risk]
Investment Objective
To earn a total return modestly in excess of the total return
performance of the S&P 500 Index (including the reinvestment of dividends) while
maintaining a volatility of return similar to the S&P 500 Index.
Principal Investment Strategy
The Portfolio invests primarily in large- and medium-capitalization
U.S. companies but may invest in foreign companies included in the S&P 500
Index. Industry by industry, the Portfolio's weightings are similar to those of
the S&P 500 Index. The Portfolio does not look to overweight or underweight
industries. Holdings by industry sector will normally approximate those of the
S&P 500 Index.
[SIDE BAR:
--------
The S&P 500 Index is a widely recognized unmanaged index that measures the stock
performance of 500 large- and medium-sized publicly traded companies and is
often used to indicate the performance of the overall stock market.]
Within each industry, the Portfolio's investment adviser modestly
overweights stocks that are ranked as undervalued or fairly valued while
modestly underweighting or not holding stocks that appear overvalued. The
investment adviser employs a three- step process in valuing stocks:
o Research - The investment adviser takes an in-depth look at
company prospects over a relatively long period -- often as
much as five years -- rather than focusing on near-term
expectations. The team of approximately 23 analysts with an
average of over ten years of experience follows over 900
large- and medium-sized U.S. companies.
-36-
<PAGE>
The research goal is to provide insight into a company's real
growth potential.
o Valuation - The research findings allow the investment adviser
to rank the companies in each industry group according to
their relative value. The greater a company's estimated worth
compared to the current market price of its stock, the more
undervalued the company. The valuation rankings are produced
with the help of a variety of models that quantify the
research team's findings.
o Stock Selection - The Portfolio's investment adviser uses
research and valuation rankings as a basis for choosing which
stocks to buy and sell. In general, the investment adviser
buys approximately 300 stocks that are identified as
undervalued and considers selling them when they appear
overvalued. Along with attractive valuation, the investment
adviser often considers a number of other criteria, including:
o catalysts that could trigger a rise in a stock's price
o high potential reward compared to potential risk
o temporary mispricings caused by market overreactions
The Portfolio invests at least 65% of its assets in equity securities,
primarily common stocks. During ordinary market conditions, the Portfolio's
investment adviser will keep the Portfolio as fully invested as practicable in
equity securities. The Portfolio may invest up to 35% of its assets in
short-term fixed income instruments including:
o U.S. government securities
o bankers' acceptances, commercial paper, certificates of
deposit and Eurodollar obligations issued or guaranteed by
bank holding companies in the U.S., their subsidiaries and
their foreign branches or of the World Bank
o commercial paper and other short-term obligations of, and
variable amount master demand notes and variable rate
notes issued by, U.S. and foreign corporations
o repurchase agreements
o short-term bonds and notes with remaining maturities of 13
months or less
-37-
<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Interest rate risk
o Credit risk
o Market capitalization risk
o Investment style risk Past Performance:
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/2/97) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
31.39% 18.16%
98 99
High Quarter: 4th - 1998 +22.37%
Low Quarter: 3rd - 1998 -9.63%
-38-
<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/99 with
the S&P 500 Index and with the Lipper VA Growth & Income Index, an equally
weighted performance index of growth and income funds underlying 10 variable
annuities. An index does not include transaction costs associated with buying
and selling securities or any mutual fund expenses. It is not possible to invest
directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year Inception
-------------------------------------
Portfolio 18.16% 27.39%
S&P 500 Index 21.03% 27.36%*
Lipper VA Growth &
Income Index 11.61% 18.12%*
* From 4/30/97
[SIDE BAR:
--------
Portfolio management:
o J.P. Morgan Investment Management Inc.
see page 76
o For financial highlights see page 81]
-39-
<PAGE>
[Left Side:]
---------
Endeavor Janus Growth Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o Long-term growth of capital and are willing to accept the risk of potential
sizeable stock market volatility]
Investment Objective:
- --------------------
To seek long-term growth of capital.
Principal Investment Strategy:
- -----------------------------
The Portfolio invests substantially all of its assets in common stocks
selected for their growth potential. The Portfolio invests in industries and
companies that the investment adviser believes are experiencing favorable demand
for their products and services, and which operate in a favorable competitive
environment and regulatory climate. The investment adviser's analysis and
selection process focuses on stocks issued by companies with earnings growth
potential, especially those that may not be recognized by the market. Although
the Portfolio can invest in companies of any size, it generally invests in
larger, more established companies. The Portfolio may also invest up to 25% of
its total assets in foreign securities including foreign debt securities.
The investment adviser applies a bottom-up approach in choosing
investments. In other words, it looks for companies with earnings growth
potential one at a time. Securities are selected solely for their growth
potential. Investment income and dividend payments are not a factor. If the
investment adviser is unable to find sufficient investments with earnings growth
potential, a significant portion of a Portfolio's assets may be in cash or
similar investments.
[SIDE BAR:
--------
In an attempt to protect the Portfolio against unfavorable changes in
the value of the U.S. dollar versus foreign currencies, the Portfolio may also
engage in foreign currency transactions, particularly in foreign currency
forward contracts. It may also purchase or sell foreign currency on a spot basis
to facilitate trades.]
-40-
<PAGE>
[Right Side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Foreign investment risk
o Market capitalization risk
o Investment style risk
Past Performance:
- ----------------
The Portfolio commenced operations on May 1, 1999. As a result, it does
not have a significant operating history. For performance information for the
period ended December 31, 1999, see "Financial Highlights" and the Statement of
Additional Information.
[SIDE BAR:
--------
Portfolio Management
o Janus Capital Corporation
See page 77]
-41-
<PAGE>
[Left Side:]
---------
Endeavor Select Portfolio
(formerly Endeavor Select 50 Portfolio)
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o Long-term growth of capital through concentrated investments utilizing three
different investment styles
Investment Objective
To provide long-term capital growth by investing in at least 60
different equity securities of companies of all sizes throughout the world.
Principal Investment Strategy
Three of the investment adviser's portfolio management teams each
typically selects between 20 and 30, but never less than 20, equity securities,
primarily common stocks, that they believe may offer the greatest capital growth
potential from their respective areas of expertise or disciplines. The result is
a concentrated portfolio of at least 60 equity securities that is allocated
approximately equally among the investment adviser's three equity disciplines
and is well diversified with typically 33% of total assets allotted to U.S.
securities of all capitalization ranges and 67% of total assets allotted to
foreign securities. The three investment disciplines currently are:
[SIDE BAR:
--------
The Portfolio may at times invest up to 15% of its total assets in illiquid
securities.]
o U.S. Growth Equity
The team selects companies of any size, but will invest at
least 65% of the total assets allocated to it in those
companies whose shares have a total market capitalization of
at least $1 billion. The team's strategy is to identify
well-managed U.S. companies whose share prices appear to be
undervalued relative to the firms' growth potential. All
prospective holdings are subject to the following three steps
of the investment process:
o Identify companies with improving business fundamentals
o Conduct in-depth analysis of each company's current
business and future prospects
-42-
<PAGE>
o Analyze each company's price to determine whether its
growth prospects have been discovered by the market
o International Equity
Under normal conditions, the team invests in the common stocks
of companies outside the United States and will invest at
least 65% of the total assets allocated to it in those
companies whose shares have a total market capitalization of
more than $1 billion. Currently investments are concentrated
in the stock markets of western Europe, particularly the
United Kingdom, France, Germany, Italy and the Netherlands, as
well as developed markets in Asia, such as Japan and Hong
Kong. Investments typically are made in at least three
countries outside the United States with no more than 40% of
its assets (or twice the benchmark index weightings used by
the team, whichever is greater) in any one country. The
investment adviser currently expects that only those
investments in Japan could exceed that 40% limit.
The team seeks well-managed companies that it believes will be
able to increase their sales and corporate earnings on a
sustained basis. In addition, the team purchases shares of
companies that they consider to be under- or reasonably valued
relative to their long-term prospects. The team favors
companies that it believes have a competitive advantage, offer
innovative products or services, and may profit from such
trends as deregulation and privatization. On a strategic
basis, investments may be allocated among countries in an
attempt to take advantage of market trends.
o Emerging Markets
Seeks long-term capital growth by investing in common stocks
of companies based in emerging market countries. The team
currently considers the following to be emerging market
countries but may invest in others in the future:
- Latin America (Argentina, Brazil, Chile, Columbia, Costa
Rica, Jamaica, Mexico, Peru, Trinidad and Tobago, Uruguay
and Venezuela)
- Asia (Bangladesh, China/Hong Kong, India, Indonesia,
Malaysia, Pakistan, the Phillippines,
Singapore, South Korea, Taiwan, Thailand and Vietnam)
- Europe (Czech Republic, Greece, Hungary, Kazakhstan,
Poland, Portugal, Romania, Russia, Slovakia, Slovenia,
Turkey and Ukraine)
- The Middle East (Israel and Jordan)
-43-
<PAGE>
- Africa (Egypt, Ghana, Ivory Coast, Kenya, Morocco, Nigeria,
South Africa, Tunisia and Zimbabwe)
No more than 50% of the total assets allocated to the team may
be invested in one country.
The team's strategy combines computer-based screening
techniques and in-depth financial review and on-site analysis
of companies, countries and regions to identify potential
investments. The Portfolio allocates its assets among emerging
countries with stable or improving macro economic environments
and invests in companies within those countries that the team
believes have high capital appreciation potential without
excessive risk.
[SIDE BAR:
--------
In an attempt to protect the Portfolio against unfavorable changes in
the value of the U.S. dollar versus foreign currencies, the Portfolio may also
invest in foreign currency transactions, particularly in foreign currency
forward contracts. It may also purchase or sell foreign currency on a spot basis
to facilitate trades.]
-44-
<PAGE>
[Right side:]
----------
Primary Risks
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Foreign investment risk
The U.S. Growth Equity team's focus on growth stocks may expose
shareholders to investment style risk. To the extent that the International
Equity team invests in Japanese securities, shareholders may be exposed to
special risks. The Portfolio's share value may be more volatile than that of
mutual funds not sharing this geographic concentration. The value of the
Portfolio's shares may vary dramatically in response to political and economic
factors affecting companies in Japan.
The decline in the Japanese securities market since 1989 has contributed to
a weakness in the Japanese economy, and the impact of a further decline cannot
be ascertained. The common stocks of many Japanese companies continue to trade
at high price-earnings ratios in comparison with those in the United States,
even after that market decline. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States.
The Emerging Market team's investments in emerging markets include all
of the risks of investments in foreign securities and are subject to abrupt and
severe price declines. The economic and political structures of developing
nations, in most cases, do not compare favorably with the U.S. or other
developed countries in terms of wealth and stability, and their financial
markets often lack liquidity. Such countries may have relatively unstable
governments, immature economic structures, national policies restricting
investments by foreigners and economies based on only a few industries. For
these reasons, all of the risks of investing in foreign securities are
heightened by investing in emerging markets countries. The markets of developing
countries have been more volatile than the markets of developed countries with
more mature economies. These markets often have provided significantly higher or
lower rates of return than developed markets, and significantly greater risks,
to investors.
Past Performance:
- ----------------
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a predictor of future returns.
-45-
<PAGE>
Prior to May 1, 2000, the Portfolio's assets were divided among five
investment disciplines. Each respective portfolio management team selected
approximately 10 equity securities for a concentrated portfolio of at least 50
equity securities. Beginning on May 1, 2000, two of the Portfolio's investment
disciplines were eliminated and the Portfolio's assets were allocated among the
three investment disciplines discussed above.
The bar chart below shows you the Portfolio's performance for the full
calendar year since its inception (2/03/98). The Portfolio can also experience
short-term performance swings as indicated in the high and low quarter
information at the bottom of the chart.
Total Return as of 12/31
47.84%
99
High Quarter: 4th - 1999 +31.01%
Low Quarter: 3rd - 1999 - 2.91%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/99 with
the S&P 500 Index, a widely recognized unmanaged index that measures the stock
performance of 500 large- and medium-sized publicly traded companies and is
often used to indicate the performance of the overall stock market, with a
blended index which weights the different types of equity investments, and with
the Lipper VA Global Index, an equally weighted performance index of global
funds underlying 10 variable annuities. An index does not include transaction
costs associated with buying and selling securities or any mutual fund expenses.
It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year Inception
----------------------------------------------
Portfolio 47.84% 26.90%
S&P 500 Index 21.03% 25.20%*
Blended Index (40% S%P 500 Index, 37.60% 26.09%*
20% Russell 2000 Index, 20% MSCI EAFE
Index, 20% MSCI EMF Index)
Lipper VA Global Index 34.52% 19.77%*
-46-
<PAGE>
*from 1/31/98
[SIDE BAR:
--------
Portfolio Management
o Montgomery Asset Management, LLC
see page 76
o For financial highlights see page 81]
-47-
<PAGE>
-48-
<PAGE>
[Left Side:]
---------
Dreyfus U.S. Government Securities Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o A conservative investment
o Long-term total return from dividend and capital
growth of primarily U.S. government securities]
Investment Objective:
- --------------------
To provide as high a level of total return as is consistent with
prudent investment strategies by investing under normal conditions at least 75%
of its assets in U.S. government debt obligations and mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or
government-sponsored entities.
Principal Investment Strategy:
- -----------------------------
-49-
<PAGE>
The Portfolio invests under normal circumstances at least 75% of its assets in
U.S. government securities. These securities include:
o U.S. Treasury obligations
o obligations issued by or guaranteed by U.S. government agencies or
government-sponsored entities
o mortgage-backed securities guaranteed by Ginnie Mae or other U.S.
government agencies or government-sponsored entities such as Sallie
Mae or Fannie Mae
o collateralized mortgage obligations issued by private issuers for
which the underlying mortgage-backed securities serving as collateral
are backed by the U.S. government or its agencies and
government-sponsored entities
The average weighted maturity for these U.S. government security obligations
will generally range from three to seven years.
The Portfolio may invest the remaining portion of its assets in:
o investment grade corporate bonds
o short-term corporate debt securities
o non-mortgage-backed securities such as motor vehicle
installment purchase obligations, credit card receivables,
corporate convertible and non-convertible fixed and variable
rate bonds
o high yield debt securities (up to 25% of the Portfolio's total
assets) so long as they are consistent with the Portfolio's
objective (The weighted average maturity of such obligations
will generally range from two to ten years.)
o high quality money-market securities
o debt securities (up to 25% of its total assets), including
securities denominated in foreign currencies, of foreign
issuers (including foreign governments) in developed countries
o U.S. dollar-denominated obligations issued by foreign branches of
U.S. banks and domestic branches of foreign banks (up to 25% of the
Portfolio's total assets)
o zero-coupon bonds
The Portfolio invests in debt obligations that the investment adviser
believes offer attractive yields and are undervalued relative to issues of
similar credit quality and interest rate sensitivity. In choosing securities,
the investment adviser uses a
-50-
<PAGE>
combination of quantitative and fundamental research, including analysis of the
credit worthiness of issuers and the rates of interest offered by various
issuers.
The Portfolio's investment adviser may also engage in options and
futures transactions and interest rate swap transactions in an attempt to hedge
the Portfolio's investments against adverse changes in interest rates. The
Portfolio may also purchase securities on a when-issued, delayed delivery or
forward commitment basis. The risks involved in these transactions are described
in "Additional Investment Strategies."
-51-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return on the price of its shares to decrease
or could cause the Portfolio's yield to fluctuate:
o Interest rate risk
o Credit risk
o High yield debt security risk
o Foreign investment risk
Like other debt securities, changes in interest rates generally affect
the value of a mortgage-backed security. Additionally, some mortgage-backed
securities may be structured so that they may be particularly sensitive to
interest rates.
Investments in mortgage-related securities are also subject to special
risks of prepayment. Prepayment risk occurs when the issuer of a security can
prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including the collateralized mortgage obligations and other
mortgage-related securities that the Portfolio can buy, generally offer less
potential for gains when prevailing interest rates decline, and have greater
potential for loss when interest rates rise. The impact of prepayments on the
price of a security may be difficult to predict and may increase the volatility
of the price. In addition, early repayment of mortgages underlying these
securities may expose the Portfolio to a lower rate of return when it reinvests
the principal. Further, the Portfolio may buy mortgage-related securities at a
premium. Accelerated prepayments on those securities could cause the Portfolio
to lose a portion of its principal investment represented by the premium the
Portfolio paid.
If interest rates rise rapidly, prepayments may occur at slower rates
than expected, which could have the effect of lengthening the expected maturity
of a short-or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Portfolio's shares to fluctuate more.
Non-mortgage asset-backed securities are not issued or guaranteed by
the U.S. government or its agencies or government-sponsored entities. In the
event of a failure of these securities to pay interest or repay principal, the
assets backing these securities such as automobiles or credit card receivables
may be insufficient to support the payments on the securities.
Past Performance:
- ----------------
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not
-52-
<PAGE>
include the effect of Contract charges. If these Contract charges had been
included, performance would have been lower. As with all mutual funds, past
returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/13/94) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
15.64% 1.81% 9.15% 7.38% (0.87)%
95 96 97 98 99
High Quarter: 2nd - 1995 +5.52%
Low Quarter: 1st - 1996 -2.63%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/99 with the Lehman Brothers Aggregate Bond Index, a widely recognized
unmanaged index that measures the market performance of government and
government agency debt securities, corporate securities, asset-backed
securities, and mortgage-backed securities, and with the Lipper VA General U.S.
Government Index, an equally weighted performance index of U.S. Government funds
underlying 30 variable annuities. An index does not include transaction costs
associated with buying and selling securities or any mutual fund expenses. It is
not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
1 Year 5 Year Since Inception
----------------------------------
Portfolio (0.87)% 6.46% 5.64%
Lehman Brothers Aggregate 0.82% 7.73% 6.93%*
Bond Index
Lipper VA General U.S. Government 5.72% 4.93%* (2.80)%
Index
* From 4/30/94
[SIDE BAR:
--------
Portfolio Management:
o The Dreyfus Corporation
see page 75
o For financial highlights
see page 81]
-53-
<PAGE>
[Left Side:]
---------
Endeavor High Yield Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o High current income and are willing to assume the risks of investing
in junk bonds]
Investment Objective
To provide high current income by investing primarily in a
professionally managed diversified portfolio of fixed income securities some of
which may involve equity features. Capital growth, if any, is a consideration
incidental to the objective of high current income.
Principal Investment Strategy
The Portfolio invests, under normal market conditions, at least 80% of
its total assets in high yield fixed income securities. Fixed income securities
offering the high current income sought by the Portfolio generally are lower
rated bonds. These bonds, commonly known as junk bonds, are assigned lower
credit ratings by credit rating agencies or are unrated and considered by the
investment adviser to be comparable to lower rated bonds. In analyzing debt
securities, the investment adviser may purchase securities of any maturity.
[SIDE BAR:
--------
While the Portfolio focuses its investments on long- and short-term
fixed, contingent or variable interest rate bonds issued by corporations or
other similar entities, it may invest in all types of debt and other fixed
income securities including:
o zero-coupon bonds, deferred interest bonds and pay-in-kind bonds
o mortgage-backed securities
o collateralized mortgage obligations
o convertible securities
o non-mortgage-backed securities (such as pools of motor vehicle
installment purchase obligations and credit card receivables)
o participations in bank loans to corporate borrowers
o U.S. government securities including U.S. Treasury obligations
o Brady bonds
o commercial paper and other short-term corporate obligations
o Eurodollar obligations
o variable amount master demand notes and variable rate notes]
-54-
<PAGE>
The Portfolio may invest up to 25% of its net assets in foreign securities
including foreign debt securities such as Eurodollar bonds and Yankee bonds. The
Portfolio may invest in foreign securities of issuers located in emerging
markets (up to 5% of net assets). The Portfolio may also engage in foreign
currency transactions in order to attempt to hedge against adverse changes in
currency exchange rates.
In selecting fixed income investments for the Portfolio, the investment
adviser considers the views of its large group of fixed income portfolio
managers and research analysts. This group periodically assesses the three-month
total return outlook for various segments of the fixed income markets. This
three-month "horizon" outlook is used by the portfolio managers of the
investment adviser's fixed income oriented funds (including the Portfolio) as a
tool in making or adjusting the Portfolio's asset allocations to various
segments of the fixed income markets. In assessing the credit quality of fixed
income securities, the investment adviser does not rely solely on the credit
ratings assigned by credit rating agencies, but rather performs its own
independent credit analysis.
-55-
<PAGE>
[Right side:]
Primary Risks
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease
or could cause the Portfolio's yield to fluctuate:
o Interest rate risk
o Credit risk
o High yield debt security risk
o Foreign investment risk
In addition, investments in emerging markets include all of the risks
of investments in foreign securities and are subject to severe price declines.
The economic and political structures of developing nations, in most cases, do
not compare favorably with the U.S. or other developed countries in terms of
wealth and stability, and their financial markets often lack liquidity. Such
countries may have relatively unstable governments, immature economic
structures, national policies restricting investments by foreigners and
economies based on only a few industries. For these reasons, all of the risks of
investing in foreign securities are heightened by investing in emerging markets
countries. The markets of developing countries have been more volatile than the
markets of developed countries with more mature economies. These markets often
have provided significantly higher or lower rates of return than developed
markets, and significantly greater risks, to investors.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for the full
calendar year since its inception (6/01/98). The Portfolio can also experience
short-term performance swings as indicated in the high and low quarter
information at the bottom of the chart.
Total Return as of 12/31
5.82%
99
High Quarter: 1st - 1999 +4.29%
-56-
<PAGE>
Low Quarter: 3rd - 1999 -0.47%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/99 with
the Lehman Brothers High Yield Index, which is an index composed of high current
yield bonds, and with the Lipper VA High Current Yield Index, an equally
weighted performance index of high current yield funds underlying 30 variable
annuities. An index does not include transaction costs associated with buying
and selling securities or any mutual fund expenses. It is not possible to invest
directly in an index.
Average Annual Total Return as of 12/31/99
1 Year Since Inception
---------------------------
Portfolio 5.82% 1.60%
Lehman Brothers High Yield 2.39% 0.11%*
Index
Lipper VA High Current Yield 2.45% (1.75)%*
Index
* From 5/31/98
[SIDE BAR:
--------
Portfolio Management
o Massachusetts Financial Services Company
see page 76
o For financial highlights
see page 81]
-57-
<PAGE>
[Left Side:]
---------
Endeavor Asset Allocation Portfolio
[SIDE BAR:
--------
This Portfolio may be appropriate for you if you seek:
o A relatively conservative investment
o Long-term growth of capital with reduced market
volatility through asset allocation]
Investment Objective
To provide high total return through a managed asset allocation
portfolio of equity, fixed income and money market securities.
Principal Investment Strategy
The Portfolio is made up of three asset classes:
Equity - The Portfolio's investment adviser seeks to maximize long-term
capital appreciation of the equity portion of the Portfolio by investing
primarily in equity securities of large U.S. companies that exhibit strong or
accelerating earnings growth. The universe of eligible companies generally
includes those with market capitalizations of $1 billion or more. The investment
adviser emphasizes individual security selection and may focus this portion of
the Portfolio's holdings within the limits permissible for a diversified fund.
In selecting securities for the equity portion of the Portfolio, the
Portfolio's investment adviser continually and rigorously studies company
developments, including business strategy, management focus and financial
results, to identify companies with earnings growth and business momentum. In
addition, the investment adviser closely monitors analysts' expectations to
identify issuers that have the potential for positive earnings surprises versus
consensus expectations. Valuation is of secondary importance and is viewed in
the context of prospects for sustainable earnings growth and the potential for
positive earnings surprises in relation to consensus expectations.
Fixed income - The following instruments make up the fixed income
portion of the Portfolio:
o U.S. government securities
o collateralized mortgage obligations ("CMOs") that are issued or
guaranteed by the U.S. government, its agencies or government- sponsored
entities or that are collateralized by a portfolio of mortgages or
mortgage-related securities guaranteed by such an agency or entity
o CMOs that are not guaranteed by the U.S. government, its agencies or
government-sponsored entities
o high grade corporate and mortgage-backed bonds with maturities typically
ranging from two to thirty years
o short-term bonds and notes with remaining maturities of 13 months or
less.
o mortgage-backed securities, including GNMA certificates, and mortgage-
backed bonds
o zero-coupon bonds
[SIDE BAR:
--------
The Portfolio may also invest in repurchase agreements, depositary
receipts, forward commitments and may purchase and sell interest rate futures
and options and futures on stock indices.]
The dollar-weighted average maturity of such investments will generally
range from three to ten years and the securities will, at time of purchase, have
ratings within the four highest rating categories established by a nationally
recognized rating agency, or if not rated, be of comparable quality as
determined by the Portfolio's investment adviser. Although there is no minimum
or maximum maturity for any individual security in the fixed income portion of
the Portfolio, the Portfolio's investment adviser actively manages the interest
rate risk of this portion within a range relative to the benchmark.
The Portfolio's investment adviser relies upon value measures to guide
its decisions regarding sector and security selection for the fixed income
portion of the Portfolio, such as the relative attractiveness of the extra yield
offered by securities other than those issued by the U.S. Treasury. The
investment adviser also measures various types of risk, focusing on the level of
real interest rates, the shape of the yield curve, credit risk and prepayment
risk. The investment adviser may sell securities when it believes that expected
risk-adjusted return is low compared to other investment opportunities.
Cash - This portion of the Portfolio is invested in high quality money
market securities including U.S. government securities.
The Portfolio's investment adviser determines the appropriate weighting
of each asset class and adjusts it periodically. There are no limits on the
amount of investments in each asset class. In making adjustments to the asset
allocation, the Portfolio's investment adviser uses its asset allocation model
and integrates its view of
-58-
<PAGE>
the expected returns for each asset class, and factors in the stock, bond and
money markets, interest rate and corporate earnings growth trends, and economic
conditions.
-59-
<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease
or could cause the Portfolio's yield to fluctuate:
o Market risk
o Interest rate risk
o Credit risk
o Market capitalization risk
o Investment style risk
Like other debt securities, changes in interest rates generally affect
the value of a mortgage-backed security. Additionally, some mortgage-backed
securities may be structured so that they may be particularly sensitive to
interest rates.
Investments in mortgage-related securities are also subject to special
risks of prepayment. Prepayment risk occurs when the issuer of a security can
prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including collateralized mortgage obligations and other
mortgage-related securities that the Portfolio can buy, generally offer less
potential for gains when prevailing interest rates decline, and have greater
potential for loss when interest rates rise. The impact of prepayments on the
price of a security may be difficult to predict and may increase the volatility
of the price. In addition, early repayment of mortgages underlying these
securities may expose the Portfolio to a lower rate of return when it reinvests
the principal. Further, the Portfolio may buy mortgage-related securities at a
premium. Accelerated prepayments on those securities could cause the Portfolio
to lose a portion of its principal investment represented by the premium the
Portfolio paid.
If interest rates rise rapidly, prepayments may occur at slower rates
than expected, which could have the effect of lengthening the expected maturity
of a short-or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Portfolio's shares to fluctuate more.
Past Performance:
- ----------------
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included,
-60-
<PAGE>
performance would have been lower. As with all mutual funds, past returns are
not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (4/8/91) and indicates how it has varied from
year to year. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
<TABLE>
<CAPTION>
Year-by-Year Total Return as of 12/31 of Each Year
<S> <C> <C> <C> <C> <C> <C> <C>
9.01% 16.79% (5.28)% 22.91% 17.82% 20.14% 18.39% 26.39%
92 93 94 95 96 97 98 99
</TABLE>
High Quarter: 4th - 1999 +15.66%
Low Quarter: 3rd - 1998 -9.59%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period, and since inception through
12/31/99 with the S&P 500 Index, a widely recognized unmanaged index that
measures the stock performance of 500 large- and medium-sized publicly traded
companies and is often used to indicate the performance of the overall stock
market, a blended index which weights the different asset classes, and with the
Lipper VA Flexible Portfolio Index, an equally weighted performance index of
flexible portfolio funds underlying 30 variable annuities. An index does not
include transaction costs associated with buying and selling securities or any
mutual fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
Since
1 Year 5 Year Inception
-------- ------ ---------
-------------------------------------
Portfolio 26.39% 21.09% 15.68%
S&P 500 Index 21.03% 28.54% 19.62%*
Blended Index (65%
S&P 500 Index, 30%
Lehman Brothers Aggregate
Bond Index, 5% 90 day
T-Bills) 8.32% 13.80% 15.22%*
Lipper VA Flexible
Portfolio Index 11.86% 16.41% 12.07%*
* From 3/31/91
-61-
<PAGE>
[SIDE BAR:
--------
Portfolio Management
o Morgan Stanley Asset Management
see page 72
o For financial highlights see page 81]
-62-
<PAGE>
Primary Risks of Investing in the Portfolios
One or more of the following primary risks may apply to your Portfolio. Please
see the Investment Summary for your particular Portfolio to determine which
risks apply and for a discussion of other risks that may apply to the Portfolio.
Market Risk
A Portfolio's share price can fall because of weakness in the broad market, a
particular industry, or specific holdings. The market as a whole can decline for
many reasons, including disappointing corporate earnings, adverse political or
economic developments here or abroad, changes in investor psychology, or heavy
institutional selling. The prospects for an industry or a company may
deteriorate. In addition, an assessment by a Portfolio's investment adviser of
particular companies may prove incorrect, resulting in losses or poor
performance by those holdings, even in a rising market. A Portfolio could also
miss attractive investment opportunities if its investment adviser underweights
fixed income markets or industries where there are significant returns, and
could lose value if the investment adviser overweights fixed income markets or
industries where there are significant declines.
Interest Rate Risk
The values of debt securities are subject to change when prevailing interest
rates change. When interest rates go up, the value of debt securities and
certain dividend paying stocks tends to fall. If your Portfolio invests a
significant portion of its assets in debt securities or stocks purchased
primarily for dividend income and interest rates rise, then the value of your
investment may decline. Alternatively, when interest rates go down, the value of
debt securities and certain dividend paying stocks may rise.
Interest rate risk will affect the price of a fixed income security more if the
security has a longer maturity because changes in interest rates are
increasingly difficult to predict over longer periods of time. Fixed income
securities with longer maturities will therefore be more volatile than other
fixed income securities with shorter maturities. Conversely, fixed income
securities with shorter maturities will be less volatile but generally provide
lower returns than fixed income securities with longer maturities. The average
maturity of a Portfolio's fixed income investments will affect the volatility of
the Portfolio's share price.
[SIDE BAR:
--------
A fixed income security's term to maturity is the time until a fixed
income security provides its final payment.]
Credit Risk
-63-
<PAGE>
The value of debt securities is directly affected by an issuer's ability to pay
principal and interest on time. If your Portfolio invests in debt securities,
the value of your investment may be adversely affected when an issuer fails to
pay an obligation on a timely basis.
High Yield Debt Security Risk
High yield debt securities, or junk bonds, are securities which are rated below
"investment grade" or are not rated, but are of equivalent quality. High yield
debt securities range from those for which the prospect for repayment of
principal and interest is predominantly speculative to those which are currently
in default on principal or interest payments. A Portfolio with high yield debt
securities may be more susceptible to credit risk and market risk than a
Portfolio that invests only in higher quality debt securities because these
lower-rated debt securities are less secure financially and more sensitive to
downturns in the economy. In addition, the secondary market for such securities
may not be as liquid as that for more highly rated debt securities. As a result,
a Portfolio's investment adviser may find it more difficult to sell these
securities or may have to sell them at lower prices.
You should understand that high yield securities are not generally meant for
short-term investing. When a Portfolio invests in high yield securities it
generally seeks to receive a correspondingly higher return to compensate it for
the additional credit risk and market risk it has assumed.
Foreign Investment Risk
Investments in foreign securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject:
o These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer of
portfolio assets, and political or social instability.
o Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
o Foreign companies may not be subject to accounting standards
or governmental supervision comparable to U.S. companies, and
there may be less public information about their operations.
oForeign markets may be less liquid and more volatile than U.S. markets.
o Foreign securities often trade in currencies other than the U.S. dollar,
and a Portfolio may directly hold foreign currencies and purchase and sell
foreign currencies. Changes in currency exchange rates will affect a
-64-
<PAGE>
Portfolio's net asset value, the value of dividends and
interest earned, and gains and losses realized on the sale of
foreign securities. An increase in the strength of the U.S.
dollar relative to these other currencies may cause the value
of a Portfolio to decline. Certain foreign currencies may be
particularly volatile, and foreign governments may intervene
in the currency markets, causing a decline in value or
liquidity of a Portfolio's foreign currency or securities
holdings.
o Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than
those involved in domestic transactions.
Market Capitalization Risk
Stocks fall into three broad market capitalization categories--large, medium and
small. Investing primarily in one category carries the risk that due to current
market conditions that category may be out of favor. If valuations of large
capitalization companies appear to be greatly out of proportion to the
valuations of small or medium capitalization companies, investors may migrate to
the stocks of small and mid-sized companies causing a Portfolio that invests in
these companies to increase in value more rapidly than a Portfolio that invests
in larger, fully-valued companies. Investing in medium and small capitalization
companies may be subject to special risks associated with narrower product
lines, more limited financial resources, smaller management groups, and a more
limited trading market for their stocks as compared with larger companies.
Securities of smaller capitalization issuers may therefore be subject to greater
price volatility and may decline more significantly in market downturns than
securities of larger companies.
Investment Style Risk
Different investment styles tend to shift in and out of favor depending upon
market and economic conditions as well as investor sentiment. A Portfolio may
outperform or underperform other funds that employ a different investment style.
A Portfolio may also employ a combination of styles that impact its risk
characteristics. Examples of different investment styles include growth and
value investing. Growth stocks may be more volatile than other stocks because
they are more sensitive to investor perceptions of the issuing company's growth
of earnings potential. Also, since growth companies usually invest a high
portion of earnings in their business, growth stocks may lack the dividends of
value stocks that can cushion stock prices in a falling market. Growth oriented
funds will typically underperform when value investing is in favor. Value stocks
are those which are undervalued in comparison to their peers due to adverse
business developments or other factors. Value investing carries the risk that
the market will not recognize a security's inherent value for a long time, or
that a stock judged to be undervalued may actually be appropriately priced or
overvalued. Value oriented funds will typically underperform when growth
investing is in favor.
-65-
<PAGE>
Additional Investment Strategies
In addition to the principal investment strategies discussed in each
individual Portfolio's Investment Summary, a Portfolio, as indicated, may at
times invest a portion of its assets in the investment strategies and may engage
in certain investment techniques as described below. These strategies and
techniques may involve risks. Although a Portfolio that is not identified below
in connection with a particular strategy or technique generally has the ability
to engage in such a transaction, its investment adviser currently intends to
invest little, if any, of the Portfolio's assets in that strategy or technique.
(Please note that some of these strategies may be a principal investment
strategy for a particular Portfolio and consequently are also described in that
Portfolio's Investment Summary.)
For a description of each of these investment techniques and strategies, please
refer to the Glossary of Investment Terms on page 112.
<TABLE>
<CAPTION>
INVESTMENT
STRATEGY PORTFOLIO RISKS
- ----------- --------- -----
<S> <C> <C>
Foreign Debt T. Rowe Price International Foreign debt securities may be
Securities Stock subject to foreign investment
T. Rowe Price Growth risk, credit risk, and interest
Stock rate risk. Securities in
Endeavor Janus Growth developing countries are also
Endeavor High Yield subject to the additional risks
associated with emerging
markets.
U.S. Government All Portfolios U.S. government securities are
Securities subject to interest rate risk.
Credit risk is remote.
-66-
<PAGE>
INVESTMENT
Derivatives Options Derivatives may be used to
-------
hedge against an opposite
Endeavor Opportunity position that a Portfolio holds.
Value Any loss generated by the
Endeavor Select derivatives should be offset by
Dreyfus U.S. Government gains in the hedged
Securities investment. While hedging can
Endeavor Asset Allocation reduce or eliminate losses, it
can also reduce or eliminate
Futures gains or result in losses or
-------
missed opportunities. In
addition, derivatives that are
Endeavor Opportunity used for hedging the Portfolio
Value in specific securities may not
Endeavor Janus Growth fully offset the underlying
Endeavor Select positions. The counterparty to
Dreyfus U.S. Government a derivatives contract also
Securities could default. Derivatives that
Endeavor High Yield involve leverage could magnify
Endeavor Asset Allocation losses.
Derivatives
may
also
be
used
to
maintain
a
Portfolio's
exposure
to the
market,
manage
cash
flows
or to
attempt
to
increase
income.
Using
derivatives
for
purposes
other
than
hedging
is
speculative
and
involves
greater
risks.
In
many
foreign
countries,
futures
and
options
markets
do not
exist
or are
not
sufficiently
developed
to be
effectively
used
by a
Portfolio
that
invests
in
foreign
securities.
-67-
<PAGE>
INVESTMENT
High Quality Short- All Portfolios These instruments are subject term Debt to
credit risk and interest rate Obligations risk.
including Bankers'
Acceptances,
Commercial Paper,
Certificates of
Deposit and
Eurodollar
Obligations issued
or guaranteed by
Bank Holding
Companies in the
U.S., their
Subsidiaries and
Foreign Branches
or of the World
Bank; Variable
Amount Master
Demand Notes and
Variable Rate Notes
issued by U.S. and
Foreign
Corporations; and
Short-term
Corporate Bonds
-68-
<PAGE>
INVESTMENT
Foreign Currency T. Rowe Price International Foreign currency exchange
Transactions Stock rates may fluctuate significantly
T. Rowe Price Growth over short periods of time. A
Stock forward foreign currency
Endeavor Janus Growth exchange contract reduces the
Endeavor Select Portfolio's exposure to changes
Endeavor High Yield in the value of the currency it
will
deliver
and
increases
its
exposure
to
changes
in the
value
of the
currency
it
will
exchange
into.
Contracts
to
sell
foreign
currency
will
limit
any
potential
gain
which
might
be
realized
by the
Portfolio
if the
value
of the
hedged
currency
increases.
In the
case
of
forward
contracts
entered
into
for
the
purpose
of
increasing
return,
the
Portfolio
may
sustain
losses
which
will
reduce
its
gross
income.
Forward
foreign
currency
exchange
contracts
also
involve
the
risk
that
the
party
with
which
the
Portfolio
enters
the
contract
may
fail
to
perform
its
obligations
to the
Portfolio.
The
purchase
and
sale
of
foreign
currency
futures
contracts
and
the
purchase
of
call
and
put
options
on
foreign
currency
futures
contracts
and on
foreign
currencies
involve
certain
risks
associated
with
derivatives.
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<PAGE>
INVESTMENT
Preferred Stocks Endeavor Opportunity Preferred stocks are subject to
Value market risk. In addition,
T. Rowe Price Equity because preferred stocks pay
Income fixed dividends, an increase in
T. Rowe Price Growth interest rates may cause the
Stock price of a preferred stock to
fall.
Endeavor Janus Growth
Endeavor Select
Dreyfus U.S. Government
Securities
Endeavor Asset Allocation
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<PAGE>
INVESTMENT
Collateralized Endeavor Opportunity CMOs carry general fixed
Mortgage Value income securities risks, such
Obligations (CMOs) Dreyfus U.S. Government as credit risk and interest rate
Securities risk, and risks associated with
Endeavor High Yield mortgage-backed securities.
Endeavor Asset Allocation
These
securities
also
involve
prepayment
risk
which
is the
risk
that
the
underlying
mortgages
or
other
debt
may be
refinanced
or
paid
off
prior
to
their
maturities
during
periods
of
declining
interest
rates.
In
that
case,
an
investment
adviser
may
have
to
reinvest
the
proceeds
from
the
securities
at a
lower
rate.
Potential
market
gains
on a
security
subject
to
prepayment
risk
may be
more
limited
than
potential
market
gains
on a
comparable
security
that
is not
subject
to
prepayment
risk.
Convertible Endeavor Opportunity Traditionally, convertible
Securities Value securities have paid dividends
Dreyfus Small Cap Value or interest rates higher than
T. Rowe Price Equity common stocks but lower than
Income nonconvertible securities.
T. Rowe Price Growth They generally participate in
Stock the appreciation or
Endeavor Enhanced Index depreciation of the underlying
stock into which they are
Endeavor Janus Growth convertible, but to a lesser
Endeavor Select degree. These securities are
Dreyfus U.S. Government also subject to market risk and
Securities credit risk.
Endeavor High Yield
Endeavor Asset Allocation
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<PAGE>
INVESTMENT
Rights and T. Rowe Price International These investments carry the
Warrants Stock risk that they may be worthless
T. Rowe Price Equity to the Portfolio at the time it
Income may exercise its rights, due to
T. Rowe Price Growth the fact that the underlying
Stock securities have a market value
Endeavor Enhanced Index less than the exercise
price of the right or warrant.
Endeavor Janus Growth
Endeavor Select
Endeavor High Yield
Endeavor Asset Allocation
Mortgage-backed Endeavor Opportunity These securities carry general
Securities, Value fixed income security risks,
including GNMA Dreyfus U.S. Government such as credit risk and interest
Certificates, Securities rate risk, and risks associated
Mortgage-backed Endeavor High Yield with mortgage-backed
Bonds Endeavor Asset Allocation securities. These securities
also carry prepayment risk, as
described under CMOs, above.
Non-mortgage Dreyfus U.S. Government The value of some asset-
Asset-backed Securities backed securities may be
Securities Endeavor High Yield particularly sensitive to
Endeavor Asset Allocation changes in prevailing interest
rates, and like other fixed
income investments, the ability
of the Portfolio to successfully
use these instruments may
depend in part upon the ability
of an investment adviser to
forecast interest rates and
other economic factors
correctly.
Interest Rate Dreyfus U.S. Government There is the risk that the
Transactions Securities investment adviser may
Endeavor High Yield incorrectly predict the direction
Endeavor Asset Allocation of interest rates resulting in
losses to the Portfolio.
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<PAGE>
INVESTMENT
Depositary T. Rowe Price International These instruments are subject
Receipts Stock to market risk and foreign
T. Rowe Price Equity investment risk.
Income
T. Rowe Price Growth
Stock
Endeavor Enhanced Index
Endeavor Janus Growth
Endeavor Select
Endeavor Asset Allocation
Illiquid Securities Endeavor Enhanced Index The Portfolio could have
difficulty valuing these holdings
Endeavor Janus Growth precisely or could be
unable to Endeavor Select sell those holdings
at the time Dreyfus U.S. Government or price it
desires.
Securities
Endeavor High Yield
Endeavor Asset Allocation
Dollar Roll Dreyfus U.S. Government If the broker-dealer to whom
Transactions Securities the Portfolio sells the security
becomes
insolvent,
the
Portfolio's
right
to
purchase
or
repurchase
the
security
may be
restricted;
the
value
of the
security
may
change
adversely
over
the
term
of the
dollar
roll;
the
security
that
the
Portfolio
is
required
to
repurchase
may be
worth
less
than
the
security
that
the
Portfolio
originally
held;
and
the
return
earned
by the
Portfolio
with
the
proceeds
of a
dollar
roll
may
not
exceed
transaction
costs.
-73-
<PAGE>
INVESTMENT
PIK (pay-in-kind) Endeavor Janus Growth These securities are subject to Debt
Securities Endeavor High Yield credit risk and interest rate risk.
Endeavor Asset Allocation These investments also may
experience greater volatility in
market value due to changes in
interest rates than debt
obligations which make regular
payments of interest. The
Portfolio will accrue income on
such investments for tax
accounting purposes, as
required, which is distributable
to shareholders and which,
because no cash is received at
the time of accrual, may
require the liquidation of other
portfolio securities to satisfy the
Portfolio's distribution
obligations.
Repurchase Endeavor Money Market Repurchase agreements
Agreements Endeavor Enhanced Index involve the risk that the seller
will fail to repurchase the
Endeavor Janus Growth security, as agreed. In that
Endeavor Select case, the Portfolio will bear the
Dreyfus U.S. Government risk of market value
Securities fluctuations until the security
Endeavor High Yield can be sold and may
Endeavor Asset Allocation encounter delays and incur
costs in liquidating the security.
Reverse Endeavor Money Market Reverse repurchase
Repurchase Endeavor Enhanced Index agreements will be used
Agreements Dreyfus U.S. Government primarily to provide cash to
Securities satisfy unusually high
redemption requests, or for
other temporary or emergency
purposes. Reverse repurchase
agreements are considered a
form of borrowing by the
Portfolio and, therefore, are a
form of leverage. Leverage
may cause any gains or losses
of the Portfolio to be magnified.
-74-
<PAGE>
INVESTMENT
Municipal Dreyfus U.S. Government These investments are subject
Securities Securities to interest rate risk and credit
risk.
Forward T. Rowe Price International The Portfolio does not earn
Commitments, Stock interest on such securities until
When-Issued and Endeavor Value Equity settlement and bears the risk
Delayed Delivery Endeavor Janus Growth of market value fluctuations in
Securities Dreyfus U.S. Government between the purchase and
Securities settlement dates.
Endeavor High Yield
Endeavor Asset Allocation
Zero-coupon Bonds Endeavor Opportunity These investments have the
Value same risks as those described
Endeavor Janus Growth for PIKs above.
Dreyfus U.S. Government
Securities
Endeavor High Yield
Endeavor Asset Allocation
Hybrid Instruments T. Rowe Price International Hybrids may bear interest or
Stock pay dividends at below market
T. Rowe Price Equity (or even relatively nominal)
Income rates. Under certain
T. Rowe Price Growth conditions, the redemption
Stock value of the instrument could
Endeavor Janus Growth be zero. Hybrids can have
Endeavor Asset Allocation volatile prices and limited
liquidity and their use by the
Portfolio may not be
successful.
-75-
<PAGE>
INVESTMENT
Investment Grade Endeavor Money Market Interest rate risk and credit risk.
Corporate Debt Endeavor Opportunity Securities rated in the fourth
Securities Value investment category by a
T. Rowe Price Equity nationally recognized rating
Income agency may have speculative
T. Rowe Price Growth characteristics.
Stock
Endeavor Enhanced Index
Endeavor Janus Growth
Endeavor Select
Dreyfus U.S. Government
Securities
Endeavor High Yield
Endeavor Asset Allocation
Investments in T. Rowe Price International When the Portfolio invests in
Other Investment Stock another investment company, it
Companies Endeavor Janus Growth must bear the management
including Passive Endeavor High Yield and other fees of the
Foreign Investment Endeavor Asset Allocation investment company, in
Companies addition to its own expenses.
As a
result,
the
Portfolio
may be
exposed
to
duplicate
expenses
which
could
lower
its
value.
Investments
in
passive
foreign
investment
companies
also
are
subject
to
foreign
investment
risk.
High Yield/High Endeavor Opportunity High yield/high risk debt
Risk Debt Value securities are subject to high
Securities T. Rowe Price Equity yield debt security risk.
Income
Endeavor Janus Growth
Endeavor Select
Endeavor High Yield
Dreyfus U.S. Government
Securities
Defensive Investments
</TABLE>
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<PAGE>
Under adverse market or economic conditions, a Portfolio could invest
for temporary defensive purposes some or all of its assets in money market
securities or utilize other investment strategies that may be inconsistent with
a Portfolio's principal investment strategy. Although a Portfolio would employ
these measures only in seeking to avoid losses, they could reduce the benefit
from an upswing in the market or prevent the Portfolio from meeting its
investment objective.
Portfolio Turnover
The Portfolios' investment advisers will sell a security when they
believe it is appropriate to do so, regardless of how long a Portfolio has owned
that security. Buying and selling securities generally involves some expense to
a Portfolio, such as commissions paid to brokers and other transaction costs.
Generally speaking, the higher a Portfolio's annual portfolio turnover rate, the
greater its brokerage costs. Increased brokerage costs may adversely affect a
Portfolio's performance. The Portfolios, with the exception of Endeavor Money
Market Portfolio, Endeavor Asset Allocation Portfolio, Dreyfus Small Cap Value
Portfolio, Dreyfus U.S. Government Securities Portfolio, Endeavor Janus Growth
Portfolio, and Endeavor Select Portfolio, generally intend to purchase
securities for long-term investment and therefore have a relatively low turnover
rate. Annual turnover rate of 100% or more is considered high and will result in
increased costs to the Portfolios. Endeavor Money Market Portfolio, Endeavor
Asset Allocation Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, Endeavor Janus Growth Portfolio, and Endeavor
Select Portfolio generally will have annual turnover rates in excess of 100%.
The turnover rates for the Portfolios can be found in the Financial
Highlights section of this Prospectus, except for Endeavor Money Market
Portfolio whose turnover rate is not meaningful because of the very short-term
nature of its holdings.
Downgrades in Fixed Income Debt Securities
Unless required by applicable law, the Portfolios are not required to
sell or dispose of any debt security that either loses its rating or has its
rating reduced after a Portfolio purchases the security.
-77-
<PAGE>
Management
The Manager
Endeavor Management Co. (the "Manager"), 2101 East Coast Highway, Suite 300,
Corona del Mar, California 92625, has overall responsibility for the general
management and administration of all of the Portfolios. The Manager selects and
pays the fees of the investment advisers for each of the Trust's Portfolios and
monitors each investment adviser's investment program.
The annual management fee, as a percentage of a Portfolio's average daily net
assets, that the Manager receives from each Portfolio for these services is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Endeavor Money Market Portfolio - .50% T. Rowe Price Equity Income Portfolio - .80%
Endeavor Asset Allocation Portfolio - .75% T. Rowe Price Growth Stock Portfolio - .80%
T. Rowe Price International Stock Portfolio - .90% Endeavor Enhanced Index Portfolio - .75%
Endeavor Value Equity Portfolio- .80% Endeavor Select Portfolio - 1.00%
Endeavor Opportunity Value Portfolio- .80% Endeavor High Yield Portfolio - .775%
Dreyfus Small Cap Value Portfolio - .80% Endeavor Janus Growth Portfolio - .80%
Dreyfus U.S. Government Securities Portfolio - .65%
</TABLE>
The Trust and the Manager have received an exemptive order from the
Securities and Exchange Commission that permits the Manager, subject to certain
conditions, and without the approval of shareholders to: (a) employ a new
unaffiliated investment adviser for a Portfolio pursuant to the terms of a new
investment advisory agreement, in each case either as a replacement for an
existing investment adviser or as an additional investment adviser; (b) change
the terms of any investment advisory agreement; and (c) continue the employment
of an existing investment adviser on the same advisory contract terms where a
contract has been assigned because of a change in control of the investment
adviser. In such circumstances, shareholders would receive notice of such
action, including the information concerning the investment adviser that
normally is provided in a proxy statement. The exemptive order also permits
disclosure of fees paid to multiple unaffiliated investment advisers of a
Portfolio on an aggregate basis only.
The Investment Advisers
The investment adviser of each Portfolio makes day-to-day investment
decisions, arranges for the execution of portfolio transactions, and generally
manages each Portfolio's investments.
Endeavor Money Market Portfolio
Endeavor Asset Allocation Portfolio
Morgan Stanley Asset Management ("Morgan Stanley"), 1221 Avenue of the
Americas, New York, New York 10020, a subsidiary of Morgan Stanley Dean Witter &
Co., is each Portfolio's investment adviser. Morgan Stanley has been in the
investment management business since 1975. As of December 31, 1999, Morgan
Stanley,
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<PAGE>
together with its affiliated institutional asset management companies, managed
assets of approximately $184.9 billion. On December 1, 1998, Morgan Stanley
Asset Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain circumstances using the
name Morgan Stanley Asset Management.
An asset allocation team makes the allocation decisions between equity
and fixed income securities for the Endeavor Asset Allocation Portfolio.
The day-to-day investment management decisions for the equity portion
of the Endeavor Asset Allocation Portfolio are made by:
o Philip W. Friedman - a Managing Director of Morgan Stanley since 1997 and
currently head of Morgan Stanley's Institutional Equity Group. He has been a
Managing Director of Morgan Stanley & Co. Incorporated, a Morgan Stanley
affiliate, since 1990. Mr. Friedman has shared primary responsibility for
managing the Equity Growth Portfolio of the Morgan Stanley Dean Witter
Institutional Fund, Inc. since September 1998.
o Margaret K. Johnson - a Managing Director of Morgan Stanley and a Portfolio
Manager in the Institutional Equity Group. She joined Morgan Stanley in 1984 and
became an equity analyst in 1986 and a Portfolio Manager in 1989. Ms. Johnson
has shared primary responsibility for managing the Equity Growth Portfolio of
the Morgan Stanley Dean Witter Institutional Fund, Inc. since its inception in
April 1991.
o William S. Auslander - a Principal of Morgan Stanley and a Portfolio Manager
in the Institutional Equity Group. Prior to joining Morgan Stanley in 1995, he
was an equity analyst at Icahn & Co. from 1986 to 1995. Mr. Auslander has shared
primary responsibility for managing the Equity Growth Portfolio of the Morgan
Stanley Dean Witter Institutional Fund, Inc. since September 1998.
Mr. Friedman and Mr. Auslander joined Ms. Johnson in assuming responsibility for
managing the equity portion of the Endeavor Asset Allocation Portfolio's assets
at the end of September 1998.
The Portfolio's fixed income portion is managed by:
o Thomas L. Bennet - a Managing Director of Morgan Stanley & Co. Incorporated.
He joined Miller Anderson & Sherrerd, LLP ("MAS"), an affiliated asset
management company of Morgan Stanley, in 1984. He assumed responsibility for the
MAS Funds Fixed Income Portfolio in 1984, the MAS Funds Domestic Fixed Income
Portfolio in 1987, the MAS Funds High Yield Portfolio in 1985, the MAS Funds
Fixed Income II Portfolio in 1990, the MAS Funds Special Purpose Fixed Income
and Balanced Portfolios in 1992, the MAS Funds Multi-Asset- Class Portfolio in
1994, and the MAS Funds Multi-Market Fixed Income Portfolio in 1997.
o Kenneth B. Dunn - a Managing Director of Morgan Stanley & Co.
Incorporated. He joined MAS in 1987. He assumed responsibility for the
MAS Funds Fixed Income and Domestic Fixed Income Portfolios in 1987,
the MAS Funds Fixed Income II Portfolio in 1990, the MAS Funds
Mortgage-Backed Securities and Special Purpose Fixed Income Portfolios
in 1992, and the MAS Funds Multi- Market Fixed Income Portfolio in
1997.
o Richard B. Worley - a Managing Director of Morgan Stanley & Co. Incorporated.
He joined MAS in 1978. He assumed responsibility for the MAS Funds Fixed Income
Portfolio in 1984, the MAS Funds Domestic Fixed Income Portfolio in 1987, the
MAS Funds Fixed Income II Portfolio in 1990, the MAS Funds Balanced and Special
Purpose Fixed Income Portfolios in 1992, the MAS Funds Global Fixed Income and
International Fixed Income Portfolios in 1993, the MAS Funds Multi-Asset-Class
Portfolio in 1994, the MAS Funds Balanced Plus Portfolio in 1996, and the MAS
Multi-Market Fixed Income Portfolio in 1997. Mr. Worley is currently the
President of Morgan Stanley.
Messrs. Bennett, Dunn, and Worley have shared primary responsibility for
managing the fixed income portion of the Portfolio since May 1, 1998.
T. Rowe Price International Stock Portfolio
Rowe Price-Fleming International, Inc. ("Rowe Price-Fleming"), 100 East
Pratt Street, Baltimore, Maryland 21202, a joint venture established in 1979
between T. Rowe Price Associates, Inc. and the London-based Robert Fleming
Holdings Limited, is the Portfolio's investment adviser. As of December 31,
1999, Rowe Price-Fleming managed over $42 billion in investments for individual
and institutional accounts.
o An investment advisory group makes the Portfolio's day-to-day
investment decisions. This group also manages the T. Rowe Price
International Stock Fund and the Foreign Equity Fund.
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
OpCap Advisors ("OpCap"), 1345 Avenue of the Americas, New York, New
York 10105, is each Portfolio's investment adviser. OpCap is a subsidiary of
Oppenheimer Capital, an investment management firm dedicated to "value
investing." OpCap and its parent have been investment advisers to mutual funds
and other clients since 1968 and have approximately $52 billion under management
as of December 31, 1999.
o John Lindenthal - a senior equity portfolio manager and analyst at
Oppenheimer Capital, has managed the Endeavor Value Equity Portfolio
since December,
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<PAGE>
1999. Mr. Lindenthal has been with Oppenheimer Capital since 1979 and
has been a Managing Director since 1985.
o Richard Glasebrook II - a Managing Director of Oppenheimer Capital, is
the portfolio manager for the Endeavor Opportunity Value Portfolio. Mr.
Glasebrook has been with Oppenheimer Capital since 1990 and was named
1995 Variable Fund Manager of the Year by Morningstar, Inc. (an
independent service that monitors the performance of mutual funds). He
has managed the Oppenheimer Quest Opportunity Value Fund since April
1991.
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
The Dreyfus Corporation ("Dreyfus"), 200 Park Avenue, New York, New
York 10166, is each Portfolio's investment adviser. Dreyfus, established in
1951, is one of the nation's leading fund companies, currently managing more
than $125 billion in more than 160 mutual fund portfolios nationwide as of
December 31, 1999. Dreyfus is a wholly-owned subsidiary of Mellon Bank
Corporation, a global financial services company with approximately $480 billion
in assets under management.
o Gerald E. Thunelius and William Howarth have been co-portfolio managers for
the Dreyfus U.S. Government Securities Portfolio since February 9, 1998. Mr.
Thunelius, who has been with Dreyfus since 1989, is the Senior Portfolio Manager
for the Taxable Fixed Income area of Dreyfus. Mr. Howarth is a junior portfolio
manager who joined Dreyfus in 1992.
o Peter I. Higgins is the portfolio manager for the Dreyfus Small Cap Value
Portfolio. Mr. Higgins has been employed by The Boston Company, Inc., a
subsidiary of Mellon Bank Corporation, since August 1988 and by Dreyfus since
February 1996. He has managed the Dreyfus Small Company Value Fund since
November 1997.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price Associates, Inc.("T. Rowe Price"), 100 East Pratt Street,
Baltimore, Maryland 21202, each Portfolio's investment adviser, was founded in
1937. As of December 31, 1999, T. Rowe Price and its affiliates managed over
$179 billion in investments for more than 8 million individual and institutional
investor accounts.
o Brian C. Rogers - a Managing Director of T. Rowe Price, manages the T. Rowe
Price Equity Income Portfolio day-to-day and has been Chairman of the
Portfolio's Investment Advisory Committee since 1995. He joined T. Rowe Price in
1982 and has been managing investments since 1983. Mr. Rogers has managed the T.
Rowe Price Equity Income Fund since 1993 and the T. Rowe Price Value Fund since
1994.
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<PAGE>
o Robert W. Smith - a Managing Director of T. Rowe Price, manages the T. Rowe
Price Growth Stock Portfolio day-to-day and has been Chairman of the Portfolio's
Investment Advisory Committee since 1997. He joined T. Rowe Price in 1992 as an
equity analyst and has also managed the U.S. stock portion of the T. Rowe Price
Global Stock Fund since its inception in 1996 and the T. Rowe Price Growth Stock
Fund since 1997.
Endeavor Enhanced Index Portfolio
J.P. Morgan Investment Management Inc. ("J.P. Morgan"), 522 Fifth Avenue,
New York, New York 10036, is the Portfolio's investment adviser. J.P. Morgan is
a subsidiary of J.P. Morgan & Co. Incorporated, which has appoximately $349
billion in assets under management as of December 31, 1999.
o An investment advisory group makes the Portfolio's day-to-day investment
decisions. The advisory group also manages the J.P. Morgan Smart Index Fund.
Endeavor Select Portfolio
Montgomery Asset Management, LLC ("Montgomery"), 101 California Street,
San Francisco, California 94111, is the Portfolio's investment adviser. As of
December 31, 1999, Montgomery and its affiliates managed approximately $11
billion of assets. Montgomery is a subsidiary of Commerzbank, AG, the third
largest publicly held commercial bank in Germany, which with its affiliates,
managed over $132 billion in assets as of December 31, 1999. Montgomery may rely
on the expertise, research and resources of Commerzbank, AG and its worldwide
affiliates in managing the Portfolio.
o The investment adviser's three equity investment management teams make
the Portfolio's day-to-day investment decisions and are responsible for
coordinating and implementing allocation among the teams.
Endeavor High Yield Portfolio
Massachusetts Financial Services Company ("MFS"), 500 Boylston Street,
Boston, Massachusetts 02108, is the Portfolio's investment adviser. MFS is
America's oldest mutual fund organization. MFS and its predecessor organizations
have a history of money management dating from 1924 and the founding of the
first mutual fund in the United States. MFS is an indirect subsidiary of Sun
Life Assurance Company of Canada. As of December 31, 1999, MFS and its
institutional advisory affiliates had approximately $136.72 billion in assets
under management, of which approximately $20.8 billion consisted of assets in
fixed income funds.
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<PAGE>
o Bernard Scozzafava - a Senior Vice President of MFS, is the portfolio manager
for the Portfolio. Mr. Scozzafava has been a portfolio manager with MFS since
1989.
Prior Experience with Comparable Fund
The Portfolio and the MFS High Income Fund have substantially similar
investment objectives, policies, and strategies. Since the Portfolio commenced
operations in May 1998, it does not have a long operating history. In order to
provide you with information regarding the investment capabilities of MFS,
performance information regarding the MFS High Income Fund is presented.
Management fees paid by the MFS High Income Fund are less than the fees paid by
the Portfolio. If the same level of management fees charged to the Portfolio had
been charged to the MFS High Income Fund, the average annual return during the
periods would have been approximately 0.26% lower than the numbers set forth
below. This result assumes that the current management fee paid by the MFS High
Income Fund, as a percentage of average net assets, applied to all prior
periods. Such performance information should not be relied upon as an indication
of the future performance of the Portfolio.
The table below compares the MFS High Income Fund's average annual
compounded total returns for the 1-, 5- and 10-year periods through 12/31/99
with the Lehman Brothers High Yield Index, a widely recognized unmanaged index
that measures the performance of high current yield bonds, and with the Lipper
VA High Current Yield Index, an equally weighted performance index of high
current yield bond funds underlying 30 variable annuities. An index does not
include transaction costs associated with buying and selling securities or any
mutual fund expenses. It is not possible to invest directly in an index. The
calculations of total return assume the reinvestment of all dividends and
capital gain distributions and the deduction of all recurring expenses that were
charged to shareholders. These figures do not include the effect of Contract
charges. If these Contract charges had been included, performance would have
been lower.
Average Annual Total Return as of 12/31/99
1 Year 5 Year 10 Year
---------------------------------------------------------------
MFS High Income Fund
Class A shares (with sales
charge) 1.92 % 8.91% 9.95%
MFS High Income Fund
Class A shares (without
sales charge) 7.00% 9.97% 10.49%
Lehman Brothers High Yield 2.39% 9.31% 10.72%
Index
Lipper VA High Current Yield
Index 2.45% 7.95% 8.84%
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<PAGE>
Endeavor Janus Growth Portfolio
Janus Capital Corporation ("Janus"), 100 Fillmore Street, Denver,
Colorado 80206-4928, is the Portfolio's investment adviser. Janus is a 29-year
old investment adviser to a group of mutual funds and individual investors. As
of December 31, 1999, Janus managed approximately $248.8 billion in assets.
The Portfolio's day-to-day investments are managed by Edward Keely, a
Vice President at Janus who also currently manages the Growth Portfolio of the
WRL Series Fund, Inc. ("WRL Growth Portfolio"). Prior to joining Janus in 1998,
Mr. Keely was Senior Vice President of Investments at Founders Asset Management
("Founders") where he was also the portfolio manager of Founders Growth Fund
from 1994 to 1998. Prior to managing Founders Growth Fund, he was Assistant
Portfolio Manager of both Founders Discovery and Frontier Funds. Mr. Keely
joined Founders in 1989 as a financial analyst. Prior to January, 2000, Mr.
Keely co-managed the Portfolio and the WRL Growth Portfolio.
Prior Experience With Comparable Fund
Because the Portfolio commenced operations on May 1, 1999, it does not
have a significant operating history. The Portfolio's investment adviser is the
investment adviser of the WRL Growth Portfolio. To date, shares of the WRL
Growth Portfolio have only been sold to the separate accounts of PFL to fund
benefits under certain variable life insurance policies and variable annuity
contracts including the Contracts. On April 30, 1999, a portion of the assets
underlying the shares of the WRL Growth Portfolio was transferred to the
Portfolio.
The WRL Growth Portfolio commenced operations on October 2, 1986. The
Portfolio and the WRL Growth Portfolio have substantially identical investment
objectives, policies, and strategies. Since a pro rata portion of the assets of
the WRL Growth Portfolio was transferred to the Portfolio, past performance
information regarding the WRL Growth Portfolio is presented. For the year ended
December 31, 1999, the management fees and total operating expenses of the WRL
Growth Portfolio were substantially the same as the fees and expenses incurred
by the Portfolio. This information should not be relied upon as an indication of
the future performance of the Portfolio.
The tables below assume the reinvestment of all dividends and capital
gain distributions and the deduction of all recurring expenses that were charged
to shareholder accounts. The tables do not include the effect of Contract
charges. If these Contract charges had been included, performance would have
been lower. As with all mutual funds, past returns are not a prediction of
future returns.
The bar chart below shows you the WRL Growth Portfolio's performance
for the last ten years and indicates how it has varied from year to year. The
WRL Growth Portfolio has experienced short-term performance swings as indicated
in the high and low quarter information at the bottom of the chart.
-83-
<PAGE>
<TABLE>
<CAPTION>
Year-by-Year Total Return as of 12/31 of Each Year
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(0.22)% 59.79% (8.31)% 47.12% 17.96% 17.54% 64.48% 59.67%
2.35% 3.97%
90 91 94 95 96 97 98 99
92 93
</TABLE>
High Quarter: 4th - 1999 +33.08%
Low Quarter: 3rd - 1990 -16.60%
The table below compares the WRL Growth Portfolio's average annual
compounded total returns for the 1-, 5- and 10-year periods through 12/31/99
with the S&P 500 Index, a widely recognized unmanaged index that measures the
stock performance of 500 large- and medium-sized publicly traded companies and
is often used to indicate the performance of the overall stock market, and with
the Lipper VA Growth Index, an equally weighted performance index of growth
funds underlying 30 variable annuities. An index does not include transaction
costs associated with buying and selling securities or any mutual fund expense.
It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
-------------------------------------
1 Year 5 Year 10 Year
-------- ------ -------
-------------------------------------
WRL Growth Portfolio 59.67% 39.89 % 23.62%
S&P 500 Index 21.03% 28.54 % 18.21%
Lipper VA Growth Index 25.78% 29.91% 15.87%
Brokerage Enhancement Plan
The Trust has adopted, in accordance with the substantive provisions of
Rule 12b-1 under the Investment Company Act of 1940, a Brokerage Enhancement
Plan (the "Plan") for each of its Portfolios. The Plan uses available brokerage
commissions to promote the sale and distribution of each Portfolio's shares.
Under the Plan, the Trust is using recaptured commissions to pay for
distribution expenses. Except for recaptured commissions, unlike asset based
charges imposed by many mutual funds for sales expenses, the Portfolios do not
incur any asset based or additional fees or charges under the Plan.
How the Plan Works
-84-
<PAGE>
Under the Plan, the Manager is authorized to direct investment advisers
to use certain broker-dealers for securities transactions. (The duty of best
price and execution still applies to these transactions.) These broker-dealers
have agreed to give a percentage of their commission from the sale and purchase
of securities to Transamerica Capital, Inc. (formerly known as Endeavor Group),
the distributor of the Trust's shares.
Transamerica Capital, Inc. will not make any profit from participating
in the Plan. It is obligated to use any money given to it under the Plan for
distribution expenses (other than a minimal amount to defray its legal and
administrative costs). The rest will be spent on activities that are meant to
result in the sale of the Portfolios' shares, including:
o holding or participating in seminars and sales meetings promoting the
sale of the Portfolios' shares
o paying marketing fees requested by broker-dealers who sell Contracts
o training sales personnel o compensating broker-dealers and/or registered
representatives in connection with the allocation of cash values and
premiums of the Contracts to the Trust
o printing and mailing Trust prospectuses, statements of additional
information and shareholder reports to prospective Contract holders
o creating and mailing advertising and sales literature
[SIDE BAR:
--------
If you would like to learn more about the Plan, including the amount of
commissions recaptured in 1999, please read the Statement of Additional
Information which discusses the legal terms and conditions of the Plan.]
-85-
<PAGE>
Financial Highlights
The following financial highlights tables are intended to help you
understand each Portfolio's financial performance for the past 5 years (or for
its period of operation in the case of Portfolios that have operated for less
than 5 years). Certain information reflects financial results for a single
Portfolio share. Total return in each table shows how much an investment in a
Portfolio would have increased (or decreased) during each period (assuming
reinvestment of all dividends and distributions). This information has been
audited by Ernst & Young LLP, whose report, along with each Portfolio's
financial statements, is included in the Trust's Annual Report, which is
available upon request.
-86-
<PAGE>
ENDEAVOR MONEY MARKET PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98* 12/31/97 12/31/96 12/31/95
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year.......................... $1.00 $1.00 $1.00 $1.00 $1.00
---- ---- ---- ---- ----
Net investment
income........................ 0.0465 0.0485 0.0498 0.0479 0.0540
------ ------ ------ ------ ------
Distributions:
Dividends from net
investment
income........................ (0.0465) (0.0485) (0.0498) (0.0479) (0.0540)
Distributions from
net realized gains............ --- --- --- --- -----
------- ----- ----- ----- -----
Total
distributions (0.0465) (0.0485) (0.0498) (0.0479) (0.0540)
-------- -------- -------- -------- --------
Net asset value,
end of year................... $1.00 $1.00 $1.00 $1.00 $1.00
==== ==== ==== ==== ====
Total return+................. 4.75% 4.96% 5.07% 4.91% 5.54%
==== ==== ==== ==== ====
Ratios to average net assets/supple- mental data:
-87-
<PAGE>
Year Year Year Year Year
Net assets, end of
year (in 000's)............... $134,779 $100,932 $51,162 $41,545 $27,551
Ratio of net
investment income
to average net
assets........................ 4.67% 4.92% 4.99% 4.81% 5.37%
Ratio of net
expenses to
average net
assets ....................... 0.55% 0.60% 0.60% 0.60% 0.60%
Ratio of expenses
to average net
assets ....................... 0.55% 0.60% 0.60% 0.60% 0.60%
</TABLE>
- ------------------
* Effective May 1, 1998, the name of the TCW Money Market Portfolio was
changed to Endeavor Money Market Portfolio and Morgan Stanley Asset
Management became the Portfolio's investment adviser.
+ Total return represents the aggregate total return for the years
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-88-
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/99 12/31/98++ 12/31/97 12/31/96++ 12/31/95# 12/31/94
-------- ---------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year............................... $16.19 $14.21 $13.95 $12.19 $11.31 $11.99
----- ----- ----- ----- ----- -----
Net investment income..............
0.10 0.12 0.10 0.09 0.09 (0.02)
Net realized and
unrealized gain on
investments........................
5.02 2.08 0.26 1.76 1.06 (0.66)
---- ---- ---- ---- ---- ------
Net increase
in net assets
resulting from
investment operations..............
5.12 2.20 0.36 1.85 1.15 (0.68)
---- ---- ---- ---- ---- ------
Distributions:
Dividends from
net investment income..............
(0.26) (0.11) (0.10) (0.09) --- ---
Distributions from net
realized gains..................... (0.17) (0.11) --- --- (0.27) ---
------ ------ --- --- ------ ---
Total distributions (0.43) (0.22) (0.10) (0.09) (0.27) ---
------ ------ ------ ------ ------ ---
Net asset value, end of
year............................... $20.88 $16.19 $14.21 $13.95 $12.19 $11.31
===== ===== ===== ===== ===== =====
-89-
<PAGE>
Year Year Year Year Year Year
Total return+...................... 32.35% 15.44% 2.54% 15.23% 10.37% (5.67)%
===== ===== ==== ===== ===== ======
Ratios to average net assets/ supplemental data:
Net assets, end of year
(in 000's)......................... $228,655 $184,856 $164,560 $134,435 $92,352 $84,102
Ratio of net investment
income to average net 0.73% 0.76% 0.74% 0.73% 0.81%
assets.............................
(0.16)%
Ratio of net expenses
to average net
assets ............................ 0.91% 0.98% 1.07% 1.18% 1.15%
1.16%
Ratio of expenses to
average net assets ................ 1.00% 1.10% 1.12% 1.18% 1.15%
1.16%
Portfolio turnover rate............ 30% 21% 19% 11% 111% 88%
</TABLE>
- -----------------
* Effective March 24, 1995, the name of the Global Growth
Portfolio was changed to T. Rowe Price International Stock Portfolio, and the
investment objective was changed from investment on a global basis to investment
on an international basis (i.e., in non-U.S. companies).
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
-90-
<PAGE>
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
# Rowe Price-Fleming International, Inc. became the Portfolio's investment
adviser effective January 3, 1995.
-91-
<PAGE>
ENDEAVOR VALUE EQUITY PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96++ 12/31/95 12/31/99
-------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year.......................... $21.68 $20.70 $17.21 $14.23 $10.69 $21.68
----- ----- ----- ----- ----- -----
Net investment
income........................ 0.18 0.22 0.20 0.20 0.15 0.18
Net realized and
unrealized
gain/(loss) on (0.72) 1.36 3.96 3.15 3.52 (0.72)
------ ---- ---- ---- ---- ------
investments...................
Net
increase/(decrease)
in net assets
resulting from
investment (0.54) 1.58 4.16 3.35 3.67 (0.54)
------ ---- ---- ---- ---- ------
operations....................
Distributions:
Dividends from
net investment
income........................ (0.24) (0.22) (0.14) (0.13) (0.09) (0.24)
Distributions
from net
realized gains................ (0.91) (0.38) (0.53) (0.24) (0.04) (0.91)
------ ------ ------ ------ ------ ------
Total distributions (1.15) (0.60) (0.67) (0.37) (0.13) (1.15)
------ ------ ------ ------ ------ ------
-92-
<PAGE>
Year Year Year Year Year Year
Net asset value,
end of year................... $19.99 $21.68 $20.70 $17.21 $14.23 $19.99
===== ===== ===== ===== ===== =====
Total return+................. (3.06)% 7.56% 24.81% 23.84% 34.59% 3.06%
====== ==== ===== ===== ===== ====
Ratios to average net assets/ supplemental data:
Net assets, end of
year (in 000's)............... $209,653 $246,102 $216,039 $127,927 $68,630 $209,653
Ratio of net
investment income
to average net
assets........................ 0.77% 1.10% 1.39% 1.29% 1.56% 0.77%
Ratio of net
expenses to
average net
assets ....................... 0.88% 0.84% 0.89% 0.91% 0.86%
0.95%
Ratio of expenses
to average net
assets........................ 0.95% 0.85% 0.89% 0.91% 0.86%
0.95%
Portfolio turnover
rate.......................... 51% 19% 16% 27% 28% 51%
</TABLE>
- -----------------------
* Effective May 1, 1998, the name of the Value Equity Portfolio was
changed to Endeavor Value Equity Portfolio.
-93-
<PAGE>
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
-94-
<PAGE>
ENDEAVOR OPPORTUNITY VALUE PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Period
Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96*
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period....................... $12.22 $11.75 $10.06 $10.00
----- ----- -----
Net investment income/(loss)..............
0.18 0.11 0.07 ----
Net realized and
unrealized gain on
investments............................... 0.41 0.50 1.62 0.06
---- ---- ----
Net increase in net
assets resulting from
investment operations..................... 0.59 0.61 1.69 0.06
---- ---- ---- ----
Distributions:
Dividends from net
investment income......................... (0.13) (0.05) --- ---
Distributions from net
realized gains............................ (0.12) (0.09) --- ---
------ ----- ----
Total distributions....................... (0.25) (0.14) --- ---
------ ------ --- ----
Net asset value, end
of period................................. $12.56 $12.22 $11.75 $10.06
===== ===== ===== =====
Total return++............................ 4.79% 5.18% 16.81% 0.60%
==== ==== ===== ====
Ratios to average net assets/supplemental data:
-95-
<PAGE>
Year Year Year Period
Net assets, end of
period (in 000's)......................... $44,900 $45,506 $26,802 $701
Ratio of net
investment income/ (loss) to
average net assets........................ 1.34% 1.22% 1.34% (1.09)%+
Ratio of net expenses to
average net assets........................ 0.85% 0.98% 1.15% 1.30%+
Ratio of expenses to average
net assets................................ 0.91% 1.00% 1.15% 1.30%+
Ratio of net expenses to
average net assets before
waivers................................... 0.91% 1.00% 1.16% 12.69%+
Portfolio turnover
rate...................................... 48% 43% 44% 0%
</TABLE>
- -----------------
* Effective May 1, 1998, the Opportunity Value Portfolio changed its name
to Endeavor Opportunity Value Portfolio. The Portfolio commenced
operations on November 18, 1996.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-96-
<PAGE>
DREYFUS SMALL CAP VALUE PORTFOLIO
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96++# 12/31/95
-------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year......................... $14.14 $16.41 $14.69 $12.22 $10.98
----- ----- ----- ----- -----
Net investment
income/(loss)................ (0.04) (0.03) 0.02 0.12 0.15
Net realized and
unrealized
gain/(loss) on
investments.................. 4.00 (0.13) 3.52 2.95 1.36
------ ---- ---- ----
Net increase/
(decrease) in net
assets resulting
from investment
operations................... 3.96 (0.16) 3.54 3.07 1.51
------ ---- ---- ----
Distributions:
Dividends from
net investment
income....................... --- (0.02) (0.10) (0.14) (0.10)
Distributions from
net realized
gains........................ (1.59) (2.09) (1.72) (0.46) (0.17)
------ ------ ------ ------ ------
Total distributions (1.59) (2.11) (1.82) (0.60) (0.27)
------ ------ ------ ------ ------
-97-
<PAGE>
Year Year Year Year Year
Net asset value,
end of year.................. $16.51 $14.14 $16.41 $14.69 $12.22
===== ===== ===== ===== =====
Total return+................ 29.39% (2.18)% 25.56% 25.63% 14.05%
===== ====== ===== ===== =====
Ratios to average net assets/ supplemental data:
Net assets, end of
year (in 000's).............. $187,803 $158,662 $146,195 $85,803 $52,597
Ratio of net
investment
income/(loss) to
average net assets........... (0.28)% (0.23)% 0.20% 0.95% 1.56%
Ratio of net
expenses to
average net
assets ...................... 0.90% 0.86% 0.91% 0.92% 0.87%
Ratio of expenses
to average net
assets ...................... 1.22% 0.94% 0.91% 0.92% 0.87%
Portfolio turnover
rate......................... 216% 183% 127% 171% 75%
- -----------------------
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
-98-
<PAGE>
# The Dreyfus Corporation became the Portfolio's investment adviser
effective September 16, 1996.
-99-
<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO
Year Year Year Year Period
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96+++ 12/31/95*+++
-------- -------- ----------- ------------
Operating performance:
Net asset value,
beginning of period.................. $20.04 $19.34 $15.49 $13.05 $10.00
----- ----- ----- ----- -----
Net investment
income............................... 0.38 0.35 0.25 0.41 0.34
Net realized and
unrealized gain on
investments.......................... 0.42 1.33 4.06 2.17 2.71
---- ---- ---- ---- ----
Net increase in net
assets resulting from
investment operations................ 0.80 1.68 4.31 2.58 3.05
---- ---- ---- ---- ----
Distributions:
Dividends from net
investment income.................... (0.40) (0.28) (0.19) (0.10) ---
Distributions from net
realized gains....................... (0.94) (0.70) (0.27) (0.04) ---
------ ------ ------ ------ ---
Total distributions.................. (1.34) (0.98) (0.46) (0.14) ---
------ ------ ------ ------ ---
Net asset value, end of
period............................... $19.50 $20.04 $19.34 $15.49 $13.05
===== ===== ===== ===== =====
Total return++....................... 3.47% 8.81% 28.27% 19.88% 30.50%
==== ==== ===== ===== =====
-100-
<PAGE>
Year Year Year Year Period
Ratios to average net assets/ supplemental data:
Net assets, end of period
(in 000's)........................... $264,718 $262,328 $197,228 $78,251 $21,910
Ratio of net investment
income to average net
assets............................... 1.89% 2.18% 2.47% 2.89% 3.24%+
Ratio of net expenses to
average net assets .................. 0.87% 0.85% 0.94% 0.96% 1.15%+
Ratio of expenses to
average net assets .................. 0.88% 0.85% 0.94% 0.96% 1.15%+
Portfolio turnover rate.............. 35% 20% 23% 19% 16%
- --------------------------
* The Portfolio commenced operations on January 3, 1995.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the period
since use of the undistributed method did not accord with results of
operations.
-101-
<PAGE>
T. ROWE PRICE GROWTH STOCK PORTFOLIO
Year Year Year Year Period
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96+++ 12/31/95*+++
-------- -------- -------- ----------- ------------
Operating performance:
Net asset value, beginning of
period..................................... $25.60 $20.78 $16.29 $13.72 $10.00
----- ----- ----- ----- -----
Net investment income...................... 0.03 0.06 0.04 0.11 0.08
Net realized and unrealized
gain on investments........................ 5.28 5.76 4.59 2.71 3.64
---- ---- ---- ---- ----
Net increase in net assets
resulting from investment
operations................................. 5.31 5.82 4.63 2.82 3.72
---- ---- ---- ---- ----
Distributions:
Dividends from net
investment income.......................... (0.07) (0.05) (0.03) (0.01) ---
Distributions from net realized
gains...................................... (2.11) (0.95) (0.11) (0.24) ---
------ ------ ------ ---
Total distributions........................ (2.18) (1.00) (0.14) (0.25) ---
------ ------ ------ ---
Net asset value, end of
period..................................... $28.73 $25.60 $20.78 $16.29 $13.72
===== ===== ===== ===== =====
Total return++............................. 22.19% 28.67% 28.57% 20.77% 37.20%
===== ===== ===== ===== ======
-102-
<PAGE>
Year Year Year Year Period
Ratios to average net assets/supplemental data:
Net assets, end of period (in
000's)..................................... $257,879 $194,301 $123,230 $59,732 $21,651
Ratio of net investment
income to average net
assets..................................... 0.21% 0.43% 0.38% 0.75% 0.69%+
Ratio of net expenses to
average net assets......................... 0.87% 0.87% 0.96% 1.01% 1.26%+
Ratio of expenses to average
net assets................................. 0.88% 0.87% 0.96% 1.01% 1.26%+
Portfolio turnover rate.................... 66% 58% 41% 44% 64%
- --------------------
* The Portfolio commenced operations on January 3, 1995.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the period
since use of the undistributed method did not accord with results of
operations.
-103-
<PAGE>
ENDEAVOR ENHANCED INDEX PORTFOLIO*
Year Year Period
Ended Ended Ended
12/31/99 12/31/98 12/31/97*
-------- ---------
Operating performance:
Net asset value,
beginning of period................................ $16.08 $12.29 $10.00
----- ----- -----
Net investment income.............................. 0.08 0.04 0.02
Net realized and
unrealized gain on investments..................... 2.78 3.81 2.27
---- ---- ----
Net increase in net
assets resulting from
investment operations.............................. 2.86 3.85 2.29
---- ---- ----
Distributions:
Dividends from net investment
income............................................. (0.03) (0.02) ---
Distributions from net realized gains.............. (0.75) (0.04) ---
------ ------
Total distributions................................ (0.78) (0.06) ---
------ ------ ----
Net asset value, end
of period.......................................... $18.16 $16.08 $12.29
===== ===== =====
Total return++..................................... 18.16% 31.39% 22.90%
===== ===== =====
Ratios to average net assets/supplemental data:
-104-
<PAGE>
Year Year Period
Net assets, end of
period (in 000's)..................................
$153,967 $64,058 $19,811
Ratio of net
investment income to average
net assets......................................... 0.73% 0.48% 0.55%+
Ratio of net expenses to
average net assets ................................ 0.78% 1.10% 1.30%+
Ratio of expenses to average net
assets ............................................ 0.78% 1.10% 1.30%+
Ratio of net expenses to average
net assets before waivers.......................... 0.78% 1.10% 1.56%+
Portfolio turnover
rate............................................... 56% 78% 6%
- -----------------
* Effective May 1, 1998, the Enhanced Index Portfolio changed its name to
Endeavor Enhanced Index Portfolio. The Portfolio commenced operations
on May 2, 1997.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-105-
<PAGE>
ENDEAVOR JANUS GROWTH PORTFOLIO
Period
Ended
12/31/99*
Operating performance:
Net asset value, beginning of period............................ $69.88
-----
Net investment loss............................................. (0.04)
Net realized and unrealized gain on
investments..................................................... 25.53
-----
Net increase in net assets resulting from
investment operations........................................... 25.49
-----
Net asset value, end of period.................................. $95.37
=====
Total return++.................................................. 36.48%
=====
Ratios to average net assets/ supplemental
data:
Net assets, end of period (in 000's)............................ $1,065,191
Ratio of net investment loss to average net
assets.......................................................... (0.09)%+
Ratio of net expenses to average net
assets ......................................................... 0.83%+
Ratio of expenses to average net assets ........................ 0.83%+
Ratio of net expenses to average net assets
before waivers.................................................. 0.83%+
Portfolio turnover rate......................................... 43%
- -----------------
* The Portfolio commenced operations on May 1, 1999.
+ Annualized.
++ Total return represents aggregate total return for the period
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-106-
<PAGE>
ENDEAVOR SELECT PORTFOLIO*
Year Period
Ended Ended
12/31/99 12/31/98*+++
------------
Operating performance:
Net asset value, beginning of period............................ $10.66 $10.00
----- -----
Net investment income/(loss).................................... (0.01) 0.07
Net realized and unrealized gain on
investments..................................................... 5.12 0.59
---- ----
Net increase in net assets resulting from
investment operations........................................... 5.11 0.66
---- ----
Net asset value, end of period.................................. $15.77 $10.66
===== =====
Total return++.................................................. 47.84% 6.60%
===== ====
Ratios to average net assets/ supplemental
data:
Net assets, end of period (in 000's)............................ $40,770 $24,865
Ratio of net investment income/(loss) to
average net assets.............................................. (0.12)% 0.75%+
Ratio of net expenses to average net
assets ......................................................... 1.48% 1.49%+
Ratio of expenses to average net assets ........................ 1.49% 1.49%+
Ratio of net expenses to average net assets
before waivers.................................................. 1.49% 1.55%+
Portfolio turnover rate......................................... 157% 128%
- -----------------
* Effective May 1, 2000, the name of the Endeavor Select 50 Portfolio was
changed to Endeavor Select Portfolio and the investment policy was
changed to investing in U.S. growth stocks and foreign securities
including those of emerging market issuers. The Portfolio commenced
operations on February 3, 1998.
+ Annualized.
-107-
<PAGE>
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the period
since use of the undistributed method did not accord with results of
operations.
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<PAGE>
DREYFUS U.S. GOVERNMENT SECURITIES PORTFOLIO*
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96++ 12/31/95
-------- -------- -------- ---------- --------
Operating performance:
Net asset value,
beginning of year.................... $12.32 $11.87 $11.23 $11.39 $9.96
----- ----- ----- ----- ----
Net investment income................ 0.62 0.40 0.39 0.62 0.30
Net realized and
unrealized gain/(loss) on
investments.......................... (0.73) 0.46 0.61 (0.44) 1.25
------ ---- ---- ------ ----
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<PAGE>
Year Year Year Year Year
Net increase/ (decrease)
in net assets resulting
from investment
operations...........................
(0.11) 0.86 1.00 0.18 1.55
------ ---- ---- ---- ----
Distributions:
Dividends from net
investment income.................... (0.46) (0.41) (0.36) (0.22) (0.12)
Distributions from net
realized gains....................... (0.22) --- --- (0.12) ---
------ --- ------ ---
Total distributions.................. (0.68) (0.41) (0.36) (0.34) (0.12)
------ ------ ------ ------ ------
Net asset value, end of
year................................. $11.53 $12.32 $11.87 $11.23 $11.39
===== ===== ===== ===== =====
Total return+........................ (0.87)% 7.38% 9.15% 1.81% 15.64%
======= ==== ==== ==== =====
Ratios to average net assets/ supplemental data:
Net assets, end of period
(in 000's)........................... $83,777 $82,889 $46,542 $24,727 $12,718
Ratio of net investment
income to average net
assets............................... 5.52% 5.21% 5.74% 5.68% 5.58%
Ratio of net expenses to
average net assets................... 0.73% 0.72% 0.80% 0.82% 0.84%
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<PAGE>
Year Year Year Year Year
Ratio of expenses to
average net assets .................. 0.77% 0.73% 0.80% 0.82% 0.84%
Portfolio turnover
rate................................. 596% 615% 185% 222% 161%
- ------------------------
* Effective May 1, 1996, The Dreyfus Corporation became the Portfolio's
investment adviser.
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
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<PAGE>
ENDEAVOR HIGH YIELD PORTFOLIO
Year Period
Ended Ended
12/31/99 12/31/98*
Operating performance:
Net asset value, beginning of period............................ $9.69 $10.00
---- -----
Net investment income........................................... 0.47 0.25
Net realized and unrealized gain/(loss) on
investments..................................................... 0.09 (0.56)
---- ------
Net increase/(decrease) in net assets resulting
from investment operations...................................... 0.56 (0.31)
------ ------
Distributions:
Dividends from net investment income. . . . . . . (0.16) ---
------ ---
Total distributions. . . . . . . . . . . . . . . . . . . . . . . (0.16) ---
------ ---
Net asset value, end of period.................................. $10.09 $9.69
===== ====
Total return++.................................................. 5.82% (3.10)%
==== ======
Ratios to average net assets/ supplemental
data:
Net assets, end of period (in 000's)............................ $20,015 $9,819
Ratio of net investment income to average net
assets.......................................................... 7.07% 6.43%+
Ratio of net expenses to average net
assets ......................................................... 1.22% 1.30%+
Ratio of expenses to average net assets ........................ 1.25% 1.43%+
Ratio of net expenses to average net assets
before waivers.................................................. 1.27% 1.58%+
Portfolio turnover rate......................................... 77% 26%
- -----------------
* The Portfolio commenced operations on June 1, 1998.
+ Annualized.
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<PAGE>
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
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<PAGE>
ENDEAVOR ASSET ALLOCATION PORTFOLIO*
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98* 12/31/97 12/31/96 12/31/95
-------- --------- -------- -------- --------
Operating
performance:
Net asset value,
beginning of
year......................... $23.89 $22.34 $18.84 $16.28 $13.48
----- ----- ----- ----- -----
Net investment
income....................... 0.34 0.43 0.32 0.27 0.33
Net realized and
unrealized gain on
investments..................
4.80 3.50 3.45 2.61 2.72
---- ---- ---- ---- ----
Net increase
in net assets
resulting from
investment
operations................... 5.14 3.93 3.77 2.88 3.05
---- ---- ---- ---- ----
Distributions:
Dividends from
net investment
income....................... (0.43) (0.32) (0.27) (0.32) (0.25)
Distributions from
net realized gains........... (5.71) (2.06) --- --- ---
------ ----- ----- ----
Total distributions.......... (6.14) (2.38) (0.27) (0.32) (0.25)
====== ====== ====== ====== ======
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<PAGE>
Net asset value,
end of year.................. $22.89 $23.89 $22.34 $18.84 $16.28
===== ===== ===== ===== =====
Total return+................ 26.39% 18.39% 20.14% 17.82% 22.91%
===== ===== ===== ===== =====
Ratios to average net assets/ supplemental data:
Net assets, end of
year (in 000's).............. $414,926 $353,001 $303,102 $240,210 $198,876
Ratio of net
investment income
to average net
assets....................... 1.58% 1.97% 1.61% 1.59% 2.12%
Ratio of net
expenses to
average net
assets....................... 0.84% 0.78% 0.84% 0.85% 0.84%
Ratio of expenses
to average net
assets ...................... 0.87% 0.80% 0.84% 0.85% 0.84%
Portfolio turnover
rate......................... 220% 262% 67% 58% 93%
</TABLE>
- ---------------
* Effective May 1, 1998, the name of the TCW Managed Asset Allocation
Portfolio was changed to Endeavor Asset Allocation Portfolio and Morgan
Stanley Asset Management became the Portfolio's investment adviser.
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<PAGE>
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
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<PAGE>
YOUR INVESTMENT
Shareholder Information
The separate accounts of PFL are the record owners of the Portfolios'
shares. Any reference to the shareholder in this Prospectus technically refers
to PFL's separate accounts and not to you, the Contract owner. The legal rights
of you, the Contract owner, are different from the legal rights of PFL.
However, PFL is required to solicit instructions from the Contract
owners when voting on shareholder issues. Any voting by PFL as shareholder would
therefore reflect the actual votes of Contract owners. Please see "Voting
Rights" in the prospectus for the Contracts accompanying this Prospectus for
more information on your voting rights.
Dividends, Distributions and Taxes
Each Portfolio distributes its dividends from its net investment income
to PFL's separate accounts once a year (except in the case of the Endeavor Money
Market Portfolio whose dividends are declared daily and paid monthly) and not to
you, the Contract owner. These distributions are in the form of additional
shares of stock and not cash. The result is that a Portfolio's investment
performance, including the effect of dividends, is reflected in the cash value
of the Contracts. Please see the Contracts prospectus accompanying this
Prospectus for more information.
All net realized long- or short-term capital gains of each Portfolio
are also declared once a year and reinvested in the Portfolio.
Please see the Contracts prospectus accompanying this Prospectus for a
discussion of the tax impact on you resulting from the income taxes PFL owes as
a result of its ownership of a Portfolio's shares and its receipt of dividends
and capital gains.
Sales and Purchases of Shares
The Trust does not sell its shares directly to the public. The Trust
continuously sells shares of each Portfolio only to PFL's separate accounts and
may in the future offer its shares to qualified pension and profit-sharing
plans. It could also offer shares to other separate accounts of other insurers
if approved by the Board of Trustees.
AFSG Securities Corporation ("AFSG Securities"), an affiliate of PFL,
is the principal underwriter and distributor of the Contracts. AFSG Securities
places orders for the purchase or redemption of shares of each Portfolio based
on, among other things, the amount of net Contract premiums or purchase payments
transferred to the separate accounts, transfers to or from a separate account
investment division and benefit payments to be effected on a given date pursuant
to the terms of the Contracts. Such orders are effected, without sales charge,
at the net asset value per share for each Portfolio determined on that same
date.
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<PAGE>
The net asset value per share of each Portfolio for the purpose of
pricing orders for the purchase and sale of shares is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the Exchange is open. Net asset value per share is computed by
dividing the value of all assets of a Portfolio (including accrued interest and
dividends), less all liabilities of the Portfolio (including accrued expenses
and dividends payable), by the number of outstanding shares of the Portfolio.
The assets of the Endeavor Money Market Portfolio are valued on a basis
(amortized cost) designed to maintain the net asset value at $1.00 per share.
Each other Portfolio's investments are valued based on market value, or where
market quotations are not readily available, based on fair value as determined
in good faith by the Trust's Board of Trustees. Amortized cost is also used to
value the short-term (60 days or less) assets of the Trust's other Portfolios.
Transamerica Capital, Inc., an affiliate of the Manager, serves as the
distributor for the Trust. Transamerica Capital, Inc.'s office is located at
2101 East Coast Highway, Suite 300, Corona del Mar, California 92625.
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<PAGE>
GLOSSARY OF INVESTMENT TERMS
This glossary provides a more detailed description of some of the types
of securities in which the Portfolios may invest. The Portfolios may invest in
these securities to the extent permitted by their investment objectives and
policies. The Portfolios are not limited by this discussion and may invest in
any other types of securities not precluded by the policies discussed elsewhere
in this Prospectus. Please refer to the Statement of Additional Information for
a more detailed discussion of certain of these and other securities.
Bonds are also called debt securities or debt obligations. The issuer of the
bond, which could be the U.S. government, a corporation, or a city or state,
borrows money from investors and agrees to pay back the loan amount (the
principal) on a certain date (the maturity date). Usually, the issuer also
agrees to pay interest on certain dates during the period of the loan. Some
bonds, such as zero-coupon bonds, do not pay interest, but instead pay back more
at maturity than the original loan. Most bonds pay a fixed rate of interest (or
income), but some bonds' interest rates may change based on market or other
factors.
Brady Bonds are fixed income securities created through the exchange of existing
commercial bank loans to public and private entities in certain emerging markets
for new bonds in connection with debt restructurings.
Collateralized mortgage obligations (CMOs) are fixed income securities secured
by mortgage loans and other mortgage-backed securities and are generally
considered to be derivatives.
Commercial paper is a short-term debt obligation with a maturity ranging from
one to 270 days issued by banks, corporations, and other borrowers to investors
seeking to invest idle cash.
Common stocks are equity securities representing shares of ownership in a
company and usually carry voting rights and earn dividends. Unlike preferred
stock, dividends on common stock are not fixed but are declared at the
discretion of the issuer's board of directors.
Convertible securities are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
Debt securities are securities representing money borrowed that must be repaid
at a later date. Such securities have specific maturities and usually a specific
rate of interest or an original purchase discount. They include bonds and high
yield debt securities (junk bonds). Some debt securities have variable or
floating rates of interest. Variable and floating rate securities carry interest
rates that may be adjusted periodically to reflect changes in interest rates.
Depositary receipts are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts), and broker-dealers
(depositary shares).
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<PAGE>
Derivatives are used to limit risk in a Portfolio or to enhance investment
return, and have a return tied to a formula based upon an interest rate, index,
price of a security, or other measurement. Derivatives include options, futures,
forward contracts and related products.
Dollar roll transactions are comprised of the sale by the Portfolio of
mortgage-based securities, together with a commitment to purchase similar, but
not identical, securities at a future date. In addition, the Portfolio is paid a
fee as consideration for entering into the commitment to purchase. Dollar rolls
may be renewed after cash settlement and initially may involve only a firm
commitment agreement by the Portfolio to buy a security. Dollar roll
transactions are treated as borrowings for purposes of the Investment Company
Act of 1940, and the aggregate of such transactions and all other borrowings of
the Portfolio (including reverse repurchase agreements) will be subject to the
requirement that the Portfolio maintain asset coverage of 300% for all
borrowings.
Equity Securities include common stocks, preferred stocks, convertible
securities, warrants and other rights to purchase common stock.
Eurodollar obligations are dollar-denominated securities issued outside the
U.S. by foreign corporations and financial institutions and by foreign branches
of U.S. corporations and financial institutions.
Fixed income securities are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupon for a specified
period of time, and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
Foreign currency transactions are entered into for the purpose of hedging
against foreign exchange risk arising from the Portfolio's investment or
anticipated investment in securities denominated in foreign currencies. The
Portfolio also may enter into these contracts for purposes of increasing
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another. Foreign currency transactions include
the purchase of foreign currency on a spot (or cash) basis, contracts to
purchase or sell foreign currencies at a future date (forward contracts), the
purchase and sale of foreign currency futures contracts, and the purchase of
exchange traded and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies.
These hedging transactions do not eliminate fluctuations in the
underlying prices of the securities which the Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which can be achieved
at some future point in time.
Foreign debt securities are issued by foreign corporations and governments. They
may include Eurodollar obligations and Yankee bonds.
Forward commitments, when-issued and delayed delivery securities generally
involve the purchase of a security with payment and delivery at some time in the
future - i.e., beyond normal settlement. The Portfolios do not earn interest on
such securities until settlement and bear the risk of market value fluctuations
in between the purchase and settlement dates. New issues of
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<PAGE>
stocks and bonds, private placements and U.S. government securities may be sold
in this manner.
Forward contracts are contracts to purchase or sell a specified amount of a
financial instrument for an agreed upon price at a specified time.
Futures are contracts that obligate the buyer to receive and the seller to
deliver an instrument or money at a specified price on a specified date.
GNMA certificates are debt securities representing an interest in one or a pool
of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration. The
certificates are guaranteed as to timely payment of principal and interest by
Ginnie Mae.
High yield/high risk debt securities are securities that are rated below
investment grade by the primary rating agencies (e.g., BB or lower by Standard &
Poor's Ratings Services ("Standard & Poor's"), and Ba or lower by Moody's
Investors Service, Inc. ("Moody's")). Other terms commonly used to describe such
securities include "lower rated bonds," "noninvestment grade bonds," and "junk
bonds."
Hybrid Instruments were recently developed and combine the elements of futures
contracts or options with those of debt, preferred equity or a depositary
instrument. They are often indexed to the price of a commodity, particular
currency, or a domestic or foreign debt or equity security index. Examples of
hybrid instruments include debt instruments with interest or principal payments
or redemption terms determined by reference to the value of a currency or
commodity or securities index at a future point in time or preferred stock with
dividend rates determined by reference to the value of a currency.
Interest rate transactions are hedging transactions such as interest rate swaps
and the purchase or sale of interest rate caps and floors. They are used by a
Portfolio in an attempt to protect the value of its investments from interest
rate fluctuations. Interest rate swaps involve the exchange by the Portfolio
with another party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate payments. The
purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The investment adviser to the Portfolio enters
into these transactions on behalf of the Portfolio primarily to preserve a
return or spread on a particular investment or portion of its portfolio or to
protect against any increase in the price of securities the Portfolio
anticipates purchasing at a later date. The Portfolio will not sell interest
rate caps or floors that it does not own.
Investment grade corporate debt securities are securities rated in one of the
four highest rating categories by Standard & Poor's, Moody's or other nationally
recognized rating agency. Securities rated in the fourth category (e.g., BBB by
Standard & Poor's and Baa by Moody's) may have some speculative characteristics.
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<PAGE>
Illiquid securities are securities that cannot be disposed of quickly in the
normal course of business.
Mortgage-backed securities include securities backed by Ginnie Mae and Fannie
Mae. These securities represent collections (pools) of commercial and
residential mortgages. These securities are generally pass-through securities,
which means that principal and interest payments on the underlying securities
(less servicing fees) are passed through to shareholders on a pro rata basis.
Non-mortgage asset-backed securities include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. This means that principal and interest payments on the underlying
securities (less servicing fees) are passed through to shareholders on a pro
rata basis.
Notes are debt securities with shorter-term obligations than bonds.
Options are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price.
Passive foreign investment companies are any foreign corporations which generate
certain amounts of passive income or hold certain amounts of assets for the
production of passive income. Passive income includes dividends, royalties,
rent, and annuities.
PIK debt securities are debt obligations which provide that the issuer may, at
its option, pay interest on such bonds in cash or in the form of additional debt
obligations. Such investments benefit the issuer by mitigating its need for cash
to meet debt service, but also require a higher rate of return to attract
investors who are willing to defer receipt of such cash.
Preferred stocks are equity securities that generally pay dividends at a
specified rate and have preference over common stock in the payment of dividends
and liquidation. Preferred stock generally does not carry voting rights.
Repurchase agreements involve the purchase of a security by a Portfolio and a
simultaneous agreement by the seller (generally a bank or dealer) to repurchase
the security from the Portfolio at a specified date or upon demand. This
technique offers a method of earning income on idle cash.
Reverse repurchase agreements involve the sale of a security by a Portfolio to
another party (generally a bank or dealer) in return for cash and an agreement
by the Portfolio to buy the security back at a specified price and time.
U.S. government securities include direct obligations of the U.S. government
that are supported by its full faith and credit, like Treasury bills. Treasury
bills have initial maturities of less than one year, Treasury notes have initial
maturities of one to ten years and Treasury bonds may be issued with any
maturity but generally have maturities of at least ten years. U.S. government
securities
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<PAGE>
also include indirect obligations of the U.S. government that are issued by
federal agencies and government-sponsored entities, like bonds and notes issued
by the Federal Home Loan Bank, Ginnie Mae, Fannie Mae, and Sallie Mae. Unlike
Treasury securities, agency securities generally are not backed by the full
faith and credit of the U.S. government. Some agency securities are supported by
the right of the issuer to borrow from the Treasury, others are supported by the
discretionary authority of the U.S. government to purchase the agency's
obligations and others are supported only by the credit of the sponsoring
agency.
Variable amount master demand notes differ from ordinary commercial paper in
that they are issued pursuant to a written agreement between the issuer and the
holder, their amounts may be increased from time to time by the holder (subject
to an agreed maximum) or decreased by the holder or the issuer, they are payable
on demand, the rate of interest payable on them varies with an agreed formula
and they are typically not rated by a rating agency. Transfer of such notes is
usually restricted by the issuer, and there is no secondary trading market for
them. Any variable amount master demand note purchased by a Portfolio will be
regarded as an illiquid security.
Warrants are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a period of years or
indefinitely.
Yankee bonds are dollar-denominated securities issued in the U.S. by foreign
issuers.
Zero-coupon bonds are bonds that provide for no current interest payment and are
sold at a discount.
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<PAGE>
FOR MORE INFORMATION
If you would like more information about a Portfolio, the following documents
are available to you free upon request:
Annual/ Semi-annual Reports
Contain additional information about a Portfolio's
performance. In a Portfolio's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Portfolio's performance during
its last fiscal year.
Statement of Additional Information ("SAI")
Provides a fuller technical and legal description of the
Portfolio's policies, investment restrictions, and business
structure. The SAI is legally considered to be a part of this
Prospectus.
If you would like a copy of the current versions of these documents, or other
information about a Portfolio, contact:
ENDEAVOR SERIES TRUST
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
1-800-854-8393
Information about a Portfolio, including the Annual and Semi-annual Reports and
SAI, may also be obtained from the Securities and Exchange Commission ('SEC"):
o In person Review and copy documents in the SEC's Public Reference Room in
Washington, D.C. (for information call 1-800-SEC-0330).
o On line Retrieve information from the SEC's web site at: http://www.sec.gov.
o By mail Request documents, upon payment of a duplicating fee, by writing to
SEC, Public Reference Section, Washington, D.C. 20549.
SEC FILE # 811-5780
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ENDEAVORSM SERIES TRUST
This Statement of Additional Information provides supplementary
information pertaining to shares of the thirteen investment portfolios
("Portfolios") of Endeavor Series Trust (the "Fund"), a diversified, open-end,
management investment company. This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus dated May 1,
2000 (the "Prospectus") for the Endeavor Money Market Portfolio, the Endeavor
Asset Allocation Portfolio, the T. Rowe Price International Stock Portfolio, the
Endeavor Value Equity Portfolio, the Dreyfus Small Cap Value Portfolio, the
Dreyfus U.S. Government Securities Portfolio, the T. Rowe Price Equity Income
Portfolio, the T. Rowe Price Growth Stock Portfolio, the Endeavor Opportunity
Value Portfolio, the Endeavor Enhanced Index Portfolio, the Endeavor Select
Portfolio (formerly known as Endeavor Select 50 Portfolio), the Endeavor High
Yield Portfolio and the Endeavor Janus Growth Portfolio, which may be obtained
by writing the Fund at 2101 East Coast Highway, Suite 300, Corona del Mar,
California 92625 or by calling (800) 854-8393. Unless otherwise defined herein,
capitalized terms have the meanings given to them in the Prospectus.
The date of this Statement of Additional Information is May 1, 2000.
EndeavorSM is a registered service mark of Endeavor Management Co.
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<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVES AND POLICIES..........................................4
U.S. Government Securities.........................................4
Money Market Securities............................................4
Mortgage-Backed Securities.........................................5
Collateralized Mortgage Obligations................................6
Stripped Mortgage-Backed Securities................................7
Non-Mortgage Asset-Backed Securities...............................8
Preferred Stocks...................................................9
Rights and Warrants................................................9
Convertible Securities............................................10
Foreign Securities................................................11
Investment Grade Corporate Debt Securities........................11
Zero Coupon Bonds, Deferred Interest Bonds and PIK Bonds
..........................................................12
Loans and Other Direct Indebtedness.................................12
Brady Bonds.........................................................13
Other Investment Companies..........................................13
Reverse Repurchase Agreements.......................................15
Depositary Receipts.................................................15
Hybrid Instruments..................................................15
Illiquid Securities.................................................16
Indexed Securities..................................................16
Short Sales.........................................................17
Special Situations..................................................17
High Yield/High Risk Debt Securities................................17
Options and Futures Strategies......................................18
Foreign Currency Transactions.......................................24
Repurchase Agreements...............................................28
Forward Commitments, When-Issued and Delayed Delivery Securities....28
Securities Loans....................................................29
Interest Rate Transactions..........................................30
Dollar Roll Transactions............................................31
Municipal Fixed-Income Securities...................................32
Portfolio Turnover..................................................34
INVESTMENT RESTRICTIONS......................................................34
Other Policies......................................................36
PERFORMANCE INFORMATION......................................................38
Total Return........................................................38
Yield ...........................................................41
Non-Standardized Performance........................................43
PORTFOLIO TRANSACTIONS.......................................................43
Brokerage Enhancement Plan..........................................46
MANAGEMENT OF THE FUND.......................................................48
Trustees and Officers...............................................48
INVESTMENT ADVISORY AND OTHER SERVICES.......................................55
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The Manager...............................................55
The Investment Advisers...................................57
Code of Ethics............................................63
Custodian.................................................63
Transfer Agent............................................63
Legal Matters.............................................64
Independent Auditors......................................64
REDEMPTION OF SHARES...............................................64
NET ASSET VALUE....................................................64
TAXES ..........................................................66
Federal Income Taxes......................................66
ORGANIZATION AND CAPITALIZATION OF THE FUND........................68
FINANCIAL STATEMENTS...............................................71
APPENDIX .........................................................A-1
----------------------
No person has been authorized to give any information or to make any
representation not contained in this Statement of Additional Information or in
the Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized. This Statement of Additional
Information does not constitute an offering of any securities other than the
registered securities to which it relates or an offer to any person in any state
or other jurisdiction of the United States or any country where such offer would
be unlawful.
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the investment
objectives and policies of the Portfolios in the Prospectus.
U.S. Government Securities (All Portfolios)
- --------------------------
Securities issued or guaranteed as to principal and interest by the
U.S. government or its agencies and government-sponsored entities include U.S.
Treasury obligations, consisting of bills, notes and bonds, which principally
differ in their interest rates, maturities and times of issuance, and
obligations issued or guaranteed by agencies and government-sponsored entities
which are supported by (i) the full faith and credit of the U.S. Treasury (such
as securities of the Small Business Administration), (ii) the limited authority
of the issuer to borrow from the U.S. Treasury (such as securities of the
Student Loan Marketing Association) or (iii) the authority of the U.S.
government to purchase certain obligations of the issuer (such as securities of
the Federal National Mortgage Association). No assurance can be given that the
U.S. government will provide financial support to U.S. government agencies or
government-sponsored entities as described in clauses (ii) or (iii) above in the
future, other than as set forth above, since it is not obligated to do so by
law.
Money Market Securities (All Portfolios)
- -----------------------
Money market securities in which the Portfolios may invest include U.S.
government securities, U.S. dollar denominated instruments (such as bankers'
acceptances, commercial paper, domestic or Yankee certificates of deposit and
Eurodollar obligations) issued or guaranteed by bank holding companies in the
United States, their subsidiaries and their foreign branches. These bank
obligations may be general obligations of the parent bank holding company or may
be limited to the issuing entity by the terms of the specific obligation or by
government regulation.
Obligations of the International Bank for Reconstruction and
Development (also known as the World Bank) are supported by subscribed but
unpaid commitments of its member countries. There can be no assurance that these
commitments will be undertaken or complied with in the future.
Other money market securities in which a Portfolio may invest also
include certain variable and floating rate instruments and participations in
corporate loans to corporations in whose commercial paper or other short-term
obligations a Portfolio may invest. Because the bank issuing the participations
does not guarantee them in any way, they are subject to the credit risks
generally associated with the underlying corporate borrower. To the extent that
a Portfolio may be regarded as a creditor of the issuing bank (rather than of
the underlying corporate borrower under the terms of the loan participation),
the Portfolio may also be subject to credit risks associated with the issuing
bank. The secondary market, if any, for these loan participations is extremely
limited and any such participations purchased by a Portfolio will be regarded as
illiquid.
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A Portfolio may also invest in bonds and notes with remaining
maturities of thirteen months or less, variable rate notes and variable amount
master demand notes. A variable amount master demand note differs from ordinary
commercial paper in that it is issued pursuant to a written agreement between
the issuer and the holder, its amount may be increased from time to time by the
holder (subject to an agreed maximum) or decreased by the holder or the issuer,
it is payable on demand, the rate of interest payable on it varies with an
agreed formula and it is typically not rated by a rating agency. Transfer of
such notes is usually restricted by the issuer, and there is no secondary
trading market for them. Any variable amount master demand note purchased by a
Portfolio will be regarded as an illiquid security.
The Portfolios will invest only in high quality money market
instruments, i.e., securities which have been assigned the highest quality
ratings by nationally recognized statistical rating organizations ("NRSROs")
such as "A-1" by Standard & Poor's Ratings Services ("Standard & Poor's") or
"Prime-1" by Moody's Investors Service, Inc. ("Moody's"), or if not rated,
determined to be of comparable quality by the Portfolio's investment adviser.
With respect to the Endeavor Money Market Portfolio, no more than 5% of the
Portfolio's total assets may be invested in instruments assigned the second
highest quality ratings such as "A-2" or "Prime-2", or if not rated, determined
to be of comparable quality by the Portfolio's investment adviser.
Mortgage-Backed Securities (Endeavor Asset Allocation, Dreyfus U.S.
- --------------------------
Government Securities, Endeavor High Yield, T. Rowe Price Equity Income,
Endeavor Janus Growth and T. Rowe Price International Stock Portfolios)
The mortgage-backed securities in which a Portfolio invests represent
participation interests in pools of mortgage loans which are guaranteed by
agencies or instrumentalities of the U.S. government. However, the guarantee of
these types of securities runs only to the principal and interest payments and
not to the market value of such securities. In addition, the guarantee only runs
to the portfolio securities held by the Portfolio and not the purchase of shares
of the Portfolio.
Mortgage-backed securities are issued by lenders such as mortgage
bankers, commercial banks, and savings and loan associations. Such securities
differ from conventional debt securities which provide for periodic payment of
interest in fixed amounts (usually semiannually) with principal payments at
maturity or specified call dates. Mortgage- backed securities provide for
monthly payments which are, in effect, a "pass-through" of the monthly interest
and principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans. Principal prepayments result from the
sale of the underlying property or the refinancing or foreclosure of underlying
mortgages.
The yield of mortgage-backed securities is based on the average life of
the underlying pool of mortgage loans, which is computed on the basis of the
maturities of the underlying instruments. The actual life of any particular pool
may be shortened by unscheduled or early payments
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of principal and interest. The occurrence of prepayments is affected by a wide
range of economic, demographic and social factors and, accordingly, it is not
possible to accurately predict the average life of a particular pool. For pools
of fixed rate 30-year mortgages, it has been common practice to assume that
prepayments will result in a 12-year average life. The actual prepayment
experience of a pool of mortgage loans may cause the yield realized by the
Portfolio to differ from the yield calculated on the basis of the average life
of the pool. In addition, if any of these mortgage-backed securities are
purchased at a premium, the premium may be lost in the event of early prepayment
which may result in a loss to the Portfolio.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. Reinvestment by the Portfolio of scheduled principal payments and
unscheduled prepayments may occur at higher or lower rates than the original
investment, thus affecting the yield of the Portfolio. Monthly interest payments
received by the Portfolio have a compounding effect which will increase the
yield to shareholders as compared to debt obligations that pay interest
semiannually. Because of the reinvestment of prepayments of principal at current
rates, mortgage- backed securities may be less effective than Treasury bonds of
similar maturity at maintaining yields during periods of declining interest
rates. Also, although the value of debt securities may increase as interest
rates decline, the value of these pass-through type of securities may not
increase as much due to the prepayment feature.
Collateralized Mortgage Obligations (Endeavor Asset Allocation, Dreyfus
- -----------------------------------
U.S. Government Securities, Endeavor High Yield, Endeavor Value Equity
and Endeavor Janus Growth Portfolios)
Collateralized mortgage obligations ("CMOs"), which are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities, provide the holder with a specified interest in the cash flow of a
pool of underlying mortgages or other mortgage-backed securities. Issuers of
CMOs frequently elect to be taxed as a pass- through entity known as real estate
mortgage investment conduits. CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final distribution date. The
relative payment rights of the various CMO classes may be structured in many
ways. In most cases, however, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no principal
payments will be made on a CMO class until all other classes having an earlier
stated maturity date are paid in full. The classes may include accrual
certificates (also known as "Z-Bonds"), which only accrue interest at a
specified rate until other specified classes have been retired and are converted
thereafter to interest-paying securities. They may also include planned
amortization classes which generally require, within certain limits, that
specified amounts of principal be applied on each payment date, and generally
exhibit less yield and market volatility than other classes. Generally, CMOs are
issued or guaranteed by the U.S. government or its agencies or instrumentalities
or maybe collateralized by a portfolio of mortgages or mortgage-related
securities guaranteed by such an agency or instrumentality. Certain
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CMOs in which a Portfolio may invest are not guaranteed by the U.S.
government or its agencies or instrumentalities.
Stripped Mortgage-Backed Securities (Endeavor Asset Allocation, Dreyfus
- -----------------------------------
U.S. Government Securities, T. Rowe Price International Stock and
Endeavor Janus Growth Portfolios)
Stripped mortgage-backed securities ("SMBS") are derivative multi-
class mortgage securities. SMBS are usually structured with two classes that
receive different proportions of the interest and principal distributions from a
pool of mortgage assets. A Portfolio will only invest in SMBS whose mortgage
assets are guaranteed by agencies of the U.S. government or government-sponsored
entities.
A common type of SMBS will be structured so that one class receives
some of the interest and most of the principal from the mortgage assets, while
the other class receives most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the interest
(the interest-only or "IO" class) while the other class will receive all of the
principal (the principal-only or "PO" class). The yield to maturity on an IO
class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on a Portfolio's yield to
maturity from these securities. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Portfolio may fail to fully
recoup its initial investment in these securities even if the security is in one
of the highest rating categories.
The Endeavor Asset Allocation Portfolio may invest not more than 5% of
its total assets in CMOs deemed by its investment adviser to be complex, such as
floating rate and inverse floating rate tranches and SMBS.
Non-Mortgage Asset-Backed Securities (Endeavor Asset Allocation, Dreyfus
- ------------------------------------
U.S. Government Securities, Endeavor High Yield, T. Rowe Price
International Stock and Endeavor Janus Growth Portfolios)
Non-mortgage asset-backed securities include interests in pools of
receivables, such as motor vehicle installment purchase obligations and credit
card receivables. Such securities are generally issued as pass- through
certificates, which represent undivided fractional ownership interests in the
underlying pools of assets.
Non-mortgage asset-backed securities are not issued or guaranteed by
the U.S. government or its agencies or government-sponsored entities; however,
the payment of principal and interest on such obligations may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. In addition, such securities generally will have
remaining estimated lives at the time of purchase of five years or less.
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The purchase of non-mortgage asset-backed securities raises
considerations peculiar to the financing of the instruments underlying such
securities. For example, most organizations that issue asset- backed securities
relating to motor vehicle installment purchase obligations perfect their
interests in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation of its duty not to do so, there
is a risk that such party could acquire an interest in the obligations superior
to that of holders of the asset-backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset- backed securities. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on those securities. In addition, various state and federal
laws give the motor vehicle owner the right to assert against the holder of the
owner's obligation certain defenses such owner would have against the seller of
the motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other asset-backed securities, credit card receivables are unsecured obligations
of the card holder.
Preferred Stocks (All Portfolios except Endeavor Money Market and
- ----------------
Dreyfus Small Cap Value Portfolios)
A Portfolio may purchase preferred stock. Preferred stock, unlike
common stock, has a stated dividend rate payable from the corporation's
earnings. Preferred stock dividends may be cumulative or non- cumulative,
participating, or auction rate. "Cumulative" dividend provisions require all or
a portion of prior unpaid dividends to be paid.
If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, which can be a negative feature when interest
rates decline. Preferred stock also generally has a preference over common stock
on the distribution of a corporation's assets in the event of liquidation of the
corporation. Preferred stock may be "participating" stock, which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stock on distribution of a corporation's assets in the
event
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<PAGE>
of a liquidation are generally subordinate to the rights associated with
a corporation's debt securities.
Rights and Warrants (All Portfolios except Endeavor Money Market, Endeavor Value
Equity, Dreyfus Small Cap Value and Dreyfus U.S.
Government Securities Portfolios)
A Portfolio may purchase rights and warrants. Warrants basically are
options to purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to the prices of
the underlying securities. Rights are similar to warrants, but normally have a
short duration and are distributed directly by the issuer to its shareholders.
Rights and warrants have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer. These investments carry the
risk that they may be worthless to the Portfolio at the time it may exercise its
rights, due to the fact that the underlying securities have a market value less
than the exercise price.
Convertible Securities (All Portfolios except Endeavor Money Market and
- ----------------------
Endeavor Value Equity Portfolios)
A Portfolio may invest in convertible securities of domestic and,
subject to the Portfolio's investment strategy, foreign issuers. The convertible
securities in which a Portfolio may invest include any debt securities or
preferred stock which may be converted into common stock or which carry the
right to purchase common stock. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of
time.
Convertible securities may be converted at either a stated price or
stated rate into underlying shares of common stock. Although to a lesser extent
than with fixed-income securities, the market of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stock. A unique feature of convertible
securities is that as the market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a yield basis, and so may
not experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the
prices of the convertible securities tend to rise as a reflection of the value
of the underlying common stock. While no securities investments are without
risk, investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
Convertible securities are investments that provide for a stable stream
of income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential
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for capital appreciation through the conversion feature, which enables the
holder to benefit from increases in the market price of the underlying common
stock. There can be no assurance of capital appreciation, however, because
securities prices fluctuate. Convertible securities, however, generally offer
lower interest or dividend yields than non-convertible securities of similar
quality because of the potential for capital appreciation.
Foreign Securities (All Portfolios)
- ------------------
A Portfolio may invest in foreign equity and debt securities or U.S.
securities traded in foreign markets. In addition to securities issued by
foreign companies, permissible investments may also consist of obligations of
foreign branches of U.S. banks and of foreign banks, including European
certificates of deposit, European time deposits, Canadian time deposits, Yankee
certificates of deposit, Eurodollar bonds and Yankee bonds. The Portfolio may
also invest in Canadian commercial paper and Europaper. These instruments may
subject the Portfolio to additional investment risks from those related to
investments in obligations of U.S. issuers. See the prospectus for a discussion
of the risks of investing in foreign securities. In addition, foreign branches
of U.S. banks and foreign banks may be subject to less stringent reserve
requirements than those applicable to domestic branches of U.S. banks.
The debt obligations of foreign governments and entities may or may not
be supported by the full faith and credit of the foreign government. A Portfolio
may buy securities issued by certain "supra-national" entities, which include
entities designated or supported by governments to promote economic
reconstruction or development, international banking organizations and related
government agencies. Examples are the International Bank for Reconstruction and
Development (commonly called the "World Bank"), the Asian Development bank and
the Inter-American Development Bank.
The governmental members of these supranational entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
Investment Grade Corporate Debt Securities (All Portfolios except
- ------------------------------------------
Endeavor Value Equity and Dreyfus Small Cap Value Portfolios)
Debt securities are rated by national bond ratings agencies. Securities
rated BBB by Standard & Poor's or Baa by Moody's are considered investment grade
securities, but are somewhat riskier than higher rated investment grade
obligations because they are regarded as having only an adequate capacity to pay
principal and interest, and are considered to lack outstanding investment
characteristics and may be speculative. See the Appendix to this Statement of
Additional Information for a description of the various securities ratings.
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Zero Coupon Bonds, Deferred Interest Bonds and PIK Bonds (Endeavor Asset
- --------------------------------------------------------
Allocation, Dreyfus U.S. Government Securities, T. Rowe Price
International Stock, Endeavor High Yield and Endeavor Opportunity Value
Portfolios)
Zero coupon and deferred interest bonds are debt obligations which are
issued at a significant discount from face value. The discount approximates the
total amount of interest the bonds will accrue and compound over the period
until maturity or the first interest payment date at a rate of interest
reflecting the market rate of the security at the time of issuance. While zero
coupon bonds do not require the periodic payment of interest, deferred interest
bonds provide for a period of delay before the regular payment of interest
begins. Payment- in-kind ("PIK") bonds are debt obligations which provide that
the issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments benefit the issuer by
mitigating its need for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to defer receipt of such
cash. Such investments may experience greater volatility in market value due to
changes in interest rates than debt obligations which make regular payments of
interest. A Portfolio will accrue income on such investments for tax and
accounting purposes, as required, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the Portfolio's
distribution obligations.
Loans and Other Direct Indebtedness (Endeavor High Yield, Dreyfus U.S.
- -----------------------------------
Government Securities, T. Rowe Price International Stock and Endeavor
Janus Growth Portfolios)
By purchasing a loan, a Portfolio acquires some or all of the interest
of a bank or other lending institution in a loan to a corporate borrower. Many
such loans are secured, and most impose restrictive covenants which must be met
by the borrower. These loans are made generally to finance internal growth,
mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate
activities. Such loans may be in default at the time of purchase. A Portfolio
may also purchase trade or other claims against companies, which generally
represent money owed by the company to a supplier of goods or services. These
claims may also be purchased at a time when the company is in default. Certain
of the loans acquired by a Portfolio may involve revolving credit facilities or
other standby financing commitments which obligate the Portfolio to pay
additional cash on a certain date or on demand.
The highly leveraged nature of many such loans may make such loans
especially vulnerable to adverse changes in economic or market conditions. Loans
and other direct investments may not be in the form of securities or may be
subject to restrictions on transfer, and only limited opportunities may exist to
resell such instruments. As a result, a Portfolio may be unable to sell such
investments at an opportune time or may have to resell them at less than fair
market value.
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Brady Bonds (Endeavor High Yield Portfolio)
- -----------
Brady Bonds are securities created through the exchange of existing
commercial bank loans to public and private entities in certain emerging markets
for new bonds in connection with debt restructurings under a debt restructuring
plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the
"Brady Plan"). Brady Plan debt restructurings have been implemented to date in
Argentina, Brazil, Bulgaria, Costa Rica, Croatia, Dominican Republic, Ecuador,
Jordan, Mexico, Morocco, Nigeria, Panama, Peru, the Philippines, Poland,
Slovenia, Uruguay and Venezuela. Brady Bonds have been issued only recently, and
for that reason do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (but
primarily the U.S. dollar) and are actively traded in over-the-counter secondary
markets. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed
rate bonds or floating- rate bonds, are generally collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (the uncollateralized
amounts constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds with
respect to commercial bank loans by public and private entities, investments in
Brady Bonds may be viewed as speculative.
Other Investment Companies (All Portfolios except Endeavor Money Market,
- --------------------------
Endeavor Value Equity and Endeavor Opportunity Value Portfolios)
In connection with its investments in accordance with the various
investment disciplines, a Portfolio may invest up to 10% of its total assets in
shares of other investment companies investing exclusively in securities in
which it may otherwise invest. Because of restrictions on direct investment by
U.S. entities in certain countries, other investment companies may provide the
most practical or only way for a Portfolio to invest in certain markets. Such
investments may involve the payment of substantial premiums above the net asset
value of those investment companies' portfolio securities and are subject to
limitations under the Investment Company Act of 1940, as amended ("1940 Act"). A
Portfolio also may incur tax liability to the extent it invests in the stock of
a foreign issuer that is a "passive foreign investment company" regardless of
whether such "passive foreign investment company" makes distributions to the
Portfolio.
Each Portfolio does not intend to invest in other investment companies
unless, in the investment adviser's judgment, the potential benefits exceed
associated costs. As a shareholder in an investment company, a Portfolio bears
its ratable share of that investment company's expenses, including advisory and
administration fees. The Manager and the investment adviser to the Endeavor
Select Portfolio have agreed to waive their respective own management and
advisory fees with respect to the portion of the Portfolio's assets invested in
other open- end (but not closed-end) investment companies. If the Endeavor Janus
Growth Portfolio invests in a Janus money market fund, the Portfolio's
investment adviser will remit to the Portfolio the fees it receives from the
Janus money market fund to the extent such fees are based on the Portfolio's
assets.
It is expected that the T. Rowe Price International Stock Portfolio, T.
Rowe Price Equity Income Portfolio and T. Rowe Price Growth Stock Portfolio will
each invest its cash reserves primarily in a money market fund established for
the exclusive use of the T. Rowe Price family of mutual funds and other clients
of the Portfolios' investment advisers. The Reserve Investment Fund ("RIF") is a
series of Reserve Investment Funds, Inc. Additional series may be created in the
future. The RIF was created and operates under an exemptive order issued by the
Securities and Exchange Commission.
The RIF must comply with the requirements of Rule 2a-7 under the 1940
Act governing money market funds. The RIF invests at least 95% of its total
assets in prime money market instruments receiving the highest credit rating.
The RIF provides a very efficient means of managing the cash reserves
of the Portfolios. While the RIF does not pay an advisory fee to its investment
adviser, it will incur other expenses. However, the RIF is expected by its
investment adviser to operate at a very low expense ratio. Each Portfolio will
only invest in RIF to the extent it is consistent with its objective and
program.
In addition to the above, pursuant to an exemptive order issued by the
Securities and Exchange Commission, each Portfolio may invest its uninvested
cash in shares of the Endeavor Money Market Portfolio if, in the opinion of the
Portfolio's investment adviser, such investment is in the Portfolio's best
interests.
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Reverse Repurchase Agreements (All Portfolios)
- -----------------------------
Each Portfolio is permitted to enter into reverse repurchase
agreements. In a reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price, reflecting
the interest rate effective for the term of the agreement. For the purposes of
the 1940 Act it is considered a form of borrowing by the Portfolio and,
therefore, is a form of leverage. Leverage may cause any gains or losses of the
Portfolio to be magnified.
Depositary Receipts (All Portfolios except Endeavor Money Market
-------------------
Portfolio)
A Portfolio may purchase foreign securities in the form of American
Depositary Receipts, European Depositary Receipts, Global Depositary Receipts or
other securities convertible into securities of corporations in which the
Portfolio is permitted to invest pursuant to its investment objectives and
policies. These securities may not necessarily be denominated in the same
currency into which they may be converted. Depositary receipts are receipts
typically issued by a U.S. or foreign bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation. The Endeavor
High Yield Portfolio will only invest in American Depositary Receipts. Because
American Depositary Receipts are listed on a U.S. securities exchange, the
Portfolio's investment adviser does not treat them as foreign securities.
However, like other depositary receipts, American Depositary Receipts are
subject to many of the risks of foreign securities such as changes in exchange
rates and more limited information about foreign issuers.
Hybrid Instruments (T. Rowe Price Equity Income, T. Rowe Price Growth
- ------------------
Stock, T. Rowe Price International Stock, Dreyfus U.S. Government
Securities, Endeavor High Yield, Endeavor Asset Allocation and Endeavor
Janus Growth Portfolios)
The T. Rowe Price Equity Income, T. Rowe Price Growth Stock and T. Rowe
Price International Stock Portfolios may invest up to 10% of their total assets
and the Dreyfus U.S. Government Securities Portfolio may invest up to 5% of its
total assets in hybrid instruments. Although there are no percentage limitations
on the amount of assets that may be invested in hybrid instruments, the
investment advisers to the Endeavor High Yield, Endeavor Asset Allocation and
Endeavor Janus Growth Portfolios do not anticipate that such investments will
exceed 5% of each Portfolio's total assets. Hybrid instruments have recently
been developed and combine the elements of futures contracts or options with
those of debt, preferred equity or a depository instrument. Often these hybrid
instruments are indexed to the price of a commodity, particular currency, or a
domestic or foreign debt or equity securities index. Hybrid instruments may take
a variety of forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future point in
time, preferred stock with dividend rates determined by reference to the value
of a currency,
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or convertible securities with the conversion terms related to a particular
commodity. Hybrid instruments may bear interest or pay dividends at below market
(or even relatively nominal) rates. Under certain conditions, the redemption
value of such an instrument could be zero. Hybrid instruments can have volatile
prices and limited liquidity and their use by a Portfolio may not be successful.
Illiquid Securities (All Portfolios)
- -------------------
Each Portfolio may invest up to 15% (10% with respect to Endeavor Money
Market Portfolio) of its net assets in illiquid securities and other securities
which are not readily marketable, including non- negotiable time deposits,
certain restricted securities not deemed by the Fund's Trustees to be liquid and
repurchase agreements with maturities longer than seven days. Securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933,
which have been determined to be liquid, will not be considered by the
Portfolios' investment advisers to be illiquid or not readily marketable and,
therefore, are not subject to the aforementioned 10% or 15% limits. The
inability of a Portfolio to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Portfolio's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Portfolio which are eligible for resale pursuant to
Rule 144A will be monitored by the Portfolios' investment advisers on an ongoing
basis, subject to the oversight of the Trustees. In the event that such a
security is deemed to be no longer liquid, a Portfolio's holdings will be
reviewed to determine what action, if any, is required to ensure that the
retention of such security does not result in a Portfolio having more than 10%
or 15%, as applicable, of its assets invested in illiquid or not readily
marketable securities.
Indexed Securities (Endeavor High Yield and Endeavor Janus Growth
- ------------------
Portfolios)
A Portfolio may invest in indexed securities whose value is linked to
foreign currencies, interest rates, commodities, indices or other financial
indicators. Most indexed securities are short to intermediate term fixed-income
securities whose values at maturity (i.e., principal value) or interest rates
rise or fall according to changes in the value of one or more specified
underlying instruments. Indexed securities may be positively or negatively
indexed (i.e., their principal value or interest rates may increase or decrease
if the underlying instrument appreciates), and may have return characteristics
similar to direct investments in the underlying instrument or to one or more
options on the underlying instrument. Indexed securities may be more volatile
than the underlying instrument itself and could involve the loss of all or a
portion of the principal amount of, or interest on, the instrument.
Short Sales (Endeavor High Yield, Endeavor Janus Growth, T. Rowe Price
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International Stock, Dreyfus U.S. Government Securities and Endeavor
Enhanced Index Portfolios)
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A Portfolio may sell securities "short against the box." A short sale
is the sale of a security that the Portfolio does not own. A short sale is
"against the box" if at all times when the short position is open, the Portfolio
owns an equal amount of the securities sold short or securities convertible
into, or exchangeable without further consideration for, securities of the same
issue as the securities sold short.
Special Situations (Endeavor Janus Growth Portfolio)
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The Portfolio may invest in "special situations" from time to time. A
special situation arises when, in the opinion of the investment adviser, the
securities of a particular issuer will be recognized and appreciate in value due
to a specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
management change, a technological breakthrough, or other extraordinary
corporate event, or differences in market supply and demand for the security.
Investment in special situations may carry an additional risk of loss
in the event that the anticipated development does not occur or does not attract
the expected attention. The impact of this strategy on the Portfolio will depend
on the Portfolio's size and the extent of the holdings of the special situation
issuer relative to its total assets.
High Yield/High Risk Debt Securities (T. Rowe Price International
- ------------------------------------
Stock, Endeavor Opportunity Value, T. Rowe Price Equity Income, Endeavor
Select, Endeavor Janus Growth, Endeavor High Yield and Dreyfus U.S.
Government Securities Portfolios)
Certain lower rated securities purchased by a Portfolio, such as those
rated Ba or B by Moody's or BB or B by Standard & Poor's (commonly known as junk
bonds), may be subject to certain risks with respect to the issuing entity's
ability to make scheduled payments of principal and interest and to greater
market fluctuations. While generally providing greater income than investments
in higher quality securities, lower quality fixed income securities involve
greater risk of loss of principal and income, including the possibility of
default or bankruptcy of the issuers of such securities, and have greater price
volatility, especially during periods of economic uncertainty or change. These
lower quality fixed income securities tend to be affected by economic changes
and short-term corporate and industry developments to a greater extent than
higher quality securities, which react primarily to fluctuations in the general
level of interest rates. To the extent that a Portfolio invests in such lower
quality securities, the achievement of its investment objective may be more
dependent on the investment adviser's own credit analysis.
Lower quality fixed income securities are affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. Economic downturns or an
increase in interest rates may cause a higher incidence of default by the
issuers of these securities, especially issuers that are highly leveraged. The
market for these lower quality fixed income securities
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is generally less liquid than the market for investment grade fixed income
securities. It may be more difficult to sell these lower rated securities to
meet redemption requests, to respond to changes in the market, or to value
accurately a Portfolio's portfolio securities for purposes of determining the
Portfolio's net asset value.
In determining suitability of investment in a particular unrated
security, the investment adviser takes into consideration asset and debt service
coverage, the purpose of the financing, history of the issuer, existence of
other rated securities of the issuer, and other relevant conditions, such as
comparability to other issuers.
Options and Futures Strategies (All Portfolios except Endeavor Money
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Market Portfolio)
A Portfolio may seek to increase the current return on its investments
by writing covered call or covered put options. In addition, a Portfolio may at
times seek to hedge against either a decline in the value of its portfolio
securities or an increase in the price of securities which its investment
adviser plans to purchase through the writing and purchase of options including
options on stock indices and the purchase and sale of futures contracts and
related options. A Portfolio may utilize options or futures contracts and
related options for other than hedging purposes to the extent that the aggregate
initial margins and premiums do not exceed 5% of the Portfolio's net asset
value. The investment advisers to the Endeavor Value Equity Portfolio , Dreyfus
Small Cap Value Portfolio, T. Rowe Price Equity Income Portfolio and T. Rowe
Price Growth Stock Portfolio do not presently intend to utilize options or
futures contracts and related options but may do so in the future. The
investment advisers to the T. Rowe Price International Stock Portfolio, T. Rowe
Price Equity Income Portfolio, T. Rowe Price Growth Stock Portfolio and Endeavor
Enhanced Index Portfolio do not presently intend to write or purchase put or
call options, but may do so in the future. The investment adviser to the
Endeavor Select Portfolio does not currently intend to purchase and sell
interest rate futures or options on future contracts, but may do so in the
future. Expenses and losses incurred as a result of such hedging strategies will
reduce a Portfolio's current return.
The ability of a Portfolio to engage in the options and futures
strategies described below will depend on the availability of liquid markets in
such instruments. Markets in options and futures with respect to stock indices
and U.S. government securities are relatively new and still developing. It is
impossible to predict the amount of trading interest that may exist in various
types of options or futures. Therefore no assurance can be given that a
Portfolio will be able to utilize these instruments effectively for the purposes
stated below.
Writing Covered Options on Securities. A Portfolio may write covered
call options and covered put options on optionable securities of the types in
which it is permitted to invest from time to time as its investment adviser
determines is appropriate in seeking to attain the Portfolio's investment
objective. Call options written by a Portfolio give the holder the right to buy
the underlying security from the
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Portfolio at a stated exercise price; put options give the holder the right to
sell the underlying security to the Portfolio at a stated price.
A Portfolio may only write call options on a covered basis or for
cross-hedging purposes and will only write covered put options. A put option
would be considered "covered" if the Portfolio owns an option to sell the
underlying security subject to the option having an exercise price equal to or
greater than the exercise price of the "covered" option at all times while the
put option is outstanding. A call option is covered if the Portfolio owns or has
the right to acquire the underlying securities subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against
another security which the Portfolio owns or has the right to acquire. In the
case of a call written for cross-hedging purposes or a put option, the Portfolio
will maintain in a segregated account at the Fund's custodian bank liquid assets
with a value equal to or greater than the Portfolio's obligation under the
option. A Portfolio may also write combinations of covered puts and covered
calls on the same underlying security.
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A Portfolio will receive a premium from writing an option, which
increases the Portfolio's return in the event the option expires unexercised or
is terminated at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option, and the volatility of the
market price of the underlying security. By writing a call option, a Portfolio
will limit its opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option. By writing a put
option, a Portfolio will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.
A Portfolio may terminate an option which it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Portfolio will
realize a profit (or loss) from such transaction if the cost of such transaction
is less (or more) than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option may be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Portfolio.
Purchasing Put and Call Options on Securities. A Portfolio may purchase
put options to protect its portfolio holdings in an underlying security against
a decline in market value. This protection is provided during the life of the
put option since the Portfolio, as holder of the put, is able to sell the
underlying security at the exercise price regardless of any decline in the
underlying security's market price. For the purchase of a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs. By using put options in this manner, any profit which the Portfolio might
otherwise have realized on the underlying security will be reduced by the
premium paid for the put option and by transaction costs.
A Portfolio may also purchase a call option to hedge against an
increase in price of a security that it intends to purchase. This protection is
provided during the life of the call option since the Portfolio, as holder of
the call, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. For the
purchase of a call option to be profitable, the market price of the underlying
security must rise sufficiently above the exercise price to cover the premium
and transaction costs. By using call options in this manner, any profit which
the Portfolio might have realized had it bought the underlying security at the
time it purchased the call option will be reduced by the premium paid for the
call option and by transaction costs.
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Except for the Endeavor Janus Growth Portfolio, no Portfolio intends to
purchase put or call options if, as a result of any such transaction, the
aggregate cost of options held by the Portfolio at the time of such transaction
would exceed 5% of its total assets. There are no specific limitations on the
Endeavor Janus Growth Portfolio's purchasing options on securities.
Purchase and Sale of Options and Futures on Stock Indices. A Portfolio
may purchase and sell options on stock indices and stock index futures contracts
either as a hedge against movements in the equity markets or for other
investment purposes.
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks. Currently options traded include the Standard & Poor's 500
Composite Stock Price Index, the NYSE Composite Index, the AMEX Market Value
Index, the National Over-The-Counter Index, the Nikkei 225 Stock Average Index,
the Financial Times Stock Exchange 100 Index and other standard broadly based
stock market indices. Options are also traded in certain industry or market
segment indices such as the Pharmaceutical Index.
A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made.
If a Portfolio's investment adviser expects general stock market prices
to rise, it might purchase a call option on a stock index or a futures contract
on that index as a hedge against an increase in prices of particular equity
securities it wants ultimately to buy for the Portfolio. If in fact the stock
index does rise, the price of the particular equity securities intended to be
purchased may also increase, but that increase would be offset in part by the
increase in the value of the Portfolio's index option or futures contract
resulting from the increase in the index. If, on the other hand, the Portfolio's
investment adviser expects general stock market prices to decline, it might
purchase a put option or sell a futures contract on the index. If that index
does in fact decline, the value of some or all of the equity securities held by
the Portfolio may also be expected to decline, but
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that decrease would be offset in part by the increase in the value of the
Portfolio's position in such put option or futures contract.
Purchase and Sale of Interest Rate Futures. A Portfolio may purchase
and sell interest rate futures contracts on fixed income securities or indices
of such securities, including municipal indices and any other indices of fixed
income securities that may become available for trading either for the purpose
of hedging its portfolio securities against the adverse effects of anticipated
movements in interest rates or for other investment purposes.
A Portfolio may sell interest rate futures contracts in anticipation of
an increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the securities held by a Portfolio will fall, thus
reducing the net asset value of the Portfolio. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Portfolio's average yield as a result of the shortening of
maturities.
The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Portfolio's
short position in the futures contracts will also tend to increase thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's investments that are being hedged. While the Portfolio will incur
commission expenses in selling and closing out futures positions (which is done
by taking an opposite position in the futures contract), commissions on futures
transactions are lower than transaction costs incurred in the purchase and sale
of portfolio securities.
A Portfolio may purchase interest rate futures contracts in
anticipation of a decline in interest rates when it is not fully invested. As
such purchases are made, it is expected that an equivalent amount of futures
contracts will be closed out.
A Portfolio will enter into futures contracts which are traded on
national or foreign futures exchanges, and are standardized as to maturity date
and the underlying financial instrument. Futures exchanges and trading in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are traded in London at the London
International Financial Futures Exchange, in Paris, at the MATIF, and in Tokyo
at the Tokyo Stock Exchange.
Options on Futures Contracts. A Portfolio may purchase and write call
and put options on stock index and interest rate futures contracts. A Portfolio
may use such options on futures contracts in connection with its hedging
strategies in lieu of purchasing and writing options directly on the underlying
securities or stock indices or purchasing or selling the underlying futures. For
example, a Portfolio may purchase
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<PAGE>
put options or write call options on stock index futures or interest rate
futures, rather than selling futures contracts, in anticipation of a decline in
general stock market prices or rise in interest rates, respectively, or purchase
call options or write put options on stock index or interest rate futures,
rather than purchasing such futures, to hedge against possible increases in the
price of equity securities or debt securities, respectively, which the Portfolio
intends to purchase.
In connection with transactions in stock index options, stock index
futures, interest rate futures and related options on such futures, a Portfolio
will be required to deposit as "initial margin" an amount of cash and short-term
U.S. government securities. The current initial margin requirement per contract
is approximately 2% of the contract amount. Thereafter, subsequent payments
(referred to as "variation margin") are made to and from the broker to reflect
changes in the value of the futures contract. Brokers may establish deposit
requirements higher than exchange minimums.
Limitations. A Portfolio will not purchase or sell futures contracts or
options on futures contracts or stock indices for non-hedging purposes if, as a
result, the sum of the initial margin deposits on its existing futures contracts
and related options positions and premiums paid for options on futures contracts
or stock indices would exceed 5% of the net assets of the Portfolio.
Risks of Options and Futures Strategies. The effective use of options
and futures strategies depends, among other things, on a Portfolio's ability to
terminate options and futures positions at times when its investment adviser
deems it desirable to do so. Although a Portfolio will not enter into an option
or futures position unless its investment adviser believes that a liquid market
exists for such option or future, there can be no assurance that a Portfolio
will be able to effect closing transactions at any particular time or at an
acceptable price. The investment advisers generally expect that options and
futures transactions for the Portfolios will be conducted on recognized
exchanges. In certain instances, however, a Portfolio may purchase and sell
options in the over-the-counter market. The staff of the Securities and Exchange
Commission considers over-the-counter options to be illiquid. A Portfolio's
ability to terminate option positions established in the over-the-counter market
may be more limited than in the case of exchange traded options and may also
involve the risk that securities dealers participating in such transactions
would fail to meet their obligations to the Portfolio.
The use of options and futures involves the risk of imperfect
correlation between movements in options and futures prices and movements in the
price of the securities that are the subject of the hedge. The successful use of
these strategies also depends on the ability of a Portfolio's investment adviser
to forecast correctly interest rate movements and general stock market price
movements. This risk increases as the composition of the securities held by the
Portfolio diverges from the composition of the relevant option or futures
contract.
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Foreign Currency Transactions (Dreyfus U.S. Government Securities, T.
- -----------------------------
Rowe Price Growth Stock, T. Rowe Price International Stock, Endeavor
Opportunity Value, Endeavor Select, Endeavor High Yield, Endeavor Janus
Growth and Endeavor Asset Allocation Portfolios)
Foreign Currency Exchange Transactions. A Portfolio may engage in
foreign currency exchange transactions to protect against uncertainty in the
level of future exchange rates. The investment adviser to a Portfolio may engage
in foreign currency exchange transactions in connection with the purchase and
sale of portfolio securities ("transaction hedging"), and to protect the value
of specific portfolio positions ("position hedging").
A Portfolio may engage in "transaction hedging" to protect against a
change in the foreign currency exchange rate between the date on which the
Portfolio contracts to purchase or sell the security and the settlement date, or
to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. For that purpose, a Portfolio may purchase or sell a foreign
currency on a spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in or
exposed to that foreign currency.
If conditions warrant, a Portfolio may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts as a hedge against changes
in foreign currency exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign currency forward
contract is a negotiated agreement to exchange currency at a future time at a
rate or rates that may be higher or lower than the spot rate. Foreign currency
futures contracts are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, a Portfolio may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives a Portfolio the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives a Portfolio the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives a Portfolio the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives a Portfolio the right to purchase a
currency at the exercise price until the expiration of the option.
A Portfolio may engage in "position hedging" to protect against a
decline in the value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated, or quoted or exposed (or an increase in
the value of currency for securities which the Portfolio intends to buy, when it
holds cash reserves and short-term investments). For position hedging purposes,
a Portfolio may purchase or sell foreign currency futures contracts and foreign
currency forward contracts, and may purchase put or call options on foreign
currency futures contracts
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and on foreign currencies on exchanges or over-the-counter markets. In
connection with position hedging, a Portfolio may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Portfolio to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Portfolio is obligated to deliver and if
a decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities if the market value of such security or securities exceeds the amount
of foreign currency the Portfolio is obligated to deliver.
Hedging transactions involve costs and may result in losses. A
Portfolio may write covered call options on foreign currencies to offset some of
the costs of hedging those currencies. A Portfolio will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of the Portfolio's investment adviser,
the pricing mechanism and liquidity are satisfactory and the participants are
responsible parties likely to meet their contractual obligations. A Portfolio's
ability to engage in hedging and related option transactions may be limited by
tax considerations.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
the value of such currency.
Currency Forward and Futures Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the
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future delivery of a specified amount of a foreign currency at a future date at
a price set at the time of the contract. Foreign currency futures contracts
traded in the United States are designed by and traded on exchanges regulated by
the CFTC, such as the New York Mercantile Exchange. A Portfolio would enter into
foreign currency futures contracts solely for hedging or other appropriate
investment purposes as defined in CFTC regulations.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in any
given month. Forward contracts may be in any amounts agreed upon by the parties
rather than predetermined amounts. Also, forward foreign exchange contracts are
traded directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Portfolio may
either accept or make delivery of the currency specified in the contract, or at
or prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market in such
contracts. Although a Portfolio intends to purchase or sell foreign currency
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there can be no assurance that a secondary market on
an exchange or board of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, a Portfolio would
continue to be required to make daily cash payments of variation margin.
Foreign Currency Options. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when a Portfolio's investment adviser believes that a liquid secondary market
exists for such options. There can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. Options on
foreign currencies are affected by all of those factors which influence foreign
exchange rates and investments generally. The investment adviser for the
Endeavor High Yield Portfolio does not intend to engage in foreign currency
options.
The value of a foreign currency option is dependent upon the value
of the foreign currency and the U.S. dollar, and may have no
relationship to the investment merits of a foreign security. Because
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foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should a
Portfolio desire to resell that currency to the dealer.
Repurchase Agreements (All Portfolios)
- ---------------------
Each of the Portfolios may enter into repurchase agreements with a
bank, broker-dealer, or other financial institution but no Portfolio may invest
more than 15% (10% with respect to the Endeavor Money Market Portfolio) of its
net assets in illiquid securities, including repurchase agreements having
maturities of greater than seven days. A Portfolio may enter into repurchase
agreements, provided the Fund's custodian always has possession of securities
serving as collateral whose market value at least equals the amount of the
repurchase obligation. To minimize the risk of loss a Portfolio will enter into
repurchase agreements only with financial institutions which are considered by
its investment adviser to be creditworthy. If an institution enters an
insolvency proceeding, the resulting delay in liquidation of the securities
serving as collateral could cause a Portfolio some loss, as well as legal
expense, if the value of the securities declines prior to liquidation.
Forward Commitments, When-Issued and Delayed Delivery Securities (All
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Portfolios)
A Portfolio may purchase securities on a when-issued or delayed
delivery basis and may purchase or sell securities on a forward commitment
basis. Settlement of such transactions normally occurs within a month or more
after the purchase or sale commitment is made.
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A Portfolio may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Portfolio may be required to
pay more at settlement than the security is worth. In addition, the purchaser is
not entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued,
delayed delivery or forward commitment basis the Portfolio will hold liquid
assets in a segregated account at the Portfolio's custodian bank worth at least
the equivalent of the amount due. The liquid assets will be monitored on a daily
basis and adjusted as necessary to maintain the necessary value.
Purchases made under such conditions may involve the risk that yields
secured at the time of commitment may be lower than otherwise available by the
time settlement takes place, causing an unrealized loss to the Portfolio. In
addition, when the Portfolio engages in such purchases, it relies on the other
party to consummate the sale. If the other party fails to perform its
obligations, the Portfolio may miss the opportunity to obtain a security at a
favorable price or yield. Although a Portfolio will generally enter into forward
commitments to purchase securities with the intention of actually acquiring the
security for its portfolio (or for delivery pursuant to options contracts it has
entered into), the Portfolio may dispose of a security prior to settlement if
its investment adviser deems it advisable to do so. The Portfolio may realize
short-term gains or losses in connection with such sales.
Securities Loans (All Portfolios)
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Each Portfolio may lend its portfolio securities to qualified
institutional buyers for the purpose of realizing additional income. Each of the
Portfolios may pay reasonable finders', administrative and custodial fees in
connection with loans of its portfolio securities. Such loans must be
continuously secured by liquid assets at least equal to the market value of the
securities loaned. Although voting rights or the right to consent accompanying
loaned securities pass to the borrower, a Portfolio retains the right to call
the loan at any time on reasonable notice, and will do so in order that the
securities may be voted by the Portfolio with respect to matters materially
affecting the investment. A Portfolio may also call a loan in order to sell the
securities involved. Loans of portfolio securities will only be made to
borrowers considered by a Portfolio's investment adviser to be creditworthy
under guidelines adopted by the Trustees of the Fund. Securities lending may
involve some credit risk to a Portfolio if the borrower defaults and the
Portfolio is delayed or prevented from recovering the collateral.
Interest Rate Transactions (Dreyfus U.S. Government Securities, T. Rowe
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Price International Stock, T. Rowe Price Growth Stock, Endeavor Asset
Allocation, Endeavor High Yield and Endeavor Janus Growth Portfolios)
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Among the strategic transactions into which the Dreyfus U.S. Government
Securities, T. Rowe Price International Stock, T. Rowe Price Growth Stock,
Endeavor Asset Allocation, Endeavor High Yield and Endeavor Janus Growth
Portfolios may enter are interest rate swaps and the purchase or sale of related
caps and floors. A Portfolio expects to enter into these transactions primarily
to preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a duration management
technique or to protect against any increase in the price of securities the
Portfolio anticipates purchasing at a later date. A Portfolio intends to use
these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Portfolio may be obligated to pay.
Interest rate swaps involve the exchange by a Portfolio with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal. A currency swap is an agreement to exchange cash flows on a
notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser, to the extent that a specific index
exceeds a predetermined interest rate, to receive payments of interest on a
notional principal amount from the party selling such cap. The purchase of a
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling such floor to the extent that a specified index falls
below a predetermined interest rate or amount.
A Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these swaps, caps
and floors are entered into for good faith hedging purposes, the investment
advisers to the Portfolios and the Fund believe such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to its borrowing restrictions. A Portfolio will not enter
into any swap, cap and floor transaction unless, at the time of entering into
such transaction, the unsecured long-term debt of the counterparty, combined
with any credit enhancements, is rated at least "A" by Standard & Poor's or
Moody's or has an equivalent rating from an NRSRO or is determined to be of
equivalent credit quality by the investment adviser. For a description of the
NRSROs and their ratings, see the Appendix. If there is a default by the
counterparty, a Portfolio may have contractual remedies pursuant to the
agreements 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. Caps and floors are more
recent innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
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With respect to swaps, a Portfolio will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps and floors require
segregation of assets with a value equal to the Portfolio's net obligations, if
any.
Dollar Roll Transactions (Dreyfus U.S. Government Securities, Endeavor
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Janus Growth and T. Rowe Price International Stock Portfolios)
The Dreyfus U.S. Government Securities, Endeavor Janus Growth and T.
Rowe Price International Stock Portfolios may enter into "dollar roll"
transactions, which consist of the sale by the Portfolio to a bank or
broker-dealer (the "counterparty") of Government National Mortgage Association
certificates or other mortgage-backed securities together with a commitment to
purchase from the counterparty similar, but not identical, securities at a
future date. The counterparty receives all principal and interest payments,
including prepayments, made on the security while it is the holder. A Portfolio
receives a fee from the counterparty as consideration for entering into the
commitment to purchase. Dollar rolls may be renewed over a period of several
months with a different repurchase price and a cash settlement made at each
renewal without physical delivery of securities. Moreover, the transaction may
be preceded by a firm commitment agreement pursuant to which a Portfolio agrees
to buy a security on a future date.
A Portfolio will not use such transactions for leveraging purposes and,
accordingly, will segregate cash, U.S. government securities or other liquid
assets in an amount sufficient to meet its purchase obligations under the
transactions. The Dreyfus U.S. Government Securities Portfolio will also
maintain asset coverage of at least 300% for all outstanding firm commitments,
dollar rolls and other borrowings.
Dollar rolls are treated for purposes of the 1940 Act as borrowings of
a Portfolio because they involve the sale of a security coupled with an
agreement to repurchase. Like all borrowings, a dollar roll involves costs to a
Portfolio. For example, while a Portfolio receives a fee as consideration for
agreeing to repurchase the security, the Portfolio forgoes the right to receive
all principal and interest payments while the counterparty holds the security.
These payments to the counterparty may exceed the fee received by a Portfolio,
thereby effectively charging the Portfolio interest on its borrowing. Further,
although a Portfolio can estimate the amount of expected principal prepayment
over the term of the dollar roll, a variation in the actual amount of prepayment
could increase or decrease the cost of the Portfolio's borrowing.
The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, a Portfolio's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before a Portfolio is able to purchase them.
Similarly, the Portfolio may be required to purchase securities in connection
with a dollar roll at a higher price than may otherwise be available on the open
market. Since,
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as noted above, the counterparty is required to deliver a similar, but not
identical, security to a Portfolio, the security that the Portfolio is required
to buy under the dollar roll may be worth less than an identical security.
Finally, there can be no assurance that a Portfolio's use of the cash that it
receives from a dollar roll will provide a return that exceeds borrowing costs.
Municipal Fixed-Income Securities (T. Rowe Price International Stock
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and Dreyfus U.S. Government Securities Portfolios)
A Portfolio may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The Portfolio may also invest in municipal bonds of any political subdivision,
agency or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Interest payments received by holders of these securities are generally
tax-free. Municipal bonds may also be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
A Portfolio may also invest in industrial development bonds. Such bonds
are usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market
conditions, the financial condition of the issuer and the issue's size, maturity
date and rating. Municipal bonds are rated by Standard & Poor's, Moody's and
Fitch IBCA, Inc. Such ratings, however, are opinions, not absolute standards of
quality. Municipal bonds with the same maturity, interest rates and rating may
have different yields, while municipal bonds with the same maturity and interest
rate, but different ratings, may have the same yield. Once purchased by the
Portfolio, a municipal bond may cease to be rated or receive a new rating below
the minimum required for purchase by the Portfolio. Neither event would require
the Portfolio to sell the bond, but the
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Portfolio's investment adviser would consider such events in determining whether
the Portfolio should continue to hold it.
The ability of the Portfolio to achieve its investment objective
depends upon the continuing ability of the issuers of municipal bonds to pay
interest and principal when due. Municipal bonds are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. Such laws extend the time for payment of principal and/or interest,
and may otherwise restrict the Portfolio's ability to enforce its rights in the
event of default. Since there is generally less information available on the
financial condition of municipal bond issuers compared to other domestic issuers
of securities, the Portfolio's investment adviser may lack sufficient knowledge
of an issue's weaknesses. Other influences, such as litigation, may also
materially affect the ability of an issuer to pay principal and interest when
due. In addition, the market for municipal bonds is often thin and can be
temporarily affected by large purchases and sales, including those by the
Portfolio.
From time to time, Congress has considered restricting or eliminating
the federal income tax exemption for interest on municipal bonds. Such actions
could materially affect the availability of municipal bonds and the value of
those already owned by the Portfolio. If such legislation were passed, the
Fund's Board of Trustees may recommend changes in the Portfolio's investment
objectives and policies.
Portfolio Turnover
While it is impossible to predict portfolio turnover rates, the
investment advisers to the Portfolios other than the Dreyfus U.S. Government
Securities Portfolio, Dreyfus Small Cap Value Portfolio, Endeavor Select
Portfolio, Endeavor Money Market Portfolio, Endeavor Asset Allocation Portfolio
and Endeavor Janus Growth Portfolio anticipate that portfolio turnover will
generally not exceed 100% per year. The investment advisers to the Endeavor
Select Portfolio and Endeavor Janus Growth Portfolio anticipate that portfolio
turnover will generally not exceed 150% per year. The investment adviser to the
Endeavor Asset Allocation Portfolio anticipates that portfolio turnover will
generally not exceed 250% per year. The investment adviser to the Dreyfus U.S.
Government Securities Portfolio anticipates that portfolio turnover may exceed
500% per year, exclusive of dollar roll transactions. The investment adviser to
the Dreyfus Small Cap Value Portfolio anticipates that the Portfolio's portfolio
turnover rate will generally not exceed 200%. With respect to the Endeavor Money
Market Portfolio, although the Portfolio intends normally to hold its
investments to maturity, the short maturities of these investments are expected
by the Portfolio's investment adviser to result in a relatively high rate of
portfolio turnover. Higher portfolio turnover rates usually generate additional
brokerage commissions and expenses.
INVESTMENT RESTRICTIONS
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Except for restriction numbers 2, 3, 4, 11 and 12 with respect to the
T. Rowe Price Equity Income, T. Rowe Price Growth Stock, Endeavor Opportunity
Value, Endeavor Enhanced Index, Endeavor Select, Endeavor High Yield and
Endeavor Janus Growth Portfolios and restriction number 11 with respect to the
T. Rowe Price International Stock, Endeavor Asset Allocation, Endeavor Value
Equity, Dreyfus U.S. Government Securities and Dreyfus Small Cap Value
Portfolios (which restrictions are not fundamental policies), the following
investment restrictions (numbers 1 through 12) are fundamental policies, which
may not be changed without the approval of a majority of the outstanding shares
of the Portfolio, and apply to each of the Portfolios except as otherwise
indicated. As provided in the 1940 Act, a vote of a majority of the outstanding
shares necessary to amend a fundamental policy means the affirmative vote of the
lesser of (1) 67% or more of the shares present at a meeting, if the holders of
more than 50% of the outstanding shares of the Portfolio are present or
represented by proxy, or (2) more than 50% of the outstanding shares of the
Portfolio.
A Portfolio may not:
1. Borrow money, except to the extent permitted by applicable law.
2. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to
secure borrowings permitted by restriction 1 above. Collateral arrangements with
respect to margin for futures contracts and options are not deemed to be pledges
or other encumbrances for purposes of this restriction.
3. Purchase securities on margin, except a Portfolio may obtain such
short-term credits as may be necessary for the clearance of securities
transactions and may make margin deposits in connection with transactions in
options, futures contracts and options on such contracts.
4. Make short sales of securities or maintain a short position for the account
of the Portfolio, unless at all times when a short position is open the
Portfolio owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible or exchangeable
for securities of the same issue as, and in equal amounts to, the securities
sold short.
5. Underwrite securities issued by other persons, except to the extent that in
connection with the disposition of its portfolio investments it may be deemed to
be an underwriter under federal securities laws.
6. Purchase or sell real estate, although a Portfolio may purchase securities
of issuers which deal in real estate, securities which are secured by interests
in real estate and securities representing interests in real estate; provided,
however, that the Endeavor High Yield Portfolio may hold and sell real estate
acquired as a result of the ownership of securities.
7. Purchase or sell commodities or commodity contracts, except that
all Portfolios other than the Endeavor Money Market Portfolio may
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purchase or sell financial futures contracts and related options. For purposes
of this restriction, currency contracts or hybrid investments shall not be
considered commodities.
8. Make loans, except by purchase of debt obligations in which the Portfolio
may invest consistently with its investment policies, by entering into
repurchase agreements or through the lending of its portfolio securities.
9. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Portfolio (taken at current
value) would be invested in the securities of such issuer or acquire more than
10% of the outstanding voting securities of any issuer, provided that this
limitation does not apply to obligations issued or guaranteed as to principal
and interest by the U.S. government or its agencies and government-sponsored
entities or to repurchase agreements secured by such obligations and that up to
25% of the Portfolio's total assets (taken at current value) may be invested
without regard to this limitation.
10. Invest more than 25% of the value of its total assets in any one industry,
provided that this limitation does not apply to obligations issued or guaranteed
as to interest and principal by the U.S. government, its agencies and
government-sponsored entities, and repurchase agreements secured by such
obligations, and in the case of the Endeavor Money Market Portfolio obligations
of domestic branches of United States banks.
11. Invest more than 15% (10% with respect to the Endeavor Money Market
Portfolio) of its net assets (taken at current value at the time of each
purchase) in illiquid securities including repurchase agreements maturing in
more than seven days.
12. Purchase securities of any issuer for the purpose of exercising
control or management.
All percentage limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and partially or completely as a
result of such investment.
Other Policies
The Endeavor Money Market Portfolio may not invest in the securities of
any one issuer if, immediately after such investment, more than 5% of the total
assets of the Portfolio (taken at current value) would be invested in the
securities of such issuer, provided that this limitation does not apply to
obligations issued or guaranteed as to principal and interest by the U.S.
government or its agencies and government-sponsored entities or to repurchase
agreements secured by such obligations and that with respect to 25% of the
Portfolio's total assets more than 5% may be invested in securities of any one
issuer for three business days after the purchase thereof if the securities have
been assigned the highest quality rating by NRSROs, or if not rated,
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have been determined to be of comparable quality. These limitations apply to
time deposits, including certificates of deposit, bankers' acceptances, letters
of credit and similar instruments; they do not apply to demand deposit accounts.
For a description of the NRSROs' ratings, see the Appendix.
In addition, the Endeavor Money Market Portfolio may not purchase any
security that matures more than thirteen months (397 days) from the date of
purchase or which has an implied maturity of more than thirteen months (397
days) except as provided in (1) below. For the purposes of satisfying this
requirement, the maturity of a portfolio instrument shall be deemed to be the
period remaining until the date noted on the face of the instrument as the date
on which the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be made,
except that:
1. An instrument that is issued or guaranteed by the U.S. government or any
agency thereof which has a variable rate of interest readjusted no less
frequently than every 25 months (762 days) may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
2. A variable rate instrument, the principal amount of which is scheduled on
the face of the instrument to be paid in thirteen months (397 days) or less, may
be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
3. A variable rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the longer of the period remaining until the
next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
4. A floating rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
5. A repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities is
scheduled to occur, or where no date is specified, but the agreement is subject
to demand, the notice period applicable to a demand for the repurchase of the
securities.
6. A portfolio lending agreement may be treated as having a maturity equal to
the period remaining until the date on which the loaned securities are scheduled
to be returned, or where no date is specified, but the agreement is subject to
demand, the notice period applicable to a demand for the return of the loaned
securities.
Each of the Endeavor Value Equity and Dreyfus Small Cap Value
Portfolios may not invest more than 5% of the value of its total assets in
warrants not listed on either the New York or American Stock Exchange. Each of
the Endeavor Opportunity Value and Endeavor Enhanced Index Portfolios will not
invest in warrants if, as a result thereof, more than 2% of the value of the
total assets of the Portfolio would be
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invested in warrants which are not listed on the New York Stock Exchange, the
American Stock Exchange, or a recognized foreign exchange, or more than 5% of
the value of the total assets of the Portfolio would be invested in warrants
whether or not so listed. However, the acquisition of warrants attached to other
securities is not subject to this restriction. Each of the T. Rowe Price Equity
Income, T. Rowe Price Growth Stock, T. Rowe Price International Stock and
Endeavor Select Portfolios will not invest in warrants if, as a result thereof,
the Portfolio will have more than 10% of the value of its total assets invested
in warrants; provided that this restriction does not apply to warrants acquired
as a result of the purchase of another security.
With respect to borrowing, in general, under the 1940 Act, a Portfolio
may not borrow money except that (1) a Portfolio may borrow from banks or enter
into reverse repurchase agreements, in amounts up to 331/3% of its total assets
(including the amount borrowed); and (2) a Portfolio may borrow up to an
additional 5% of its total assets for temporary purposes.
PERFORMANCE INFORMATION
Total return and yield will be computed as described below.
Total Return
Each Portfolio's "average annual total return" figures described and
shown in the Prospectus are computed according to a formula prescribed by the
Securities and Exchange Commission. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment made at the
beginning of the 1, 5, or 10 years (or other) periods at the end of the 1, 5, or
10 years (or other) periods (or fractional portion thereof)
The table below shows the average annual total return for the Endeavor
Asset Allocation, T. Rowe Price International Stock, Endeavor Value Equity,
Dreyfus Small Cap Value, Dreyfus U.S. Government Securities, T. Rowe Price
Equity Income, T. Rowe Price Growth Stock, Endeavor Opportunity Value, Endeavor
Enhanced Index, Endeavor Select, Endeavor High Yield and Endeavor Janus Growth
Portfolios for the specific periods.
With respect to the T. Rowe Price International Stock Portfolio which
commenced operation April 8, 1991, effective January 1, 1995, the Portfolio's
investment adviser was changed to Rowe Price-Fleming International, Inc.
("Price-Fleming"). Prior to March 24, 1995, the Portfolio was known as the
Global Growth Portfolio. Subsequent to such time, the Portfolio's investment
objective was changed from investments in small capitalization companies on a
global basis to investments in a
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broad range of established companies on an international basis (i.e.,
non-U.S. companies). Average annual total return information for the
period from January 1, 1995 to December 31, 1999 is available upon
written request to the Fund.
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For the One For the Five For Period From
Year Period Year Period Inception to
Ended December Ended December December 31, 1999
31, 1999 31, 1999
Endeavor Asset
Allocation(1)...... 26.39% 21.09% 15.68%/15.67%*
T. Rowe Price
International
Stock(1)........... 32.35% 14.79% 14.79%
Endeavor Value
Equity(2).......... (3.06)% 16.74% 13.61%/13.60%*
Dreyfus Small
Cap Value(3)....... 29.39% 17.88% 14.74%/14.73%*
T. Rowe Price
Equity Income(4)... 3.47% N/A 17.73%
T. Rowe Price Growth
Stock(4)............ 22.19% N/A 27.38%
Dreyfus U.S.
Government
Securities(5)...... (0.87)% 6.46% 5.64%/5.63%*
Endeavor Opportunity
Value(6)........... 4.79% N/A 8.65%/8.65%*
Endeavor Enhanced
Index (7).......... 18.16% N/A 27.39%/27.38%*
Endeavor Select
(8)............. 47.84% N/A
26.90%/26.88%*
Endeavor High
Yield (9)......... 5.82% N/A 1.60%/1.57%*
Endeavor Janus N/A N/A
Growth (10)....... 36.48%/36.46%*
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* The figure shows what the Portfolio's performance would have been in
the absence of fee waivers and/or reimbursement of other expenses, if
any.
(1) The Portfolio commenced operations on April 8, 1991.
(2) The Portfolio commenced operations on May 27, 1993.
(3) The Portfolio commenced operations on May 4, 1993.
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(4) The Portfolio commenced operations on January 3, 1995.
(5) The Portfolio commenced operations on May 13, 1994.
(6) The Portfolio commenced operations on November 18, 1996.
(7) The Portfolio commenced operations on May 2, 1997.
(8) The Portfolio commenced operations on February 3, 1998.
(9) The Portfolio commenced operations on June 1, 1998.
(10) The Portfolio commenced operations on May 1, 1999.
The calculations of total return assume the reinvestment of all
dividends and capital gain distributions on the reinvestment dates during the
period and the deduction of all recurring expenses that were charged to
shareholders' accounts. The above table does not reflect charges and deductions
which are, or may be, imposed under the Contracts.
The performance of each Portfolio will vary from time to time in
response to fluctuations in market conditions, interest rates, the composition
of the Portfolio's investments and expenses. Consequently, a Portfolio's
performance figures are historical and should not be considered representative
of the performance of the Portfolio for any future period.
Yield
From time to time, the Fund may quote the Endeavor Money Market
Portfolio's, the Dreyfus U.S. Government Securities Portfolio's and the Endeavor
High Yield Portfolio's yield and effective yield in advertisements or in reports
or other communications to shareholders. Yield quotations are expressed in
annualized terms and may be quoted on a compounded basis.
The annualized current yield for the Endeavor Money Market Portfolio is
computed by: (a) determining the net change in the value of a hypothetical
pre-existing account in the Portfolio having a balance of one share at the
beginning of a seven calendar day period for which yield is to be quoted; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares, but does not
include realized gains and losses or unrealized appreciation and depreciation.
In addition, the Endeavor Money Market Portfolio may calculate a compound
effective annualized yield by adding 1 to the base period return (calculated as
described above), raising the sum to a power equal to 365/7 and subtracting 1.
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The Dreyfus U.S. Government Securities Portfolio's and the Endeavor
High Yield Portfolio's 30-day yield will be calculated according to a formula
prescribed by the Securities and Exchange Commission. The formula can be
expressed as follows:
YIELD = 2[(a-b+1)6-1]
---
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the net asset value per share on the last day of the
period
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by the Portfolio at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
Yield information is useful in reviewing a Portfolio's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Portfolios'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a
Portfolio from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the Portfolio's
investments, thereby reducing the current yield of the Portfolio. In periods of
rising interest rates, the opposite can be expected to occur.
Non-Standardized Performance
In addition to the performance information described above, the Fund
may provide total return information with respect to the Portfolios for
designated periods, such as for the most recent six months or most recent twelve
months. This total return information is computed as described under "Total
Return" above except that no annualization is made.
PORTFOLIO TRANSACTIONS
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Subject to the supervision and control of the Manager and the Trustees
of the Fund, each Portfolio's investment adviser is responsible for decisions to
buy and sell securities for its account and for the placement of its portfolio
business and the negotiation of commissions, if any, paid on such transactions.
Brokerage commissions are paid on transactions in equity securities traded on a
securities exchange and on options, futures contracts and options thereon. Fixed
income securities and certain equity securities in which the Portfolios invest
are traded in the over-the-counter market. These securities are generally traded
on a net basis with dealers acting as principal for their own account without a
stated commission, although prices of such securities usually include a profit
to the dealer. In over-the-counter transactions, orders are placed directly with
a principal market maker unless a better price and execution can be obtained by
using a broker. In underwritten offerings, securities are usually purchased at a
fixed price which includes an amount of compensation to the underwriter
generally referred to as the underwriter's concession or discount. Certain money
market securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. U.S. government securities are generally
purchased from underwriters or dealers, although certain newly-issued U.S.
government securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality. Each Portfolio's investment adviser is
responsible for effecting its portfolio transactions and will do so in a manner
deemed fair and reasonable to the Portfolio and not according to any formula.
The primary consideration in all portfolio transactions will be prompt execution
of orders in an efficient manner at a favorable price. In selecting
broker-dealers and negotiating commissions, an investment adviser considers the
firm's reliability, the quality of its execution services on a continuing basis
and its financial condition. When more than one firm is believed to meet these
criteria, preference may be given to brokers that provide the Portfolios or
their investment advisers with brokerage and research services within the
meaning of Section 28(e) of the Securities Exchange Act of 1934. Each
Portfolio's investment adviser is of the opinion that, because this material
must be analyzed and reviewed, its receipt and use does not tend to reduce
expenses but may benefit the Portfolio by supplementing the investment adviser's
research. In seeking the most favorable price and execution available, an
investment adviser may, if permitted by law, consider sales of the Contracts as
described in the Prospectus a factor in the selection of broker-dealers.
An investment adviser may effect portfolio transactions for other
investment companies and advisory accounts. Research services furnished by
broker-dealers through which a Portfolio effects its securities transactions may
be used by the Portfolio's investment adviser in servicing all of its accounts;
not all such services may be used in connection with the Portfolio. In the
opinion of each investment adviser, it is not possible to measure separately the
benefits from research services to each of its accounts, including a Portfolio.
Whenever concurrent decisions are made to purchase or sell securities by a
Portfolio and another account, the Portfolio's investment adviser will attempt
to allocate equitably portfolio transactions among the Portfolio and other
accounts. In making such allocations between the Portfolio and
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other accounts, the main factors to be considered are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held, and the opinions of the persons responsible for
recommending investments to the Portfolio and the other accounts. In some cases
this procedure could have an adverse effect on a Portfolio. In the opinion of
each investment adviser, however, the results of such procedures will, on the
whole, be in the best interest of each of the accounts.
The investment advisers to the Endeavor Money Market, Endeavor Asset
Allocation, T. Rowe Price International Stock, T. Rowe Price Equity Income, T.
Rowe Price Growth Stock, Endeavor Enhanced Index, Endeavor Select and Endeavor
Janus Growth Portfolios may execute portfolio transactions through certain of
their affiliated brokers, acting as agent in accordance with the procedures
established by the Fund's Board of Trustees, but will not purchase any
securities from or sell any securities to any such affiliate acting as principal
for its own account.
For the year ended December 31, 1997, the Endeavor Money Market
Portfolio and the Dreyfus U.S. Government Securities Portfolio did not pay any
brokerage commissions, while the Endeavor Asset Allocation Portfolio paid
$214,145 in brokerage commissions. For the year ended December 31, 1997, the T.
Rowe Price International Stock Portfolio, the Endeavor Value Equity Portfolio
and the Dreyfus Small Cap Value Portfolio paid $205,850, $75,870 and $525,982,
respectively, in brokerage commissions of which $14,665 (7.13%) and $608 (.30%)
with respect to the T. Rowe Price International Stock Portfolio was paid to
Robert Fleming Holdings Limited and Jardine Fleming Group Limited, and Ord
Minnett Securities, Ltd., respectively. For the year ended December 31, 1997,
the T. Rowe Price Equity Income Portfolio and the T. Rowe Price Growth Stock
Portfolio paid $117,830 and $87,464, respectively, in brokerage commissions of
which $74 (.06%) with respect to the T. Rowe Price Equity Income Portfolio was
paid to Robert Flemings Holdings Limited and $2,663 (3.04%) with respect to the
T. Rowe Price Growth Stock Portfolio was paid to Robert Flemings Holdings
Limited. For the fiscal year ended December 31, 1997, the Endeavor Opportunity
Value Portfolio paid $23,636 in brokerage commissions and for the fiscal period
ended December 31, 1997, the Endeavor Enhanced Index Portfolio paid $9,494 in
brokerage commissions.
For the year ended December 31, 1998, the Endeavor Money Market
Portfolio and the Endeavor High Yield Portfolio did not pay any brokerage
commissions while the Endeavor Asset Allocation Portfolio paid $699,420 in
brokerage commissions of which $288 (0.04%) was paid to Morgan Stanley & Co.,
Inc. For the year ended December 31, 1998, the T. Rowe Price International Stock
Portfolio, the Endeavor Value Equity Portfolio and the Dreyfus Small Cap Value
Portfolio paid $121,001, $142,104 and $889,611, respectively, in brokerage
commissions of which $1,917 (1.58%), $10,301 (8.51%) and $759 (0.63%) with
respect to the T. Rowe Price International Stock Portfolio was paid to Robert
Fleming Holdings Limited, Jardine Fleming Group Limited, and Ord Minnett
Securities, Ltd., respectively. For the year ended December 31, 1998,
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the T. Rowe Price Equity Income Portfolio and the T. Rowe Price Growth Stock
Portfolio paid $122,431 and $21,866, respectively, in brokerage commissions of
which $2,964 (1.37%) with respect to the T. Rowe Price Growth Stock Portfolio
was paid to Robert Fleming Holdings Limited. For the year ended December 31,
1998, the Dreyfus U.S. Government Securities Portfolio, the Endeavor Opportunity
Value Portfolio and the Endeavor Enhanced Index Portfolio paid $67,575, $43,947
and $46,321, respectively, in brokerage commissions. For the fiscal year ended
December 31, 1998, the Endeavor Select Portfolio paid $177,608 in brokerage
commissions of which $1,356 (0.76%) was paid to Montgomery Securities, Inc.
For the year ended December 31, 1999, the Endeavor Money Market
Portfolio and the Endeavor High Yield Portfolio did not pay any brokerage
commissions while the Endeavor Asset Allocation Portfolio paid $323,182 in
brokerage commissions. For the year ended December 31, 1999, the T. Rowe Price
International Stock Portfolio, the Endeavor Value Equity Portfolio and the
Dreyfus Small Cap Value Portfolio paid $193,255, $296,817 and $1,384,644,
respectively, in brokerage commissions of which $3,858 (2.00%) and $1,260
(0.65%) with respect to the T. Rowe Price International Stock Portfolio was paid
to Robert Fleming Holdings Limited and Jardine Fleming Group Limited,
respectively. For the year ended December 31, 1999, the T. Rowe Price Equity
Income Portfolio and the T. Rowe Price Growth Stock Portfolio paid $187,277 and
$285,487, respectively, in brokerage commissions of which $2,845 (1.00%) with
respect to the T. Rowe Price Growth Stock Portfolio was paid to Robert Fleming
Holdings Limited. For the year ended December 31, 1999, the Dreyfus U.S.
Government Securities Portfolio, the Endeavor Opportunity Value Portfolio and
the Endeavor Enhanced Index Portfolio paid $44,456, $44,461 and $89,427,
respectively, in brokerage commissions. For the fiscal year ended December 31,
1999, the Endeavor Select Portfolio paid $156,177 in brokerage commissions of
which $33 (0.02%) was paid to Montgomery Securities, Inc. For the fiscal year
ended December 31, 1999 the Endeavor Janus Growth Portfolio paid $393,997 in
brokerage commissions.
For 1999, the percentage of each Portfolio's aggregate dollar amount of
commissionable transactions effected through an affiliated broker is as follows:
T. Rowe Price International Stock Portfolio - 2.53% (Robert Fleming
Holdings Limited)
T. Rowe Price International Stock Portfolio - 1.44% (Jardine
Fleming Group Limited)
T. Rowe Price Growth Stock Portfolio - 0.52% (Robert Fleming
Holdings Limited)
Endeavor Select Portfolio - 0.13% (Montgomery Securities, Inc.)
Brokerage Enhancement Plan
The Board of Trustees of the Fund, including all of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the
Fund, Endeavor Management Co. or Transamerica Capital, Inc. (formerly
known as Endeavor Group) (the "Distributor") (hereinafter referred to as
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<PAGE>
"Independent Trustees"), and each Portfolio's shareholders, have voted pursuant
to the substantive provisions of Rule 12b-1 under the 1940 Act to adopt a
Brokerage Enhancement Plan (the "Plan") for the purpose of utilizing the Fund's
brokerage commissions, to the extent available, to promote the sale and
distribution of the Fund's shares. Under the Plan, the Fund is using recaptured
commissions to pay for distribution expenses. However, under the Plan, except
for recaptured commissions, neither the Fund nor any series of the Fund,
including the Portfolios, will incur any additional fees or charges. As part of
the Plan, the Fund and the Distributor have entered into a Distribution
Agreement. Under the Distribution Agreement, the Distributor is the principal
underwriter of the Fund, with responsibility for promoting sales of the shares
of each Portfolio.
The Distributor, however, does not receive any additional compensation
from the Fund for performing this function. Instead, under the Plan, the Manager
is authorized to direct that the investment adviser of each Portfolio effect
brokerage transactions in portfolio securities through certain broker-dealers,
consistent with each investment adviser's obligations to achieve best price and
execution. It is anticipated that these broker-dealers will agree that a
percentage of the commission will be directed to the Distributor. The
Distributor will use a part of these directed commissions to defray legal and
administrative costs associated with implementation of the Plan. These expenses
are expected to be minimal. The remainder of the commissions received by the
Distributor will be used to finance activities principally intended to result in
the sale of shares of the Portfolios. These activities will include: holding or
participating in seminars and sales meetings designed to promote the sale of
Fund shares; paying marketing fees requested by broker-dealers who sell
Contracts; training sales personnel; compensating broker-dealers and/or their
registered representatives in connection with the allocation of cash values and
premiums of the Contracts to the Fund; printing and mailing Fund prospectuses,
statements of additional information, and shareholder reports for prospective
Contract holders; and creating and mailing advertising and sales literature.
The Distributor is obligated to use all of the funds directed to it for
distribution expenses, except for a small amount to be used to defray the
incidental costs associated with implementation of the Plan. Accordingly, the
Distributor will not make any profit from the operation of the Plan.
Both the Plan and the Distribution Agreement provide (A) that they will
be subject to annual approval by the Trustees and the Independent Trustees; (B)
that any person authorized to make payments under the Plan or Distribution
Agreement must provide the Trustees a quarterly written report of payments made
and the purpose of the payments; (C) that the Plan may be terminated at any time
by the vote of a majority of the Independent Trustees; (D) that the Distribution
Agreement may be terminated without penalty at any time by a vote of a majority
of the Independent Trustees or, as to a Portfolio, by vote of a majority of the
outstanding securities of the Portfolio on not more than 60 days' written
notice; and (E) that the Distribution Agreement terminates if it
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<PAGE>
is assigned. The Plan may not be amended to increase materially the amount to be
spent for distribution without shareholder approval, and all material Plan
amendments must be approved by a vote of the Independent Trustees. In addition,
the selection and nomination of the Independent Trustees must be committed to
the Independent Trustees.
For the year ended December 31, 1999, the Distributor received an
aggregate of $829,876 pursuant to the Plan, of which $519,184 was attributable
to the Dreyfus Small Cap Value Portfolio, $26,151 to the Endeavor Opportunity
Value Portfolio, $175,545 to the Endeavor Value Equity Portfolio, $76,797 to the
Endeavor Asset Allocation Portfolio, $23,039 to the T. Rowe Price Equity Income
Portfolio and $9,160 to the T. Rowe Price Growth Stock Portfolio. In 1999,
$888,475 was utilized to pay the costs of seminars and sales meetings.
MANAGEMENT OF THE FUND
The Fund is supervised by a Board of Trustees that is responsible for
representing the interests of shareholders. The Trustees meet periodically
throughout the year to oversee the Portfolios' activities, reviewing, among
other things, each Portfolio's performance and its contractual arrangements with
various service providers.
Trustees and Officers
The Trustees and executive officers of the Fund, their ages and their
principal occupations during the past five years are set forth below. Unless
otherwise indicated, the business address of each is 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625.
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<PAGE>
<TABLE>
<CAPTION>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
<S> <C> <C>
*+Vincent J. McGuinness, Jr. President, From July, 1997 to
(34) Chief November, 1997,
Financial Executive Vice
Officer President -
(Treasurer), Administration of
Trustee Registrant; from
September,
1996
to
June,
1997
and
since
June,
1998,Chief
Financial
Officer
(Treasurer)
of
Registrant;
from
February,
1997
to
December,
1997,
Executive
Vice-
President,
Chief
of
Operations,
from
March,
1997
to
October,
1999,
Director,
from
December,
1997
to
October,
1999,
Chief
Operating
Officer,
and
from
June,
1998
to
October,
1999,
Chief
Financial
Officer,
from
July,
1999
to
October,
1999,
Chief
Executive
Officer
of
Endeavor
Group;
from
September,
1996
to
June,
1997,
and
from
June,
1998
to
October,
1999,
Chief
Financial
Officer,
since
May,
1996,
Director
and
from
June,
1997
to
October,
1998,
Executive
Vice
President
-
Administration,
from
October,
1998
to
October,
1999,
Chief
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<PAGE>
Principal
Executive
Officer,
of
Endeavor
Management
Co.;
since
August,
1996,
Chief
Financial
Officer
of
VJM
Corporation
(oil
and
gas);
from
May,
1996
to
January,
1997,
Executive
Vice
President
and
Director
of
Sales,
Western
Division
of
Endeavor
Group;
since
May,
1996,
Chief
Financial
Officer
of
McGuinness
&
Associates.
*Vincent J. McGuinness (65) Trustee Until December 31,
1901 Ocean Way 1999, Director of
Laguna Beach, California Endeavor Group and
92651 Endeavor Management
Co.;
President
of
VJM
corporation
(oil
and
gas);
until
July,
1999,
Chairman,
Chief
Executive
Officer
and
Director
of
McGuinness
&
Associates
and
VJM
Corporation;
until
July,
1996,
Chairman,
Chief
Executive
Officer
and
Director
of
McGuinness
Group
(insurance
marketing);
from
September,
1988
to
July,
1999,
Chief
Executive
Officer
of
Endeavor
Management
Co.;
until
October,
1998,
President
of
Endeavor
Management
Co.
Manager,
PFL
Endeavor
Target
Account
and
AUSA
Endeavor
Target
Account.
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<PAGE>
Principal
Timothy A. Devine (65)
1424 Dolphin Terrace Trustee President, Chief
Corona del Mar, California Executive Officer,
92625 Devine Properties, Inc.
(landscape contracting
and maintenance);
Consultant, Plant
Control, Inc. Manager,
PFL Endeavor Target
Account and AUSA
Endeavor Target
Account.
Thomas J. Hawekotte (64) Trustee President, Thomas J.
6007 North Sheridan Road Hawekotte, P.C. (law
Chicago, Illinois 60660 practice). Manager,
PFL Endeavor Target
Account and AUSA
Endeavor Target
Account.
Steven L. Klosterman (48) Trustee Since July, 1995,
5973 Avenida Encinas President of Klosterman
Suite 300 Capital Corporation
Carlsbad, California 92008 (investment adviser);
Investment Counselor,
Robert J. Metcalf &
Associates, Inc.
(investment adviser)
from August, 1990 to
June, 1995. Manager,
PFL Endeavor Target
Account and AUSA
Endeavor Target
Account.
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<PAGE>
Principal
Halbert D. Lindquist (53) Trustee President, Lindquist
1650 E. Fort Lowell Road and Associates
Suite 203 (investment adviser)
Tucson, Arizona 85719-2324 and since December,
1987 Tucson Asset
Management, Inc.
(commodity trading
adviser), and since
November, 1987,
Presidio Securities,
Inc. (broker-dealer),
and from January, 1998
to January 1999, Chief
Investment Officer and
since January, 1999,
Consultant, Blackstone
Alternative Asset
Management. Manager,
PFL Endeavor Target
Account and AUSA
Endeavor Target
Account.
Keith H. Wood (63) Trustee Since 1972, Chairman
39 Main Street and Chief Executive
Chatham, New Jersey 07928 Officer of Jamison,
Eaton
&
Wood
(investment
adviser)
and
from
1978
to
December,
1997,
President
of
Ivory
&
Sime
International,
Inc.
(investment
adviser);
since
1999,
President,
Wood
&
Anthony,
LLC
(investment
adviser).
Manager,
PFL
Endeavor
Target
Account
and
AUSA
Endeavor
Target
Account.
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<PAGE>
Principal
Peter F. Muratore (67) Trustee From June, 1989 to
Too Far March, 1998, President
Posthouse Road of OCC Distributors
Morristown, New Jersey 07960 (broker-dealer), a
subsidiary of
Oppenheimer Capital.
Manager, PFL Endeavor
Target Account and AUSA
Endeavor Target
Account.
P. Michael Pond (46) Executive Since November 1, 1998,
Vice-President Executive Vice-
- President -
Administration Administration and
and Compliance Compliance of Endeavor
Group; from November 1,
1998 to October, 1999,
Executive Vice
President -
Administration and
Compliance and Chief
Investment Officer of
Endeavor Management
Co.; since October,
1999, President, Chief
Executive Officer and
Chief Investment
Officer of Endeavor
Management Co.; from
November, 1991 to
November, 1996,
Chairman and President
of The Preferred Group
of Mutual Funds; from
October, 1989 to
December, 1996,
President of
Caterpillar Securities
Inc. and Caterpillar
Investment Manager Ltd.
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<PAGE>
Principal
Gail A. Hanson(57) Secretary Since September, 1994,
Vice President for PFPC
Inc. (formerly known as
First Data Services
Investor Group, Inc.)
(mutual fund
administration).
</TABLE>
* May be deemed an "interested person" of the Fund as defined in the
1940 Act.
+ Vincent J. McGuinness, Jr. is the son of Vincent J. McGuinness.
No remuneration will be paid by the Fund to any Trustee or officer of
the Fund who is affiliated with the Manager or the investment advisers. Each
Trustee who is not an affiliated person of the Manager or the investment
advisers will be reimbursed for out-of-pocket expenses and currently receives an
annual fee of $18,000 and $2,500 for attendance at each Trustees' Board or
committee meeting. Set forth below for each of the Trustees of the Fund is the
aggregate compensation paid to such Trustees for the fiscal year ended December
31, 1999.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total
Compensation
From Fund
Aggregate and Fund
Name of Compensation Complex
Person From Fund Paid to Trustees
<S> <C> <C>
Vincent J. McGuinness $ - $ -
Timothy A. Devine $18,000 $19,400
Thomas J. Hawekotte $18,500 $19,900
Steven L. Klosterman $19,000 $20,400
Halbert D. Lindquist $18,000 $19,300
Keith H. Wood $18,500 $19,900
Peter F. Muratore $18,500 $19,900
Vincent J. McGuinness, Jr. - -
- ---------------
</TABLE>
The Agreement and Declaration of Trust of the Fund provides that the
Fund will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Fund, except if it is determined in the manner specified
in the Agreement and Declaration of
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<PAGE>
Trust that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Fund or that such indemnification
would relieve any officer or Trustee of any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties. The Fund, at its expense, provides liability
insurance for the benefit of its Trustees and officers.
As of the date of this Statement of Additional Information, the
officers and Trustees of the Fund as a group owned less than 1% of the
outstanding shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
The Manager
The Fund is managed by Endeavor Management Co. (the "Manager") which,
subject to the supervision and direction of the Trustees of the Fund, has
overall responsibility for the general management and administration of the
Fund. AUSA Holding Company ("AUSA"), an affiliate of PFL Life Insurance Company,
owns all of the outstanding common shares of the Manager and Transamerica
Capital, Inc.
The Manager is responsible for providing investment management and
administrative services to the Fund and in the exercise of such responsibility
selects the investment advisers for the Fund's Portfolios and monitors the
investment advisers' investment programs and results, reviews brokerage matters,
oversees compliance by the Fund with various federal and state statutes, and
carries out the directives of the Trustees. The Manager is responsible for
providing the Fund with office space, office equipment, and personnel necessary
to operate and administer the Fund's business, and also supervises the provision
of services by third parties such as the Fund's custodian and transfer agent.
Pursuant to an administration agreement, PFPC Inc. assists the Manager in the
performance of its administrative responsibilities to the Fund.
As compensation for these services the Fund pays the Manager a monthly
fee at the following annual rates of each Portfolio's average daily net assets:
Endeavor Money Market Portfolio - .50%; Endeavor Asset Allocation Portfolio -
.75%; T. Rowe Price International Stock Portfolio - .90%; Endeavor Value Equity
Portfolio - .80%; Dreyfus Small Cap Value Portfolio - .80%; Dreyfus U.S.
Government Securities Portfolio - .65%; T. Rowe Price Equity Income Portfolio -
.80%; T. Rowe Price Growth Stock Portfolio - .80%; Endeavor Opportunity Value
Portfolio - .80%; Endeavor Enhanced Index Portfolio - .75%; Endeavor Select
Portfolio - 1.00%; Endeavor High Yield Portfolio - .775%; Endeavor Janus Growth
Portfolio - .80%. The management fees paid by the Portfolios (other than the
Endeavor Money Market and Dreyfus U.S. Government Securities Portfolios),
although higher than the fees paid by most other investment companies in
general, are comparable to management fees paid for similar services by many
investment companies with similar investment objectives and policies. From the
management fees, the Manager pays the expenses of
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<PAGE>
providing investment advisory services to the Portfolios, including the fees of
the investment adviser of each Portfolio.
The Manager pays the fees and expenses of PFPC Inc. pursuant to the
administration agreement and the Manager is entitled to be reimbursed for each
Portfolio's portion of the fees and expenses paid by the Manager to PFPC Inc.
with respect to each Portfolio. For Portfolios other than the Endeavor Select,
Endeavor High Yield and Endeavor Janus Growth Portfolios, the Manager pays an
annual fee equal to $650,000 plus 0.01% of the Fund's average daily net assets
in excess of $1 billion. For the Endeavor Select, Endeavor High Yield and
Endeavor Janus Growth Portfolios, the Manager pays PFPC Inc., $40,000 ($30,000
in the case of Endeavor Select Portfolio in its first year of operation) per
year plus 0.01% of the Portfolio's average daily net assets. These fees are
accrued daily and paid monthly.
In addition to the management fees and allocable administrative fees,
the Fund pays all expenses not assumed by the Manager, including, without
limitation, expenses for legal, accounting and auditing services, interest,
taxes, costs of printing and distributing reports to shareholders, proxy
materials and prospectuses, charges of its custodian, transfer agent and
dividend disbursing agent, registration fees, fees and expenses of the Trustees
who are not affiliated persons of the Manager, insurance, brokerage costs,
litigation, and other extraordinary or nonrecurring expenses. All general Fund
expenses are allocated among and charged to the assets of the Portfolios of the
Fund on a basis that the Trustees deem fair and equitable, which may be on the
basis of relative net assets of each Portfolio or the nature of the services
performed and relative applicability to each Portfolio.
The Management Agreement continues in force for two years from its
commencement date, with respect to each Portfolio, and from year to year
thereafter, but only so long as its continuation as to each Portfolio is
specifically approved at least annually (i) by the Trustees or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (ii) by the
vote of a majority of the Independent Trustees, by votes cast in person at a
meeting called for the purpose of voting on such approval. The Management
Agreement provides that it shall terminate automatically if assigned, and that
it may be terminated as to any Portfolio without penalty by the Trustees of the
Fund or by vote of a majority of the outstanding voting securities of the
Portfolio upon 60 days' prior written notice to the Manager, or by the Manager
upon 90 days' prior written notice to the Fund, or upon such shorter notice as
may be mutually agreed upon. In the event the Manager ceases to be the Manager
of the Fund, the right of the Fund to use the identifying name of "Endeavor" may
be withdrawn.
The Investment Advisers
Pursuant to an investment advisory agreement with the Manager, each
investment adviser to a Portfolio furnishes continuously an investment program
for the Portfolio, makes investment decisions on behalf of the Portfolio, places
all orders for the purchase and sale of investments for the Portfolio's account
with brokers or dealers selected by such
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<PAGE>
investment adviser and may perform certain limited related administrative
functions in connection therewith. For its services, the Manager pays each
investment adviser a fee based on a percentage of the average daily net assets
of the Portfolios as follows:
Endeavor Money Market - Morgan Stanley Asset Management* -.25%
Endeavor Asset Allocation - Morgan Stanley Asset Management - .30%
T. Rowe Price International Stock - Rowe Price-Fleming
International, Inc. - .75% up to $20 million; .60% in excess of $20
million up to $50 million; and .50% of assets in excess of $50 million.
At such time as net assets exceed $200 million, .50% of total net
assets.
Endeavor Value Equity - OpCap Advisors - .40%
Endeavor Opportunity Value - OpCap Advisors - .40%
Dreyfus U.S. Government Securities - The Dreyfus Corporation - .15%
Dreyfus Small Cap Value - The Dreyfus Corporation - .375%
T. Rowe Price Equity Income - T. Rowe Price Associates, Inc. - .40%
T. Rowe Price Growth Stock - T. Rowe Price Associates, Inc. - .40%
Endeavor Enhanced Index - J.P. Morgan Investment Management Inc. -
.35%
Endeavor Select - Montgomery Asset Management, LLC - .60%
Endeavor High Yield - Massachusetts Financial Services Company -
.375%
Endeavor Janus Growth - Janus Capital Corporation - .50% (voluntarily
waived to .40%)
Effective May 1, 1998, Morgan Stanley Asset Management became the
investment adviser of the Endeavor Money Market Portfolio and Endeavor Asset
Allocation Portfolio; effective January 1, 1995, Price-Fleming became the
investment adviser of the T. Rowe Price International Stock Portfolio; effective
May 1, 1996 The Dreyfus Corporation became the investment adviser of the Dreyfus
U.S. Government Securities Portfolio; and effective September 16, 1996, The
Dreyfus Corporation became the investment adviser of the Dreyfus Small Cap Value
Portfolio. The investment adviser to each other Portfolio has managed the
Portfolio since its inception date.
- --------
* On December 1, 1998, Morgan Stanley Asset Management Inc.
changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain
circumstances using the name Morgan Stanley Asset Management.
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<PAGE>
Each investment advisory agreement will continue in force for two years
from its commencement date, and from year to year thereafter, but only so long
as its continuation as to a Portfolio is specifically approved at least annually
(i) by the Trustees or by the vote of a majority of the outstanding voting
securities of the Portfolio, and (ii) by the vote of a majority of the
Independent Trustees by votes cast in person at a meeting called for the purpose
of voting on such approval. Each investment advisory agreement provides that it
shall terminate automatically if assigned or if the Management Agreement with
respect to the related Portfolio terminates, and that it may be terminated as to
a Portfolio without penalty by the Manager, by the Trustees of the Fund or by
vote of a majority of the outstanding voting securities of the Portfolio on not
less than 60 days' prior written notice to the investment adviser or by the
investment adviser on not less than 150 days' (90 days' with respect to the
Endeavor Money Market, Endeavor Asset Allocation, Endeavor Enhanced Index,
Endeavor Select, Endeavor High Yield and Endeavor Janus Growth Portfolios) prior
written notice to the Manager, or upon such shorter notice as may be mutually
agreed upon.
Each investment advisory agreement provides that the investment adviser
shall not be subject to any liability to the Fund or the Manager for any act or
omission in the course of or connected with rendering services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties on the part of the investment adviser.
The following table shows the fees paid by each of the Portfolios and
any fee waivers or reimbursements during the fiscal years ended December 31,
1997, December 31, 1998 and December 31, 1999. For Endeavor Select Portfolio,
the table reflects a management fee paid to the Manager in an amount equal to
1.10% of the Portfolio's average daily net assets. Effective May 1, 2000, the
fee was reduced to 1.00%.
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<PAGE>
<TABLE>
<CAPTION>
1999
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
<S> <C> <C> <C>
Endeavor Money Market
Portfolio.......... $580,293 $ -- $ --
Endeavor Asset
Allocation
Portfolio.......... $2,772,660 -- --
T. Rowe Price
International
Stock Portfolio.... $1,697,527 -- --
Endeavor Value Equity
Portfolio.......... $1,856,971 -- --
Dreyfus Small
Cap Value
Portfolio.......... $1,300,689 -- --
Dreyfus U.S.
Government
Securities
Portfolio.......... $560,715 -- --
T. Rowe Price
Equity Income
Portfolio.......... $2,160,124 -- --
T. Rowe Price
Growth Stock
Portfolio.......... $1,712,439 -- --
Endeavor Opportunity
Value Portfolio $364,453 -- --
Endeavor Enhanced Index
Portfolio.......... $782,584 -- --
Endeavor Select
Portfolio.......... $291,700 $834 --
Endeavor High Yield
Portfolio.......... $120,397 $4,167 --
Endeavor Janus Growth
Portfolio*......... $4,168,779 $158,179 --
1998
Investment
Management Investment Other
Fee Management Expenses
Paid Fee Waived Reimbursed
Endeavor Money Market
Portfolio......... $ 387,793 $--- $ ---
Endeavor Asset
Allocation
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Portfolio......... 2,449,659 --- ---
T. Rowe Price
International
Stock Portfolio... 1,603,389 --- ---
Endeavor Value
Equity Portfolio. 1,901,572 --- ---
Dreyfus Small
Cap Value
Portfolio......... 1,207,117 --- ---
Dreyfus U.S.
Government
Securities
Portfolio......... 419,748 --- ---
T. Rowe Price
Equity Income
Portfolio......... 1,866,844 --- ---
T. Rowe Price Growth
Stock Portfolio... 1,255,157 --- ---
Endeavor Opportunity
Value Portfolio... 303,103 --- ---
Endeavor Enhanced Index
Portfolio......... 284,833 --- ---
Endeavor Select
Portfolio**........ 197,853 9,166 ---
Endeavor High Yield
Portfolio***....... 29,230 5,833 ---
1997
Investment
Management Investment Other
Fee Management Expenses
Paid Fee Waived Reimbursed
Endeavor Money Market
Portfolio......... $ 258,744 $--- $ ---
Endeavor Asset
Allocation
Portfolio......... 2,057,590 --- ---
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T. Rowe Price
International
Stock Portfolio... 1,404,553 ---
Endeavor Value
Equity Portfolio. 1,367,432 --- ---
Dreyfus Small
Cap Value
Portfolio......... 920,244 ---
Dreyfus U.S.
Government
Securities
Portfolio......... 227,037 ---
T. Rowe Price
Equity Income
Portfolio......... 1,073,258 ---
T. Rowe Price Growth
Stock Portfolio.... 710,554 ---
Endeavor Opportunity
Value Portfolio.... 97,611 ---
Endeavor Enhanced
Index Portfolio**** 50,159 17,349
- ---------------
</TABLE>
* The information presented with respect to the Endeavor Janus Growth
Portfolio is for the period from May 1, 1999 (commencement of
operations) to December 31, 1999.
** The information presented with respect to the Endeavor Select Portfolio
is for the period from February 3, 1998 (commencement of operations) to
December 31, 1998.
*** The information presented with respect to the Endeavor High Yield
Portfolio is for the period from June 1, 1998 (commencement of
operations) to December 31, 1998.
**** The information presented with respect to the Endeavor Enhanced Index
Portfolio is for the period from May 2, 1997 (commencement of operations) to
December 31, 1997.
- ---------------------------
For the year ended December 31, 1999, the following Portfolios
reimbursed, after waivers, the Manager for administrative expenses incurred by
the Manager on behalf of the Portfolios:
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Endeavor Money Market - $16,387 T. Rowe Price Growth Stock - $42,322
Endeavor Asset Allocation - Endeavor Opportunity Value - $2,281
$75,318
T. Rowe Price International Endeavor Enhanced Index - $9,860
Stock - $16,229
Endeavor Value Equity - $45,114 Endeavor Select - $39,167
Dreyfus Small Cap Value - $34,255 Endeavor High Yield - $35,833
Dreyfus U.S. Government Endeavor Janus Growth - $20,137
Securities - $16,347
T. Rowe Price Equity Income -
$53,809
Code of Ethics
The Fund, its Manager, its Distributor, and each of its investment
advisers, have adopted Codes of Ethics pursuant to Rule 17j-1 under the 1940
Act. Each of these Codes of Ethics permits the personnel of their respective
organizations to invest in securities for their own accounts. A copy of each of
the Codes of Ethics is on public file with, and is available from the Securities
and Exchange Commission.
Custodian
Boston Safe Deposit and Trust Company, located at One Boston Place,
Boston, Massachusetts 02108, serves as the custodian of the Fund. Under the
custody agreement, Boston Safe holds the Portfolios' securities and keeps all
necessary records and documents.
Transfer Agent
PFPC Inc., located at 4400 Computer Drive, Westborough,
Massachusetts 01581, serves as transfer agent for the Fund.
Legal Matters
Certain legal matters are passed on for the Fund by Sullivan &
Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
Independent Auditors
Ernst & Young LLP, located at Two Commerce Square, 2001 Market Street,
Suite 4000, Philadelphia, Pennsylvania 19103, serves as the Fund's independent
auditors.
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REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of
payment on shares of the Portfolios for more than seven days during any period
(1) when the New York Stock Exchange is closed or trading on the Exchange is
restricted as determined by the Securities and Exchange Commission, (2) when an
emergency exists, as defined by the Securities and Exchange Commission, which
makes it not reasonably practicable for a Portfolio to dispose of securities
owned by it or fairly to determine the value of its assets, or (3) as the
Securities and Exchange Commission may otherwise permit.
The value of the shares on redemption may be more or less than the
shareholder's cost, depending upon the market value of the portfolio securities
at the time of redemption.
NET ASSET VALUE
The net asset value per share of each Portfolio is determined as of the
close of regular trading of the New York Stock Exchange (currently 4:00 p.m.,
New York City time), each day the Exchange is open for trading. Currently, the
Exchange is closed on: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Portfolio securities for which the primary market is on a
domestic or foreign exchange or which are traded over-the-counter and quoted on
the NASDAQ System will be valued at the last sale price on the day of valuation
or, if there was no sale that day, at the last reported bid price, using prices
as of the close of trading. Portfolio securities not quoted on the NASDAQ System
that are actively traded in the over-the-counter market, including listed
securities for which the primary market is believed to be over-the-counter, will
be valued at the most recently quoted bid price provided by the principal market
makers.
In the case of any securities which are not actively traded, reliable
market quotations may not be considered to be readily available. These
investments are stated at fair value as determined under the direction of the
Trustees. Such fair value is expected to be determined by utilizing information
furnished by a pricing service which determines valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders.
If any securities held by a Portfolio are restricted as to resale,
their fair value will be determined following procedures approved by the
Trustees. The fair value of such securities is generally determined as the
amount which the Portfolio could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary from case to
case. However, consideration is generally given to the financial position of the
issuer and other fundamental
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analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Portfolio in connection with such disposition). In addition,
specific factors are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of the same class
(both at the time of purchase and at the time of valuation), the size of the
holding, the prices of any recent transactions or offers with respect to such
securities and any available analysts' reports regarding the issuer.
Notwithstanding the foregoing, short-term debt securities with
maturities of 60 days or less will be valued at amortized cost.
The Endeavor Money Market Portfolio's investment policies and method of
securities valuation are intended to permit the Portfolio generally to maintain
a constant net asset value of $1.00 per share by computing the net asset value
per share to the nearest $.01 per share. The Portfolio is permitted to use the
amortized cost method of valuation for its portfolio securities pursuant to
regulations of the Securities and Exchange Commission. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Portfolio would receive if it sold the instrument. The net
asset value per share would be subject to fluctuation upon any significant
changes in the value of the Portfolio's securities. The value of debt
securities, such as those in the Portfolio, usually reflects yields generally
available on securities of similar yield, quality and duration. When such yields
decline, the value of a portfolio holding such securities can be expected to
decline. Although the Portfolio seeks to maintain the net asset value per share
of the Portfolio at $1.00, there can be no assurance that net asset value will
not vary.
The Trustees of the Fund have undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
Portfolio's investment objective, to stabilize the net asset value per share for
purposes of sales and redemptions at $1.00. These procedures include the
determination, at such intervals as the Trustees deem appropriate, of the
extent, if any, to which the net asset value per share calculated by using
available market quotations deviates from $1.00 per share. In the event such
deviation exceeds one half of one percent, the Trustees are required to promptly
consider what action, if any, should be initiated.
With respect to the Portfolios other than the Endeavor Money Market
Portfolio, foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually different from
the close of the New York Stock Exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close of the New
York Stock Exchange that will not be reflected in the computation of the
Portfolio's net asset value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures decided upon in good faith by the Fund's
Board of Trustees. All securities and other assets of a Portfolio initially
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<PAGE>
expressed in foreign currencies will be converted to U.S. dollar values
at the mean of the bid and offer prices of such currencies against U.S.
dollars last quoted on a valuation date by any recognized dealer.
TAXES
Federal Income Taxes
Each Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying, a Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
In order to so qualify, a Portfolio must, among other things, (1)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stocks or securities or foreign currencies, or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stocks or securities;
and (2) diversify its holdings so that, at the end of each quarter of the
Portfolio's taxable year, (a) at least 50% of the market value of the
Portfolio's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to 5% of the value of the
Portfolio's assets and to not more than 10% of the voting securities of such
issuer, and (b) not more than 25% of the value of its assets is invested in
securities of any one issuer (other than government securities).
As a regulated investment company, a Portfolio will not be subject to
federal income tax on net investment income and capital gains (short- and
long-term), if any, that it distributes to its shareholders if at least 90% of
its net investment income and net short-term capital gains for the taxable year
are distributed, but will be subject to tax at regular corporate rates on any
income or gains that are not distributed. In general, dividends will be treated
as paid when actually distributed, except that dividends declared in October,
November or December and made payable to shareholders of record in such a month
will be treated as having been paid by the Portfolio (and received by
shareholders) on December 31, provided the dividend is paid in the following
January. Each Portfolio intends to satisfy the distribution requirement in each
taxable year.
The Portfolios will not be subject to the 4% federal excise tax imposed
on registered investment companies that do not distribute all of their income
and gains each calendar year because such tax does not apply to a registered
investment company whose only shareholders are segregated asset accounts of life
insurance companies held in connection with variable annuity and/or variable
life insurance policies.
The Fund intends to comply with section 817(h) of the Code and the
regulations issued thereunder. As required by regulations under that section,
the only shareholders of the Fund and its Portfolios will be
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<PAGE>
life insurance company segregated asset accounts (also referred to as separate
accounts) that fund variable life insurance or annuity contracts and the general
account of PFL Life Insurance Company which provided the initial capital for the
Portfolios of the Fund. See the prospectus or other material for the Contracts
for additional discussion of the taxation of segregated asset accounts and of
the owner of the particular Contract described therein.
Section 817(h) of the Code and Treasury Department regulations
thereunder impose certain diversification requirements on the segregated asset
accounts investing in the Portfolios of the Fund. These requirements, which are
in addition to the diversification requirements applicable to the Fund under the
1940 Act and under the regulated investment company provisions of the Code, may
limit the types and amounts of securities in which the Portfolios may invest.
Failure to meet the requirements of section 817(h) could result in current
taxation of the owner of the Contract on the income of the Contract.
The Fund may therefore find it necessary to take action to ensure that
a Contract continues to qualify as a Contract under federal tax laws. The Fund,
for example, may be required to alter the investment objectives of a Portfolio
or substitute the shares of one Portfolio for those of another. No such change
of investment objectives or substitution of securities will take place without
notice to the shareholders of the affected Portfolio and the approval of a
majority of such shareholders and without prior approval of the Securities and
Exchange Commission, to the extent legally required.
In certain foreign countries, interest and dividends are subject to a
tax which is withheld by the issuer. U.S. income tax treaties with certain
countries reduce the rates of these withholding taxes. The Fund intends to
provide the documentation necessary to achieve the lower treaty rate of
withholding whenever applicable or to seek refund of amounts withheld in excess
of the treaty rate.
Portfolios that invest in foreign securities may purchase the
securities of certain foreign investment funds or trusts called passive foreign
investment companies. Such trusts have been the only or primary way to invest in
certain countries. In addition to bearing their proportionate share of a
Portfolio's expenses (management fees and operating expenses), shareholders will
also indirectly bear similar expenses of such trusts. Capital gains on the sale
of such holdings are considered ordinary income regardless of how long a
Portfolio held its investment. In addition, a Portfolio could be subject to
corporate income tax and an interest charge on certain dividends and capital
gains earned from these investments, regardless of whether such income and gains
are distributed to shareholders. To avoid such tax and interest, a Portfolio's
investment adviser intends to treat these securities as sold on the last day of
its fiscal year and recognize any gains for tax purposes at that time;
deductions for losses are allowable only to the extent of any gains resulting
from these deemed sales for prior taxable years. Such gains will be considered
ordinary income, which a Portfolio will be required to distribute even though it
has not sold the security.
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ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund is a Massachusetts business trust organized on November 18,
1988. A copy of the Fund's Agreement and Declaration of Trust, as amended, which
is governed by Massachusetts law, is on file with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees of the Fund have authority to issue an unlimited number of
shares of beneficial interest without par value of one or more series.
Currently, the Trustees have established and designated thirteen series. Each
series of shares represents the beneficial interest in a separate Portfolio of
assets of the Fund, which is separately managed and has its own investment
objective and policies. The Trustees of the Fund have authority, without the
necessity of a shareholder vote, to establish additional portfolios and series
of shares. The shares outstanding are, and those offered hereby when issued will
be, fully paid and nonassessable by the Fund. The shares have no preemptive,
conversion or subscription rights and are fully transferable.
The assets received from the sale of shares of a Portfolio, and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, constitute the underlying assets of the Portfolio. The underlying
assets of a Portfolio are required to be segregated on the Fund's books of
account and are to be charged with the expenses with respect to that Portfolio.
Any general expenses of the Fund not readily attributable to a Portfolio will be
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
Portfolio and the other Portfolios.
Each share has one vote, with fractional shares voting proportionately.
Shareholders of a Portfolio are not entitled to vote on any matter that requires
a separate vote of the shares of another Portfolio but which does not affect the
Portfolio. The Agreement and Declaration of Trust does not require the Fund to
hold annual meetings of shareholders. Thus, there will ordinarily be no annual
shareholder meetings, unless otherwise required by the 1940 Act. The Trustees of
the Fund may appoint their successors until fewer than a majority of the
Trustees have been elected by shareholders, at which time a meeting of
shareholders will be called to elect Trustees. Under the Agreement and
Declaration of Trust, any Trustee may be removed by vote of two-thirds of the
outstanding shares of the Fund, and holders of 10% or more of the outstanding
shares can require the Trustees to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. If ten or more
shareholders who have been such for at least six months and who hold in the
aggregate shares with a net asset value of at least $25,000 inform the Trustees
that they wish to communicate with other shareholders, the Trustees either will
give such shareholders access to the shareholder lists or will inform them of
the cost involved if the Fund forwards materials to the shareholders on their
behalf. If the Trustees object to mailing such materials, they must inform the
Securities and Exchange Commission and thereafter comply with the requirements
of the 1940 Act.
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<PAGE>
PFL Life Insurance Company will vote shares of the Fund as described
under the caption "Voting Rights" in the prospectus or other material for the
Contracts which accompanies the Prospectus.
As of January 31, 2000, the PFL Endeavor Variable Annuity Account owned
of record the following approximate percentages of the outstanding shares of
each Portfolio: 64.82% of the Endeavor Money Market Portfolio; 88.80% of the
Endeavor Asset Allocation Portfolio; 79.48% of the T. Rowe Price International
Stock Portfolio; 81.38% of the Endeavor Value Equity Portfolio; 80.37% of the
Dreyfus Small Cap Value Portfolio; 76.69% of the Dreyfus U.S. Government
Securities Portfolio; 79.69% of the T. Rowe Price Equity Income Portfolio;
74.91% of the T. Rowe Price Growth Stock Portfolio; 81.21% of the Endeavor
Opportunity Value Portfolio; 66.20% of the Endeavor Enhanced Index Portfolio;
68.65% of the Endeavor Select Portfolio; 77.45% of the Endeavor High Yield
Portfolio; and 81.95% of the Endeavor Janus Growth Portfolio. As of January 31,
2000, the PFL Endeavor Platinum Variable Annuity Account owned of record the
following approximate percentages of the outstanding shares of each Portfolio:
21.01% of the Endeavor Money Market Portfolio; 9.36% of the Endeavor Asset
Allocation Portfolio; 18.28% of the T. Rowe Price International Stock Portfolio;
14.31% of the Endeavor Value Equity Portfolio; 13.92% of the Dreyfus Small Cap
Value Portfolio; 19.78% of the Dreyfus U.S. Government Securities Portfolio;
14.98% of the T. Rowe Price Equity Income Portfolio; 17.75% of the T. Rowe Price
Growth Stock Portfolio; 15.64% of the Endeavor Opportunity Value Portfolio;
25.75% of the Endeavor Enhanced Index Portfolio; 30.25% of the Endeavor Select
Portfolio; 22.42% of the Endeavor High Yield Portfolio; and 14.82% of the
Endeavor Janus Growth Portfolio. As of January 31, 2000, the AUSA Life Insurance
Variable Annuity Account owned of record the following approximate percentages
of the outstanding shares of each Portfolio: 0.55% of the Endeavor Value Equity
Portfolio; 0.61% of the Dreyfus Small Cap Value Portfolio; 2.17% of the T. Rowe
Price Equity Income Portfolio; and 3.53% of the T. Rowe Price Growth Stock
Portfolio. As of January 31, 2000, the People's Benefit Life Insurance Company
Separate Account V owned of record the following approximate percentages of the
outstanding shares of each Portfolio: 1.31% of the Dreyfus Small Cap Value
Portfolio; 2.24% of the T. Rowe Price International Stock Portfolio; and 4.63%
of the Endeavor Enhanced Index Portfolio.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts and obligations of the Fund and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Fund or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of any
shareholders held personally liable for obligations of the Fund. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to meet its
obligations. The likelihood of such circumstances is remote.
FINANCIAL STATEMENTS
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The financial statements of the Endeavor Money Market Portfolio,
Endeavor Asset Allocation Portfolio, T. Rowe Price International Stock
Portfolio, Endeavor Value Equity Portfolio, Dreyfus Small Cap Value Portfolio,
Dreyfus U.S. Government Securities Portfolio, T. Rowe Price Equity Income
Portfolio, T. Rowe Price Growth Stock Portfolio, Endeavor Opportunity Value
Portfolio, Endeavor Enhanced Index Portfolio, Endeavor Select Portfolio,
Endeavor High Yield Portfolio and Endeavor Janus Growth Portfolio for the fiscal
period ended December 31, 1999, including notes to the financial statements and
financial highlights and the Report of Ernst & Young LLP, Independent Auditors,
are included in the Fund's Annual Report to Shareholders. A copy of the Annual
Report accompanies this Statement of Additional Information. The financial
statements (including the Report of Independent Auditors) included in the Annual
Report are incorporated herein by reference.
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APPENDIX
SECURITIES RATINGS
Standard & Poor's Bond Ratings
A Standard & Poor's corporate debt rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. Debt
rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated "A" has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt of a higher rated category. Debt rated "BBB" is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
to repay principal for debt in this category than for higher rated categories.
Bonds rated "BB", "B", "CCC" and "CC" are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. The rating "C" is reserved for income bonds on which no interest is
being paid. Debt rated "D" is in default, and payment of interest and/or
repayment of principal is in arrears. The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Moody's Bond Ratings
Bonds which are rated "Aaa" are judged to be 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 by an 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. 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. Moody's applies numerical
modifiers 1, 2 and 3 in the Aa and A rating categories. The modifier 1 indicates
that the security ranks at a higher end of the rating category, modifier 2
indicates a mid-range rating and the modifier 3 indicates that the issue ranks
at the lower
A-1
<PAGE>
end of the rating category. 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. 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 length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. 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 both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated
"B" generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. 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 or interest. 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. 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.
Standard & Poor's Commercial Paper Ratings
"A" is the highest commercial paper rating category utilized by
Standard & Poor's, which uses the numbers "1+", "1", "2" and "3" to denote
relative strength within its "A" classification. Commercial paper issuers rated
"A" by Standard & Poor's have the following characteristics. Liquidity ratios
are better than industry average. Long-term debt rating is "A" or better. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow are in an upward trend. Typically, the issuer is a strong
company in a well-established industry and has superior management. Issues rated
"B" are regarded as having only an adequate capacity for timely payment.
However, such capacity may be damaged by changing conditions or short-term
adversities. The rating "C" is assigned to short-term debt obligations with a
doubtful capacity for repayment. An issue rated "D" is either in default or is
expected to be in default upon maturity.
Moody's Commercial Paper Ratings
"Prime-1" is the highest commercial paper rating assigned by Moody's,
which uses the numbers "1", "2" and "3" to denote relative strength within its
highest classification of Prime. Commercial paper issuers rated Prime by Moody's
have the following characteristics. Their short-term debt obligations carry the
smallest degree of investment risk. Margins of support for current indebtedness
are large or stable with cash flow and asset protection well assured. Current
liquidity
A-2
<PAGE>
provides ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective elements may
change over the intermediate or longer terms, such changes are most unlikely to
impair the fundamentally strong position of short-term obligations.
Fitch IBCA, Inc. Commercial Paper Ratings. Fitch Investors Service L.P. employs
the rating F-1+ to indicate issues regarded as having the strongest degree of
assurance for timely payment. The rating F-1 reflects an assurance of timely
payment only slightly less in degree than issues rated F-1+, while the rating
F-2 indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
Duff & Phelps Inc. Commercial Paper Ratings. Duff & Phelps Inc. employs
the designation of Duff 1 with respect to top grade commercial paper and
bank money instruments. Duff 1+ indicates the highest certainty of
timely payment: short-term liquidity is clearly outstanding, and safety
is just below risk-free U.S. Treasury short-term obligations. Duff 1-
indicates high certainty of timely payment. Duff 2 indicates good
certainty of timely payment: liquidity factors and company fundamentals
are sound.
Thomson BankWatch, Inc. ("BankWatch") Commercial Paper Ratings. BankWatch will
assign both short-term debt ratings and issuer ratings to the issuers it rates.
BankWatch will assign a short-term rating ("TBW-1", "TBW-2", "TBW-3", or
"TBW-4") to each class of debt (e.g., commercial paper or non-convertible debt),
having a maturity of one-year or less, issued by a holding company structure or
an entity within the holding company structure that is rated by BankWatch.
Additionally, BankWatch will assign an issuer rating ("A", "A/B", "B", "B/C",
"C", "C/D", "D", "D/E", and "E") to each issuer that it rates.
Various of the NRSROs utilize rankings within rating categories
indicated by a + or -. The Portfolios, in accordance with industry practice,
recognize such rankings within categories as graduations, viewing for example
Standard & Poor's rating of A-1+ and A-1 as being in Standard & Poor's highest
rating category.
F:\RNH\MV33\PEA30FIL:2/18/98
A-3
<PAGE>
- ------------------ COMPARISON OF FOOTNOTES ------------------
- -FOOTNOTE *-
December 1, 1998, Morgan Stanley Asset Management Inc. changed its name
to Morgan Stanley Dean Witter Investment Management Inc. but continues
to do business in certain circumstances using the name Morgan Stanley
Asset Management.
A-4
<PAGE>
ENDEAVOR SERIES TRUST
PART C
Other Information
Item 23. EXHIBITS
All references are to the Registrant's registration statement
on Form N-1A as filed with the SEC on March 7, 1989, File Nos.
33-27352 and 811-5780 (the "Registration Statement").
Exhibit No. Description of Exhibits
(a)(1) Agreement and Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 14 to the
Registration Statement as filed with the
SEC on April 29, 1996 ("Post-Effective
Amendment No. 14").
(a)(2) Amendment No. 1 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(3) Amendment No. 2 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(4) Amendment No. 3 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(5) Amendment No. 4 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14
(a)(6) Amendment No. 5 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
-5-
<PAGE>
Exhibit No. Description of Exhibits
(a)(7) Amendment No. 6 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(8) Amendment No. 7 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 16 to the Registration Statement as
filed with the SEC on February 14, 1997
("Post-Effective Amendment No. 16").
(a)(9) Amendment No. 8 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 21 to the Registration Statement as
filed with the SEC on December 19, 1997
("Post-Effective Amendment No. 21").
(a)(10) Amendment No. 9 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 22 to the Registration Statement as
filed with the SEC on February 27, 1998
("Post-Effective Amendment No. 22").
(a)(11) Amendment No. 10 to Agreement and
Declaration of Trust is filed herein.
(b) Amended and Restated By-Laws are
incorporated by reference to Post-
Effective Amendment No. 14.
(c)(1) Specimen certificate for shares of beneficial
interest of the Domestic Money Market Portfolio (now
known as Endeavor Money Market Portfolio) is
incorporated by reference to Post- Effective
Amendment No. 14.
(c)(2) Specimen certificate for shares of beneficial
interest of the Domestic Managed Asset Allocation
Portfolio (now known as Endeavor Asset Allocation
Portfolio) is incorporated by reference to
Post-Effective Amendment No. 14.
(c)(3) Specimen certificate for shares of
beneficial interest of the Global Growth
Portfolio (now known as T. Rowe Price
International Stock Portfolio) is
incorporated by reference to Post-
Effective Amendment No. 14.
-6-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(c)(4) Specimen certificate for shares of
beneficial interest of the Quest for
Value Equity Portfolio (now known as
Endeavor Value Equity Portfolio) is
incorporated by reference to Post-
Effective Amendment No. 14.
(c)(5) Specimen certificate for shares of beneficial
interest of the Quest for Value Small Cap Portfolio
(now known as Dreyfus Small Cap Value Portfolio) is
incorporated by reference to Post- Effective
Amendment No. 14.
(c)(6) Specimen certificate for shares of
beneficial interest of the U.S.
Government Securities Portfolio (now
known as Dreyfus U.S. Government
Securities Portfolio) is incorporated by
reference to Post-Effective Amendment
No. 14.
(c)(7) Specimen certificate for shares of
beneficial interest of the T. Rowe Price
Equity Income Portfolio is incorporated
by reference to Post-Effective Amendment
No. 14.
(c)(8) Specimen certificate for shares of
beneficial interest of the T. Rowe Price
Growth Stock Portfolio is incorporated
by reference to Post-Effective Amendment
No. 14.
(c)(9) Specimen certificate for shares of
beneficial interest of the Opportunity
Value Portfolio (now known as Endeavor
Opportunity Value Portfolio) is
incorporated by reference to Post-
Effective Amendment No. 15 to the
Registration Statement as filed with the
SEC on August 21, 1996 ("Post-Effective
Amendment No. 15").
(c)(10) Specimen certificate for shares of
beneficial interest of the Enhanced
Index Portfolio (now known as Endeavor
Enhanced Index Portfolio)is incorporated
by reference to Post-Effective Amendment
No. 15.
-7-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(c)(11) Specimen certificate for shares of
beneficial interest of the Select 50
Portfolio (now known as Endeavor Select
Portfolio) is incorporated by reference
to Post-Effective Amendment No. 18 to
the Registration Statement as filed with
the SEC on July 18, 1997 ("Post-
Effective Amendment No. 18").
(c)(12) Specimen certificate for shares of
beneficial interest of the Endeavor High
Yield Portfolio is incorporated by
reference to Post-Effective Amendment
No. 23 as filed with the SEC on March
18, 1998 ("Post-Effective Amendment No.
23").
(c)(13) Specimen certificate for shares of
beneficial interest of the Endeavor
Janus Growth Portfolio is incorporated
by reference to Post-Effective Amendment
No. 24 as filed with the SEC on November
25, 1998 ("Post-Effective Amendment No.
24").
(d)(1) Management Agreement dated July 22, 1999
between Registrant and Endeavor
Management Co. is incorporated by
reference to Post-Effective Amendment
No. 29 as filed with the SEC on
February 29, 2000 ("Post-Effective
Amendment No. 29").
(d)(2) Investment Advisory Agreement between
OpCap Advisors and Endeavor Management
Co. with respect to the Endeavor Value
Equity Portfolio is
incorporated by reference to Post-
Effective Amendment No. 29.
(d)(3) Investment Advisory Agreement between
The Dreyfus Corporation and Endeavor
Management Co. with respect to the
Dreyfus U.S. Government Securities
Portfolio is incorporated
by reference to Post-Effective Amendment
No. 29.
-8-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(d)(4) Investment Advisory Agreement between T.
Rowe Price Associates, Inc. and Endeavor
Management Co. with respect to the T.
Rowe Price Equity Income Portfolio is
incorporated by reference
to Post-Effective Amendment No. 29.
(d)(5) Investment Advisory Agreement between T.
Rowe Price Associates, Inc. and Endeavor
Management Co. with respect to the T.
Rowe Price Growth Stock Portfolio is
incorporated by reference
to Post-Effective Amendment No. 29.
(d)(6) Investment Advisory Agreement between
Rowe Price-Fleming, International, Inc.
and Endeavor Management Co. with respect
to the T. Rowe Price International Stock
Portfolio is incorporated
by reference to Post-Effective Amendment
No. 29.
(d)(7) Investment Advisory Agreement between
The Dreyfus Corporation and Endeavor
Management Co. with respect to the
Dreyfus Small Cap Value Portfolio is
incorporated by reference
to Post-Effective Amendment No. 29.
(d)(8) Investment Advisory Agreement between
OpCap Advisors and Endeavor Management
Co. with respect to the Endeavor
Opportunity Value Portfolio is
incorporated by reference to
Post-Effective Amendment No. 29.
(d)(9) Investment Advisory Agreement between
J.P. Morgan Investment Management Inc.
and Endeavor Management Co. with respect
to the Endeavor Enhanced Index Portfolio
is incorporated by
reference to Post-Effective Amendment
No. 29.
(d)(10) Investment Advisory Agreement between
Montgomery Asset Management, LLC and
Endeavor Management Co. with respect to
the Endeavor Select 50 Portfolio (now
known as Endeavor Select Portfolio) is
incorporated by reference
to Post-Effective Amendment No. 29.
-9-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(d)(11) Investment Advisory Agreement between
Morgan Stanley Dean Witter Asset
Management Inc. and Endeavor Management
Co. with respect to Endeavor Money
Market Portfolio is
incorporated by reference to Post-
Effective Amendment No. 29.
(d)(12) Investment Advisory Agreement between
Morgan Stanley Dean Witter Asset
Management Inc. and Endeavor Management
Co. with respect to Endeavor Asset
Allocation Portfolio is
incorporated by reference to Post-
Effective Amendment No. 29.
(d)(13) Investment Advisory Agreement between
Massachusetts Financial Services Company
and Endeavor Management Co. with respect
to Endeavor High Yield Portfolio is
incorporated by reference
to Post-Effective Amendment No. 29.
(d)(14) Investment Advisory Agreement between
Janus Capital Corporation and Endeavor
Management Co. with respect to Endeavor
Janus Growth Portfolio is
incorporated by reference to Post-
Effective Amendment No. 29.
(d)(15) Amendment No. 1 to Management Agreement
between Registrant and Endeavor
Management Co. is filed herein.
(d)(16) Amendment No. 1 to Investment Advisory
Agreement between Montgomery Asset
Management, LLC and Endeavor Management
Co. is filed herein.
(e)(1) Participation Agreement between
Registrant, Endeavor Management Co. and
PFL Life Insurance Company is
incorporated by reference to Post-
Effective Amendment No. 14.
(e)(2) Distribution Agreement between the
Registrant and Endeavor Group is
incorporated by reference to Post-
Effective Amendment No. 24.
(f) Not Applicable.
-10-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(g)(1) Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company is
incorporated by reference to Post-
Effective Amendment No. 14.
(g)(2) Supplement dated April 19, 1993 to
Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company
with respect to the Quest for Value
Equity Portfolio and Quest for Value
Small Cap Portfolio is incorporated by
reference to Post-Effective Amendment
No. 14.
(g)(3) Supplement dated December 30, 1994 to
Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company
with respect to the T. Rowe Price Equity
Income Portfolio and T. Rowe Price
Growth Stock Portfolio is incorporated
by reference to Post-Effective Amendment
No. 14.
(g)(4) Supplement dated March 25, 1994 to
Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company
with respect to the U.S. Government
Securities Portfolio is incorporated by
reference to Post-Effective Amendment
No. 14.
(g)(5) Supplement dated November 4, 1996 to
Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company
with respect to the Opportunity Value
Portfolio and Enhanced Index Portfolio
is incorporated by reference to Post-
Effective Amendment No. 16.
(g)(6) Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and
Trust Company with respect to the
Endeavor Select Portfolio (formerly
known as Endeavor Select 50 Portfolio
and Montgomery Select 50 Portfolio) is
incorporated by reference to Post-
Effective Amendment No. 24.
-11-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(g)(7) Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and
Trust Company with respect to Endeavor
High Yield Portfolio is incorporated by
reference to Post-Effective Amendment
No. 24.
(g)(8) Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and
Trust Company with respect to Endeavor
Janus Growth Portfolio is incorporated
by reference to Post-Effective Amendment
No. 26 as filed with the SEC on February
22, 1999 ("Post-Effective
Amendment No. 26").
(h)(1) Transfer Agency and Registrar Agreement
between Registrant and The Shareholder
Services Group, Inc. (now known as
PFPC Inc.) is incorporated by reference
to Post-Effective Amendment No. 14.
(h)(2) License Agreement between Endeavor
Management Co. and Registrant is
incorporated by reference to Post-
Effective Amendment No. 14.
(h)(3) Amendment to License Agreement between
Endeavor Management Co. and Registrant
is incorporated by reference to Post-
Effective Amendment No. 14.
(h)(4) Administration Agreement between
Endeavor Management Co. and The Boston
Company Advisors, Inc. is incorporated
by reference to Post-Effective Amendment
No. 14.
(h)(5) Supplement dated April 19, 1993 to
Administration Agreement between
Endeavor Investment Advisers and The
Boston Company Advisors, Inc., with
respect to the Quest for Value Equity
Portfolio and Quest for Value Small Cap
Portfolio is incorporated by reference
to Post-Effective Amendment No. 14.
-12-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(h)(6) Amendment No. 2 dated April 1, 1994 to
Administration Agreement between
Endeavor Investment Advisers and The
Boston Company Advisors, Inc. is
incorporated by reference to Post-
Effective Amendment No. 22.
(h)(7) Consent to Assignment of Administration
Agreement dated May 4, 1994 between
Endeavor Investment Advisers and The
Boston Company Advisors, Inc. to The
Shareholder Services Group, Inc.
(currently known as PFPC Inc.) is
incorporated by reference to Post-
Effective Amendment No. 14
(h)(8) Supplement dated October 24, 1994 to
Administration Agreement between
Endeavor Investment Advisers and The
Shareholder Services Group, Inc.
(currently known as PFPC Inc.) with
respect to the T. Rowe Price Equity
Income Portfolio and T. Rowe Price
Growth Stock Portfolio is incorporated
by reference to Post-Effective Amendment
No. 14.
(h)(9) Supplement dated March 25, 1994 to
Administration Agreement between
Endeavor Investment Advisers and The
Boston Company Advisors, Inc. (currently
known as PFPC Inc.) with respect to the
U.S. Government Securities Portfolio is
incorporated by reference to Post-
Effective Amendment No. 14.
(h)(10) Amendment No. 3 dated July 1, 1996 to
Administration Agreement between
Endeavor Investment Advisers and First
Data Investor Services Group, Inc.
(currently known as PFPC Inc.) is
incorporated by reference to Post-
Effective Amendment No. 16.
-13-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(h)(11) Supplement dated November 4, 1996 to
Administration Agreement between
Endeavor Investment Advisers and First
Data Investor Services Group, Inc.
(currently known as PFPC Inc.) with
respect to Opportunity Value Portfolio
and Enhanced Index Portfolio is
incorporated by reference to Post-
Effective Amendment No. 22.
(h)(12) Amendment No. 4 dated July 1, 1997 to
Administration Agreement between
Endeavor Investment Advisers and First
Data Investor Services Group, Inc.
(currently known as PFPC Inc.) is
incorporated by reference to Post-
Effective Amendment No. 22.
(h)(13) Amended and Restated Administration
Agreement dated as of July 1, 1997
between Endeavor Investment Advisers and
First Data Investor Services Group, Inc.
(currently known as PFPC Inc.) is
incorporated by reference to Post-
Effective Amendment No. 22.
(h)(14) Supplement dated January 28, 1998 to
Administration Agreement between
Endeavor Investment Advisers and First
Data Investor Services Group, Inc.
(currently known as PFPC Inc.) with
respect to Endeavor Select 50 Portfolio
is incorporated by reference to Post-
Effective Amendment No. 22.
(h)(15) Amendment No. 5 to Administration
Agreement dated January 28, 1998 between
Endeavor Investment Advisers and First
Data Investor Services Group, Inc.
(currently known as PFPC Inc.) is
incorporated by reference to Post-
Effective Amendment No. 22.
(h)(16) Amendment No. 1 to Amended and Restated
Administration Agreement dated June 1,
1998 with respect to Endeavor Select 50
Portfolio (now known as Endeavor Select
Portfolio) and Endeavor High Yield
Portfolio is incorporated by reference
to Post-Effective Amendment No. 24.
-14-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(h)(17) Amendment No. 2 to Amended and Restated
Administration Agreement dated as of February 1,
1999 with respect to Endeavor Janus Growth Portfolio
is incorporated by reference to Post- Effective
Amendment No. 26.
(i) Not Applicable.
(j) Consent of Independent Auditors is
incorporated by reference to
Post-Effective Amendment No. 29.
(k) Not Applicable.
(l) Subscription Agreement between
Registrant and PFL Life Insurance
Company is incorporated by reference to
Post-Effective Amendment No. 14.
(m) Brokerage Enhancement Plan incorporated
by reference to Post-Effective Amendment
No. 21.
(n) Not Applicable.
(o) Not Applicable.
(p)(1)
Code of Ethics of Endeavor
Series Trust is filed herein.
(p)(2) Code of Ethics of Endeavor Management
Co. is filed herein.
(p)(3) Code of Ethics of Transamerica Capital,
Inc. (formerly known as Endeavor Group)
is filed herein.
(p)(4) Code of Ethics of Oppenheimer Capital is
filed herein.
(p)(5) Code of Ethics of Janus Capital
Corporation is filed herein.
(p)(6) Code of Ethics of T. Rowe Price
Associates, Inc. is filed herein.
(p)(7) Code of Ethics of Rowe Price-Fleming
International, Inc. is filed herein.
(p)(8) Code of Ethics of Montgomery Asset
Management, LLC is filed herein.
-15-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(p)(9) Code of Ethics of J.P. Morgan Investment
Management Inc. is filed herein.
(p)(10) Code of Ethics of Morgan Stanley Asset
Management is filed herein.
(p)(11) Code of Ethics of Massachusetts
Financial Services Company is filed
herein.
(p)(12) Code of Ethics of The Dreyfus
Corporation is filed herein.
(q) Powers of Attorney are incorporated by
reference to Post-Effective Amendment
Nos. 14, 16, 18, 20 (as filed with the
SEC on October 28, 1997), 22 and 24.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
As of the effective date of this Post-Effective Amendment, PFL Life
Insurance Company's separate accounts, PFL Endeavor Variable Annuity Account,
PFL Endeavor Platinum Variable Annuity Account and PFL Life Variable Annuity
Account A, PFL Life Variable Annuity Account C, PFL Life Variable Annuity
Account D; AUSA Life Insurance Company's separate account, AUSA Endeavor
Variable Annuity Account; and one of People's Benefit Life Insurance Company's
separate accounts, People's Benefit Life Insurance Company Separate Account V,
held all the outstanding shares of the Registrant. PFL Life Insurance Company, a
stock life insurance company organized under the laws of the State of Iowa, AUSA
Life Insurance Company, a stock life insurance company organized under the laws
of the State of New York, and People's Benefit Life Insurance Company, a stock
life insurance company organized under the laws of Missouri, are each
wholly-owned indirect subsidiaries of AEGON USA, Inc., an Iowa corporation. All
of the stock of AEGON USA, Inc. is indirectly owned by AEGON n.v. of The
Netherlands.
Item 25. INDEMNIFICATION
Reference is made to the following documents:
Agreement and Declaration of Trust, as amended, as filed as
Exhibits (a)(1) - (a)(11) hereto;
Amended and Restated By-Laws as filed as Exhibit 2 hereto; and
-16-
<PAGE>
Participation Agreement between Registrant, Endeavor
Management Co. and PFL Life Insurance Company as filed as
Exhibit (e)(1) hereto.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant, its Trustees and officers, Endeavor Management Co. (the
"Manager"), and persons affiliated with them are insured under a policy of
insurance maintained by the Registrant and the Manager within the limits and
subject to the limitations of the policy, against certain expenses in connection
with the defense of actions suits or proceedings, and certain liabilities that
might me imposed as a result of such actions, suits or proceedings, to which
they are parties by reason of being or having been such Trustees or officers.
The policy expressly excludes coverage for any Trustee or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been finally adjudicated or may be established or who
willfully fails to act prudently.
Item 26. (a) Business and Other Connections of the Investment Adviser
--------------------------------------------------------
Investment Adviser - Endeavor Management Co.
The Manager, a wholly-owned subsidiary of AUSA Holding
Company, an affiliate of PFL Life Insurance Company, is a registered investment
adviser providing investment management and administrative services to the
Registrant.
The list required by this Item 26 of officers and directors of
the Manager together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedule A
and D of Form ADV filed by the Manager pursuant to the Investment Advisers Act
of 1940 (SEC File No. 801-34064).
-17-
<PAGE>
Item 26. (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - Morgan Stanley Asset Management
Morgan Stanley Asset Management ("Morgan Stanley") is a
wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover and Co. Morgan
Stanley provides a broad range of portfolio management services to customers in
the United States and abroad.
The list required by this Item 26 of officers and directors of
Morgan Stanley, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules A
and D of Form ADV filed by Morgan Stanley pursuant to the Investment Advisers
Act of 1940 (SEC file No. 801-15757).
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - OpCap Advisors
OpCap Advisors ("OpCap") is an indirect subsidiary of PIMCO
Advisors L.P., a registered investment adviser, which provides a variety of
investment management services for clients. OpCap manages registered investment
companies other than certain Portfolios of the Registrant.
The list required by this Item 26 of the officers and
directors of OpCap, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated by reference to
Schedules D and F of Form ADV filed by OpCap pursuant to the Investment Advisers
Act of 1940 (SEC file No. 801-27180).
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") is a wholly owned
subsidiary of Mellon Bank, N.A. Dreyfus is a registered investment adviser
founded in 1947 providing a variety of investment management services for
clients.
The list required by this Item 26 of the officers and
directors of Dreyfus, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated by reference to
Schedules A and D of Form ADV filed by Dreyfus pursuant to the Investment
Advisers Act of 1940 (SEC file No. 801-8147).
-18-
<PAGE>
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as
investment manager to a variety of individual and institutional
investors, including limited and real estate partnerships and other
mutual funds.
The list required by this Item 26 of officers and directors of
T. Rowe Price together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules A
and D of Form ADV filed by T. Rowe Price pursuant to the Investment Advisers Act
of 1940 (SEC file No. 801-856).
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - Rowe Price-Fleming International, Inc.
Rowe Price-Fleming International, Inc. ("Price-Fleming") is a
joint venture between T. Rowe Price and Robert Fleming Holdings Limited
("Flemings"). Flemings is a diversified investment organization which
participates in a global network of regional investment offices in New York,
London, Zurich, Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, Teipi,
Bombay, Jakarta, Singapore, Bangkok and Johannesburg.
The list required by this Item 26 of officers and directors of
Price-Fleming, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules A
and D of Form ADV filed by Price-Fleming pursuant to the Investment Advisers Act
of 1940 (SEC file No. 801-14714).
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - J.P. Morgan Investment Management Inc.
J.P. Morgan Investment Management Inc. ("Morgan") manages
employee benefit funds of corporations, labor unions and state and local
governments and the accounts of other institutional investors, including
investment companies.
The list required by this Item 26 of officers and directors of
Morgan, together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedules A and D of
Form ADV filed by Morgan pursuant to the Investment Advisers Act of 1940 (SEC
file No. 801-21011).
-19-
<PAGE>
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - Montgomery Asset Management, LLC
Montgomery Asset Management, LLC ("Montgomery") serves as
investment manager to a variety of individual and institutional investors,
including limited partnerships and other mutual funds.
The list required by this Item 26 of officers and directors of
Montgomery together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules B
and D of Form ADV filed by Montgomery pursuant to the Investment Advisers Act of
1940 (SEC file No. 801-36790).
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - Massachusetts Financial Services Company
Massachusetts Financial Services Company ("MFS") serves as
investment manager to a variety of individual and institutional investors,
including other mutual funds.
The list required by this Item 26 of officers and directors of
MFS together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedules A and D of
Form ADV filed by MFS pursuant to the Investment Advisers Act of 1940 (SEC file
No. 801-17352).
Item 26 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - Janus Capital Corporation
Janus Capital Corporation ("Janus") is a majority-owned
subsidiary of Kansas City Southern Industries, Inc. Janus provides investment
management and related services to mutual funds, individual, corporate,
charitable and retirement accounts.
The list required by this Item 26 of officers and directors of
Janus, together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedules A and D of
Form ADV filed by Janus pursuant to the Investment Advisers Act of 1940 (SEC
file No. 801-13991).
Item 27 Principal Underwriter
(a) Inapplicable
-20-
<PAGE>
(b) Officers and Directors of Transamerica
Capital, Inc.
Positions and Positions and
Name and Principal Offices With Offices with
Business Address Underwriter Registrant
- ------------------ ------------- ----------
David Bullock Chairman, Chief ---
Executive Officer,
President and
Director
Director ---
Larry Norman
Bart Herbert Director ---
George F. Veazey, III Executive Vice ---
President
Charles Edwards Executive Vice ---
President
Michael Carpenter Executive Vice
President
Guillermo Nordarse Senior Vice ---
President
Matthew Coben Senior Vice ---
President
Michael Brandsma Senior Vice ---
President
Richard Cardall Senior Vice ---
President
Mark Schofield Senior Vice ---
President
Richard Alvarez Senior Vice ---
President
Kevin Grant Senior Vice ---
President
Joel Z. Horsager Vice President, ---
Chief Financial
Officer
-21-
<PAGE>
Positions and Positions and
Roseann Morrison Vice President ---
Carl Spicer Vice President ---
Frank Camp Secretary ---
The principal business address of each officer and director is 2101
East Coast Highway, Suite 300, Corona del Mar, California 92625.
(c) Inapplicable
Item 28 Location of Accounts and Records
--------------------------------
The Registrant maintains the records required by Section 31(a)
of the 1940 Act and Rules 31a-1 to 31a-3 inclusive thereunder at its principal
office, located at 2101 East Coast Highway, Suite 300, Corona del Mar,
California 92625 as well as at the offices of its investment advisers and
administrator: Morgan Stanley Asset Management Inc., 1999 Avenue of the Stars,
Los Angeles, California 90067; OpCap Advisors, c/o Oppenheimer Capital, 1345
Avenue of the Americas, New York, New York 10105; The Dreyfus Corporation, 200
Park Avenue, New York, New York 10166; T. Rowe Price Associates, Inc., 100 East
Pratt Street, Baltimore, Maryland 21202; Rowe Price-Fleming International, Inc.,
100 East Pratt Street, Baltimore, Maryland 21202; J.P. Morgan Investment
Management Inc., 522 Fifth Avenue, New York, New York 10036; Montgomery Asset
Management, LLC, 101 California Street, San Francisco, California 94111;
Massachusetts Financial Services Company, 500 Boylston Street, Boston,
Massachusetts 02116; Janus Capital Corporation, 100 Fillmore Street, Denver, CO
80206; and PFPC Inc. (formerly, First Data Investor Services Group, Inc.),
located at 53 State Street, One Exchange Place, Boston, Massachusetts 02109.
Certain records, including records relating to the Registrant's shareholders and
the physical possession of its securities, may be maintained pursuant to Rule
31a-3 at the main office of the Registrant's transfer agent and dividend
disbursing agent, Investor Services Group and the Registrant's custodian, Boston
Safe Deposit and Trust Company, located at One Boston Place, Boston,
Massachusetts 02108.
Item 29 Management Services
None
Item 30 Undertakings
(a) Inapplicable
-22-
<PAGE>
(b) Inapplicable
(c) The Registrant will 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.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, as amended, the Registrant, ENDEAVOR SERIES
TRUST, has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Corona del Mar, State of California on the 27th day
of April, 2000.
ENDEAVOR SERIES TRUST
Registrant
By: /s/Vincent J. McGuinness, Jr.*
------------------------------
Vincent J. McGuinness, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the date(s) indicated.
Signature Title Date
/s/Vincent J. McGuinness, Jr.* President (principal April
- ------------------------------
Vincent J. McGuinness, Jr. executive officer), 27, 2000
Chief Financial
Officer (Treasurer)
(principal financial
and accounting
officer), Trustee
/s/Vincent J. McGuinness* Trustee April
- -------------------------
Vincent J. McGuinness 27, 2000
/s/Timothy A. Devine* Trustee April
- ---------------------
Timothy A. Devine 27, 2000
/s/Thomas J. Hawekotte* Trustee April
- -----------------------
Thomas J. Hawekotte 27, 2000
/s/Steven L. Klosterman* Trustee April
- ------------------------
Steven L. Klosterman 27, 2000
-24-
<PAGE>
Signature Title Date
- ---------
/s/Halbert D. Lindquist* Trustee April
- ------------------------
Halbert D. Lindquist 27, 2000
/s/Keith H. Wood* Trustee April
- -----------------
Keith H. Wood 27, 2000
/s/Peter F. Muratore* Trustee April
- ---------------------
Peter F. Muratore 27, 2000
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
-25-
<PAGE>
ENDEAVOR SERIES TRUST
AMENDMENT NO. 10
TO AGREEMENT AND DECLARATION OF TRUST
Change of Name of Series of the Trust
from Endeavor Select 50 Portfolio to Endeavor Select Portfolio
The undersigned, Secretary of Endeavor Series Trust (the "Trust"), does
hereby certify that pursuant to Article VIII, Section 8.3 of the Trust's
Agreement and Declaration of Trust (the "Declaration of Trust") dated November
18, 1988, as amended, the following votes were duly adopted by at least a
majority of the Trustees of the Trust at a Regular Meeting of the Board on
February 7, 2000:
VOTED: That the name of Endeavor Select 50 Portfolio be changed to Endeavor
Select Portfolio, effective May 1, 2000; and further
VOTED: That the proper officers of the Trust be, and each hereby is, authorized
and empowered to execute all instruments and documents and to take all
actions, including the filing of an Amendment to the Trust's Declaration of
Trust with the Secretary of State of the Commonwealth of Massachusetts and the
Clerk of the City of Boston, Massachusetts, as they or any one of them in his or
her sole discretion deems necessary or appropriate to carry out the intents and
purposes of the foregoing vote.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 25th day
of April, 2000.
/s/Gail A. Hanson
-------------------------
Gail A. Hanson
Secretary
<PAGE>
FORM OF
AMENDMENT NO. 1 TO MANAGEMENT AGREEMENT
This Amendment No. 1 to the Management Agreement (the "Agreement") dated
July 22, 1999, by and between Endeavor Series Trust and Endeavor Management Co.
(the "Manager"), is entered into effective the 28th day of April, 2000.
WHEREAS the Agreement provides for the Manager to provide certain
services to the Trust for which the Manager is to receive agreed upon fees; and
WHEREAS the Manager and the Trust desire to make certain changes to the
Agreement;
NOW, THEREFORE, the Manager and the Trust hereby agree that the
Agreement is amended as follows:
1. Schedule A of the Agreement regarding management fees is amended as
follows, to be effective as of May 1, 2000:
Portfolio Percentage of daily net assets
--------- ------------------------------
Endeavor Select Portfolio 1.00%
2. All other terms and conditions of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the 28th day of April, 2000.
ENDEAVOR SERIES TRUST
By:
Name:
Title:
ENDEAVOR MANAGEMENT CO.
By:
Name:
Title:
<PAGE>
FORM OF
AMENDMENT NO. 1 TO INVESTMENT ADVISORY AGREEMENT
This Amendment No. 1 to the Investment Advisory Agreement (the "Agreement")
dated July 23, 1999, by and between Montgomery Asset Management, LLC (the
"Adviser") and Endeavor Management Co. (the "Manager"), is entered into
effective the 1st day of May, 2000.
WHEREAS the Agreement provides for the Adviser to provide certain
services to the Manager and is to receive agreed upon fees; and
WHEREAS the Manager and the Adviser desire to make certain changes to the
Agreement;
NOW, THEREFORE, the Manager and the Adviser hereby agree that the
Agreement is amended as follows:
1. Endeavor Select 50 Portfolio shall now be known as Endeavor Select
Portfolio.
2. Schedule A of the Agreement regarding the advisory fee is amended as
follows, to be effective May 1, 2000:
Portfolio Percentage of daily net assets
--------- ------------------------------
Endeavor Select Portfolio 0.60%
3. All other terms and conditions of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the 28th day of April, 2000.
MONTGOMERY ASSET MANAGEMENT, LLC
By:
Name:
Title:
ENDEAVOR MANAGEMENT CO.
By:
Name:
Title:
<PAGE>
----------------------------------
AMENDED AND RESTATED
CODE OF ETHICS OF
ENDEAVOR SERIES TRUST
----------------------------------
AMENDED AND RESTATED
CODE OF ETHICS OF
ENDEAVOR SERIES TRUST
Preamble and Statement of General Principles
This AMENDED AND RESTATED CODE OF ETHICS (the "Code"), adopted pursuant
to Section 17(j) of the Investment Company Act of 1940 and Rule 17j-1
thereunder, applies to "Access Persons" (as defined below) of Endeavor Series
Trust (the "Trust"), including each portfolio thereof (a "Fund"), Endeavor
Management Co. (the "Manager"), Transamerica Capital, Inc. (the "Distributor")
and each investment adviser of a Fund (each, an "Adviser"). Rule 17j-1 was
adopted in order to prevent persons who are actively involved in the management,
portfolio selection or underwriting of registered investment companies from
engaging in fraudulent, deceptive or manipulative acts, practices or courses of
business in connection with the purchase or sale of securities held or to be
acquired by such companies. This Code is designed to prevent persons who have
access to information concerning the securities transactions of a Fund from
using that information for their personal benefit. The Code prohibits, with
certain limited exceptions, any Access Person from purchasing or selling a
Security (as defined below) for any personal account if such Access Person knows
or should know that a Fund is purchasing or selling, or considering purchasing
or selling, that Security.
In performing their daily responsibilities, Access Persons may have
access to information about impending Fund transactions. Like all insiders,
these individuals may not use material
nonpublic information to benefit themselves or others.
Conflicts of interest can arise whenever Access Persons buy and sell
securities for their personal accounts. This Code is intended to ensure that all
personal securities transactions are conducted 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.
All Access Persons, particularly those who manage or make
recommendations to a Fund, should scrupulously avoid any conduct that appears to
take advantage of this relationship. Accordingly, in addition to complying with
the specific prohibitions set forth below, all Access Persons should conduct
their personal investment activities in a manner consistent with the following
general fiduciary principles: (1) the duty at all times to place the interests
of a Fund first; (2) the requirement that all personal securities transactions
be conducted in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility;
and (3) the fundamental standard that Access Persons should not take
inappropriate advantage of their positions.
I.
Definitions
As used in this Code, the following terms shall have the meanings set
forth below unless the context otherwise requires:
"Access Person" means any trustee, officer or Advisory Person of the
Trust; any director, officer or general partner of a principal underwriter who,
in the ordinary course of business, makes, participates in or obtains
information regarding, the purchase or sale of Securities by a Fund for which
the principal underwriter acts, or whose functions or duties in the ordinary
course of business relate to the making of any recommendation to a Fund
regarding the purchase or sale of Securities. For purposes of this Code, (a) a
person who normally assists in the preparation of public reports or who receives
public reports but who receives no information about current recommendations or
trading or who obtains knowledge of current recommendations or trading activity
once or infrequently or inadvertently shall not be deemed to be either an
Advisory Person or an Access Person, and (b) the defined terms "Access Person",
"Advisory Person" and "Portfolio Manager" shall not include any person who is
subject to securities transaction pre-clearance requirements, holdings reporting
requirements and securities transaction reporting requirements of a code of
ethics adopted by the Manager, Distributor or an Adviser and approved by the
Trust's Board of Trustees in compliance with Rule 17j-1 of the Investment
Company Act of 1940, as amended (the "1940 Act"), and/or Rule 204-2(a)(12) of
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as long as
such Manager, Distributor or Adviser complies with the provisions of Section VI
of this
<PAGE>
Code.
"Adviser" has the meaning designated in the preamble hereto.
"Advisory Person" means (i) any officer or employee of the Trust, the
Manager or an Adviser (or of any company in a control relationship to the Trust,
the Manager or an Adviser) who, in connection with his or her regular functions
or duties, makes, participates in or obtains information regarding the purchase
or sale of any 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 Trust, the Manager or an Adviser
who obtains information concerning recommendations made to a Fund regarding the
purchase or sale of any Security.
"Beneficial ownership" shall be interpreted in the same manner as it is
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,
both as amended from time to time, except that the determination of beneficial
ownership shall apply to all Securities which an Access Person has or acquires.
Examples of beneficial ownership, which are set forth in Attachment A to this
Code, include securities held in the name of any relative who shares your home.
"Control" has the meaning designated in Section 2(a)(9) of the 1940
Act. "Designated Supervisory Person" has the meaning designated in
Article V, Section 5.1 of this
Code.
"Distributor" has the meaning designated in the preamble hereto. "Fund"
has the meaning designated in the preamble hereto.
"Independent Trustee" means any trustee of the Trust who is not an
"interested person" of the Trust within the meaning of Section 2(a)(19) of the
1940 Act.
<PAGE>
"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 the Trust.
"Portfolio Manager" means the Advisory Person or Persons with the
direct responsibility and authority to make investment decisions affecting a
Fund.
"Purchase or sale of a Security" includes, among other things, the
writing of an option to purchase or sell a Security.
"Security" has the meaning designated in Section 2(a)(36) of the 1940
Act; provided, however, that it shall not include direct obligations of the U.S.
Government, commercial paper and high-quality short-term debt instruments,
including repurchase agreements, bankers' acceptances, certificates of deposit
of a domestic bank, and shares of registered open-end investment companies.
"Security held or to be acquired" by a Fund means any Security which,
within the most recent 15 days, (i) is or has been held by the Fund, or (ii) is
being or has been considered by the Fund or an Adviser for purchase by the Fund.
"Trust" has the meaning designated in the preamble hereto.
-----
II.
Prohibited Practices and Transactions;
Restrictions on Activities
Section 2.1. Prohibited Practices and Transactions. No Access Person shall:
-------------------------------------
(1) employ any device, scheme or artifice to defraud the Trust;
(2) make to the Trust any untrue statement of a material fact or omit to
state to the Trust a material fact necessary in order to make the statements
made, in light of the circumstances under
<PAGE>
which they are made, not misleading;
(3) engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Trust;
(4) engage in any manipulative practice with respect to the Trust; or
(5) except as otherwise provided in Article III below, purchase or sell,
directly or indirectly, any Security in which he or she has or by reason of such
transaction acquires any direct or indirect beneficial ownership, if such Access
Person knows or in the ordinary course of fulfilling his or her duties should
know that such Security is currently being purchased or sold, or considered for
purchase or sale, by a Fund. This prohibition shall continue until the time that
the Fund completes or determines not to make the purchase or sale.
<PAGE>
Section 2.2 Restrictions on Activities.
(1) Initial Public Offerings. No Advisory Person shall acquire any direct
or indirect beneficial ownership of securities in an initial public offering of
securities.
2) Private Placements. No Advisory Person shall acquire any direct or
indirect beneficial ownership of securities in a private placement without the
prior written approval of the relevant Designated Supervisory Person. This prior
approval will take into account, among other factors, whether the investment
opportunity should be reserved for a Fund, and whether the opportunity is being
offered to an individual by virtue of his position with a Fund or its Adviser or
distributor. Advisory Persons who have been authorized to acquire securities in
a private placement must disclose that investment when they play a part in a
Fund's subsequent consideration of an investment in the issuer. In such
circumstances, a Fund's decision to purchase securities of the issuer will be
subject to an independent review by personnel of the Adviser or Manager, as the
case may be, with no beneficial ownership interest in the issuer.
(3) Blackout Periods. No Access Person shall execute a securities
transaction on a day during which any Fund has a pending "buy" or "sell" order
in that same Security (or a related Security) until that order is fully executed
or withdrawn, provided however that the foregoing shall not apply to either an
Independent Trustee of the Trust or a trustee of the Trust who is not an
affiliate of an Adviser or the Manager. No Portfolio Manager for a Fund may buy
or sell a Security (or a related Security) within seven calendar days before or
after that Fund trades in that Security (or related Security). Trades within the
proscribed periods shall be unwound, if possible; if impractical, all profits
from the trading shall be disgorged to the relevant Fund or to a charitable
organization as
<PAGE>
directed by the relevant Designated Supervisory Person.
(4) Ban on Short-Term Trading Profits. No Advisory Person shall profit
from short-term trading (i.e., purchases and sales within a 60-day period) for
accounts in which he or she has a beneficial interest. Trades made in violation
of this prohibition shall be unwound; if impractical, any profits realized on
such short-term trades shall be disgorged to the appropriate Fund or a
charitable organization as directed by the relevant Designated Supervisory
Person.
(5) Disclosure of Interest in Transaction. No Access Person shall
recommend any securities transaction by any Fund without having disclosed his or
her interest, if any, in such securities or the issuer thereof, including
without limitation:
(a) his or her direct or indirect beneficial ownership of any securities of
such issuer; (b) any contemplated transaction by such person in such securities;
(c) any position with such issuer or its affiliates; (d) 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; and (e) any factors
about the transaction that are potentially relevant to a conflicts of interest
analysis. Required disclosure shall be made to the relevant Designated
Supervisory Person, and a Fund's decision to engage in the securities
transaction will be subject to an independent review by personnel of the Trust,
Adviser or Manager, as the case may be, with no beneficial ownership interest in
the securities or the issuer thereof.
(6) Gifts. Advisory Persons shall not seek
or accept any gift, favor, preferential treatment -----
<PAGE>
or valuable consideration or other thing of more than a de minimis value from
any persons or entity that does business with or on behalf of the Trust or a
Fund.
(7) Service as a Director. Advisory Persons shall not serve on the
board of directors of publicly-traded companies, absent prior written
authorization by the relevant Designated Supervisory Person based upon a
determination that such board service would be consistent with the interests of
the Trust. Where board service is authorized, Advisory Persons serving as
directors shall be isolated from those making investment decisions with respect
to the securities of that issuer through "Chinese Wall" or other procedures
specified by the relevant Designated Supervisory Person, absent a determination
by the Designated Supervisory Person to the contrary for good cause shown.
III.
Exempt Transactions.
-------------------
The provisions of Sections 2.1(5), 2.2 (3) and (4) of Article II and
Section 4.1 of Article IV of this Code shall not apply to the following types of
transactions:
(1) purchases or sales effected in any account over which an Access Person
has no direct
or indirect influence or control;
(2) purchases or sales of Securities which are not eligible for
purchase or sale by a Fund; (3) purchases or sales which are
non-volitional on the part of the Access Person; (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;
(5) purchases or sales for which the Access Person has received prior
written approval from the relevant Designated Supervisory Person. Prior approval
shall be granted only if a purchase
<PAGE>
or sale of securities is consistent with this Code and its purposes and Section
17(j) of the 1940 Act. To illustrate, a purchase or sale shall 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 purchases or sale is
clearly not related economically to the securities held, purchased or sold by a
Fund.
IV.
Preclearance, Reporting and Other Compliance Procedures.
-------------------------------------------------------
Section 4.1 Preclearance. No Access Person may purchase or sell securities for
an account in which he or she has a beneficial interest unless prior written
approval has been obtained from the relevant Designated Supervisory Person. If
such approval is obtained, the broker or futures commission merchant through
which the transaction was effected shall be directed by that Access Person to
supply the relevant Designated Supervisory Person, on a timely basis, duplicate
copies of confirmations of all securities transactions and copies of periodic
statements for all securities accounts. Prior written authorization shall
involve disclosure necessary for a conflict of interest analysis. If prior
written authorization is given for a purchase or sale and the transaction is not
consummated by the close of business on the second trading day after written
authorization is received, a new prior written authorization request must be
obtained. An Independent Trustee, a trustee of the Trust who is not an affiliate
of an Adviser or the Manager, or an officer of the Trust who is also an employee
of the administrator to the Trust shall be required to comply with this
paragraph with respect to a transaction only if such person, at the time of that
transaction, knew, or in the ordinary course of fulfilling his or her official
duties as a trustee or officer of the Trust should have known, that during the
15-day period immediately preceding the date of the transaction by such
<PAGE>
person, the security such person purchased or sold is or was purchased or sold
by a Fund or was being considered for purchase or sale by a Fund or its Adviser.
The prior authorization form appended to this Code as Attachment B shall be used
for all securities transactions for which Designated Supervisory Person approval
is necessary.
Section 4.2 Reporting Obligations.
---------------------
1. Unless excepted by Section 4.2(2), every Access Person must report to
the
Designated Supervisory Person as described below.
(a) Initial Holdings Reports. (Attachment C) Not later than 10 days after
the person becomes an Access Person, the following information:
(i) the title, number of shares and
principal amount of each security in
which the Access Person had any
direct or indirect beneficial
ownership when the person became a
Access Person;
(ii) 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 a Access Person; and
(iii) the date that the report is signed and submitted
by the Access Person.
(b) Quarterly Transaction Reports. (Attachment D) Not
later than 10 days after the end of each calendar quarter,
the following information:
(i) With respect to any transaction
during the quarter in a security in
which the Access Person had any
direct or indirect beneficial
ownership:
(1) the date of the transaction, the title, the
interest rate and maturity date (if applicable), the number
of shares and the principal amount of each security
involved;
<PAGE>
(2) the nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
(3) the price of the security at which the transaction
was effected;
(4) the name of the broker, dealer or bank with or
through which the transaction was effected; and
(5) the date that the report is signed and submitted by
the Access Person.
(ii) With respect to any account
established by the Access Person in
which any securities were held
during the quarter for the direct or
indirect benefit of the Access
Person:
(1) the name of the broker, dealer or bank with whom
the Access Person established the account;
(2) the date that the account was established; and
(3) the date that the report is signed and submitted by
the Access Person.
(iii) In the event that no reportable
transactions occurred during the
quarter, the report should be so
noted and returned signed and dated.
(c) Annual Holdings Reports. (Attachment E) Not
later than each January 30th, the following
information (which information must be
current as of a date no more than 30 days
before the report is submitted):
(i) the title, number of shares and principal amount of
each security in which the Access Person had any direct or
indirect beneficial ownership;
(ii) the name of any broker, dealer or
bank with whom the Access Person
maintains an account in which any
securities are held for the direct
or indirect benefit of the Access
Person; and
(iii) the date on which the report is signed and
submitted by the Access Person.
<PAGE>
2. The following are the exceptions to the reporting
requirements outlined in Paragraph (1) of Section 4.2(1):
(a) A person need not make any report required
under Section 4.2(1) with respect to
transactions effected for, and securities
held in, any account over which the person
has no direct influence or control,
including such an account in which the
person has any beneficial ownership.
(b) A person who would otherwise be required to
make the reports described in this Section
4.2 shall not be required to file reports
pursuant to this Section 4.2 if such person
is required to file reports pursuant to a
code of ethics described in Section VI
hereof.
(c) An Independent Trustee, a Trustee of the
Trust who is not an affiliate of an Adviser
or the Manager, or an officer of the Trust
who is also an employee of the administrator
to the Trust who would be required to make
the reports required under Section 4.2(1)
solely by reason of such position need not
make:
(i) an initial holdings report under Section 4.2(1)(a)
or an annual holdings report under Section 4.2(1)(c); or
(ii) a quarterly transaction report under Section
4.2(1)(b), unless the Trustee or officer knew or, in the
ordinary course of fulfilling his or her official duties,
should have known, that during the 15-day period immediately
before or after the transaction in a security, a Fund
purchased or sold the security or a Fund or its Adviser
considered purchasing or selling the security.
(d) A person need not make a quarterly transaction
report under Section 4.2(1)(b) if the report would duplicate
information contained in broker trade confirmations or
account statements received by the relevant Designated
Supervisory Person with respect to the person in the time
period required under Section 4.2(1)(b), if all of the
information required under Section 4.2(1)(b) is contained in
the broker trade confirmations or account statements or in
the records of the Trust.
(3) Any report delivered pursuant to this Section 4.2 may
contain a statement that the report shall not be
construed as an admission by the person making such
report that he or she has any direct or indirect
beneficial ownership in the securities to which the
report relates.
<PAGE>
Any reports and any other information furnished pursuant to the
requirements of this Code shall be treated as confidential, except that reports
of securities transactions hereunder will be made available to the Securities
and Exchange Commission or any other regulatory or self-regulatory organization
to the extent required by law or regulation.
Section 4.3 Annual Certification. All Access Persons shall certify annually to
the relevant Designated Supervisory Person that they have read and understand
this Code and recognize that they are subject thereto. Further, Access Persons
shall certify annually to the relevant Designated Supervisory Person that during
the prior year 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 during the
prior year. A form of this certification is appended as Attachment F.
V.
Designated Supervisory Person; Maintenance of Records;
Sanctions; Review by Board of Trustees
Section 5.1. Designated Supervisory Person.
As of the date hereof, the Designated Supervisory
Persons are the following individuals:
(1) in the case of trustees, officers and employees of
the Trust, the Designated Supervisory Person is the
Executive Vice-President - Administration and Compliance of
the Trust;
(2) in the case of directors, trustees, officers and
employees of an Adviser, the Designated Supervisory Person
is the person designated in writing to the Trust by such
Adviser; and
<PAGE>
(3) in the case of directors, trustees, officers and employees of the
Manager and the Distributor, the Designated Supervisory Person is the person
designated in writing to the Trust by such Manager and Distributor.
Section 5.2. Maintenance of Records. The Trust shall maintain the following
records at its principal place of business 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 under the 1940 Act and shall be available for
examination by representatives of the Securities and Exchange Commission.
(1) A copy of this Code and of any other code of ethics 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 list of all persons who are currently, or within the past five
years have been, required to make reports pursuant to Rule 17j-1 under the 1940
Act, as well as a list of persons who are or were responsible for reviewing such
reports, shall be maintained in an easily accessible place.
(3) 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.
(4) A copy of each report made by an Access Person pursuant to this
Code, including any material submitted in lieu of 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.
(5) A copy of each written report made to the Board of Trustees must be
maintained for at least five years after the end of the fiscal in which it is
made, the first two years in an easily accessible place.
<PAGE>
(6) A record of any decisions and the reasons supporting the decision
to approve the acquisition by Advisory Persons of securities in a private
placement for at least five years after the end of the fiscal year in which the
approval is granted.
The compliance records maintained pursuant to this Section 5.2 shall be
available to the Securities and Exchange Commission or any representative
thereof at any time and from time to time for reasonable periodic, special or
other examination.
Section 5.3. Sanctions. Upon finding of a violation of this Code, the board of
directors or trustees of the Trust, the Manager, the Distributor or an Adviser,
as most appropriate, may impose such sanctions as the board deems appropriate,
which may include disgorgement of profits, censure, fine, suspension or
termination of status of the violator.
Material violations of the requirements of this Code and the sanctions
imposed in connection therewith insofar as they relate to a Fund shall be
reported not less frequently than quarterly to the Board of Trustees of the
Trust. A material violation is one which results in a fine exceeding $10,000,
suspension or termination of employment.
Section 5.4 Review by the Board of Trustees. Management of the Trust, the
Manager, the Distributor and each Adviser shall prepare an annual written report
to the Board of Trustees' consideration that:
(1) certifies that the Trust, the Manager, the Distributor or the
Adviser has adopted procedures reasonably necessary to prevent Access Persons
from violating its code of ethics;
(2) identifies any material violations of its code of
ethics and the sanctions imposed
<PAGE>
during the past year not previously reported to the Board; and
(3) identifies any recommended changes in existing restrictions or
procedures based upon its experience under this Code of Ethics, evolving
industry practices or developments in applicable laws or regulations.
VI.
Manager's, Distributor's and Advisers' Codes of Ethics
The Manager, Distributor and each Adviser shall:
(1) submit to the Board of Trustees of the Trust for approval a copy of
the code of ethics adopted by such Adviser, Distributor and Manager pursuant to
Rule 17j-1 of the 1940 Act and/or Rule 204-2(a)(12) of the Advisers Act;
(2) promptly report to the Board of Trustees of the
Trust in writing any material amendments to such Manager's,
Distributor's or Adviser's code of ethics; (3) promptly
furnish to the Board of Trustees of the Trust, upon request,
copies of any reports made pursuant to such Manager's,
Distributor's or Adviser's code of ethics by any person who
would be an Access Person, Advisory Person or Portfolio
Manager hereunder if such person were not subject to such
Manager's, Distributor's or Adviser's code of ethics; and
(4) immediately furnish to the Board of Trustees of the
Trust all material information regarding any material
violation of such Manager's, Distributor's or Adviser's code
of ethics by any person who would be an Access Person,
Advisory Person or Portfolio Manager hereunder if such
person were not subject to such Manager's, Distributor's or
Adviser's code of ethics.
<PAGE>
VII.
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 procedures
governing the conduct of such person adopted by the Trust.
VIII.
Further Information.
-------------------
If any person has any questions with regard to the applicability of the
provisions of this Code generally or with regard to any securities transaction
or transactions such person should consult the relevant Designated Supervisory
Person.
Dated: November 6, 1995
amended November 17, 1998
further amended April 28, 2000
<PAGE>
ATTACHMENT A
ENDEAVOR SERIES TRUST
EXAMPLES OF BENEFICIAL OWNERSHIP
"Beneficial ownership" of a security has been addressed by the Securities and
Exchange Commission in a number of releases and encompasses many diverse
situations, including the following:
1. Securities held by you for your own benefit, whether in bearer
form, registered in your name, or otherwise.
2. Securities held by others for your benefit (regardless of
whether or how they are registered), such as securities held
for you by a custodian, broker, relative, executor or
administrator.
3. Securities held for your account by a pledgee.
4. Securities held by a trust in which you have an income or
remainder interest, unless your only interest is to receive
principal if (i) some other remainderman dies before
distribution, or (ii) some other person by will directs a
distribution of trust property or income to you.
5. Securities held by you as trustee or co-trustee, if either you
or a member of your immediate family (i.e., your spouse,
children and their descendants, step-children, parents and
their ancestors, and step-parents [treating a legal adoption
as a blood relationship]) have an income or remainder interest
in the trust.
6. Securities 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.
7. Securities held by any partnership in which you are a partner.
8. Securities held by a personal holding company controlled by you
alone or jointly with others.
9. Securities held in the name of your spouse unless you are legally
separated.
10. Securities held in the name of your minor child or in the name
of any relative of yours or of your spouse (including an adult
child) who is presently sharing your home, even if the
securities were not received from you and the dividends are
not
<PAGE>
actually used for the maintenance of your home.
<PAGE>
11. Securities held in the name of another person (other than
those listed in examples 9 and 10 above), if by reason of any
contract, understanding, relationship, agreement or other
arrangement, you obtain benefits substantially equivalent to
those of ownership.
12. Securities held in the name of any person other than yourself,
even though you do not obtain benefits substantially
equivalent to those of ownership (as described in example 11
above), if you can vest or revest title in yourself.
* * *
<PAGE>
ATTACHMENT B
ENDEAVOR SERIES TRUST
ACCESS PERSON REQUEST FOR PRIOR APPROVAL OF PERSONAL SECURITY
TRANSACTIONS
Request to: buy _____ sell _____
name of issuer/security:
type of security (e.g., equity, bond, option, future):
amount of security/number of shares: price:
for my own account:
for an account in which I have a beneficial interest (describe):
for both of the above:
proposed transaction date:
broker/dealer/bank through whom transaction to be effected:
(1) I learned about this security in the following manner:
(2) I do _____ do not _____ serve as a director or have any relatives
serving as a director or officer of the issuer. If so, please discuss:
(3) Set forth below are any facts which may be relevant to a conflict of
interest analysis of which I am aware, including the existence of any
substantial economic relationship between my transaction(s) and
securities held or to be required by a client:
I have read and understand the Code of Ethics of Endeavor Series Trust and
recognize that the proposed transaction is subject thereto. I further understand
that any written authorization obtained shall be valid for a period ending at
the close of business on the second trading day after such approval is received.
Date: _______________________ Signature:
Print Name:
The proposed (purchase) (sale) described above is approved (disapproved).
Name: _______________________ Date:
<PAGE>
Instructions: Prepare and forward to the relevant Designated
Supervisory Person, who will inform you whether the transaction is approved
or disapproved.
<PAGE>
ATTACHMENT C
ENDEAVOR SERIES TRUST
INITIAL SECURITIES HOLDINGS REPORT
This report should be completed and returned to the Designated Supervisory
Person within ten (10) days after a person becomes an Access Person. All terms
have the same meanings as in the Amended and Restated Code of Ethics of Endeavor
Series Trust.
Access Person (name): _____________________________ Date of Report: __________
1. The following are all securities in which I had a direct or
indirect beneficial interest when I became an Access Person:
Number of
Title of Security Shares/ Broker/Dealer/Bank Direct/Indirect
Principal Ownership
Amount
2. The following are all securities accounts with brokers, dealers or
banks in which I hold securities for my direct or indirect benefit whether or
not transactions in such securities are reportable under the Code:
A. I hereby acknowledge receipt of a copy of the Amended and Restated
Code of Ethics of Endeavor Series Trust.
B. I have read and understand the Code and recognize that I am
subject thereto in the capacity of an "Access Person."
Signature:
<PAGE>
Print Name:
Date: ________________________________
<PAGE>
ATTACHMENT D
ENDEAVOR SERIES TRUST
REPORT OF SECURITIES TRANSACTIONS
In the Calendar Quarter Ended _________________________
(month/date/year)
1. On the dates indicated, the following transactions were effected in
securities of which I had or acquired a direct or indirect "beneficial
ownership" interest and which are required to be reported pursuant to the
Amended and Restated Code of Ethics of Endeavor Series Trust.
Title and
Principal Amount
of each Security Nature of
(interest rate Dollar Transaction Broker/Dealer/Bank
Date of and maturity date, No. of Amount of(Purchase, by Whom Transaction
Transaction if applicable) Shares Transaction Sale, Other) Was Effected
- ----------- -------------- ------ ----------- ------------ --------------
Any facts which may be relevant to a conflict of interest analysis of which I am
aware, including the existence of any substantial economic relationship between
my transaction(s) and securities held or to be required by a Fund:
This report is not an admission that I have or had any direct or indirect
beneficial ownership in the securities listed above.
Date: _______________________
Signature:
2. During the quarter referred to above, the following are new accounts
with all brokers, dealers or banks with which I hold securities whether or not
transactions in such securities are reportable under the Code:
Broker/Dealer Bank Date Account Established
Trustees and Officers only:
I had no transactions in Securities which had to be reported
pursuant to Section 4.2. Date: _______________________ Signature:
Print Name:
THIS REPORT MUST BE SUBMITTED TO THE DESIGNATED SUPERVISORY PERSON WITHIN 10
DAYS AFTER THE END OF EACH CALENDAR QUARTER.
<PAGE>
ATTACHMENT E
ENDEAVOR SERIES TRUST
ANNUAL SECURITIES HOLDINGS REPORT
All Access Persons must report any securities owned either directly (registered
in your name) or indirectly (in a beneficial ownership account). The reports
must be returned to the Designated Supervisory Person by January 30th each year.
Access Person (name): ________________________Date of Report: ________________
Number/of
Title of Security Shares Broker/Dealer/Bank Direct/Indirect
Principal Ownership
Amount
2. The following are all securities accounts with brokers, dealers or
banks in which I hold securities for my direct or indirect benefit whether or
not transactions in such securities are reportable under the Code:
Signature:
Print Name:
Date:____________________________
<PAGE>
ATTACHMENT F
ENDEAVOR SERIES TRUST
I HEREBY CERTIFY THAT:
(1) I have received, read and understand the Amended and Restated Code
of Ethics adopted by Endeavor Series Trust, dated November 6, 1995 as
amended to date (the "Code of Ethics");
(2) I recognize that I am subject to the Code of Ethics;
(3) I have complied with the requirements of the Code of Ethics
during the calendar year ending December 31, 20___; and
(4) I have disclosed or reported all personal securities transactions
required to be disclosed or reported pursuant to the requirements of
the Code of Ethics during the calendar year ending December 31, 20___.
Set forth below exceptions to items (3) and (4), if any:
Name:
Date:
<PAGE>
CODE OF ETHICS
OF
ENDEAVOR MANAGEMENT CO.
ARTICLE I
Preamble
The Advisor manages and supervises the investment portfolios of its
clients and is authorized to take all actions necessary and appropriate in
seeking to achieve investment objectives of, and to carry out the investment
policies established for, such accounts, including the purchase and sale of
securities on their behalf. In carrying out its obligations to its clients, the
Adviser acknowledges that it has a fiduciary duty recognized under the federal
securities laws and regulations governing the Adviser's operations. Investment
advisers and their personnel are required to serve their clients with undivided
loyalty. In particular, an underlying policy of the Investment Advisers Act of
1940 is to prohibit any person who is associated with a registered investment
adviser from deriving a hidden profit from such association. The Investment
Advisers Act of 1940 prohibits, among other things, an investment adviser from
engaging in any transaction, practice or course of business which operates as a
fraud or deceit upon any client or prospective client. The practice of trading
privately in a security at the same time that a client is trading in the same
security may be deemed to be such a fraudulent or deceptive practice.
The Adviser is fully conscious of its duties and responsibilities to
its clients. Although the Adviser respects the personal freedom and privacy of
its directors, officers and employees, such considerations are outweighed in
certain circumstances by the need to carry out its fiduciary duties in the
regulatory environment in which it operates. Therefore, the Adviser has adopted
this Code of Ethics, which includes standards of conduct that may be more strict
than those
- 1 -
<PAGE>
required by law, in order to prevent conflicts of interest in connection with
the investment activities of its clients.
ARTICLE II Applicability This Code of Ethics is applicable to
Endeavor Management Co. ("the Adviser") and to all advisory
representatives (as hereinafter defined).
ARTICLE III
Definitions
Whenever used herein, unless otherwise required by the context or
specifically provided: "Advisory representative" means (i) any officer
or director of the Adviser; (ii) any
employee of the Adviser who makes any recommendation, who participates in the
determination of which recommendation shall be made, or whose functions or
duties relate to the determination of which recommendation shall be made; (iii)
any employee of the Adviser who, in connection with his duties, obtains any
information concerning which securities are being recommended prior to the
effective dissemination of such recommendations or of the information concerning
such recommendations; and (iv) any of the following persons who obtain
information concerning securities recommendations being made by the Adviser
prior to the effective dissemination of such recommendations, or the information
concerning such recommendations: (A) any person in a control relationship to the
Adviser; (B) any affiliated person of such controlling person, and (C) any
affiliated person of such affiliated person.
- 2 -
<PAGE>
"Affiliated person" has the same meaning as that set forth in Section
2(a)(3) of the Investment Company Act of 1940, as amended.
"Beneficial interest" includes any entity, person, trust or account
with respect to which an advisory person exercises investment discretion or
provides investment advice. A beneficial interest shall be presumed to include
all accounts in the name of or for the benefit of such advisory representative,
his spouse, dependent children or any person living with such advisory
representative or to whom he contributes economic support.
A security is being "considered for purchase or sale" when a
recommendation to purchase or sell such security has been made and communicated
and, with respect to the person making the recommendation, when such person
seriously considers making such recommendation.
"Control" has the same meaning as that set forth in Section 2(a)(9) of
the Investment Act of 1940, as amended.
"Compliance Officer" means such person as may be designated by the
Board of Directors and such other person as the Board or the Compliance Officer
shall designate from time to time to act in his stead in the event of his
absence.
"Security" has the same meaning as that set forth in Section 202(a)(18)
of the Investment Advisers Act of 1940, as amended, including any option,
warrant or right to purchase or sell a security and any security convertible
into or exchangeable for such security, except that it shall not include
securities which are direct obligations of the United States.
- 3 -
<PAGE>
ARTICLE IV
Standards of Conduct
(1) No advisory representative shall make use of any confidential
information gained by reason of his position or employment in order to derive a
personal profit nor shall he engage, directly or indirectly, in any business
transaction or arrangement for personal profit which is inconsistent with the
best interests of any client.
(2) No advisory representative shall personally trade in any security
if such trading is based in any way upon any action being taken by the Adviser
on behalf of any of its clients.
(3) No advisory representative shall accept, directly or indirectly,
any gift, favor or service of significant value from any person with whom he
transacts business on behalf of any client under circumstances where to do so
may conflict with the client's best interest, or may impair the ability of such
person to be completely impartial when required in the course of business to
make judgments and/or recommendations on behalf of the client.
Questions concerning the scope of the foregoing standards of conduct or
this Code should be directed to the Compliance Officer.
ARTICLE V
Specific Rules
The following rules have been adopted to carry out the purposes of this
Code; however, literal compliance with them may not in every instance constitute
adequate compliance with this Code.
(1) Every advisory representative recommending or
authorizing the purchase or sale of a security by any client
shall reveal to the client at the time of such recommendation or
- 4 -
<PAGE>
authorization whether he has any direct or indirect beneficial interest in such
security and/or has effected any transaction in such security during the
six-month period prior to the date of such recommendation or authorization.
(2) Unless prior authorization has been obtained from the Compliance
Officer, no advisory representative shall purchase or sell, directly or
indirectly, any security in which he has, or by reason of such transaction
acquires, any direct or indirect beneficial interest and which, to his actual
knowledge at the time of such purchase or sale, is being purchased or sold by
any client of the Adviser or is being considered for the purchase or sale. This
prohibition shall continue until the time that the client completes the purchase
or sale, or determines not to make the purchase or sale.
(3) No advisory representative shall dispense any information
concerning securities holdings or securities transactions of any client to
anyone outside the Adviser, without obtaining prior written approval from the
Chairman or such person or persons as he may designate to act on his behalf;
provided, however, that an advisory representative may dispense such information
when there is a public report containing the same information, when such
information is dispensed in accordance with compliance procedures established to
prevent conflicts of interest, when such information is dispensed to
broker-dealers in the ordinary course of business, or when such information is
reported to administrators or other fiduciaries of clients in the course of
carrying out their fiduciary duties.
(4) No advisory representative shall act as an investment adviser to
any other person or entity, join an investment club or enter into an investment
trading partnership, serve as a director of another entity, or obtain an
interest in a broker or dealer, without in each case obtaining prior
- 5 -
<PAGE>
written approval from the Chairman or such person or persons as he may
designate to act on his behalf.
With regard to Rules 2, 3 and 4, the Adviser may, in its sole
discretion, withhold such authorizations and approvals when to do so appears
reasonable for the protection of itself, its employees or its clients.
ARTICLE VI
Exempt Purchases and Sales
The provisions of Article V shall not apply to:
(1) purchases or sales effected in any account over which
neither the Adviser nor any advisory representative has any
direct or indirect influence or control; (2) purchases or sales
of securities that are not eligible for purchase or sale by any
client of the Adviser; (3) purchases or sales that are
non-volitional on the part of either the Adviser or any advisory
representative; (4) purchases that are made pursuant to a
dividend investment or other similar plan; (5) purchases effected
upon the exercise of rights issued by the issuer pro rata to all
holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so
acquired; and (6) purchases or sales that receive the prior
approval of the Compliance Officer on the basis that the
transaction is not potentially harmful to the client of the
Adviser because it would be very unlikely to affect a highly
institutional market.
- 6 -
<PAGE>
ARTICLE VII
Reporting Securities Transactions
Every advisory representative shall report to the Compliance Officer
with respect to transactions in any security in which such advisory
representative has, or by reason of such transaction acquires, any direct or
indirect beneficial interest. Such report shall be made not later than ten 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 title and amount of the security involved; (2) the
date and nature of the transaction, i.e., purchase, sale or other
acquisition or disposition; (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. All
reports shall be made on the Report of Securities Transactions
annexed hereto. Copies of confirmation statements may be attached
to a signed report in lieu of setting forth the information
otherwise required. Any report made pursuant to this Article VII
shall not be construed as an admission by the person making such
report that he has any direct or indirect beneficial interest in
the security to which the report relates.
ARTICLE VII
Enforcement and Sanctions
The Compliance Officer shall inquire into any apparent violations of
this Code and shall report any apparent material violations to the Chairman.
Upon finding of a violation hereof, the
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<PAGE>
Chairman may impose such sanctions as he deems appropriate including censure,
suspension or termination of employment. The Chairman may also report any such
violation to the administrator or other fiduciary of any client affected
thereby. Violations of this Code may also involve violations of federal and
state law which may subject the violator to civil liability and expense and to
criminal penalties, including fines and imprisonment.
The Chairman shall periodically furnish to the Board of Directors a
report regarding the administration of this Code. The Board shall from time to
time review the provisions of this Code in light of its purposes and current
regulatory and other developments to determine whether any amendments hereto are
necessary or appropriate.
- 8 -
<PAGE>
CODE OF ETHICS
OF
ENDEAVOR MANAGEMENT CO.
ACKNOWLEDGMENT
I hereby acknowledge that I have received and reviewed the Code of Ethics of
Endeavor Management Co. and that I understand its provisions and its
applicability to me.
- ----------------------------------- -----------------------------------
(Name -- please print) (Position)
- -----------------------------------
(Date)
- -----------------------------------------------------
(Signature)
Detach and return this acknowledgment to the Compliance Officer of Endeavor
Management Co.
- 9 -
<PAGE>
CONFIDENTIAL
PERSONAL SECURITY TRANSACTION PRE-CLEARANCE FORM
Date: ___________________
Pre-clearance is requested for the ( ) sale
( ) purchase of
- ----------------------------- ------------------------------------------
(amount) (name of issuer and type of security)
for my personal account, or an account in which I have a direct or indirect
beneficial interest, or an account with respect to which I exercise investment
discretion or render investment advice.
This transaction will be effected through: ___________________________________
(name of broker dealer or bank)
I understand this pre-clearance is valid only for transactions on the date shown
below.
----------------------------------------
(signature)
Examination of the activities of clients of Endeavor Management Co. reveals no
record of activity with respect to the above-named security or its issuer during
the five-day period prior to this date.
- ---------------------------- ----------------------------------------
(date) (signature)
- 10 -
<PAGE>
Code of Ethics
Endeavor Group
January 8, 1998
1. Introduction
This document constitutes the current Code of Ethics ("Code") of the
Endeavor Group. This Code is adopted pursuant to rule 17j-1 under the Investment
Company Act of 1940 ("1940 Act ") and in general accord with good business
practice. This Code supplants and replaces the Code of Ethics of the Endeavor
Group which had been in place through this date.
The purpose of this Code is to prevent the directors, officers and
employees of the Endeavor Group (collectively, "Employees") from trading in
securities, options contracts and financial futures contracts in such a way as
could work to the detriment of the Funds and/or other clients with respect to
which the Endeavor Group provides investment advice. (The funds together with
such other clients are referred to herein as the "Clients"). Among other things,
the Code seeks to assure that Employees will not engage in fraudulent, deceptive
or manipulative practices in securities held or to be acquired by Clients.
All Employees are required to have a working familiarity with this Code
of Ethics. Each Employee must sign and return to the Compliance Officer the
Acknowledgment form attached to this Code, indicating that the Employee has read
and understands the Code as currently in effect and agrees to abide by it.
(Definitions of certain key words and phrases used in the Code are set forth in
Appendix A).
2. Purposes of the Code and General Summary
The law imposes significant responsibilities upon directors, officers
and employees of firms such as the Endeavor Group. Because our Clients have
entrusted the care of their assets to us, we are deemed to be "fiduciaries". As
such, under the law, we have the duty of providing undivided loyalty to each
Client, and are required to place the Client's interests ahead of our own in
cases where there is a conflict or potential conflict between the two. Such a
conflict can occur, for instance, when an Employee is purchasing a security on
the same day Endeavor Group is purchasing or considering purchasing the same
security for one or more of the Clients. While Employees are permitted to trade
in securities, option contracts and financial futures contracts for their own
accounts, in every instance where there is a potential conflict in interest
between an Employee's personal interests and the interests of a Client,
precedence must be given to the Client.
To ensure this result, this Code requires that, unless specifically
exempted by a provision of the Code, each trade by an Employee of a U.S.
security, option contract or financial futures contract must be approved by
Endeavor Group's Compliance Officer. Similarly, any trade by an Employee of a
foreign security, option contract or financial futures contract first must be
-1-
<PAGE>
approved by Endeavor Group's Compliance Officer. The procedure for seeking this
required approval is discussed in the body of the Code. In addition, the Code
specifically prohibits (in the absence of such prior approval) Employee
purchases or sales of a security, option contract or financial futures contract
when the Employee is aware that the security or contract is being purchased or
sold, being considered for purchase or sale or recently has been purchased or
sold by a client.
There are a very limited number of exemptions from this prior approval
rule, the most significant of which permits Employees to purchase and redeem
shares of mutual funds without gaining prior approval of the transactions.
Although Employees generally are not prohibited from purchasing or selling
options or selling securities short, Employees may face restrictions in closing
out or covering such positions.
This Code governs all securities trading (unless specifically excepted
as provided herein) by or on behalf of Employees and members of Employees'
families. Accordingly, throughout the rest of this Code references to
transactions or possible transactions in securities by Employees must also be
read to encompass the Employee's family as well. Specifically, the Code applies
to every account in which Employee or a member of Employee's family has a direct
or indirect beneficial interest, every account over which any such person may
exercise control or influence, and every other account in the name of any such
person. "Family", for purposes of the Code, means spouse, minor children, every
other relative or other person resident in Employee's home and every other
relative to whose support Employee or any of the foregoing persons contribute.
The Code refers to all affected accounts by the term "Employee Accounts."
In addition to requiring prior approval of proposed Employee trades and
prohibiting certain types of trades, the code requires that each Employee with a
securities, options or financial futures account direct the firm at which such
account is maintained to provide the Compliance Officer with duplicates of each
confirmation and statement relating to the account. This procedure enables the
Compliance Officer to review each Employee's securities activities to assure
compliance with the Code.
To assure compliance with this requirement, each Employee will be
required to complete and provide the Compliance Officer with a completed Code of
Ethics Acknowledgment and List of Accounts form, in which the Employee will
provide information about each relevant account he or she maintains, or certify
that no such accounts are maintained. (This form must be completed regardless
whether the Compliance Officer already is receiving duplicate confirmations and
statements with respect to an Employee's account.) Any changes in this
information must be reported immediately in writing to the Compliance Officer.
-2-
<PAGE>
In addition, as noted above, the law prohibits fiduciaries from
competing with or profiting at the expense of a client. Accordingly, any breach
of fiduciary duty by an Employee will be deemed to be a breach of the Code,
whether or not the conduct in question is listed among the Code's specific
prohibitions.
If Employees have any questions concerning the provisions of the Code
or other questions about ethical and/or compliance matters, they should contact
the Compliance Officer.
3. Prior Approval of Securities Trades by Employees
A. Prior Approval Requirement: No Employee may purchase or sell any
U.S. security, option contract or financial futures contract except in a
transaction exempt pursuant to Section 5 of this Code, without first obtaining
prior clearance from Endeavor Group's Compliance Officer. No Employee Account
may purchase or sell any non-U.S. security, option contract or financial futures
contract except in a transaction exempt pursuant to Section 5 of this Code,
without the prior approval of the Compliance Officer and such non-U.S. portfolio
managers as the Compliance Officer shall designate with respect to the proposed
transaction.
B. Employee Trade Approval Form: In submitting proposed purchases or
sales to the Compliance Officer for approval, Employees are required to use the
Employee Trade Approval Form attached hereto as Appendix A. All necessary
authorizing signatures, as indicated on the Form, must be obtained, and the
fully completed and executed Form must be returned to the Compliance Officer,
before authority to trade is granted. The Compliance Officer shall indicate
approval of a proposed trade by signing the Employee Trade Approval Form in the
space designated for such initials on the Form.
C. Basis for Rejection of Trades: The Compliance Officer may reject
any proposed trade by an Employee that:
(1) Involves a security, option contract or financial futures
contract which is being purchased or sold by Endeavor Group on
behalf of any client or is being considered for such purchase
or sale.
(2) Is prohibited under Section 4 of this code.
(3) Breaches either the Employee's or Endeavor Group's fiduciary
responsibility to any Client.
(4) Is otherwise inconsistent with applicable law, including
Rule 17j-1 under the 1940 Act or the Employee Retirement
Income Security Act of 1974.
(5) Creates an appearance of impropriety.
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<PAGE>
D. Confidentiality of Reasons for Rejection of Trades: Employees
should understand that the reason a proposed trade has been rejected
may sometimes be confidential. The reason for rejection may not be
disclosed, for example, if Endeavor Group is in possession of material
non-public information about an issuer.
E. Duration of Trade Approvals: The Compliance Officer shall
record the date and time each Personal Trading Authorization Form relating to
approved trades has been fully executed and received. Permission to complete a
proposed trade shall remain valid until the close of trading on the business day
following the day on which permission was granted. However, permission to trade
may be revoked as a result of subsequent developments, and revocation is
effective immediately upon receipt by the Employee of oral notice by the
Compliance Officer.
F. False Statements by Employees: Any false statement by an Employee in
securing approval for a trade renders the approval null and void.
G. Subsequent Employee Knowledge of Information Relevant to a
Trade Approval: If, during the period after approval is granted and before the
trade is executed, the Employee becomes aware that the approved trade does not
comply with this Code or that his or her statements on the Employee Trade
Request Form are no longer true, the Employee must immediately notify the
General Counsel of that information.
H. Delegation of Duties by the Compliance Officer: An alternate Compliance
Officer shall be designated to act in the absence of the Compliance Officer.
4. Prohibited Transactions and Activities
A. Employees may not execute trades in Employee Accounts that
fall within the following categories, unless the trade is first approved
pursuant to Section 3 of Section 4-A(4) or is exempted by Section 5 of this
Code.
(1) Trading Ahead of Client Accounts: An Employee may not
purchase a security, option contract or financial futures
contract if the Employee is intending, or knows of another's
intention, to purchase that security or contract, or a related
security or contract, on behalf of any Client. An Employee may
not sell a security, option contract or financial futures
contract if the Employee is intending, or knows of another's
intention, to sell that security or contract, or a related
security or contract, on behalf of any Advisory Account.
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<PAGE>
(2) Trading Parallel to Client Accounts: An Employee may not
purchase a security, option contract or financial futures
contract if the Employee is purchasing, or knows that another
is purchasing, that security or contract, or a related
security or contract, on behalf of a Client. An Employee may
not sell a security, option or financial futures contract if
the Employee is selling or knows that another is selling, that
security or contract, or a related security or contract, on
behalf of a client.
(3) Trading Against Client Accounts: An Employee may not
purchase a security, option contract or financial futures
contract if the Employee or another known to the Employee is
intending to sell, is selling or has within the past five
business days sold that security or contract, or a related
security or contract, on behalf of a Client. An Employee may
not sell a security, option contract or financial futures
contract if the Employee or another known to the Employee is
intending to purchase, is purchasing or within the past five
business days has purchased that security or contract, or a
related to security or contract, on behalf of a Client.
(4) Short Term Trading: When an Employee purchases a security,
option contract or financial futures contract, the Employee
may not sell that security or contract, or a related security
or contract, within thirty (30) days of the purchase, unless
the Compliance Officer gives prior approval of such sale in
writing. In considering whether to approve such a trade, the
Compliance Officer shall consider all relevant facts,
including whether such trade would involve a breach of any
fiduciary duty, whether it would otherwise be consistent with
the applicable law and whether the trade would create an
appearance of impropriety.
B. Undue Influence: No employee shall cause or attempt to
cause any Client to purchase, sell or hold any security, option contract or
financial futures contract in a manner calculated to create any personal benefit
to the Employee or any Employee Account. An Employee who participates in any
research or an investment decision concerning a particular security or contract
must disclose to the Compliance Officer any personal or beneficial interest that
the Employee has in that security or contract, or any related security or
contract, or in the issuer thereof, where such decision could create a material
benefit to the Employee or any Employee Account. The Compliance Officer shall
determine whether or not the Employee will be restricted in pursuing the
research or recommendation.
5. Exempt Securities
A. The prior approval requirements of Section 3 and prohibited
transaction provisions of Section 4 shall not apply to Employee transactions in
the following types of securities:
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<PAGE>
(1) Mutual Fund Shares, i.e. shares of open-end management investment
companies.
(2) Units in Unit Investment Trusts
(3) United States Government Securities
(4) Money Market Instruments, including short-term government
securities, bankers' acceptances, bank certificates of
deposit, commercial paper, repurchase agreements relating to
the foregoing, and any other money market securities that may
from time-to-time be designated as exempt by the Code of
Ethics Review Committee.
B. If an Employee has any question whether a particular
security is exempt from the prior approval requirements, the Employee should
contact the Compliance Officer for clarification.
6. Exempt Transactions
A. The requirements and prohibitions of Sections 3 and 4-A of this
Code shall not apply to:
(1) Purchases or sales effected in any account over which the
employee has no direct or indirect influence or control.
(2) Purchases or sales which are non-volitional on the part of the
employee.
(3) Purchases which are part of an automatic dividend reinvestment
plan.
(4) Purchases and sales of Exempt Securities, as defined in this Code.
(5) 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 in such
issue.
B. This Section 6 does not exempt Employees from the
prohibition in Section 4-B of this Code on the use of undue influence and the
requirement to disclose a personal position.
7. Reporting
A. Employees: Shall arrange for the Compliance Officer to receive,
directly from the broker, dealer or bank in question, duplicate copies of
each confirmation and each monthly account statement for each Employee
Account. In the event that an Employee is not able to
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<PAGE>
arrange such submissions, the Employee shall personally report to the Compliance
Officer the reasons thereof, and shall provide the following information to the
Compliance Officer personally with respect to all transations in Employee
Accounts, within ten days after the transaction in question:
(1) The date of the transaction, the title and the number of
shares, units or contracts, and the principal amount of each
security or contract involved.
(2) The nature of the transaction (i.e., purchase, sale of and other
type of acquisition or disposition.
(3) The price at which the transaction was effected.
(4) The amount of commission, if any.
(5) The name of the broker, dealer or bank with or through
whom the transaction was effected.
B. Exemptions: The following transactions are exempt from the
reporting requirements of this Section 7:
(1) Transactions in shares of open-end management investment
companies not affiliated with Endeavor Group.
(2) Transactions in direct obligations of the United States.
(3) Transactions in accounts over which no Employee has any
direct or indirect influence or control.
C. Disclaimer: Any report filed pursuant to this Section 7 may contain
a statement that the report shall not be construed as an admission by the
person making such report that he/she has any direct or indirect beneficial
ownership in the security to which the report relates.
D. Review and Availability of Information: Information
supplied on the reports provided under this Code shall be reviewed for
compliance with this Code and other applicable standards of conduct by the
Compliance Officer. All such information shall be available for inspection by
the Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers ("NASD"). Such information shall be so available for at least
five years following the end of the fiscal year in which each report is made.
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<PAGE>
8. Remedies
A. Investigations: The Code of Ethics Review Committee (consisting of
Officers of Endeavor Group), with the assistance of the Compliance Officer,
shall be responsible for investigating any reported or suspected violation
of the Code of Ethics and shall document the results of each investigation
and recommend a solution.
B. Sanctions: Upon determining that an Employee has committed a
violation of this Code of Ethics, the Endeavor Group shall impose such
sanctions and take such other actions as are deemed appropriate
including, among other things, a letter of censure, fine, suspension
or termination of the employment of the violator; referral to the SEC,
NASD or other regulatory authorities for civil action; or referral to
the appropriate authorities for criminal action.
C. Reversal of Trades: In addition to or in lieu of the above
sanctions, the Endeavor Group may require the Employee to reverse or close the
trade(s) in question and forfeit any profit or absorb any loss derived
therefrom. The Endeavor Group may also direct that a trade be reversed or closed
when the Compliance Officer determines that the trade creates an appearance of
impropriety. In such a case, the Employee will forfeit any profit or absorb any
loss derived therefrom. Depending on the nature and size of transaction, the
Company may elect to absorb any loss, but is not obligated to do so. Failure to
abide by a directive to reverse a trade may result in the imposition of the
sanctions specified in Section 7-A.
D. Disposition of Profits Forfeited: The Code of Ethic Review
Committee, together with Compliance Officer, shall determine the
appropriate disposition of any profits forfeited pursuant to Section
8-B of this Code.
9. Code of Ethics Review Committee
A. Duties: In addition to its duties as described above, the
Code of Ethics Review Committee, which shall include the Compliance Officer,
shall review this Code no less frequently than once a year, in light of legal
and business developments and experience in implementing the Code. The committee
shall make recommendations for any revisions that, in the committee's opinion,
are deemed appropriate.
B. Composition: The Code of Ethics Committee shall consist of
Officers of the Endeavor Group (as previously mentioned in 8-A)
including the Compliance Officer.
10. Employee Education
To ensure that every Employee understands this Code and the
policies and procedures it establishes, the following will occur:
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<PAGE>
A. Initial Review of New Employees: All new Endeavor employees
will be provided with a copy of this Code at the commencement of
employment, and will be required to read the Code and acknowledge
having received and read it.
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<PAGE>
Exhibit A
Name of Endeavor Employee
Personal Trading Authorization Form
Endeavor Group
This Form is to be used by Employees seeking permission to trade a non-exempt
security, as defined by the Code of Ethics, for the Employee's personal account
(or the account of an immediate family member of an Employee, as defined in the
Code). A separate form is to be used for each transaction. The first page of
this Form is to be completed by the Employee.
Name of Security or
Instrument Proposed for Trading
Type of Transaction (purchase, sale, etc.)
Number of Shares/Units/Contracts
Name of Account Involved
Name of Broker/Dealer or Bank Where
Account is Maintained
Account Number
Signature of Employee
Date
Authorizing Signatures of Investment Personnel
1.
2.
3.
Signature of Compliance Officer:
When this Form is signed below, the Employee named above shall have the
authority to execute the proposed trade described on this Form. This authority
shall expire at the close of business on the business day following the
authorization date as listed immediately below.
Signature Authorization Date
-----------------------------------------
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<PAGE>
Name of Endeavor Employee
CODE OF ETHICS ACKNOWLEDGMENT
AND
LIST OF ACCOUNTS
ENDEAVOR GROUP
I hereby certify that I have received the Code of Ethics of the
Endeavor Group and that I have read and understand the Code and its
requirements. I further certify that I have listed below all securities, options
and financial futures accounts in which I have any beneficial ownership, direct
or indirect. Unless noted otherwise, I hereby represent that I am authorized to
permit the Endeavor Group to receive directly copies of confirmations and
account statements for all such accounts, and I hereby authorize the Endeavor
Group to obtain those copies.
I understand that the Compliance Officer of Endeavor Group, or a person
working under the Compliance Officer's direction, regularly will obtain and
review copies of confirmations and account statements for all of these accounts.
I also understand that any violations of the Code that I commit may subject me
to various penalties, including the cancellation of trades on behalf of any
account in which I have a beneficial interest if such trades do not comply with
the Code or create an appearance of impropriety. I further understand that any
violations of the Code that I commit may subject me to disciplinary action,
including dismissal from employment. I agree to notify the Compliance Officer or
the Compliance Officer's designate immediately of any additional account in
which I obtain any beneficial interest in the future.
List of Accounts
Securities Account Number Registered Name of Account Name of Bank or
Broker/Dealer
Execution of Certification
Signed: Date
--------------------------------------------------
Printed Name:
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<PAGE>
OPPENHEIMER CAPITAL
CODE OF ETHICS
Effective July 1, 1999
INTRODUCTION
This Code of Ethics is based on the principle that you, as an officer or
employee of Oppenheimer Capital (OpCap), owe a fiduciary duty to the
shareholders of the registered investment companies (the Funds) and other
clients (together with the Funds, the Advisory Clients) for which OpCap serves
as an adviser or subadviser. 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:
1. 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
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 you owned for the
purpose of increasing the price of that Security. If you are an
employee who makes decisions about investments (each a Portfolio
Manager) or provides information or advice to a Portfolio Manager or
helps execute a Portfolio Manager's decisions (together with Portfolio
Managers, each a Portfolio Employee), you would also violate this Code
if you made a personal investment in a Security that might be an
appropriate investment for an Advisory Client without first
considering the Security as an investment for the Advisory Client.
2. Conduct all of your personal Securities transactions in full
compliance with this Code and the PIMCO Advisors Insider Trading
Policy. OpCap encourages you and your family to develop personal
investment programs. However, you must not take any action in
connection with your personal investments that could cause 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 Securities Transactions. In addition, you must comply
with the policies and procedures set forth in the PIMCO Advisors
Insider Trading Policy, which is attached to this Code as Appendix I.
Doubtful situations should be resolved against your personal trading.
3. Avoid taking inappropriate advantage of your position. The
receipt of investment opportunities, gifts or gratuities from
persons seeking business with OpCap 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 Fiduciary Duties. Doubtful situations should be
resolved against your personal interest.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
PERSONAL SECURITIES TRANSACTIONS 3
Trading in General 3
Securities 3
Exempt Securities 3
Beneficial Ownership 4
Exempt Transactions 5
Preclearance Procedures 6
Initial Public Offerings 6
Private Placements 6
Short-Term Trading Profits 7
Use of Broker-Dealers 7
REPORTING 8
Reporting of Transactions 8
Annual Reports 8
FIDUCIARY DUTIES 8
Gifts 8
Service as a Director 8
COMPLIANCE 9
Certificate of Receipt 9
Certificate of Compliance 9
Remedial Actions 9
REPORTS TO DIRECTORS AND TRUSTEES 9
Reports of Significant Remedial Action 9
Annual Reports 9
APPENDICES:The following Appendices are attached to and are a part of this Code:
I. PIMCO Advisors Insider Trading Policy and Procedures 11
II. Form for preclearance of Non-Exempt Securities transactions 18
III. Form for annual report of personal Securities holdings 19
IV. Form for acknowledgment of receipt of this Code 21
V. Form for annual certification of compliance with this Code 22
VI. Policy Regarding Special Trading Procedures For Securities
of PIMCO Advisors Holdings L.P. 23
Questions
Questions regarding this Code should be addressed to a Compliance Officer. The
Compliance Officers are Frank Poli and Joseph DiBartolo.
<PAGE>
PERSONAL SECURITIES TRANSACTIONS
Trading in General
You may not engage, and you may not permit any other person or entity to engage,
in any purchase or sale of any Security (other than an Exempt Security), of
which you have, or by reason of the transaction will acquire, Beneficial
Ownership, unless (i) the transaction is an Exempt Transaction or (ii) such
transaction is approved by a Compliance Officer and precleared.
Securities
The following are Securities:
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 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 security.
The following are not Securities:
Commodities, futures and options traded on a commodities exchange, including
currency futures. However, futures and options on any group or index of
Securities are Securities.
Exempt Securities
The following are Exempt Securities:
1. Securities issued by the Government of the United States.
2. Bankers' acceptances, bank certificates of deposit, commercial
paper, bank repurchase agreements and such other money market
instruments as may be designated from time to time by the
committee appointed by OpCap to administer this Code (the
Compliance Committee).
3. Shares of registered open-end investment companies.
<PAGE>
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 beneficial 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.
<PAGE>
Exempt Transactions
The following are Exempt Transactions:
1. Any transaction in Securities in an account over which you do
not have any direct or indirect influence or control. There is
a presumption that you can exert some measure of influence or
control over accounts held by members of your immediate family
sharing the same household, but this presumption may be
rebutted by convincing evidence.
2. Purchases of Securities under dividend reinvestment plans.
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 of which you have
Beneficial Ownership.
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 of which you have Beneficial Ownership.
5. Subject to the restrictions on participation in private
placements set forth below under Private Placements, acquisitions or
dispositions of Securities of a private issuer. A private issuer is a
corporation, partnership, limited liability company or other entity
which has no outstanding publicly-traded Securities, and no
outstanding Securities which are exercisable to purchase, convertible
into or exchangeable for publicly-traded Securities. However, you will
have Beneficial Ownership of Securities held by a private issuer whose
equity Securities you hold, unless you are not a controlling
equityholder and do not have or share investment control over the
Securities held by the entity.
6. Such other classes of transactions as may be exempted from
time to time by the Compliance Committee based upon a
determination that the transactions are unlikely to violate
Rule 17j-1 under the Investment Company Act of 1940, as
amended. The Compliance Committee may exempt designated
classes of transactions from any of the provisions of this
Code except the provisions set forth below under Reporting.
7. Such other specific transactions as may be exempted from time
to time by a Compliance Officer. On a case-by-case basis when
no abuse is involved a Compliance Officer may exempt a
specific transaction from any of the provisions of this Code
except the provisions set forth below under Reporting.
<PAGE>
Preclearance Procedures
If a Securities transaction requires preclearance:
1. The Securities may not be purchased or sold if at the time of
preclearance there is a pending buy or sell order on behalf of
an Advisory Client in the same Security or an equivalent
Security or if you knew or should have known that an Advisory
Client would be trading in that security or an equivalent
Security on the same day.
An equivalent Security of a given Security is (i ) a Security
issuable upon exercise, conversion or exchange of the given
Security, or (ii) a Security exercisable to purchase,
convertible into or exchangeable for the given Security, or
(iii) a Security otherwise representing an interest in or
based on the value of the given Security.
2. If you are a Portfolio Manager (or a person identified by the
CIO as having access to the same information), the Securities
may not be purchased or sold during the period which begins
seven days before and ends seven days after the day on which
an Advisory Client trades in the same Security or an
equivalent Security; except that you may, if you preclear the
transaction, (i) trade same way to an Advisory Client after
its trading is completed, or (ii) trade opposite way to an
Advisory Client before its trading is commenced.
If you are a Portfolio Manager, and you preclear a Securities
transaction and trade same way to an Advisory Client before
its trading is commenced, the transaction is not a violation
of this Code unless you knew or should have known that the
Advisory Client would be trading in that Security or an
equivalent Security within seven days after your trade.
3. The Securities may be purchased or sold only if you have asked
the Trading Department to preclear the purchase or sale, the
Trading Department has given you preclearance in writing, and
the purchase or sale is executed by the close of business on
the day preclearance is given. The form for requesting
preclearance is attached to this Code as Appendix II.
Initial Public Offerings
If you are a Portfolio Employee, you may not acquire Beneficial Ownership of any
Securities (other than Exempt Securities) in an initial public offering.
Private Placements
If you are a Portfolio Employee, you may not acquire Beneficial Ownership of any
Securities (other than Exempt Securities) in a private placement, unless you
have received the prior written approval of the Chief Executive Officer or the
General Counsel of PIMCO Advisors. Approval will be 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.
If you are a Portfolio Employee, and you have acquired Beneficial Ownership of
Securities in a private placement, you must disclose your investment when you
play a part in any consideration of an investment by
<PAGE>
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 Beneficial Ownership of any Securities of the issuer.
Short-Term Trading Profits
If you are a Portfolio Employee, you may not profit from the purchase and sale,
or sale and purchase, within 60 calendar days, of the same Securities or
equivalent Securities (other than Exempt Securities) of which you have
Beneficial Ownership. Any such short-term trade must be unwound, or if that is
not practical, the profits must be contributed to a charitable organization.
You are considered to profit from a short-term trade if Securities of which you
have Beneficial Ownership are sold for more than the purchase price of the same
Securities or equivalent Securities, even though the Securities purchased and
the Securities sold are held of record or beneficially by different persons or
entities.
Puts, Calls, Straddles and Options; Short Sales
You may not acquire Beneficial Ownership of any put, call, straddle, option or
privilege on any Securities on the Approved List or any equivalent Securities or
sell any such Securities or equivalent Securities short. You may not acquire
Beneficial Ownership of any put, call, straddle, option or privilege on any
Securities which are not shares of a large-cap issuer.
A large-cap issuer is an issuer with a total market capitalization in excess of
one billion dollars and an average daily trading volume during the preceding
calendar quarter, on the principal securities exchange (including NASDAQ) on
which its shares are traded, in excess of 100,000 shares.
A list of large-cap issuers will be prepared as of the last business day of each
calendar quarter, will be available for review with any Compliance Officer, and
will be effective for the following calendar quarter.
Use of Broker-Dealers
You may not engage, and you may not permit any other person or entity to engage,
in any purchase or sale of publicly-traded Securities (other than Exempt
Securities) of which you have, or by reason of the transaction will acquire,
Beneficial Ownership, except through a registered broker-dealer. You will engage
in purchases or sales of publicly-traded Securities only through Charles Schwab
& Co. or such other registered broker-dealer as may be specified by the
Compliance Committee.
REPORTING
Reporting of Transactions
You must cause each broker-dealer which maintains an account for Securities of
which you have Beneficial Ownership, to provide to the Compliance Committee, on
a timely basis, duplicate copies of confirmations of all transactions in the
account and of periodic statements for the account, and you must report to the
Compliance Committee, on a timely basis, all transactions effected without the
use of a broker in Securities
<PAGE>
(other than Exempt Securities) of which you have Beneficial Ownership.
Annual Reports
You must disclose your holdings of all Securities (other than Exempt Securities)
of which you have Beneficial Ownership upon commencement of your employment by
OpCap or the effective date of this Code, whichever occurs later, and annually
thereafter. The form for this purpose is attached to this Code as Appendix III.
FIDUCIARY DUTIES
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 OpCap directly or on behalf of an Advisory Client.
You may accept gifts from a single giver so long as their aggregate annual value
does not exceed the equivalent of $100. You may attend business meals, business
related conferences, sporting events and other entertainment events at the
expense of a giver, so long as the expense is reasonable and both you and the
giver are present. You must obtain prior written approval from your supervisor
(the person to whom you report) for all air travel, conferences, and business
events that require overnight accommodations. You must provide a copy of such
written approval to the Compliance Committee.
Service as a Director
If you are a Portfolio Employee, you may not serve on the board of directors or
other governing board of a publicly traded entity, unless you have received the
prior written approval of the Chief Executive Officer or the General Counsel of
PIMCO Advisors. 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 Portfolio Employees who make investment
decisions with respect to the securities of that entity, through a "Chinese
Wall" or other procedures.
<PAGE>
COMPLIANCE
Certificate of Receipt
You are required to acknowledge receipt of your copy of this Code. A form for
this purpose is attached to this Code as Appendix IV.
Certificate of Compliance
You are required to certify upon commencement of your employment or the
effective date of this Code, whichever occurs later, and annually thereafter,
that you have read and understand this Code and recognize that you are subject
to this Code. Each annual certificate will also state that you have complied
with the requirements of this Code during the prior year, and that you have
disclosed, reported, or caused to be reported all transactions during the prior
year in Securities (other than Exempt Securities) of which you had or acquired
Beneficial Ownership. A form for this purpose is attached to this Code as
Appendix V.
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
substantial fine, demotion, suspension or termination.
REPORTS TO DIRECTORS AND TRUSTEES
Reports of Significant Remedial Action
The General Counsel of PIMCO Advisors or his delegate will on a timely basis
inform the directors or trustees of each Fund which is an Advisory Client of
each significant remedial action taken in response to a violation of this Code.
A significant remedial action means any action that has a significant financial
effect on the violator, such as disgorgement of profits, imposition of a
substantial fine, demotion, suspension or termination.
Annual Reports
The General Counsel of PIMCO Advisors or his delegate will report annually to
the Management Board of PIMCO Advisors and the directors or trustees of each
Fund which is an Advisory Client with regard to efforts to ensure compliance by
the officers and employees of OpCap with their fiduciary obligations to our
Advisory Clients.
The annual report will, at a minimum:
1. Summarize existing procedures regarding personal Securities
transactions, and any changes in such procedures during the prior
year;
2. Summarize the violations of this Code, if any, which resulted
in significant remedial action during the prior year; and
3. Describe any recommended changes in existing procedures or
restrictions based upon experience with this Code, evolving
industry practices, or developments in applicable laws or
regulations.
<PAGE>
APPENDIX I
PIMCO ADVISORS
INSIDER TRADING POLICY AND PROCEDURES
Effective as of May 1, 1995
SECTION I. POLICY STATEMENT ON INSIDER TRADING
A. Policy Statement on Insider Trading
PIMCO Advisors L.P. ("PIMCO Advisors"), its affiliates, PIMCO Partners, G.P.
("PIMCO GP") and PIMCO Fund 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 PIMCO Advisors), 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". This is a group wide policy.
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 policy applies to every such officer, director and employee and extends to
activities within and outside their duties at the Company. 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 PIMCO Advisors.
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.
<PAGE>
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 in 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 relatives 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;
major litigation developments; major personnel changes; debt service
or liquidity problems; bankruptcy or insolvency; extraordinary
management developments;
<PAGE>
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, The New York Times or Financial 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
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.
<PAGE>
Information Provided in Confidence. Occasionally, one or more directors,
officers, or employees of the Company may become temporary "insiders" because of
a fiduciary or commercial relationship. For example, personnel at the Company
may become insiders when an external source, such as a company whose securities
are held by one or more of the accounts managed by the Company, entrusts
material, non-public information to the Company's 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
the Company 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.
4. IDENTIFYING MATERIAL INFORMATION
Before trading for yourself or others, including investment companies or private
accounts managed by the Company, 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 The
Financial Times, Reuters, The Wall Street Journal or other publications
of general circulation?
Given the potentially severe regulatory, civil and criminal sanctions to
which you the Company and its
<PAGE>
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 General
Counsel of PIMCO Advisors;
ii. Do not purchase or sell the securities on behalf of yourself or others,
including investment companies or private accounts managed by PIMCO
Advisors; and
iii. Do not communicate the information inside or outside the Company,
other than to a Compliance Officer or the General Counsel of PIMCO
Advisors.
After the Compliance Officer or General Counsel 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.
In addition, any violation of this policy statement can be expected to result in
serious sanctions by the Company, including dismissal of the persons involved.
<PAGE>
SECTION II. PROCEDURES TO IMPLEMENT THE POLICY AGAINST INSIDER TRADING
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 PIMCO
Advisors 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 PIMCO Advisors who possesses
material non-public information relating to PIMCO Advisors, may buy or
sell any securities of PIMCO Advisors Holdings L.P. 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 PIMCO Advisors 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 PIMCO Advisors shall engage in a
securities transaction with respect to the securities of PIMCO Advisors
Holdings L.P., except in accordance with the specific procedures
published from time to time by PIMCO Advisors.
4. Each employee, officer and director of PIMCO Advisors shall submit
reports of every securities transaction involving securities of PIMCO
Advisors Holdings L.P. (if applicable) to a Compliance Officer in
accordance with the terms of PIMCO Advisors' Code of Ethics as they
relate to any other securities transaction.
5. No employee 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 PIMCO Advisors' 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.
7. Because even inadvertent disclosure of material non-public information
to others can lead to significant legal difficulties, officers,
directors and employees of PIMCO Advisors should not discuss any
potentially material non-public information concerning PIMCO Advisors
or other companies, including other officers, employees and directors,
except as specifically required in the performance of their duties.
<PAGE>
B. Chinese Wall Procedures
The Insider Trading and Securities Fraud Enforcement Act in the US requires the
establishment and strict enforcement of procedures reasonably designed to
prevent the misuse of "inside" information1. Accordingly, you should not discuss
material non-public information about PIMCO Advisors 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 US 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 your 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.
<PAGE>
APPENDIX II
EMPLOYEE TRADE PRECLEARANCE FORM
PLEASE USE A SEPARATE FORM FOR EACH SECURITY
Name of Employee (please print)
Department Supervisor Telephone Date
Broker Account Number Telephone Sales Representative
( )
Buy Sell Ticker Symbol Price: Limit _______ Market
Quantity Issue (Full Security Description)
Special Instructions
Approvals
This area reserved for Trading Department use only
Trade Has Been Date Approved Approved By
Approved Not Approved
Legal / Compliance (if required)
Approvals are valid until the close of business on the day approval has been
granted. Accordingly, GTC (good till canceled) orders are prohibited. If a trade
is not executed by the close of business resubmitting a new preclearance form is
required. It is each employee's responsibility to comply with all provisions of
the Code. Obtaining preclearance satisfies the preclearance requirements of the
Code and does not imply compliance with the Code's other provisions.
Preclearance procedures apply to all employees and their immediate family (as
defined by the Code) including: a) all accounts in the name of the employee or
the employee's spouse or minor children; b) all accounts in which any of such
persons have a beneficial interest; and c) all other accounts over which any
such person exercises any investment discretion. Please see the Code for the
complete definition of immediate family.
By signing below the employee certifies the following: The employee agrees that
the above order is in compliance with the Code of Ethics and is not based on
knowledge of an actual client order within the previous seven calendar days in
the security that is being purchased or sold, or knowledge that the security is
being considered for purchase or sale in one or more specific client accounts,
or knowledge of a change or pendency of a change of an investment management
recommendation. The employee also acknowledges that he/she is not in possession
of material, inside information pertaining to the security or issuer of the
security.
Employee Signature Date
PLEASE SEND A COPY OF THIS COMPLETED FORM TO THE
COMPLIANCE DEPARTMENT FOR ALL EXECUTED TRADES
<PAGE>
APPENDIX III
OPPENHEIMER CAPITAL
PERSONAL SECURITIES HOLDINGS
In accordance with the Code of Ethics, please provide a list of all Securities
(other than Exempt Securities) in which you or any account, in which you have a
Pecuniary Interest, has a Beneficial Interest and all Securities (other than
Exempt Securities) in non-client accounts for which you make investment
decisions. This includes not only securities held by brokers, but also
Securities held at home, in safe deposit boxes, or by an issuer.
(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) Broker(s) at which Account is Maintained: ____________________________
----------------------------
----------------------------
----------------------------
(5) Account Number(s): ____________________________
----------------------------
----------------------------
----------------------------
(6) Phone number(s) of Broker: ____________________________
----------------------------
----------------------------
<PAGE>
(7) For each account, attach your most recent account statement listing
Securities in that account. If you own Securities that are not listed
in an attached account statement, list them below:
<TABLE>
<CAPTION>
Name of Security Quantity Value Custodian
<S> <C> <C> <C> <C>
1. __________________ ___________ ___________ ___________________
2. __________________ ___________ ___________ ___________________
3. __________________ ___________ ___________ ___________________
4. __________________ ___________ ___________ ___________________
5. __________________ ___________ ___________ ___________________
</TABLE>
(Attached separate sheet if necessary)
I certify that this form and the attached statements (if any) constitute all of
the Securities of which I have Beneficial Ownership as defined in the Code.
------------------------------
Signature
------------------------------
Print Name
Dated: _________________
<PAGE>
APPENDIX IV
OPPENHEIMER CAPITAL
ACKNOWLEDGMENT CERTIFICATION
CODE OF ETHICS
and
INSIDER TRADING POLICY AND PROCEDURES
I hereby certify that I have read and understand the attached Oppenheimer
Capital Code of Ethics and Pimco Advisors Insider Trading Policy and Procedures
(together the "Code"). Pursuant to such Code, I recognize that I must disclose
or report all personal securities transactions required to be disclosed or
reported thereunder and comply in all other respects with the requirements of
the Code. I also agree to cooperate fully with any investigation or inquiry as
to whether a possible violation of the foregoing Code has occurred. I understand
that any failure to comply in all aspects with the foregoing and these policies
and procedures may lead to sanctions including dismissal.
Date: __________________________ ______________________________
Signature
------------------------------
Print Name
<PAGE>
APPENDIX V
OPPENHEIMER CAPITAL
ANNUAL CERTIFICATION OF COMPLIANCE
I hereby certify that I have complied with the requirements of the Code of
Ethics and the Insider Trading Policy and Procedures, for the year ended
December 31, ____. Pursuant to the Code, I have disclosed or reported all
personal securities transactions required to be disclosed or reported
thereunder, and complied in all other respects with the requirements of the
Code. I also agree to cooperate fully with any investigation or inquiry as to
whether a possible violation of the Code has occurred.
Date: _________________________ ____________________________
Signature
-----------------------------
Print Name
<PAGE>
APPENDIX VI
PIMCO ADVISORS
POLICY REGARDING SPECIAL TRADING PROCEDURES
FOR SECURITIES OF PIMCO ADVISORS HOLDINGS L.P.
Effective as of May 1, 1996
INTRODUCTION
PIMCO Advisors Holdings 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 Holdings L.P. ("PIMCO Holdings"), PIMCO Advisors L.P. ("PIMCO
Advisors"), PIMCO Partners, G.P. ("PIMCO GP"), PIMCO Funds Distribution LLC
("PFD") (collectively, "PIMCO Advisors") and any entity in relation to which
PIMCO Advisors or one of its subsidiaries 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 PIMCO
Holdings, the members of the Management 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:
the Covered Person's spouse;
the Covered Person's minor children;
any other relatives living in the Covered Person's household;
a trust in which the Covered Person has a beneficial interest, unless
such Covered 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.
The family members, trust and corporations listed above are hereinafter referred
to as "Related persons."
<PAGE>
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 PIMCO Holdings or other
securities of PIMCO Holdings, including options and other derivative securities
(such as a put, call or index security) in relation to such securities (the
"PIMCO Holdings' Securities").
SPECIAL TRADING PROCEDURES RELATING TO SECURITIES OF PIMCO HOLDINGS
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 PIMCO Holdings' 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 PIMCO Holdings' Securities
during four "trading windows" that may occur each year. The four trading windows
are generally during the months of February, May, August and November. A
memorandum detailing the specific dates of the period is sent to each employee
approximately one week prior to the opening of the window.
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 PIMCO Advisors should be aware that there are potential tax
consequences for such employees resulting from the ownership of PIMCO Holdings'
Securities. Each such employee contemplating purchasing PIMCO Holdings'
Securities should discuss the matter with such employee's tax advisor.
The exercise of options to purchase PIMCO Holdings' Securities for cash are not
covered by 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.
<PAGE>
2. Post-Trade Reporting
All Covered Persons shall submit to the Compliance Officer a report of every
securities transaction in PIMCO Holdings' 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 (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 PIMCO Holdings' 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 Sections
16(a) and 16(b) of the Securities Exchange Act of 1934 and Rule 144 under the
Securities Act of 1933.
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 the
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.
Modifications and Waivers
PIMCO Advisors (with the consent of PIMCO Holdings) 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 the
Compliance Officer and either the General Counsel of PIMCO Holdings or any
member of the Management Board of PIMCO Holdings. Any such waiver shall be
reported to the Management Board of PIMCO Holdings at the next regularly
scheduled meeting of each.
<PAGE>
JANUS ETHICS RULES
"ACT IN THE BEST INTEREST OF OUR INVESTORS - EARN THEIR CONFIDENCE WITH EVERY
ACTION"
CODE OF ETHICS
INSIDER TRADING POLICY
GIFT POLICY
OUTSIDE EMPLOYMENT POLICY
1
<PAGE>
definitions........................................4
introduction.......................................6
CAUTION REGARDING PERSONAL TRADING ACTIVITIES......6
COMMUNICATIONS WITH OUTSIDE TRUSTEES/DIRECTORS.....6
code of ethics.....................................7
Overview...........................................7
General Prohibitions...............................7
Trading Restrictions...............................8
Excluded Transactions..............................9
Preclearance.......................................9
Trading Ban on Portfolio Managers and Assistant Portfolio Managers..........10
60 Day Rule...............10
Blackout Period...........10
Fifteen Day Rule..........10
Seven Day Rule............10
Short Sales...............10
Hedge Funds, Investment Clubs, and Other Investments.........................11
Preclearance Procedures...................................11
General Preclearance......................................11
Preclearance Requirements For Investment Personnel........11
Preclearance of Company Stock.............................12
Preclearance of Tender Offers and Stock Purchase Plans....12
Four Day Effective Period.................................12
Reporting Transactions and Accounts.......................12
Monthly Transaction Reports...............................13
Non-Influence and Non-Control Accounts....................14
Other Required Forms......................................14
Acknowledgement Forms.....................................14
Investment Personnel Representation Form..................14
Outside Director/Trustee Representation Form..............14
insider trading policy....................................15
BACKGROUND INFORMATION....................................15
Who is an Insider?........................................15
When is Information Nonpublic?............................16
What is Material Information?.............................16
When is Information Misappropriated?......................16
Penalties for Insider Trading.............................16
Who is a Controlling Person?..............................17
PROCEDURES TO IMPLEMENT POLICY............................17
Identifying Material Inside Information...................17
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Reporting Inside Information..............17
Watch and Restricted Lists................18
Protecting Information....................18
Responsibility to Monitor Transactions....19
Record Retention..........................19
Tender Offers.............................19
gift policy...............................20
Gift Giving...............................20
Gift Receiving............................20
Customary Business Amenities..............20
outside employment policy.................21
penalty guidelines........................22
OVERVIEW..................................22
PENALTY GUIDELINES........................22
supervisory and compliance procedures.....23
Supervisory Procedures....................23
Prevention of Violations..................23
Detection of Violations...................23
Compliance Procedures......................................................24
Reports of Potential Deviations or Violations..............................24
Annual Reports.........................................................24
Records.....................................................................24
Inspection...............................................................24
Confidentiality.............................................................24
The Ethics Committee..........25
Membership of the Committee...25
Committee Meetings............25
Special Discretion............25
General Information About the Ethics Rules.......26
Designees........................................26
Enforcement......................................26
Internal Use.....................................26
forms............................................26
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JANUS ETHICS RULES
"act in the best interest of our investors - earn their confidence with
every action"
DEFINITIONS
The following definitions are used throughout this document. You are
responsible for reading and being familiar with each definition.
1. "Access Persons" are Investment Personnel, Directors, Trustees, and
officers of JCC and other designated persons deemed by the Ethics
Committee to have access to current trading information. Access Persons
are subject to additional scrutiny and more restrictions because of
their access or potential access to information about current portfolio
holdings and transactions.
2. "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. For example, in addition to a person's own
accounts the term "Beneficial Ownership" encompasses securities held in
the name of a spouse or equivalent domestic partnership, minor
children, a relative sharing your home, or certain trusts under which
you or a related party is a beneficiary, or held under other
arrangements indicating a sharing of financial interest.
3. "Company Stock" is any stock or option issued by Janus or
Kansas City Southern Industries, Inc. ("KCSI").
4. "Covered Securities" generally include all securities, whether publicly
or privately traded (including securities issued by KCSI or JCC) and
any option, future, forward contract or other obligation involving a
security or index thereof, including an instrument whose value is
derived or based on any of the above (a "derivative"). The following
investments are not Covered Securities:
shares of open-end investment companies (e.g. mutual funds); direct
obligations of the U.S. government (e.g., Treasury securities), or any
derivative thereof; obligations of agencies and instrumentalities of
the U.S. government with a remaining term to maturity of one year or
less, or any derivative thereof; securities representing a limited
partnership interest in a real estate limited partnership; money
market instruments, such as certificates of deposit, bankers'
acceptances, repurchase agreements, and commercial paper; insurance
contracts, including life insurance or annuity contracts; direct
investments in real estate, business franchises or similar ventures;
and physical commodities (including foreign currencies), or any
derivatives thereof.
5. "Designated Compliance Representatives" are Ernie Overholt, Ted
Dryden and/or his designee(s), and
Stephen Stieneker and/or his designee(s).
6. "Designated Legal Representatives" are Debby Bielicke-Eades,
Stephen Stieneker, or their designee(s).
7. "Designated Trading Operations Representatives" are Lesa Finney,
John Porro, and Mark Farrell.
8. "Directors" are directors of JCC.
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9. "Ethics Committee" is comprised of Ted Dryden, Thomas Early, Steve
Goodbarn, and Stephen Stieneker.
10. "Inside Trustees and Directors" are Trustees and Directors that
are also employed by Janus.
11. "Investment Personnel" are portfolio managers, assistant portfolio
managers, research analysts, trading department personnel and any other
employees deemed by the Compliance Department to be comparable.
12. "Janus" is Janus Investment Fund, Janus Aspen Series, Janus
Capital Corporation, Janus Service Corporation, Janus Distributors,
Inc., Janus Capital International Ltd, and Janus International (UK)
Ltd.
13. "Janus Funds" are Janus Investment Fund and Janus Aspen Series.
14. "JCC" is Janus Capital Corporation.
15. "JDI" is Janus Distributors, Inc.
16. "JDI's Operations Manager" is Dana Wagener and/or her designee(s).
17. "NASD" is the National Association of Securities Dealers, Inc.
18. "Non-Access Person" is any person that is not an Access Person.
19. "Outside Directors" are Directors who are not employed by Janus.
20. "Outside Trustees" are Trustees who are not identified as an
"interested person" in the registration statement of the Janus Funds.
21. "Registered Persons" are persons registered with the NASD by JDI.
22. "SEC" is Securities and Exchange Commission.
23. "Trustees" are trustees of Janus Investment Fund and Janus Aspen Series.
These definitions may be updated from time to time to reflect changes in
personnel.
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INTRODUCTION
These Ethics Rules ("Rules") apply to all Directors, Trustees,
officers, and employees of Janus ("Covered Persons"). The Rules apply to
transactions for your personal accounts and any other accounts you
Beneficially Own.
You may be deemed the beneficial owner of any account in which you have a
direct or indirect financial interest. Such accounts include, among others,
accounts held in the name of your spouse or equivalent domestic
partnership,
your minor children, a
relative sharing your
home, or certain trusts
under which you or such
persons are a
beneficiary.
The Rules are intended to ensure that you (i) at all times place first
the interests of Janus' mutual funds and other clients ("Clients"), (ii)
conduct all personal trading consistent with the Rules 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, and (iii) not use any material nonpublic information in
securities trading. The Rules also establish policies regarding other
matters, such as outside employment and the giving or receiving of gifts.
You are required to read and retain these Rules and to sign and
return the attached Acknowledgment Form to the Compliance Department
("Compliance") upon commencement of employment or other services, and on
an annual
basis thereafter. The Acknowledgment confirms that (i) you have received,
read and asked any questions necessary to understand the Rules, (ii) you
agree to conduct yourself in accordance with the Rules, and (iii) you have
complied
with the Rules during such time as you have been associated with
Janus. Depending on your status, you may be required to submit
additional reports and/or obtain clearances as discussed more
fully below.
Unless otherwise defined, all
capitalized terms shall
have the same meaning
as set forth in the
Definitions section.
CAUTION REGARDING PERSONAL TRADING ACTIVITIES
Certain personal trading activities may be risky not only because of
the nature of the transactions, but also because action necessary to close out a
position may, for some Covered Persons, become prohibited while the position
remains open. For example, closing out short sales and transactions in
derivatives. Furthermore, if JCC becomes aware of material nonpublic
information, or if a Client is active in a given security, some Covered Persons
may find themselves "frozen" in a position. JCC will not bear any losses in
personal accounts resulting from the application of these Rules.
COMMUNICATIONS WITH OUTSIDE TRUSTEES/DIRECTORS
As a regular business practice, JCC attempts to keep the Directors and
Trustees informed with respect to its investment activities through reports and
other information provided to them in connection with board meetings and other
events. In addition, Janus personnel are encouraged to respond to inquiries from
Directors and Trustees, particularly as they relate to general strategy
considerations or economic or market conditions affecting Janus. However, it is
JCC's policy not to communicate specific trading information and/or advice on
specific issues to the Outside Directors and Outside Trustees (i.e., no
information should be given on securities for which current activity is being
considered for Clients). Any pattern of repeated requests by such Directors or
Trustees should be reported to the Chief Compliance Officer or the Director of
Compliance.
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CODE OF ETHICS
OVERVIEW
In general, it is unlawful for persons affiliated with investment
companies, their principal underwriters or their investment advisers to engage
in personal transactions in securities which are held or are to be acquired by a
registered investment company, if such personal transactions are made in
contravention of rules which the SEC has adopted to prevent fraudulent,
deceptive and manipulative practices. Such rules require each registered
investment company, investment adviser and principal underwriter to adopt its
own written code of ethics containing provisions reasonably necessary to prevent
its access persons from engaging in such conduct, and to maintain records, use
reasonable diligence, and institute such procedures as are reasonably necessary
to prevent violations of such code. This Code of Ethics ("Code") and information
reported hereunder will enable Janus to fulfill these requirements.
GENERAL PROHIBITIONS
The following are prohibited for Covered Persons (remember, if you work
at Janus or you're a Trustee or Director, you're a Covered Person). Persons who
violate any prohibition shall disgorge any profits realized in connection with
such violation to a charitable organization selected by the Ethics Committee,
and may be subject to sanctions imposed by the Ethics Committee, as outlined in
the Penalty Guidelines.
1. Purchasing, in an initial public offering, Covered Securities (see
Definitions section) for which no public market in the same or similar
securities of that issuer has previously existed. No securities may be
purchased in an offering that constitutes a "hot issue" as defined in
NASD rules. Such securities may be purchased, however, where the
individual has an existing right to purchase the security based on his
or her status as an investor, policyholder or depositor of the issuer.
In addition, securities issued in reorganizations are also outside the
scope of this prohibition if the transaction involves no investment
decision on the part of the employee except in connection with a
shareholder vote.*
2. Causing a Client to take action, or to fail to take action, for
personal benefit, rather than to benefit such Client. For example, an
employee would violate this Code by causing a Client to purchase a
security owned by the employee for the purpose of supporting or
increasing the price of that security or by causing a Client to refrain
from selling a security in an attempt to protect a personal investment,
such as an option on that security.
3. Using knowledge of portfolio transactions made or contemplated for
Clients to profit, or cause others to profit, by the market effect of
such transactions.
4. Disclosing current portfolio transactions made or contemplated for
Clients as well as any other nonpublic information to anyone outside
of Janus.
5. Engaging in fraudulent conduct in connection with the purchase or
sale of a security held or to be acquired by a Client, including
without limitation:
a) employing any device, scheme or artifice to defraud any Client;
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b) making to any Client any untrue statement of material fact or
omitting to state to any Client a material fact necessary in
order to make the statements made, in light of the
circumstances under which they are made, not misleading;
c) engaging in any act, practice or course of business which operates
or would operate as a fraud or deceit upon any Client;
d) engaging in any manipulative practice with respect to any Client;
or
e) investing in derivatives to evade the restrictions of this
Code. Accordingly, individuals may not use derivatives to take
positions in securities which the Code would prohibit if the
positions were taken directly.
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6. No Investment Personnel may serve on the board of directors of a
publicly traded company without prior written authorization by the
Ethics Committee. No such service shall be approved without a finding
by the Committee that the board service would not be inconsistent with
the interests of Clients. If board service is authorized by the
Committee, the Investment Personnel serving as director normally should
be isolated from those making investment decisions with respect to the
company involved through "Chinese Walls" or other procedures.**
7. If an Investment Person is planning to invest or make a recommendation
to invest in a security for a Client, and such person has a material
interest in the security, such person must first disclose such interest
to their manager or the Chief Investment Officer and obtain their
consent. The manager or Chief Investment Officer may only grant consent
if they have no material interest in the security. A material interest
is Beneficial Ownership of any securities (including derivatives,
options, warrants or rights), offices, directorships, significant
contracts, or interests or relationships that are likely to affect such
person's judgment.**
TRADING RESTRICTIONS
The trading restrictions of the Code apply to all direct or indirect
acquisitions or dispositions of Covered Securities, whether by purchase, sale,
tender, stock purchase plan, gift, inheritance, or otherwise. Unless otherwise
noted, the following Trading Restrictions are applicable to any transaction in a
Covered Security Beneficially Owned by a Covered Person. Outside Directors and
Outside Trustees are exempt from certain Trading Restrictions because of their
limited access to current information regarding Client investments.
Any disgorgement of profits required under any of the following provisions
shall be donated to a charitable organization selected by the Ethics Committee,
as outlined in the Penalty Guidelines. However, if disgorgement is required as a
result of trades by a portfolio manager that conflicted with that manager's own
Clients, disgorgement proceeds shall be paid directly to such Clients. If
disgorgement is required under more than one provision, the Committee shall
determine in its sole discretion the provision that shall control. 1 EXCLUDED
TRANSACTIONS
Some or all of the Trading Restrictions listed below do not apply to the
following transactions; however, these transactions must still be reported to
Compliance (see Reporting Transactions and Accounts):
Tender offer transactions are exempt from all Trading Restrictions
except Preclearance.
The acquisition of securities through stock purchase plans are exempt
from all Trading Restrictions except Preclearance, the Trading Ban On
Portfolio Managers and Assistant Portfolio Managers, and the Seven Day
Rule (note, sales of such securities are subject to the Trading
Restrictions of the Code).
The acquisition 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 such securities are
exempt from all Trading Restrictions.
- --------
** Items 6 and 7 are applicable to Investment Personnel only.
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The acquisition of securities through the exercise of rights issued by an
issuer pro rata to all holders of a class of securities, to the extent
the rights were acquired in the issue are exempt from all Trading
Restrictions.
Nondiscretionary transactions in Company Stock (e.g., the acquisition of
securities through KCSI's Employee Stock Purchase Plan ("ESPP")
or the receipt of options in Company Stock as part of a
compensation or benefit plan) are exempt from all Trading
Restrictions. Discretionary transactions in Company Stock issued
by JCC are exempt from all Trading Restrictions. Discretionary
transactions in Company Stock issued by KCSI (e.g., exercising
options or selling ESPP Stock) are exempt from all Trading
Restrictions except Preclearance (See procedures for
Preclearance of Company Stock).
The acquisition of securities by gift or inheritance are exempt from all
Trading Restrictions.
PRECLEARANCE
Access Persons (except Outside Directors and Outside Trustees) must obtain
preclearance prior to engaging in any personal transaction in applicable Covered
Securities. Preclearance procedures, as well as special procedures for
preclearing transactions in KCSI securities, tender offer transactions and stock
purchase plans are set forth below.
TRADING BAN ON PORTFOLIO MANAGERS AND ASSISTANT PORTFOLIO MANAGERS
Portfolio managers and their assistants are prohibited from trading
personally in Covered Securities. However, the following types of transactions
are exempt from this policy, but are subject to all applicable provisions of the
Rules, including preclearance:
Purchases or sales of securities issued by JCC or KCSI;
The sale of any security that is not held by any Client; and
The sale of any security in order to raise cash to meet personal financial
needs (e.g., to purchase a home, automobile, etc.).
60 DAY RULE
Access Persons (except Outside Directors and Outside Trustees) shall
disgorge any profits realized in the purchase and sale, or sale and purchase, of
the same or equivalent Covered Securities within 60 calendar days if a Client
held or traded the security during the 60 day period.
BLACKOUT PERIOD
No Access Person may engage in a transaction in a Covered Security when
such person knows there to be pending, on behalf of any Client, a "buy" or
"sell" order in that same security. The existence of pending orders will be
checked as part of the preclearance process referenced above. Preclearance may
be given when any pending Client order is executed or withdrawn.
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FIFTEEN DAY RULE
Any Access Person (except Outside Directors and Outside Trustees) who buys
or sells an applicable Covered Security within fifteen calendar days before such
security is bought or sold on behalf of any Client must disgorge any price
advantage realized. The price advantage shall be the favorable spread, if any,
between the price paid or received by such person and the least favorable price
paid or received by a Client during such period.1
SEVEN DAY RULE
Any portfolio manager or assistant portfolio manager who buys or sells an
applicable Covered Security within seven calendar days before or after he or she
trades in that security on behalf of a Client shall disgorge any profits
realized on such transaction.
SHORT SALES
Any Access Person who sells short a Covered Security that such person knows
is held long by any Client shall disgorge any profit realized on such
transaction. This prohibition shall not apply, however, to securities indices or
derivatives thereof (such as futures contracts on the S&P 500 index). Client
ownership of Covered Securities will be checked as part of the Preclearance
process referenced above.
HEDGE FUNDS, INVESTMENT CLUBS, AND OTHER INVESTMENTS
No Access Person (except Outside Directors and Outside Trustees) may
participate in hedge funds, partnerships, investment clubs, or similar
investment vehicles, unless such person does not have any direct or indirect
influence or control over the trading. Covered Persons relying upon this
provision will be required to file a Certification of Non-Influence and
Non-Control Form with the Director of Compliance.
PRECLEARANCE PROCEDURES
Preclearance must be obtained by Access Persons for all applicable
transactions in Covered Securities in which such person has a Beneficial
Interest. A Preclearance Form must be completed and forwarded to Compliance.
Compliance will notify the person when preclearance has been approved and the
trade then has four days to be executed.
GENERAL PRECLEARANCE
General preclearance shall be obtained from an authorized person from each
of the following three groups:
A DESIGNATED LEGAL OR COMPLIANCE REPRESENTATIVE, who will present the
personal investment to the attendees of the weekly investment meeting,
whereupon an opportunity will be given to orally object. An attendee of
the weekly investment meeting shall object to such clearance if such
person knows of a conflict with a pending Client transaction or a
transaction known by such attendee to be under consideration for a
Client. Objections to such clearance should also take into account,
among other factors, whether the investment opportunity should be
reserved for a Client. If no objections are raised, the Designated
Legal or Compliance Representative shall so indicate by signing the
Preclearance Form. Such approval shall not be required for sales of
securities not held by any Clients.
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In place of this authorization, Investment Personnel are required to
obtain portfolio manager approvals as noted in the section below
entitled Preclearance Requirements for Investment Personnel.
A DESIGNATED TRADING OPERATIONS REPRESENTATIVE, who may provide clearance
if such Representative knows of no pending "buy" or "sell" order in the
security on behalf of a Client and no such trades are known by such
person to be under consideration.
The DIRECTOR OF COMPLIANCE, OR A DESIGNATED LEGAL OR COMPLIANCE
REPRESENTATIVE IF THE DIRECTOR OF COMPLIANCE IS NOT AVAILABLE, who may
provide clearance if no legal prohibitions are known by such person to
exist with respect to the proposed trade. Approvals for such clearance
should take into account, among other factors, the existence of any
Watch List or Restricted List and, to the extent reasonably
practicable, recent trading activity and holdings of Clients.
Except for transactions in KCSI, no authorized person may preclear a
transaction in which such person has a beneficial interest.
PRECLEARANCE REQUIREMENTS FOR INVESTMENT PERSONNEL
Trades by Investment Personnel may not be precleared by presentation at the
weekly investment meeting. Instead, Investment Personnel must obtain the
following portfolio management approvals. However, such approval shall not be
required for sales of securities not held by any Clients:
o TRADES IN EQUITY SECURITIES require prior written approval from
all senior equity portfolio managers and either Ron Speaker or
Sandy Rufenacht;
o TRADES IN DEBT SECURITIES require prior written approval from all
senior fixed income portfolio managers plus either Jim Craig or two
other senior equity portfolio managers.
A portfolio manager may not preclear his/her own transaction.
PRECLEARANCE OF COMPANY STOCK
Officers of Janus and certain persons designated by Compliance who wish to
make discretionary transactions in KCSI securities, or derivatives thereon, must
preclear such transactions only with the Director of Compliance or other
Designated Legal or Compliance Representative. If such persons are subject to
the provisions of Section 16 (b) of the Securities Exchange Act of 1934, trading
will generally be allowed only in the 10 business day period beginning 72 hours
after KCSI files its quarterly results with the SEC (e.g., 10Q or 10K filing,
not earnings release). To preclear the trade, the Director of Compliance or such
other Representative shall discuss the transaction with Janus' General Counsel
or Chief Financial Officer.
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PRECLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS
Access Persons (other than Outside Directors and Outside Trustees) who wish
to participate in a tender offer or stock purchase plan must preclear such
trades only with the Director of Compliance prior to submitting notice to
participate in such tender offer or notice of participation in such stock
purchase plan to the applicable company. To preclear the trade, the Director of
Compliance shall consider all material factors relevant to a potential conflict
of interest between the Access Person and Clients. In addition, any increase of
$100 or more to a pre-existing stock purchase plan must be precleared.
FOUR DAY EFFECTIVE PERIOD
Clearances to trade will be in effect for only four trading days from and
including the date of the last Authorized Person's signature (which may not be
provided more than one day after the first Authorized Person's signature). For
tender offers, stock purchase plans, exercise of Company Stock and similar
transactions, the date the request is submitted to the company processing the
transaction will be considered the trade date for purposes of this requirement.
Open orders, including stop loss orders, will generally not be allowed unless
such order is expected to be completed within the four day effective period. It
will be necessary to re-preclear transactions not executed within the four day
effective period.
REPORTING TRANSACTIONS AND ACCOUNTS
ACCESS PERSONS (other than Outside Trustees) must arrange for their brokers
or financial institutions to provide to Compliance, on a timely basis, duplicate
account statements and confirmations showing all transactions in brokerage or
commodities accounts in which they have a Beneficial Interest. Please note that,
even if such person does not trade Covered Securities in a particular brokerage
or commodities account (e.g., trading mutual funds in a Schwab account), the
reporting of duplicate account statements and confirmations is still required.
However, if such person only uses a particular brokerage account for checking
account purposes, and not investment purposes, they may in-lieu of reporting
duplicate account statements, report duplicate confirmations and make a
quarterly representation to Compliance indicating that no investment
transactions occurred in the account during the calendar quarter. Reporting of
accounts that do not allow any trading in Covered Securities (e.g., a mutual
fund account held directly with the fund sponsor) is not required.
Access Persons must notify Compliance of each reportable account at the
time it is opened, and annually thereafter, including the name of the firm and
the name under which the account is carried. An Account Information Form should
be completed for this purpose.
Certain transactions, such as private placements, inheritances or gifts,
might not be reported through a securities account. In these instances, Access
Persons must report these transactions using a Monthly Transaction Report as
noted below.
Any REGISTERED PERSON, whether or not an Access Person, must notify
Compliance of each brokerage account in which they have a beneficial interest,
including the name of the firm and the name under which the account is carried.
An Account Information Form should be completed for this purpose. Such persons
are also required to authorize Janus to request and receive directly, duplicate
trade confirmations and duplicate account statements for each account.
Compliance may, from time to time, request and spot check such information for
all or a portion of such transactions or accounts.
13
Registered Persons are reminded that they must also inform any
brokerage firm with which they open an account, at the time
the account is opened, that they are registered with JDI.
Registered Persons, unless they are also Access Persons,
should not arrange to send duplicate confirms - compliance
will arrange this if dNON-ed.
NON-ACCESS PERSONS who engage in an aggregate of $25,000 or more of transactions
in Covered Securities within a calendar year, must provide Compliance an Annual
Transaction Report listing all such transactions in all accounts in which such
person has a Beneficial Interest. Compliance will request this information
annually and will spot check such reports.
OUTSIDE TRUSTEES need only report a transaction in a Covered Security
if such person, at the time of that transaction, knew or, in the ordinary course
of fulfilling his or her official duties as a Trustee should have known, that,
during the fifteen-day period immediately preceding the date of his or her
personal transaction, such security was purchased or sold by, or was being
considered for purchase or sale on behalf of, any Janus Fund for which such
person acts as Trustee.
MONTHLY TRANSACTION REPORTS
ACCESS PERSONS (other than Outside Trustees) must provide a Monthly
Transaction Report within 10 days after any month end showing all transactions
in Covered Securities for which confirmations are known by such person to not
have been timely provided to Janus, and all such transactions that are not
effected in securities or commodities accounts, including without limitation
nonbrokered private placements, gifts, inheritances, and other transactions in
Covered Securities.
Such persons must promptly comply with any request of the Director of
Compliance to provide monthly reports regardless of whether their broker has
been instructed to provide duplicate confirmations. Such reports may be
requested, for example, to check that all applicable confirmations are being
received or to supplement the requested confirmations where a broker is
difficult to work with or otherwise fails to provide duplicate confirmations on
a timely basis.
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NON-INFLUENCE AND NON-CONTROL ACCOUNTS
The Rules shall not apply to any account, partnership, or similar
investment vehicle over which a Covered Person has no direct or indirect
influence or control. Covered Persons relying upon this provision will be
required to file a Certification of Non-Influence and Non-Control Form with the
Director of Compliance.
Any Account beneficially owned by a Covered Person that is managed by
JCC in a discretionary capacity is not covered by these Rules so long as such
person has no direct or indirect influence or control over the account. The
employment relationship between the account-holder and the individual managing
the account, in the absence of other facts indicating control, will not be
deemed to give such account-holder influence or control over the account.
OTHER REQUIRED FORMS
In addition to the Account Information Form, Monthly and Annual
Transaction Reports, and Certification of Non-Influence and Non-Control Form
discussed above, the following forms must be completed if applicable to you:
ACKNOWLEDGEMENT FORMS
Each Covered Person must, upon commencement of services and annually
thereafter, provide Compliance with an Acknowledgment Form stating that he or
she has reviewed and complied with the Rules and has reported all applicable
securities transactions.
INVESTMENT PERSONNEL REPRESENTATION FORM
Investment Personnel must, upon commencement of services and annually
thereafter, provide Compliance with an Investment Personnel Representation Form
which lists all Covered Securities beneficially held. In addition, such persons
must provide a brief description of any positions held (e.g., director, officer,
other) with for-profit entities other than Janus.
OUTSIDE DIRECTOR/TRUSTEE REPRESENTATION FORM
All Outside Directors and Outside Trustees must, upon commencement of
services and annually thereafter, provide Compliance with an Outside
Director/Trustee Representation Form. The Form declares that such persons agree
to refrain from trading in any securities when they are in possession of any
information regarding trading recommendations made or proposed to be made to any
Client by Janus or its officers or employees.
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INSIDER TRADING POLICY
BACKGROUND INFORMATION
The term "insider trading" is not defined in the federal securities
statutes, 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 can be complex and unclear,
you should assume that the law prohibits:
trading by an insider, while in possession of material nonpublic
information,
trading by a non-insider, while in possession of material
nonpublic information, where the information was disclosed to
the non-insider (either directly or through one or more
intermediaries) in violation of an insider's duty to keep it
confidential,
communicating material nonpublic information to others in breach
of a duty not to disclose such information, and
misappropriating confidential information for securities
trading purposes, in breach of a duty owed to the source of
the information to keep the information confidential.
Trading based on material nonpublic information about an issuer does
not violate this policy unless the trader (i) is an "insider" with respect to an
issuer; (ii) receives the information from an insider or from someone that the
trader knows received the information from an insider, either directly or
indirectly, or (iii) misappropriates the nonpublic information or obtains or
misuses it in breach of a duty of trust and confidence owed to the source of the
information. Accordingly, trading based on material nonpublic information about
an issuer can be, but is not necessarily, a violation of this Policy. Trading
while in possession of material nonpublic information relating to a tender offer
is prohibited under this Policy regardless of how such information was obtained.
Application of the law of insider trading to particular transactions
can be difficult, particularly if it involves a determination about trading
based on material nonpublic information. You legitimately may be uncertain about
the application of this Policy in particular circumstances. If you have any
questions regarding the application of the Policy or you have any reason to
believe that a violation of the Policy has occurred or is about to occur, you
should contact the Chief Compliance Officer or the Director of Compliance.
The following discussion is intended to help you understand the
principal concepts involved in insider trading.
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WHO IS AN INSIDER?
The concept of "insider" is broad. It includes officers, directors and
employees of a company. In addition, a person can be a "temporary insider" if he
or she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the employees of
such organizations. In addition, one or more of the Janus entities may become a
temporary insider of a company it advises or for which it performs other
services. To be considered an insider, the company must expect the outsider to
keep the disclosed nonpublic information confidential and/or the relationship
must at least imply such a duty.
WHEN IS INFORMATION NONPUBLIC?
Information remains nonpublic until it has been made public.
Information becomes public when it has been effectively communicated to the
marketplace, such as by a public filing with the SEC or other governmental
agency, inclusion in the Dow Jones "tape" or publication in The Wall Street
Journal or another publication of general circulation. Moreover, sufficient time
must have passed so that the information has been disseminated widely.
WHAT IS MATERIAL INFORMATION?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" generally means 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 should be considered 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 may also 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. Similarly, prepublication information
regarding reports in the financial press also may be deemed material. For
example, the Supreme Court upheld the criminal convictions of insider trading
defendants who capitalized on prepublication information about The Wall Street
Journal's "Heard on the Street" column.
WHEN IS INFORMATION MISAPPROPRIATED?
The misappropriation theory prohibits trading on the basis of
non-public information by a corporate "outsider" in breach of a duty owed not to
a trading party, but to the source of confidential information. Misappropriation
of information occurs when a person obtains the non-public information through
deception or in breach of a duty of trust and loyalty to the source of the
information.
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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 or other controlling persons. 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 for up to 10 years
fines up to $1,000,000 (or $2,500,000 for corporations and other
entities)
civil penalties 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
civil penalties for the employer or other controlling person
of up to the greater of $1,000,000 or three times the amount
of the profit gained or loss avoided.
In addition, any violation of the law may result in serious sanctions
by Janus, including termination of employment.
WHO IS A CONTROLLING PERSON?
Included as controlling persons are Janus and its Directors, Trustees
and officers. If you are a Director, Trustee or officer, you have a duty to act
to prevent insider trading. Failure to fulfill such a duty may result in
penalties as described above.
PROCEDURES TO IMPLEMENT POLICY
The following procedures have been established to aid the Directors,
Trustees, officers and employees of Janus in avoiding insider trading, and to
aid Janus in preventing, detecting and imposing sanctions against insider
trading.
IDENTIFYING MATERIAL INSIDE INFORMATION
Before trading for yourself or others, including the Janus Funds or
other Clients, in the securities of a company about which you may have potential
inside information, ask yourself the following questions:
o To whom has this information been provided? Has the
information been effectively communicated to the marketplace?
o Has this information been obtained from either the issuer or
from another source in breach of a duty to that source to keep
the information confidential?
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o 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 affect
the market price of the securities if generally disclosed?
Special caution should be taken with respect to potential inside
information regarding JCC. Although JCC's shares are not publicly traded, JCC's
parent, KCSI, is a publicly traded company. KCSI owns 82% of the stock of JCC.
As a result, potential inside information regarding JCC may affect trading in
KCSI stock and should be reported pursuant to the procedures set forth below.
REPORTING INSIDE INFORMATION
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:
o Do not purchase or sell the securities on behalf of yourself or
others, including Clients.
o Do not communicate the information inside or outside of Janus,
other than to the Chief Compliance Officer or the Director of
Compliance.
o Immediately advise the Chief Compliance Officer or Director of
Compliance of the nature and source of such information. The
Chief Compliance Officer or Director of Compliance will review
the information with the Ethics Committee.
o Depending upon the determination made by the Ethics Committee,
or by the Chief Compliance Officer until the Committee can be
convened, you may be instructed to continue the prohibition
against trading and communication and the Director of
Compliance will place the security on a Restricted List or
Watch List, as described below. Alternatively, if it is
determined that the information obtained is not material
nonpublic information, you may be allowed to trade and
communicate the information.
WATCH AND RESTRICTED LISTS
Whenever the Ethics Committee or the Chief Compliance Officer
determines that a Director, Trustee, officer or employee of Janus is in
possession of material nonpublic information with respect to a company
(regardless of whether it is currently owned by any Client) such company will
either be placed on a Watch List or on a Restricted List.
WATCH LIST. If the security is placed on a Watch List, the flow of the
information to other Janus personnel will be restricted in order to allow such
persons to continue their ordinary investment activities. This procedure is
commonly referred to as a "Chinese Wall."
RESTRICTED LIST. If the Ethics Committee or the Chief Compliance
Officer determines that material nonpublic information is in the possession of a
Director, Trustee, officer, or employee of Janus and cannot be adequately
isolated through the use of a Chinese Wall, the company will be placed on the
Restricted List. While a company is on the Restricted List, no Investment Person
shall initiate or recommend any transaction in any Client account, and no Access
Person shall be precleared to transact in any account in which he or she has a
beneficial interest, with respect to the securities of such company. The Ethics
Committee or the Chief Compliance Officer will also have
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the discretion of placing a company on the Restricted List even though no "break
in the Chinese Wall" has or is expected to occur with respect to the material
nonpublic information about the company. Such action may be taken by such
persons for the purpose of avoiding any appearance of the misuse of material
nonpublic information.
The Ethics Committee or the Chief Compliance Officer will be
responsible for determining whether to remove a particular company from the
Watch List or Restricted List. The only persons who will have access to the
Watch List or Restricted List are members of the Ethics Committee, Designated
Legal or Compliance Representatives and such persons who are affected by the
information. The Watch List and Restricted List are highly confidential and
should, under no circumstances, be discussed with or disseminated to anyone
other than the persons noted above.
PROTECTING INFORMATION
Directors, Trustees, officers and employees of Janus shall not disclose
any nonpublic information (whether or not it is material) relating to Janus or
its securities transactions to any person outside Janus (unless such disclosure
has been authorized by the Chief Compliance Officer). Material nonpublic
information may not be communicated to anyone, including any Director, Trustee,
officer or employee of Janus, except as provided in this Policy. Access to such
information must be restricted. For example, access to files containing material
nonpublic information and computer files containing such information should be
restricted, and conversations containing such information, if appropriate at
all, should be conducted in private.
To insure the integrity of the Chinese Wall and to avoid unintended
disclosures, it is important that all employees take the following steps with
respect to confidential or nonpublic information:
Do not discuss confidential information in public places such as
elevators, hallways or social gatherings.
To the extent practical, limit access to the areas of the firm
where confidential information could be observed or overheard
to employees with a business need for being in the area.
Avoid use of speakerphones in areas where unauthorized persons may
overhear conversations.
Avoid use of wireless and cellular phones, or other means of
communication which may be intercepted.
Where appropriate, maintain the confidentiality of Client
identities by using code names or numbers for confidential
projects.
Exercise care to avoid placing documents containing
confidential information in areas where they may be read by
unauthorized persons and to store such documents in secure
locations when they are not in use.
Destroy copies of confidential documents no longer needed for
a project unless required to be saved pursuant to applicable
recordkeeping policies or requirements.
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RESPONSIBILITY TO MONITOR TRANSACTIONS
Compliance will monitor transactions of Clients and employees for which
reports are received to detect the existence of any unusual trading activities
with respect to companies on the Watch and Restricted Lists. Compliance will
immediately report any unusual trading activity directly to the Director of
Compliance, and in his or her absence, the Chief Compliance Officer, who will be
responsible for determining what, if any, action should be taken.
RECORD RETENTION
Copies of the Watch List and Restricted List shall be maintained by the
Director of Compliance for a minimum of six years.
TENDER OFFERS
Tender offers represent a particular concern in the law of insider
trading for two reasons. First, tender offer activity often produces
extraordinary fluctuations 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. Janus employees and others subject to this Policy should exercise
particular caution any time they become aware of nonpublic information relating
to a tender offer.
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GIFT POLICY
Gifts may only be given (or accepted) if they are in accordance with
normally accepted business practices and do not raise any question of
impropriety. A question of impropriety may be raised if a gift influences or
gives the appearance of influencing the recipient. The following outlines
Janus' policy on giving and receiving gifts to help
us maintain those
standards and is
applicable to all
Inside Directors and
Inside Trustees,
officers and employees
of Janus.
GIFT GIVING
Neither you nor members of your immediate family may give any gift,
series of gifts, or other thing of value, including cash, loans, personal
services, or special discounts ("Gifts") in excess of $100 per year to any
Client or any one person or entity that does or seeks to do business with or on
behalf of Janus or any Client (collectively referred to herein as "Business
Relationships").
GIFT RECEIVING
Neither you nor members of your immediate family may receive any Gift
of material value from any single Business Relationship. A Gift will be
considered material in value if it influences or gives the appearance of
influencing the recipient.
In the event the aggregate fair market value of all Gifts received by
you from any single Business Relationship is estimated to exceed $250 in any
12-month period, you must immediately notify your manager. Managers that receive
such notification must report this information to the Director of Compliance if
it appears that such Gifts may have improperly influenced the receiver. If the
Gift is made in connection with the sale or distribution of registered
investment company or variable contract securities, the aggregate fair market
value of all such Gifts received by you from any single Business Relationship
may never exceed $100 in any 12-month period.
Occasionally, Janus employees are invited to attend or participate in
conferences, tour a company's facilities, or meet with representatives of a
company. Such invitations may involve traveling and may require overnight
lodging. Generally, all travel and lodging expenses provided in connection with
such activities must be paid for by Janus. However, if appropriate, and with
prior approval from your manager, you may accept travel related amenities if the
costs are considered insubstantial and are not readily ascertainable.
The solicitation of a Gift is prohibited (i.e., you may not
request a Gift, such as tickets to a sporting event, be
given to you).
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CUSTOMARY BUSINESS AMENITIES
Customary business amenities are not considered Gifts so long as such
amenities are business related (e.g., if you are accepting tickets to a sporting
event, the offerer must go with you), reasonable in cost, appropriate as to time
and place, and neither so frequent nor so costly as to raise any question of
impropriety. Customary business amenities which you and, if appropriate, your
guests, may accept (or give) include an occasional meal, a ticket to a sporting
event or the theater, green fees, an invitation to a reception or cocktail
party, or comparable entertainment.
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OUTSIDE EMPLOYMENT POLICY
No Inside Director, Inside Trustee, officer or employee of Janus
shall accept employment or compensation as a result of any business activity
(other than a passive investment), outside the scope of his relationship with
Janus
unless such person has provided prompt written notice of such employment or
compensation to the Chief Compliance Officer (or, for Registered Persons, to
JDI's Operations Manager), and, in the case of securities-related employment
or compensation, has received the prior written approval of the Ethics
Committee. Registered Persons are reminded to update and submit their
Outside Business Activity Disclosure forms as appropriate pursuant to
JDI's Written
Supervisory Procedures and applicable NASD
rules.
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PENALTY GUIDELINES
OVERVIEW
Covered Persons who violate any of the requirements, restrictions, or
prohibitions of the Rules may be subject to sanctions imposed by the Ethics
Committee. The following guidelines shall be used by the Director of Compliance
for recommending remedial actions for Covered Persons who violate prohibitions
or disregard requirements of the Rules. Deviations from the Fifteen Day Rule are
not considered to be violations under the Rules and, therefore, are not subject
to the penalty guidelines.
Upon learning of a potential deviation or violation from the Rules,
the Director of Compliance will provide a written recommendation of remedial
action to the Ethics Committee. The Ethics Committee has full discretion to
approve such recommendations or impose other sanctions it deems appropriate. The
Ethics Committee will take into consideration, among other things, whether the
violation was a technical violation of the Rules or inadvertent oversight (i.e.,
ill-gotten profits versus general oversight). The guidelines are designed to
promote consistency and uniformity in the imposition of sanctions and
disciplinary matters.
PENALTY GUIDELINES
Outlined below are the guidelines for the sanctions that may be imposed
on Covered Persons who fail to comply with the Rules:
1st violation - Compliance will send a memorandum of
reprimand to the person, copying his/her supervisor.
The memorandum will generally reinforce the person's
responsibilities under the Rules, educate the person
on the severity of personal trading violations and
inform the person of the possible penalties for
future failure to comply with the Rules;
2nd violation - Janus' Chief Investment Officer, James P. Craig, will
meet with the person to discuss the violations in detail and will
reinforce the importance of complying with the Rules;
3rd violation - Janus' Chairman of the Board, Thomas H. Bailey, will
meet the person to discuss the violations in detail and will reinforce
the importance of complying with the Rules;
4th violation - The Executive Committee will impose such sanctions as
it deems appropriate, including without limitation, a letter of
censure, fines, withholding of bonus payments, or suspension or
termination of employment or personal trading privileges.
In addition to the above disciplinary sanctions, such persons may be
required to disgorge any profits realized in connection with such violation. All
disgorgement proceeds collected will be donated to a charitable organization
selected by the Ethics Committee. All sanctions imposed will be documented in
such person's personal trading file maintained by Janus, and will be reported to
the Executive Committee.
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SUPERVISORY AND COMPLIANCE PROCEDURES
Supervisory procedures can be divided into two classifications:
prevention of violations and detection of violations. Compliance
review procedures include preparation of special and annual reports,
record maintenance and review, and confidentiality preservation.
SUPERVISORY PROCEDURES
PREVENTION OF VIOLATIONS
To prevent violations of the Rules, the Director of Compliance should,
in addition to enforcing the procedures outlined in the Rules:
1. review and update the Rules as necessary, at least once annually,
including but not limited to a review of the Code by the Chief
Compliance Officer, the Ethics Committee and/or counsel;
2. answer questions regarding the Rules, or refer the same to the
Chief Compliance Officer;
3. request from all persons upon commencement of services, and
annually thereafter, any applicable forms and reports as required by
the Rules;
4. write letters to the securities firms requesting duplicate
confirmations and account statements where necessary; and
5. with such assistance from the Human Resources Department as may be
appropriate, maintain a continuing education program consisting of the
following:
a) orienting Directors, Trustees, officers, and employees who are new
to Janus to the Rules, and
b) further educating Directors, Trustees, officers, and employees
by distributing memos or other materials that may be issued by
outside organizations such as the Investment Company Institute
discussing the issue of insider trading and other issues
raised by the Rules.
DETECTION OF VIOLATIONS
To detect violations of these Rules, the Director of Compliance should, in
addition to enforcing the procedures outlined in the Rules:
Review reports, confirmations, and statements relative to applicable
restrictions, as provided under the Code;
Review the Restricted and Watch Lists relative to applicable personal and
Client trading activity, as provided under the Policy;
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Spot checks of certain information are permitted as noted under the Code.
COMPLIANCE PROCEDURES
REPORTS OF POTENTIAL DEVIATIONS OR VIOLATIONS
Upon learning of a potential deviation or violation of the Rules, the
Director of Compliance should prepare a written report providing full details
and a recommendation of remedial action to the Ethics Committee. The Ethics
Committee shall thereafter take such action as it deems appropriate (see Penalty
Guidelines).
ANNUAL REPORTS
The Director of Compliance should prepare at least annually a written
report for the Ethics Committee. This report shall set forth the following
information, and shall be confidential.
Copies of the Rules, as revised, including a summary of any changes
made during the past year;
Identification of any violations requiring significant remedial action
during the past year; and
Recommendations, if any, regarding changes in existing restrictions or
procedures based upon Janus' experience under these Rules, evolving
industry practices, or developments in applicable laws or regulations.
The Ethics Committee will annually report to the Trustees with respect to
any of the above items to the extent that the Janus Funds are materially
affected thereby.
RECORDS
Compliance should maintain the following records:
o Files for personal securities transaction confirmations and account
statements, all reports and other forms submitted by Covered Persons
pursuant to these Rules and any other pertinent information. Such files
shall be stored in a secure location;
o A copy of each preclearance;
A list of all persons who are, or have been, required to make reports
pursuant to these Rules.
INSPECTION
The records and reports maintained by Compliance pursuant to the Rules
shall at all times be available for inspection, without prior notice, by any
member of the Ethics Committee.
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CONFIDENTIALITY
All procedures, reports and records monitored, prepared or maintained
pursuant to these Rules shall be considered confidential and proprietary to
Janus and shall be maintained and protected accordingly. Except as otherwise
required by law or this Policy, such matters shall not be disclosed to anyone
other than to members of the Ethics Committee, as requested.
THE ETHICS COMMITTEE
The purpose of this Section is to describe the Ethics Committee. The Ethics
Committee is created to provide an effective mechanism for monitoring compliance
with the standards and procedures contained in the Rules and to take appropriate
action at such times as violations or potential violations are discovered.
MEMBERSHIP OF THE COMMITTEE
The Committee consists of Steven R. Goodbarn, Vice President
of Finance, Treasurer and Chief Financial Officer; Thomas A.
Early, Vice President and General Counsel; Stephen L. Stieneker,
Vice President of Compliance, Chief Compliance Officer and
Assistant General Counsel; and Ted S. Dryden, Director of
Compliance. The Director of Compliance currently serves as the
Chairman of the Committee. The composition of the Committee may
be changed from time to time.
COMMITTEE MEETINGS
The Committee shall generally meet every four months or as often as
necessary to review operation of the compliance program and to consider
technical deviations from operational procedures, inadvertent oversights, or any
other potential violation of the Rules. At such time as the Director of
Compliance learns of a potential violation, he or she shall report such
violation to the Chief Compliance Officer, together with all documents relating
to the matter. The Chief Compliance Officer shall either present the information
at the next regular meeting of the Committee, or convene a special meeting.
Deviations alternatively may be addressed by including them in the
employee's personnel records maintained by Janus. Committee meetings are
primarily intended for consideration of the general operation of the compliance
program and substantive or serious departures from standards and procedures in
the Rules.
A Committee meeting may be attended, at the discretion of the Committee, by
such other persons as the Committee shall deem appropriate. Any individual whose
conduct has given rise to the meeting may also be called upon, but shall not
have the right, to appear before the Committee.
It is not required that minutes of Committee meetings be maintained; in
lieu of minutes the Committee may issue a report describing any action taken.
The report shall be included in the confidential file maintained by the Director
of Compliance with respect to the particular employee or employees whose conduct
has been the subject of the meeting.
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SPECIAL DISCRETION
The Committee shall have the authority by unanimous action to exempt any
person or class of persons from all or a portion of the Rules, provided that:
the Committee determines, on advice of counsel, that the
particular application of all or a portion of the Rules is not
legally required;
the Committee determines that the likelihood of any abuse of
the Rules by such exempted person(s) is remote;
the terms or conditions upon which any such exemption is
granted is evidenced in a written instrument; and
the exempted person(s) agrees to execute and deliver to the
Director of Compliance, at least annually, a signed
Acknowledgment Form, which Acknowledgment shall, by operation of
this provision, include such exemptions and the terms and
conditions upon which it was granted.
The Committee shall also have the authority by unanimous action to impose
such additional requirements or restrictions as it, in its sole discretion,
determines appropriate or necessary, as outlined in the Penalty Guidelines.
Any exemption, and any additional requirement or restriction, may be
withdrawn by the Committee at any time (such withdrawal action is not required
to be unanimous).
GENERAL INFORMATION ABOUT THE ETHICS RULES
DESIGNEES
The Director of Compliance and the Chief Compliance Officer may appoint
designees to carry out their functions pursuant to these Rules.
ENFORCEMENT
In addition to the penalties described in the Penalty Guidelines and
elsewhere in the Rules, upon discovering a violation of the Rules, the Janus
entity with which you are associated may impose such sanctions as it deems
appropriate, including without limitation, a letter of censure or suspension or
termination of employment or personal trading privileges of the violator. All
material violations of the Rules and any sanctions imposed with respect thereto
shall be reported periodically to the Directors and Trustees and the directors
of any other Janus entity which has been directly affected by the violation.
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INTERNAL USE
The Rules are intended solely for internal use by Janus and do not
constitute an admission, by or on behalf of such companies, their controlling
persons or persons they control, as to any fact, circumstance or legal
conclusion. The Rules are not intended to evidence, describe or define any
relationship of control between or among any persons. Further, the Rules are not
intended to form the basis for describing or defining any conduct by a person
that should result in such person being liable to any other person, except
insofar as the conduct of such person in violation of the Rules may constitute
sufficient cause for Janus to terminate or otherwise adversely affect such
person's relationship with Janus.
FORMS
Attached are blank forms for use in complying with the Rules. These
forms may be revised from time to time, as the Ethics Committee shall
determine. Please contact Compliance if you need additional forms or if you
have any questions.
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CODE OF ETHICS
OF
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
GENERAL POLICY STATEMENT
Purpose and Scope of Code of Ethics. In recognition of T. Rowe Price Associates,
Inc.'s ("Price Associates") commitment to maintain the highest standards of
professional conduct and ethics, the firm's Board of Directors has adopted this
Code of Ethics ("Code") composed of Standards of Conduct and the following
Statements of Policy ("Statements"):
1. Statement of Policy on Material, Inside (Non-Public) Information
2. Statement of Policy on Securities Transactions
3. Statement of Policy on Corporate Responsibility
4. Statement of Policy with Respect to Compliance with Copyright Laws
5. Statement of Policy with Respect to Computer Security
6. Statement of Policy on Compliance with Antitrust Laws
The purpose of this Code is to help preserve our most valuable asset - the
reputation of Price Associates and its employees.
Who is Subject to the Code. Price Associates, its subsidiaries and their
officers, directors and employees are all subject to the Code, as are all Rowe
Price-Fleming International, Inc. ("RPFI") personnel (officers, directors, and
employees) who are stationed in Baltimore. In addition, the following persons
are also subject to the Code:
1. All temporary workers hired on the Price Associates payroll ("TRPA
Temporaries")
2. All agency temporaries, whose assignments at Price Associates
exceed four weeks or whose cumulative assignments exceed eight
weeks over a twelve-month period
3. All independent or agency-provided consultants whose assignments exceed
four weeks or whose cumulative assignments exceed eight weeks over a
twelve-month period and whose work is closely related to the ongoing
work of Price Associates' employees (versus project work that stands
apart from ongoing work)
4. Any contingent worker whose assignment is more than casual in nature or
who will be exposed to the kinds of information and situations that
would create conflicts on matters covered in the Code.
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Price Associates' Status as a Fiduciary. The primary responsibility of Price
Associates as an investment adviser is to render to its clients on a
professional basis unbiased and continuous advice regarding their investments.
As an investment adviser, Price Associates has a fiduciary relationship with all
of its clients, which means that it has an absolute duty of undivided loyalty,
fairness and good faith toward its clients and mutual fund shareholders and a
corresponding obligation to refrain from taking any action or seeking any
benefit for itself which would, or which would appear to, prejudice the rights
of any client or shareholder or conflict with his or her best interests.
What the Code Does Not Cover. The Code was not written for the purpose of
covering all policies, rules and regulations to which employees may be subject.
As an example, T. Rowe Price Investment Services, Inc. ("Investment Services")
is a member of the National Association of Securities Dealers, Inc. ("NASD")
and, as such, is required to maintain written supervisory procedures to enable
it to supervise the activities of its registered representatives and associated
persons to ensure compliance with applicable securities laws and regulations,
and with the applicable rules of the NASD and its regulatory subsidiary, NASD
Regulation, Inc. ("NASDR").
Compliance with the Code. Strict compliance with the provisions of this Code is
considered a basic condition of employment with the firm. An employee may be
required to surrender any profit realized from a transaction which is deemed to
be in violation of the Code. In addition, any breach of the Code may constitute
grounds for disciplinary action, including dismissal from employment. Employees
may appeal to the Management Committee any ruling or decision rendered with
respect to the Code.
Questions Regarding the Code. Questions regarding the Code should be referred as
follows:
1. Standards of Conduct of Price Associates and its Employees: the Chairperson
of the Ethics Committee or the Director of Human Resources.
2. Statement of Policy on Material, Inside (Non-Public) Information: Legal
Department.
3. Statement of Policy on Securities Transactions: The Chairperson of the Ethics
Committee.
4. Statement of Policy on Corporate Responsibility: Corporate Responsibility
Committee.
5. Statement of Policy with Respect to Compliance with Copyright Laws: Legal
Department.
6. Statement of Policy with Respect to Computer Security and Related Issues:
Legal Department.
7. Statement of Policy on Compliance with Antitrust Laws: Legal Department.
March, 1999
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STANDARDS OF CONDUCT OF PRICE ASSOCIATES AND ITS EMPLOYEES
Allocation of Client Brokerage. The firm's policies with respect to the
allocation of client brokerage are set forth in Part II of Form ADV, Price
Associates' registration statement filed with the Securities and Exchange
Commission ("SEC"). It is imperative that all employees -- especially those who
are in a position to make recommendations regarding brokerage allocation, or who
are authorized to select brokers who will execute securities transactions on
behalf of our clients -- read and become fully knowledgeable concerning our
policies in this regard. Any questions regarding our firm's allocation of client
brokerage should be addressed to the Chairperson of the Brokerage Control
Committee.
Antitrust. The U.S. antitrust laws are designed to ensure fair competition and
preserve the free enterprise system. Some of the most common antitrust issues
with which an employee may be confronted are in the areas of pricing (adviser
fees) and trade association activity. To ensure its employees' understanding of
these laws, Price Associates has adopted a Statement of Policy on Compliance
with Antitrust Laws. All employees should read and understand this Statement.
(See page 8-1).
Compliance with Copyright Laws. To protect Price Associates and its employees,
Price Associates has adopted a Statement of Policy with Respect to Compliance
with Copyright Laws. All employees should read and understand this Statement
(see page 6-1).
Computer Security. Computer systems and programs play a central role in Price
Associates' operations. To establish appropriate computer security to minimize
potential for loss or disruptions to our computer operations, Price Associates
has adopted a Statement of Policy with Respect to Computer Security and Related
Issues. All employees should read and understand this Statement (see page 7-1).
Conflicts of Interest. A direct or indirect interest in a supplier, creditor,
debtor or competitor may conflict with the interests of Price Associates. All
employees must avoid placing themselves in a "compromising position" where their
interests may be in conflict with those of Price Associates or its clients.
Relationships with Profitmaking Enterprises, Including Investment
Clubs. A conflict may occur when an employee of Price Associates is
also employed by another firm, directly or as a consultant or
independent contractor; has a direct financial interest in another
firm; has an immediate family financial interest in another firm; or is
a director, officer or partner of another firm.
Employees of our firm sometimes serve as directors, officers, partners,
or in other capacities with profitmaking enterprises not related to
Price Associates or its mutual funds. Employees are generally
prohibited from serving as officers or directors of corporations which
are approved or are likely to be approved for purchase in our firm's
client accounts.
An employee may not accept outside employment that would require him or
her to become registered (or dually registered) as a representative of
an unaffiliated broker/dealer, investment adviser, or an insurance
broker or company. An employee may also not become independently
registered as an investment adviser. An employee who is contemplating
obtaining another interest or relationship that might conflict or
appear to conflict with the interests of Price Associates, such as
accepting employment with or an appointment as a director, officer or
partner of an outside profitmaking enterprise or forming or
participating in a stock or investment club, must receive the prior
approval of the Ethics Committee. Upon review by the Ethics Committee,
the employee will be advised in writing of the Committee's decision. In
addition, transactions through investment clubs are subject
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to the firm's Statement of Policy on Securities Transactions. Decisions
by the Ethics Committee regarding outside directorships in profitmaking
enterprises will be reviewed by the Management Committee before
becoming final. Outside business interests that will not conflict or
appear to conflict with the interests of the firm need not be reviewed
by the Ethics Committee, but must be approved by the Employee's
supervisor.
Certain employees may serve as directors or as members of Creditors
Committees or in similar positions for non-public, for-profit entities
in connection with their professional activities at Price Associates.
An employee must obtain the permission of the Management Committee
before accepting such a position and must relinquish the position if
the entity becomes publicly held, unless otherwise determined by the
Management Committee.
Service with Nonprofitmaking Enterprises. Price Associates encourages
its employees to become involved in community programs and civic
affairs. However, employees should not permit such activities to affect
the performance of their job responsibilities. Approval by the
Chairperson of the Ethics Committee must be obtained before an employee
accepts a position as a trustee or member of the Board of Directors of
any non-profit organization.
Relationships with Financial Service Firms. In order to avoid any
actual or apparent conflicts of interest, employees are prohibited from
investing in or entering into any relationship, either directly or
indirectly, with corporations, partnerships, or other entities which
are engaged in business as a broker, a dealer, an underwriter, and/or
an investment adviser. As described above, this prohibition extends to
registration and/or licensure with an unaffiliated firm. This
prohibition, however, is not meant to prevent employees from purchasing
publicly traded securities of broker/dealers, investment advisers or
other companies engaged in the mutual fund industry. Of course, all
such purchases are subject to normal prior clearance and reporting
procedures. This policy does not preclude an employee from engaging an
outside investment adviser to manage his or her assets.
If any member of an employee's immediate family is employed by, has a
partnership interest in, or has an equity interest of .5% or more in a
broker/dealer, investment adviser or other company engaged in the
mutual fund industry, the relationship must be reported to the Ethics
Committee.
Confidentiality. The exercise of confidentiality extends to four major areas of
our operations: internal operating procedures and planning; clients and fund
shareholders; investment advice; and investment research. The duty to exercise
confidentiality applies not only when an employee is with the firm, but also
after he or she terminates employment with the firm.
Internal Operating Procedures and Planning. During the years we have
been in business, a great deal of creative talent has been used to
develop specialized and unique methods of operations and portfolio
management. In many cases, we feel these methods give us an advantage
over our competitors, and we do not want these ideas disseminated
outside our firm. Accordingly, employees should be guarded in
discussing our business practices with outsiders. Any requests from
outsiders for specific information of this type should be cleared with
your supervisor before it is released.
Also, from time to time management holds meetings with employees in
which material, non-public information concerning the firm's future
plans is disclosed. Employees should never discuss confidential
information with, or provide copies of written material concerning the
firm's internal operating procedures or projections for the future to,
unauthorized persons outside the firm.
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Clients, Fund Shareholders, and TRP Brokerage Customers. In many
instances, when clients subscribe to our services, we ask them to
disclose fully their financial status and needs. This is done only
after we have assured them that every member of our organization will
hold this information in strict confidence. It is essential that we
respect their trust. A simple rule for employees to follow is that the
names of our clients, fund shareholders, or TRP Brokerage customers or
any information pertaining to their investments must never be divulged
to anyone outside the firm, not even to members of their immediate
families, and must never be used as a basis for personal trades over
which the employee has beneficial interest or control.
Investment Advice. Because of the fine reputation our firm enjoys,
there is a great deal of public interest in what we are doing in the
market. There are two major considerations that dictate why we must not
provide investment "tips":
From the point of view of our clients, it is not fair to
give other people information which clients must purchase.
From the point of view of the firm, it is not desirable to
create an outside demand for a stock when we are trying to
buy it for our clients, as this will only serve to push
the price up. The reverse is true if we are selling.
In light of these considerations, employees must never disclose to
outsiders our buy and sell recommendations, securities we are
considering for future investment, or the portfolio holdings of our
clients or mutual funds.
The practice of giving investment advice informally to members of your
immediate family should be restricted to very close relatives. Any
transactions resulting from such advice are subject to the prior
approval and reporting requirements of the Statement of Policy on
Securities Transactions. Under no circumstances should an employee
receive compensation directly or indirectly (other than from Price
Associates or an affiliate) for rendering advice to either clients or
non-clients.
Investment Research. Any report circulated by a research analyst is
confidential in its entirety and should not be reproduced or shown to
anyone outside of our organization, except our clients where
appropriate.
Understanding as to Clients' Accounts and Company Records at Time of
Employee Termination. The accounts of clients and mutual fund
shareholders are the sole property of Price Associates. This applies to
all clients for whom Price Associates acts as investment adviser,
regardless of how or through whom the client relationship originated
and regardless of who may be the counselor for a particular client. At
the time of termination of employment with Price Associates, an
employee must: (1) surrender to Price Associates in good condition any
and all materials, reports or records (including all copies in his or
her possession or subject to his or her control) developed by him or
her or any other person which are considered confidential information
of Price Associates (except copies of any research material in the
production of which the employee participated to a material extent);
and (2) refrain from communicating, transmitting or making known to any
person or firm any information relating to any materials or matters
whatsoever which are considered by Price Associates to be confidential.
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Employees must use care in disposing of any confidential records or
correspondence. Confidential material that is to be discarded should be torn up
or, if a quantity of material is involved, you should contact Document
Management for instructions regarding proper disposal.
Corporate Responsibility. As a major institutional investor with a fiduciary
duty to its clients, including its mutual fund shareholders, Price Associates
has adopted a Statement of Policy on Corporate Responsibility (see page 5-1).
The purpose of this Statement is to establish formal standards and procedures to
guide Price Associates with respect to its responsibilities to deal with matters
of corporate and social responsibilities which may affect the companies in which
client assets are invested.
Employment of Former Government Employees. Federal laws and regulations govern
the employment of former employees of the U.S. Government and its agencies,
including the SEC. In addition, certain states have adopted similar statutory
restrictions. Finally, certain states and municipalities which are clients of
Price Associates have imposed contractual restrictions in this regard. Before
any action is taken to discuss employment by Price Associates of a former
government employee, guidance must be obtained from the Legal Department.
Employment Practices
Equal Opportunity. Price Associates is committed to the principles of
Equal Employment. We believe our continued success depends on talented
people, without regard to race, color, religion, national origin,
gender, age, disability, sexual orientation, Vietnam era military
service or any other classification protected by federal, state or
local laws.
This commitment to Equal Opportunity covers all aspects of the
employment relationship including recruitment, application and initial
employment, promotion and transfer, selection for training
opportunities, wage and salary administration, and the application of
service, retirement, and employee benefit plan policies.
All members of T. Rowe Price staff are expected to comply with the
spirit and intent of our Equal Employment Opportunity Policy.
If you feel you have not been treated in accordance with this policy,
contact your immediate supervisor, your manager or a Human Resources
Representative. No retaliation will be taken against any employee who
reports an incident of alleged discrimination.
Harassment. Price Associates intends to provide employees a workplace
free from any form of harassment. This includes sexual harassment
which, banned by and punishable under the Civil Rights Act of 1964, may
result from unwelcome advances, requests for favors or any verbal or
physical conduct of a sexual nature. Such actions or statements may or
may not be accompanied by explicit or implied promises of preferential
treatment or negative consequences in connection with one's employment.
Harassment might include uninvited sex-oriented conversations,
touching, comments, jokes, suggestions or innuendos. This type of
behavior can create a stressful, intimidating and offensive atmosphere;
it may adversely affect morale and work performance.
Any employee who feels offended by the action or comments of another,
or any employee who has observed such behavior, should report the
matter, in confidence, to his or her immediate supervisor.
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If that presents a problem, report the matter to the Director of Human
Resources or another person in the Human Resources Department. All
complaints will be investigated immediately and confidentially. Any
employee who has behaved in a reprehensible manner will be subject to
disciplinary action in keeping with the gravity of the offense.
Drug and Alcohol Abuse. Price Associates has adopted a Statement of
Policy, available from Human Resources, to maintain a drug-free
workplace and prevent alcohol abuse. This policy fosters a safe,
healthful and productive environment for its employees and customers
and protects Price Associates' property, equipment, operations and
reputation in the community and the industry.
Past and Current Litigation. As a condition of employment, each new employee is
required to answer a questionnaire regarding past and current civil and criminal
actions and certain regulatory matters. Price Associates uses the information
obtained through these questionnaires to answer questions asked on federal and
state registration forms and for insurance and bonding purposes. Each employee
is responsible for keeping answers on the questionnaire current. If an employee
becomes party to any proceeding that could lead to his or her conviction for any
felony or misdemeanor (other than traffic or other minor offenses) or becomes
the subject of a regulatory action by the SEC, a state, a foreign government or
any domestic or foreign self-regulatory organization relating to securities or
investment activities, he or she should notify the Legal Department promptly.
Financial Reporting. Price Associates' records are maintained in a manner that
provides for an accurate record of all financial transactions in conformity with
generally accepted accounting principles. No false or deceptive entries may be
made and all entries must contain an appropriate description of the underlying
transaction. All reports, vouchers, bills, invoice, payroll and service records
and other essential data must be accurate, honest and timely and should provide
an accurate and complete representation of the facts.
Health and Safety in the Workplace. Price Associates recognizes its
responsibility to provide employees a safe and healthful workplace and proper
facilities to help them do their jobs effectively.
Illegal Payments. State, federal and foreign laws prohibit the payment of
bribes, kickbacks, inducements or other illegal gratuities or payments by or on
behalf of Price Associates. Price Associates, through its policies and
practices, is committed to comply fully with these laws. The Foreign Corrupt
Practices Act makes it a crime to corruptly give, promise or authorize payment,
in cash or in kind, for any service to a foreign official or political party in
connection with obtaining or retaining business. If an employee is solicited to
make or receive an illegal payment, he or she should contact the Legal
Department.
Marketing and Sales Activities. All written and oral marketing materials and
presentations (including performance data) must be in compliance with applicable
SEC, NASD, and Association of Investment Management and Research ("AIMR")
requirements. All advertisements, sales literature and other written marketing
materials (whether they be for the Price Funds, non-Price funds, or various
advisory services) must be reviewed and approved by the advertising section of
the Legal Department prior to use. All performance data distributed outside the
firm, including total return and yield information, must be obtained from the
Performance Group before distribution.
Policy Regarding Acceptance and Giving of Gifts and Gratuities. The firm, as
well as its employees and members of their families, should not accept or give
gifts that might in any way create or appear to create a conflict of interest or
interfere with the impartial discharge of our responsibilities to clients or
place our firm in a difficult or embarrassing position. Such gifts would include
gratuities or other accommodations from or to business contacts, brokers,
securities salespersons, approved companies, suppliers, clients, or any other
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individual or organization with whom our firm has a business relationship, but
would not include certain types of business entertainment as described later in
this section.
Receipt of Gifts. Personal contacts may lead to gifts which are offered
on a friendship basis and may be perfectly proper. It must be
remembered, however, that business relationships cannot always be
separated from personal relationships and that the integrity of a
business relationship is always susceptible to criticism in hindsight
where gifts are received.
Under no circumstances may employees accept gifts from any business or
business contact in the form of cash or cash equivalents, including
gift certificates. There may be an occasion where it might be awkward
to refuse a token expression of appreciation given in the spirit of
friendship. In such cases, the value should not exceed $100 in any
twelve-month period. Gifts received which are unacceptable according to
this policy must be returned to the donors.
Giving of Gifts. An employee may never give a gift to a business
contact in the form of cash or cash equivalents, including gift
certificates. Token gifts may be given to business contacts, but the
aggregate value of all such gifts given to the business contact may not
exceed $100 in any twelve- month period without the permission of the
Ethics Committee. If an employee believes that it would be appropriate
to give a gift with a value exceeding $100 to a business contact in a
specific situation, he or she must submit a written request to the
Ethics Committee. The request should specify:
o the name of the giver;
o the name of the intended recipient and his or her
employer; o the nature of the gift and its monetary
value; o the nature of the business relationship; and
o the reason the gift is being given.
NASD regulations prohibit exceptions to the $100 limit for gifts given
in connection with Investment Services' business. The Compliance
Department will retain a record of all such gifts.
Additional Requirements for the Giving of Gifts in Connection with the
Broker/Dealer. NASD Conduct Rule 3060 imposes stringent reporting
requirements for gifts given in connection with Investment Services'
business. Under this rule, gifts may not exceed $100 (without
exception) and persons associated with Investment Services, including
its registered representatives, must report each such gift. This
reporting requirement is normally met when an item is ordered
electronically from the Corporate Gift website. If a gift is obtained
from another source, it must be reported to the Compliance Department.
The report to the Compliance Department must include:
the name of the giver;
the name of the recipient and his or her employer;
the nature of the gift and its monetary value;
the nature of the business relationship; and
the date the gift was given.
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Entertainment. Our firm's $100 limit on the acceptance and giving of
gifts not only applies to gifts of merchandise, but also covers the
enjoyment or use of property or facilities for weekends, vacations,
trips, dinners, and the like. However, this limitation does not apply
to dinners, sporting events and other activities which are a normal
part of a business relationship. To illustrate this principle, the
following examples are provided:
First Example: The head of institutional research at brokerage
firm "X" (whom you have known and done business with for a
number of years) invites you and your wife to join her and her
husband for dinner and afterwards a theatrical production.
Second Example: You are going to New York for a weekend with
your wife. You wish to see a recent Broadway hit, but are told
it is sold out. You call a broker friend who works at company
"X" to see if he can get tickets for you. The broker says yes
and offers you two tickets free of charge.
Third Example: You have been invited by a vendor to a
multi-day excursion to a resort where the primary focus is
entertainment as opposed to business. The vendor has offered
to pay your travel and lodging for this trip.
In the first example, it would be proper for you to accept the
invitation.
With respect to the second example, it would not be proper to solicit a
person doing business with the firm for free tickets to any event. You
could, however, accept the tickets if you pay for them at their fair
value or, if greater, at the cost to the broker.
With respect to the third example, trips of substantial value, such as
multi-day excursions to resorts, hunting locations or sports events,
where the primary focus is entertainment as opposed to business
activities, would not be considered a normal part of a business
relationship. Generally, such invitations may not be accepted unless
our firm or the employee pays for the cost of the excursion and the
employee has obtained approval from his or her Division Head.
The same principles apply if an employee wishes to entertain a business contact.
Inviting business contacts and, if appropriate, their guests, to an occasional
meal, sporting event, the theater, or comparable entertainment is acceptable as
long as it is neither so frequent or so extensive as to raise any question of
propriety. If an employee wishes to pay for a business guest's transportation
(e.g., airfare) and/or accommodations as part of business entertainment, he or
she must first receive the permission of the Ethics Committee.
Research Trips. Occasionally, brokers or portfolio companies invite employees of
our firm to attend or participate in research conferences, tours of portfolio
companies' facilities, or meetings with the management of such companies. These
invitations may involve traveling extensive distances to and from the sites of
the specified activities and may require overnight lodging. Employees may not
accept any such invitations until approval has been secured from their Division
heads. As a general rule, such invitations should only be accepted after a
determination has been made that the proposed activity constitutes a valuable
research opportunity which will be of primary benefit to our clients. All travel
expenses to and from the sites of the activities and the expenses of any
overnight lodging, meals or other accommodations provided in connection with
such activities, should be paid for by our firm except in situations where the
costs are considered to be
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insubstantial and are not readily ascertainable. Employees may not accept
reimbursement from brokers or portfolio companies for: travel and hotel
expenses; speaker fees or honoraria for addresses or papers given before
audiences; or consulting services or advice they may render. Likewise, employees
may neither request nor accept loans or personal services from brokers or
portfolio companies.
Political Activities. Employees are encouraged to participate and vote in all
federal, state and local elections. All officers and directors of Price
Associates are required to disclose certain Maryland local and state political
contributions on a semi-annual basis (a Political Contribution Questionnaire is
sent to officers and directors each January and July).
No political contribution of corporate funds, direct or indirect, to any
political candidate or party, or to any other organization that might use the
contribution for a political candidate or party, or use of corporate property,
services or other assets may be made without the written approval of the Legal
Department. These prohibitions cover not only direct contributions but also
indirect assistance or support of candidates or political parties through
purchase of tickets to special dinners or other fund raising events, or the
furnishing of any other goods, services or equipment to political parties or
committees.
Protection of Corporate Assets. All employees are responsible for taking
measures to ensure that Price Associates' assets are properly protected. This
responsibility not only applies to our business facilities, equipment and
supplies, but also to intangible assets such as: proprietary, research or
marketing information; corporate trademarks and servicemarks; and copyrights.
Quality of Services. It is a continuing policy of Price Associates to provide
investment products and services which: (1) meet applicable laws, regulations
and industry standards; (2) are offered to the public in a manner which ensures
that each client/shareholder understands the objectives of each investment
product selected; and (3) are properly advertised and sold in accordance with
all applicable SEC, state and NASD rules and regulations.
The quality of Price Associates' investment products and services and operations
affects our reputation, productivity, profitability and market position. Price
Associates' goal is to be a quality leader and to create conditions that allow
and encourage all employees to perform their duties in an efficient, effective
manner.
Record Retention. Under various federal and state laws and regulations, Price
Associates is required to produce, maintain and retain various records,
documents and other written (including electronic) communications. Each employee
is responsible for adhering to Price Associates' record maintenance and
retention policies.
Referral Fees. Federal securities laws strictly prohibit the payment of any type
of referral fee unless certain conditions are met. This would include any
compensation to persons who refer clients or shareholders to us (e.g., brokers,
registered representatives or any other persons) either directly in cash, by fee
splitting, or indirectly by the providing of gifts or services (including the
allocation of brokerage). No arrangements should be entered into obligating
Price Associates or any employee to pay a referral fee unless approved by the
Legal Department.
Release of Information to the Press. All requests for information from the media
concerning T. Rowe Price Associates' corporate affairs, mutual funds, investment
services, investment philosophy and policies, and related subjects should be
referred to the Public Relations Department for reply. Investment professionals
who are contacted directly by the press concerning a particular fund's
investment strategy or market outlook
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<PAGE>
may use their own discretion, but are advised to check with the Public Relations
Department if they do not know the reporter or feel it may be inappropriate to
comment on a particular matter.
Responsibility to Report Violations. Every employee who becomes aware of a
violation of this Code is encouraged to report, on a confidential basis, the
violation to his or her supervisor. If the supervisor appears to be involved in
the wrongdoing, the report should be made to the next level of supervisory
authority or to the Director of the Human Resources Department. Upon
notification of the alleged violation, the supervisor is obligated to advise the
Legal Department.
It is Price Associates' policy that no adverse action will be taken against any
employee who reports a violation in good faith.
Service as Trustee, Executor or Personal Representative. Employees may serve as
trustees, co-trustees, executors or personal representatives for the estates of
or trusts created by close family members. Employees may also serve in such
capacities for estates or trusts created by nonfamily members. However, if an
employee expects to be actively involved in an investment capacity in connection
with an estate or trust created by a nonfamily member, he or she must first be
granted permission by the Ethics Committee. If an employee serves in any of
these capacities, securities transactions effected in such accounts will be
subject to the prior approval and reporting requirements of our Statement of
Policy on Securities Transactions.
If any employees presently serve in any of these capacities for nonfamily
members, they should report these relationships in writing to the Ethics
Committee.
Speaking Engagements and Publications. Employees are often asked to accept
speaking engagements on the subject of investments, finance, or their own
particular specialty with our organization. This is encouraged by the firm, as
it enhances our public relations, but you should obtain approval from the head
of your Division before you accept such requests. You may also accept an offer
to teach a course or seminar on investments or related topics (for example, at a
local college) with the approval of the head of your Division and provided the
course is in compliance with the Guidelines found in Investment Services'
Compliance Manual.
Before making any commitment to write or publish any article or book on a
subject related to investments or your work at Price Associates, approval should
be obtained from your Division head.
Trading in Securities with Inside Information. The purchase or sale of
securities while in possession of material, inside information is prohibited by
state and federal laws. Information is considered inside and material if it has
not been publicly disclosed and is sufficiently important that it would affect
the decision of a reasonable person to buy, sell or hold stock in a company,
including Price Associates' stock. Under no circumstances may an employee
transmit such information to any other person, except to other employees who are
required to be kept informed on the subject. All employees should read and
understand the Statement of Policy on Material, Inside (Non-Public) Information
(see page 3-1).
O:\WPDATA\SARAH\CODEOFET.HIC\trpa\TRPCODE4.ETH.wpd
March, 1999
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T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
MATERIAL, INSIDE (NON-PUBLIC) INFORMATION
Introduction. "Insider trading" is a top enforcement priority of the Securities
and Exchange Commission. In 1988, the Insider Trading and Securities Fraud
Enforcement Act (the "Act") was signed into law. This Act has had a far reaching
impact on all public companies and especially those engaged in the securities
brokerage or investment advisory industries, including directors, executive
officers and other controlling persons of such companies. While the Act does not
provide a statutory definition of "insider trading," it contained major changes
to the previous law. Specifically, the Act:
Written Procedures. Requires SEC-registered brokers, dealers and
investment advisers to establish, maintain and enforce written policies
and procedures reasonably designed to prevent the misuse of material,
non-public information by such persons.
Civil Penalties. Imposes severe civil penalties on brokerage firms,
investment advisers, their management and advisory personnel and other
"controlling persons" who fail to take adequate steps to prevent insider
trading and illegal tipping by employees and other "controlled persons."
Persons who directly or indirectly control violators, including entities
such as Price Associates and their officers and directors, face penalties
to be determined by the court in light of the facts and circumstances, but
not to exceed the greater of $1,000,000 or three times the amount of
profit gained or loss avoided as a result of the violation.
Criminal Penalties. Provides as penalties for criminal securities law
violations:
o Maximum jail term -- from five to ten years;
o Maximum criminal fine for individuals -- from $100,000 to
$1,000,000; o Maximum criminal fine for entities -- from $500,000 to
$2,500,000.
Private Right of Action. Establishes a statutory private right of action
on behalf of contemporaneous traders against insider traders and their
controlling persons. Bounty Payments. Authorizes the SEC to award bounty
payments to persons who provide information leading to the successful
prosecution of insider trading violations. Bounty payments are at the
discretion of the SEC, but may not exceed 10% of the penalty imposed.
Purpose of Statement of Policy. The purpose of this Statement of Policy
("Statement") is to comply with the Act's requirement to establish, maintain,
and enforce written procedures designed to prevent insider trading. This
Statement explains: (i) the general legal prohibitions and sanctions regarding
insider trading; (ii) the meaning of the key concepts underlying the
prohibitions; (iii) the obligations of each employee of Price Associates in the
event he or she comes into possession of material, non-public information; and
(iv) the firm's educational program regarding insider trading. Price Associates
has also adopted a Statement of Policy on Securities Transactions (see page 4-1)
which requires employees to obtain prior clearance with respect to their
personal securities transactions and to report such transactions on a timely
basis to management.
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The Basic Insider Trading Prohibition. The "insider trading" doctrine under
federal securities laws generally prohibits any person (including investment
advisers) from:
trading in a security while in possession of material, non-public information
regarding the issuer of the security;
tipping such information to others;
recommending the purchase or sale of securities while in possession of
such information; o assisting someone who is engaged in any of the above
activities.
Thus, "insider trading" is not limited to insiders of the company whose
securities are being traded. It can also apply to non-insiders, such as
investment analysts, portfolio managers and stockbrokers. In addition, it is not
limited to persons who trade. It also covers persons who tip material,
non-public information or recommend transactions in securities while in
possession of such information.
Policy of Price Associates on Insider Trading. It is the policy of Price
Associates and its affiliates to forbid any of their officers, directors, or
employees, while in possession of material, non-public information, from trading
securities or recommending transactions, either personally or in its proprietary
accounts or on behalf of others (including mutual funds and private accounts),
or communicating material, non-public information to others in violation of
federal securities laws.
"Need to Know" Policy. All information regarding planned, prospective or ongoing
securities transactions must be treated as confidential. Such information must
be confined, even within the firm, to only those individuals and departments who
must have such information in order for Price Associates to carry out its
engagement properly and effectively. Ordinarily, these prohibitions will
restrict information to only those persons who are involved in the matter.
Transactions Involving Price Associates' Stock. Officers, directors and
employees are reminded that they are "insiders" with respect to Price Associates
since Price Associates is a public company and its stock is traded in the
over-the-counter market. It is therefore important that employees not discuss
with family, friends or other persons any matter concerning Price Associates
which might involve material, non-public information, whether favorable or
unfavorable.
Sanctions. Penalties for trading on material, non-public information are severe,
both for the individuals involved in such unlawful conduct and their employers.
An employee of Price Associates who violates the insider trading laws can be
subject to some or all of the penalties described below, even if he or she does
not personally benefit from the violation:
o Injunctions;
o Treble damages;
o Disgorgement of profits;
o Criminal fines;
o Jail sentences;
o Civil penalties for the person who committed the violation (which
would, under normal circumstances, be the employee and not the firm) of
up to three times the profit gained or loss avoided, whether or not the
individual actually benefited; and
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o Civil penalties for Price Associates (and other persons, such as
managers and supervisors, who are deemed to be controlling persons) of
up to the greater of $1,000,000 or three times the amount of the profit
gained or loss avoided.
In addition, any violation of this Statement can be expected to result in
serious sanctions being imposed by Price Associates, including dismissal of the
person(s) involved.
Basic Concepts of Insider Trading. The four critical concepts in insider trading
cases are: (1) fiduciary duty/misappropriation, (2) materiality, (3) non-public,
and (4) possession. Each concept is discussed below.
Fiduciary Duty/Misappropriation. In two decisions, Dirks v. SEC and Chiarella v.
United States, the United States Supreme Court held that insider trading and
tipping violate the federal securities law if the trading or tipping of the
information results in a breach of duty of trust or confidence.
A typical breach of duty arises when an insider, such as a corporate officer,
purchases securities of his or her corporation on the basis of material,
non-public information. Such conduct breaches a duty owed to the corporation's
shareholders. The duty breached, however, need not be to shareholders to support
liability for insider trading; it could also involve a breach of duty to a
client, an employer, employees, or even a personal acquaintance.
The concept of who constitutes an "insider" is broad. It includes officers,
directors and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a confidential relationship in the conduct of
a company's affairs and, as a result, is given access to information solely for
the company's purpose. A temporary insider can include, among others, a
company's attorneys, accountants, consultants, and bank lending officers, as
well as the employees of such organizations. In addition, any person may become
a temporary insider of a company if he or she advises the company or provides
other services, provided the company expects such person to keep any material,
non-public information disclosed confidential.
Court decisions have held that under a "misappropriation" theory, an outsider
(such as an investment analyst) may be liable if he or she breaches a duty to
anyone by: (1) obtaining information improperly, or (2) using information that
was obtained properly for an improper purpose. For example, if information is
given to an analyst on a confidential basis and the analyst uses that
information for trading purposes, liability could arise under the
misappropriation theory. Similarly, an analyst who trades in breach of a duty
owed either to his or her employer or client may be liable under the
misappropriation theory. For example, the Supreme Court upheld the
misappropriation theory when a lawyer received material, non-public information
from a law partner who represented a client contemplating a tender offer, where
that lawyer used the information to trade in the securities of the target
company.
The situations in which a person can trade while in possession of material,
non-public information without breaching a duty are so complex and uncertain
that the only safe course is not to trade, tip or recommend securities while in
possession of material, non-public information.
Materiality. Insider trading restrictions arise only when the information that
is used for trading, tipping or recommendations is "material." The information
need not be so important that it would have changed an investor's decision to
buy or sell; rather, it is enough that it is the type of information on which
reasonable investors rely in making purchase or sale decisions.
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Resolving Close Cases. The Supreme Court has held that, in close cases,
doubts about whether or not information is material should be resolved in
favor of a finding of materiality. You should also be aware that your
judgment regarding materiality may be reviewed by a court or the SEC with
the 20-20 vision of hindsight.
Effect on Market Price. Any information that, upon disclosure, is likely
to have a significant impact on the market price of a security should be
considered material.
Future Events. The materiality of facts relating to the possible
occurrence of future events depends on the likelihood that the event will
occur and the significance of the event if it does occur.
Illustrations. The following list, though not exhaustive, illustrates the
types of matters that might be considered material: a joint venture,
merger or acquisition; the declaration or omission of dividends; the
acquisition or loss of a significant contract; a change in control or a
significant change in management; a call of securities for redemption; the
borrowing of a significant amount of funds; the purchase or sale of a
significant asset; a significant change in capital investment plans; a
significant labor dispute or disputes with subcontractors or suppliers; an
event requiring a company to file a current report on Form 8-K with the
SEC; establishment of a program to make purchases of the company's own
shares; a tender offer for another company's securities; an event of
technical default or default on interest and/or principal payments;
advance knowledge of an upcoming publication that is expected to affect
the market price of the stock.
These illustrations are equally applicable to Price Associates as a public
company and should serve as examples of the types of matters that
employees should not discuss with persons outside the firm. Remember, even
though you may have no intent to violate any federal securities law, an
offhand comment to a friend might be used unbeknownst to you by such
friend to effect purchases or sales of Price Associates' stock. If such
transactions were discovered and your friend were prosecuted, your status
as an informant or "tipper" would directly involve you in the case.
Non-Public Vs. Public Information. Any information which is not "public" is
deemed to be "non-public." Just as an investor is permitted to trade on the
basis of information that is not material, he or she may also trade on the basis
of information that is public. Information is considered public if it has been
disseminated in a manner making it available to investors generally. An example
of non-public information would include material information provided to a
select group of analysts but not made available to the investment community at
large. Set forth below are a number of ways in which non-public information may
be made public.
Disclosure to News Services and National Papers. The U.S. stock exchanges
require exchange-traded issuers to disseminate material, non-public
information about their companies to: (1) the national business and
financial newswire services (Dow Jones and Reuters); (2) the national
service (Associated Press); and (3) The New York Times and The Wall Street
Journal.
Local Disclosure. An announcement by an issuer in a local newspaper might
be sufficient for a company that is only locally traded, but might not be
sufficient for a company that has a national market.
Information in SEC Reports. Information contained in reports filed with
the SEC will be deemed to be public.
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<PAGE>
Information in Brokerage Reports. Information published in bulletins and
research reports disseminated by brokerage firms will, as a general
matter, be deemed to be public.
If Price Associates is in possession of material, non-public information with
respect to a security before such information is disseminated to the public
(i.e., such as being disclosed in one of the public media described above),
Price Associates and its employees must wait a sufficient period of time after
the information is first publicly released before trading or initiating
transactions to allow the information to be fully disseminated.
Concept of Possession. It is important to note that the SEC takes the position
that the law regarding insider trading prohibits any person from trading in a
security in violation of a duty of trust and confidence while in possession of
material, non-public information regarding the security. This is in contrast to
trading on the basis of the material, non-public information. To illustrate the
problems created by the use of the "possession" standard, as opposed to the
"caused" standard, the following three examples are provided:
First, if the investment committee to a Price mutual fund were to obtain
material, non-public information about one of its portfolio companies from
a Price equity research analyst, that fund would be prohibited from
trading in the securities to which that information relates. The
prohibition would last until the information is no longer material or
non-public.
Second, if the investment committee to a Price mutual fund obtained
material, non-public information about a particular portfolio security but
continued to trade in that security, then the committee members, Price
Associates, and possibly management personnel might be liable for insider
trading violations.
Third, even if the investment committee to the Fund does not come into
possession of the material, non-public information known to the equity
research analyst, if it trades in the security, it may have a difficult
burden of proving to the SEC or to a court that it was not in possession
of such information.
Tender Offers. Tender offers are subject to particularly strict regulation under
the securities laws. Specifically, trading in securities which are the subject
of an actual or impending tender offer by a person who is in possession of
material, non-public information relating to the offer is illegal, regardless of
whether there was a breach of fiduciary duty. Under no circumstances should you
trade in securities while in possession of material, non-public information
regarding a potential tender offer.
Procedures to be Followed When Receiving Material, Non-Public Information.
Whenever an employee comes into possession of material, non-public information,
he or she should immediately contact the Legal Department and refrain from
disclosing the information to anyone else, including persons within Price
Associates, unless specifically advised to the contrary.
Specifically, employees may not:
o Trade in securities to which the material, non-public information relates;
o Disclose the information to others;
o Recommend purchases or sales of the securities to which the information
relates.
If the Legal Department determines that the information is material and
non-public, it will decide whether to:
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o Place the security on a Watch List ("Watch List") and restrict the
flow of the information to others within Price Associates in order to
allow Price Associates' investment counselors to continue their
ordinary investment activities. This procedure is commonly referred to
as a Chinese Wall; or
o Place the security on a Restricted List ("Restricted List") in order
to prohibit trading in the security by both clients and employees.
The Watch List is highly confidential and should, under no circumstances, be
disseminated to anyone except authorized personnel in the Legal Department. The
Restricted List is also highly confidential and should, under no circumstances,
be disseminated to anyone outside Price Associates.
The employee whose possession of or access to inside information has caused the
inclusion of an issuer on the Watch List may never trade or recommend the trade
of the securities of that issuer without the specific prior approval of the
Legal Department.
If an employee receives a private placement memorandum and the existence of the
private offering and/or the contents of the memorandum is material and
non-public, the employee should contact the Legal Department for a determination
of whether the issuer should be placed on the Watch or Restricted List.
Specific Procedures Relating to the Safeguarding of Inside Information.
To ensure the integrity of the Chinese Wall, and the confidentiality of
the Restricted List, it is important that all employees take the following steps
to safeguard the confidentiality of material, non-public information:
o Do not discuss confidential information in public places such as
elevators, hallways or social gatherings;
o To the extent practical, limit access to the areas of the firm where
confidential information could be observed or overheard to employees
with a business need for being in the area;
o Avoid using speaker phones in areas where unauthorized persons may
overhear conversations; o Where appropriate, maintain the confidentiality
of client identities by using code names or numbers
for confidential projects;
o Exercise care to avoid placing documents containing confidential
information in areas where they may be read by unauthorized persons
and store such documents in secure locations when they are not in use;
and
o Destroy copies of confidential documents no longer needed for a project.
Price Associates has adopted specific written procedures, Procedures
Pertaining to the Administration of the Statement of Policy on Material, Inside
(Non-Public) Information ("Procedures") to deal with those situations where
employees of the firm are in possession of material, non-public information with
respect to securities which may be in or are being considered for inclusion in
the portfolios of clients managed by other areas of the firm and when tender
offer financing information is received. These Procedures also describe the
procedures for managing relationship conflicts in the municipal area. These
Procedures have been designed to isolate and keep confidential material,
non-public information known to one investment group or employee from the
remainder of the firm. They are considered a part of this Statement and will be
distributed to all appropriate personnel.
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Education Program. While the probability of research analysts and portfolio
managers being exposed to material, non-public information with respect to
companies considered for investment by clients is greater than that of other
employees, it is imperative that all employees have a full understanding of this
Statement, particularly since the insider trading restrictions also apply to
transactions in the stock of Price Associates.
To ensure that all employees are properly informed of and understand Price
Associates' policy with respect to insider trading, the following program has
been adopted.
Initial Review for New Employees. All new employees will be given a copy
of the Code, which includes this Statement, at the time of their
employment and will be required to certify that they have read it. A
representative of the Legal Department will review the Statement with each
new portfolio manager, research analyst, and trader, as well as with any
person who joins the firm as a vice president of Price Associates,
promptly after his or her employment.
Distribution of Statement. Any time this Statement is revised, copies will be
distributed to all employees.
Annual Review with Research Analysts, Counselors and Traders. A
representative of the Legal Department will review this Statement at least
annually with research analysts, counselors and traders.
Annual Confirmation of Compliance. All employees will be asked to confirm their
understanding of and adherence to this Statement on an annual basis.
Questions. If you have any questions with respect to the interpretation or
application of this Statement, you are encouraged to discuss them with your
immediate supervisor or the Legal Department.
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<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
SECURITIES TRANSACTIONS
BACKGROUND INFORMATION.
Legal Requirement. In accordance with the requirements of the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940 and the Insider Trading and Securities Fraud
Enforcement Act of 1988, T. Rowe Price Associates, Inc. ("Price
Associates") and the mutual funds ("TRPA Funds") which it manages have
adopted this Statement of Policy on Securities Transactions
("Statement"). A similar Statement ("RPFI Statement") has been adopted
by Rowe Price-Fleming International, Inc. ("RPFI"). Funds sponsored and
managed by Price Associates or RPFI will be referred to as the "Price
Funds."
Price Associates' Fiduciary Position. As an investment adviser, Price
Associates is in a fiduciary position which requires it to act with an
eye only to the benefit of its clients, avoiding those situations which
might place, or appear to place, the interests of Price Associates or
its directors and employees in conflict with the interests of clients.
Purpose of Statement. The Statement was developed to help guide Price
Associates' employees and independent directors and the independent
directors of the Price Funds in the conduct of their personal
investments and to:
o eliminate the possibility of a transaction occurring that the
Securities and Exchange Commission or other regulatory bodies
would view as illegal, such as Front Running (see definition
below);
o avoid situations where it might appear that Price Associates
or the Price Funds or any of their officers, directors or
employees had personally benefitted at the expense of a client
or fund shareholder or taken inappropriate advantage of their
fiduciary positions; and
o prevent, as well as detect, the misuse of material, non-public information.
Employees and the independent directors of Price Associates and the
Price Funds are urged to consider the reasons for the adoption of this
Statement. Price Associates' and the Price Funds' reputations could be
adversely affected as the result of even a single transaction considered
questionable in light of the fiduciary duties of Price Associates and
the independent directors of the Price Funds.
Front Running. Front Running is illegal. It is generally defined as the
purchase or sale of a security by an officer, director or employee of an
investment adviser or mutual fund in anticipation of and prior to the
adviser effecting similar transactions for its clients in order to take
advantage or avoid changes in market prices effected by the clients'
transactions.
PERSONS SUBJECT TO STATEMENT. The provisions of this Statement apply to the
following persons who will be referred to as "Covered Persons". In the case of
an individual, the term "Covered Person"
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includes the individual's spouse, minor children, and certain other relatives,
as further described on page 4-3 of this Statement:
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<PAGE>
Price Associates. Price Associates, each of its subsidiaries and their
retirement plans, and the Price Associates Employee Partnerships.
Personnel. Each officer, inside director and employee of Price Associates and
its subsidiaries.
Certain Temporary Workers. These workers include:
o All temporary workers hired on the Price Associates payroll ("TRPA
Temporaries");
o All agency temporaries whose assignments at Price Associates
exceed four weeks or whose cumulative assignments exceed eight
weeks over a twelve-month period;
o All independent or agency-provided consultants whose
assignments exceed four weeks or whose cumulative
assignments exceed eight weeks over a twelve-month period
and whose work is closely related to the ongoing work of
Price Associates' employees (versus project work that
stands apart from ongoing work); and
o Any contingent worker whose assignment is more than casual
in nature or who will be exposed to the kinds of
information and situations that would create conflicts on
matters covered in the Code.
Independent Directors of Price Associates. The independent directors of
Price Associates include those directors of Price Associates who are
neither officers nor employees of Price Associates. However, they are
subject to modified reporting requirements and are exempt from the prior
clearance requirements, except for Price Associates' stock.
RPFI Personnel. As stated in the first paragraph, a similar Statement
has been adopted by RPFI. Under that Statement, all RPFI personnel
(officers, directors and employees) stationed in Baltimore will be
subject to this Statement.
Independent Directors of the Price Funds. The independent directors of
the Price Funds include those directors of Price Funds who are not
deemed to be "interested persons" of Price Associates. However, they are
subject to modified reporting requirements and are exempt from the prior
clearance requirements.
Retired Employees. Retired employees of Price Associates who continue to receive
investment research information from Price Associates.
Investment Personnel. Investment Personnel includes:
o those employees who are authorized to make investment
decisions or to recommend securities transactions on behalf of
the firm's clients (investment counselors and members of the
mutual fund advisory committees);
o research analysts; and
o traders who assist in the investment process.
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QUESTIONS ABOUT THE STATEMENT. Covered Persons are urged to seek the advice of
the chairperson of the Ethics Committee when they have questions as to the
application of this Statement to their individual circumstances.
TRANSACTIONS SUBJECT TO STATEMENT. Except as provided below, the provisions of
this Statement apply to every securities transaction in which a Covered Person
has, or by reason of the transaction may acquire, any direct or indirect
beneficial ownership interest and over which transaction the Covered Person has
direct or indirect control. This includes a right to dividends that is separated
or separable from the underlying securities (but not merely the right to
dividends alone), and the right to acquire equity securities through the
exercise or conversion of any derivative security, whether or not presently
exercisable.
Generally, a natural person is considered to have beneficial ownership in
securities:
o held in his or her name
o held in the name of a member of the person's immediate family who resides with
the person
o vheld by a trust for which the person acts as trustee, if at least
one trust beneficiary is a member of the person's immediate family
o held by a trust of which the person is a beneficiary where the trustee does
not exercise exclusive investment control
o held by a general or limited partnership of which the person is a general
partner
o held by a general or limited partnership of which the person is a
limited partner, if he or she has some control over portfolio
securities held by the partnership
o held by any entity or other person (including partnership,
corporation or trust) if the person makes the investment
decisions for that entity or person.
If a Covered Person is involved in an investment account for a family situation,
trust, partnership, corporation, etc., which the Covered Person feels should not
be subject to the Statement's prior approval and/or reporting requirements, a
request for clarification or exemption may be submitted to the chairperson of
the Ethics Committee. An example of this type of situation is where a person has
a direct or indirect beneficial interest in an account, but over which the
person has no direct or indirect control in the investment management process.
Any such request for clarification or exemption should name the account, the
interest of the Covered Person in such account, the persons or firms responsible
for its management, and the basis upon which the exemption is being claimed.
TRANSACTIONS IN STOCK OF PRICE ASSOCIATES. Because Price Associates is a public
company, ownership of its stock subjects its officers, inside and independent
directors, and employees to special legal requirements under the Federal
securities laws. Each officer, director and employee is responsible for his or
her own compliance with these requirements. In connection with these legal
requirements, Price Associates has adopted the following rules and procedures:
Independent Directors of Price Funds. The independent directors of the Price
Funds are prohibited from owning the stock of Price Associates.
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<PAGE>
Quarterly Earnings Report. Generally, all employees and independent
directors of Price Associates must refrain from initiating transactions
in Price Associates' stock in which they have a beneficial interest from
the sixth trading day following the end of the quarter (or such other
date as management shall from time to time determine) until the third
trading day following the public release of earnings. Employees and
independent directors will be notified in writing through the Office of
the Secretary of Price Associates ("Secretary") from time to time as to
the controlling dates.
Prior Clearance. Employees and independent directors of Price Associates
are required to obtain clearance prior to effecting any proposed
transaction (including gifts and transfers) involving shares of Price
Associates' stock owned beneficially or through the Employee Stock
Purchase Plan. Requests for prior clearance must be in writing on the
form entitled, "Notification of Proposed Transaction" (available from
Corporate Records Department) and be submitted to the Secretary who is
responsible for processing and maintaining the records of all such
requests. This would include sales of stock purchased through Price
Associates Employee Stock Purchase Plan ("ESPP"). Purchases effected
through the ESPP are automatically reported to the Secretary. Receiving
prior clearance does not relieve employees and independent directors of
Price Associates from conducting their personal securities transactions
in full compliance with the Code, including its prohibition on trading
while in possession of material, inside information. Transactions in
Price Associates' stock effected through the ESPP and certain options
exercises are exempted from the application of the 60 day rule. See p.
4-13.
All employees and independent directors of Price Associates must obtain prior
clearance of any transaction involving Price Associates' stock from the Office
of the Secretary of Price Associates.
Dividend Reinvestment Plans. Purchases of Price Associates' stock owned
outside of the ESPP and effected through a dividend reinvestment plan
need not receive prior clearance if the Secretary's office has been
previously notified by the employee that he or she will be participating
in that plan. Reporting of transactions effected through that plan need
only be made quarterly, except that employees who are subject to Section
16 reporting must report such transactions monthly.
Effectiveness of Prior Clearance. Prior clearance of transactions in
Price Associates' stock is effective for five (5) business days from and
including the date the clearance is granted, unless (i) advised to the
contrary by the Secretary prior to the proposed transaction, or (ii) the
person receiving the approval comes into possession of material,
non-public information concerning the firm. If the proposed transaction
in Price Associates' stock is not executed within this time period, a
new clearance must be obtained.
Reporting of Disposition of Proposed Transaction. Covered persons must
notify the Secretary of the disposition (whether the proposed
transaction was effected or not) of each transaction involving shares of
Price Stock owned directly within two business days of its execution, or
within seven days of the date of prior clearance, if not executed.
Insider Reporting and Liability. Under current rules, certain officers,
directors and 10% stockholders of a publicly traded company ("Insiders")
are subject to the requirements of Section 16 of the Securities Exchange
Act of 1934. Insiders include the directors and certain managing
directors
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<PAGE>
of Price Associates.
Reporting. There are three reporting forms which insiders are required
to file with the SEC to report their purchase, sale and transfer
transactions in, and holdings of, Price Associates' stock. While the
Secretary will provide assistance in complying with these requirements
as an accommodation to insiders, it remains the legal responsibility of
each insider to assure that the applicable reports are filed in a timely
manner.
o Form 3. The initial ownership report by an insider is required
to be filed on Form 3. This report must be filed within ten
days after a person becomes an insider (i.e., is elected as a
director or appointed as managing director) to report all
current holdings of Price Associates' stock. Following the
election or appointment of an insider, the Secretary will
deliver to the insider a Form 3 for appropriate signatures and
will file such Form with the SEC.
o Form 4. Any change in the insider's ownership of Price
Associates' stock must be reported on a Form 4 unless eligible
for deferred reporting on year-end Form 5. The Form 4 is due
by the 10th day following the end of the month in which the
ownership change occurred. Following receipt of the Notice of
Disposition of the proposed transaction, the Secretary will
deliver to the insider a Form 4, as applicable, for
appropriate signatures and will file such Form with the SEC.
o Form 5. Any transaction or holding which is exempt from
reporting on Form 4, such as option exercises, small purchases
of stock, gifts, etc. may be reported on a deferred basis on
Form 5 within 45 days after the end of the calendar year in
which the transaction occurred. No Form 5 is necessary if all
transactions and holdings were previously reported on Form 4.
Liability for Short-Swing Profits. Under Federal securities laws,
profit realized by certain officers, as well as directors and 10%
stockholders of a company (including Price Associates) as a
result of a purchase and sale (or sale and purchase) of stock of
the company within a period of less than six months must be
returned to the firm upon request.
PRIOR CLEARANCE OF SECURITIES TRANSACTIONS (OTHER THAN PRICE ASSOCIATES'
STOCK). Except as provided below, employees are required to obtain prior
clearance before directly or indirectly initiating, recommending, or in any way
participating in, the purchase or sale of a security in which the employee has,
or by reason of such transaction may acquire, any beneficial interest. Prior
clearance must be obtained regardless of whether the transaction is effected
through TRP Brokerage or through an unaffiliated broker/dealer. Receiving prior
clearance does not relieve employees from conducting their personal securities
transactions in full compliance with the Code, including its prohibition on
trading while in possession of material, inside information, and with applicable
law, including the prohibition on Front Running (see page 4-1 for definition of
Front Running).
All employees and independent directors of Price Associates must obtain prior
clearance of any transaction involving Price Associates' stock from the Office
of the Secretary of Price Associates.
If an employee has been denied prior clearance he or she may apply to the
Chairperson of the Ethics Committee for a waiver. All such requests must be in
writing and must fully describe the basis upon which the waiver is being
requested. Employees should be aware that waivers are not routinely granted.
Transactions Exempt From Prior Clearance Requirements. All securities
transactions must receive prior clearance except the following:
Mutual Funds and Variable Insurance Products. Purchases or
redemptions of shares of any open-end investment companies,
including the Price Funds, and variable insurance products.
Unit Investment Trusts. Purchases or sales of shares in unit investment trusts.
U.S. Government Obligations. Purchases or sales of direct obligations of the
U.S. Government.
Pro Rata Distributions. Purchases effected by the exercise of rights issued pro
rata to all holders of a class of securities or the sale of rights so received.
Mandatory Tenders. Purchases and sales of securities pursuant to a mandatory
tender offer.
Payroll Deduction Plans. Purchases by an employee's spouse
pursuant to a payroll deduction plan, provided the Compliance
Department has been previously notified by the employee that the
spouse will be participating in the payroll deduction plan.
Exercise of Stock Option of Corporate Employer by Spouse.
Transactions involving the exercise by an employee's spouse of a
stock option issued by the corporation employing the spouse.
Dividend Reinvestment Plans. Purchases effected through an
established Dividend Reinvestment Plan ("DRP"), provided the
Compliance Department is first notified by the employee that he
or she will be participating in the DRP. An employee's purchase
of share(s) of the issuer to initiate participation in the DRP or
an employee's purchase of shares in addition to those purchased
with dividends (a "Connected Purchase") must receive prior
clearance.
Systematic Investment Plans. Purchases effected through a
systematic investment plan involving the automatic investment of
a set dollar amount on predetermined dates, provided the
Compliance Department has been previously notified by the
employee that he or she will be participating in the plan. An
employee's purchase of securities of the issuer to initiate
participation in the plan must receive prior clearance.
Inheritances. The acquisition of securities through inheritance.
Gifts. The giving of or receipt of a security as a gift.
Procedure for Obtaining Prior Clearance. Requests for prior clearance
may be made orally, in writing, or by electronic mail (e-mail address
"Personal Trades," which appears as "Trades" in the electronic mail
address book) to the Equity Trading Department of Price Associates,
which will be responsible for processing and maintaining the records of
all such requests. All requests must indicate
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the name of the security, the number of shares or amount of bond
involved, whether a foreign security is involved, and the nature of the
transaction, i.e., whether the transaction is a purchase, sale or short
sale. Responses to all requests will be made by the Trading Department
on a standard form documenting the request and its approval/disapproval.
The requesting employee will receive the original of the form for
recordkeeping purposes.
Requests will normally be processed on the same day; however, additional
time may be required for prior clearance of transactions in foreign
securities.
Effectiveness of Prior Clearance. Prior clearance of a securities
transaction is effective for three (3) business days from and including
the date the clearance is granted. If the proposed securities
transaction is not executed within this time, a new clearance must be
obtained.
Reasons for Disallowing Proposed Transactions. A proposed security transaction
will be disapproved by the Trading Department if:
Pending Client Orders. Orders have been placed by Price Associates or RPFI to
purchase or sell the security.
Purchases and Sales Within Seven (7) Calendar Days. The security
has been purchased or sold by any client of Price Associates or,
in the case of a foreign security, for any client of either Price
Associates or RPFI, within seven calendar days immediately prior
to the date of the proposed transaction. For example, if a client
transaction occurs on Monday, an Employee may not purchase or
sell that security until Tuesday of the following week. If all
clients have eliminated their holdings in a particular security,
the seven-day restriction is not applicable to an employee's
transactions in that security.
Approved Company Rating Changes. A change in the rating of an
approved company as reported in the firm's Daily Research News
has occurred within seven (7) calendar days immediately prior to
the date of the proposed transaction. Accordingly, trading would
not be permitted until the eighth (8) calendar day.
Securities Subject to Internal Trading Restrictions. The security is limited or
restricted by Price Associates or Price-Fleming as to purchase or sale for
client accounts.
BROKERAGE CONFIRMATIONS AND PERIODIC ACCOUNT STATEMENTS. All employees must
request broker-dealers executing their transactions to send to the attention of
Compliance, Legal Department, T. Rowe Price Associates, Inc., P.O. Box 17218,
Baltimore, Maryland 21297-1218 the following documents:
Duplicate Confirmations. A duplicate confirmation with respect to each and every
reportable transaction including Price Associates' stock.
Periodic Statements. A copy of all periodic statements for all
securities accounts in which the employee is considered to have
beneficial ownership and control (see Page 4-3 for definition of
Beneficial Ownership).
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NOTIFICATION OF BROKER/DEALER ACCOUNTS. All employees must give written notice
to the Legal Department: Attention Compliance before opening or trading in a
securities account with any broker/dealer, including TRP Brokerage.
New Employees. New employees must give written notice to the Legal
Department: Attention Compliance of any existing securities accounts
maintained with any broker/dealer when joining the firm (no later than
10 days after the starting date).
Officers, Directors and Registered Representatives of Investment Services. The
NASD requires each associated person of T. Rowe Price Investment Services, Inc.
to:
o Obtain approval from Investment Services (request should be in
writing and be directed to Legal Department: Attention
Compliance) before opening or placing the initial trade in a
securities account with any broker/dealer; and
o Provide the broker/dealer with written notice of his or her
association with Investment Services.
REPORTING REQUIREMENTS FOR EMPLOYEES (OTHER THAN PRICE ASSOCIATES'
STOCK).
Transactions Exempt From Reporting. The following transactions are exempt from
the reporting requirements:
Mutual Funds and Variable Insurance Products. The purchase or
redemption of shares of any open-end investment companies,
including the Price Funds, and variable insurance products,
except that any employee who serves as the president or executive
vice president of a Price Fund must report his or her beneficial
ownership or control of shares in that Fund to the
Legal/Compliance Department through electronic mail to Dottie
Jones.
Stock Splits and Similar Acquisitions. The acquisition of
additional shares of existing corporate holdings through the
reinvestment of income dividends and capital gains in mutual
funds, stock splits, stock dividends, exercise of rights,
exchange or conversion.
U.S. Government Obligations. Purchases or redemptions of direct obligations of
the U.S. Government.
Dividend Reinvestment Plans. The purchase of securities with dividends effected
through an established DRP. If, however, a Connected Purchase must receive prior
clearance (see p. 4-6), that transaction must also be reported.
Transactions That Must Be Reported. Other than the transactions
specified above as exempt, employees and inside directors are required
to file a report of the following securities transactions:
Cleared Transactions. Any transaction that is subject to the prior clearance
requirements, including purchases in underwritten new or secondary issues and
private placement transactions.
Unit Investment Trusts. The purchase or sale of shares of a Unit Investment
Trust.
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Inheritances. Acquisition of securities through inheritance.
Gifts. Acquisition or disposition of securities by gift.
Mandatory Tenders. Purchases and sales of securities pursuant to a mandatory
tender offer.
Payroll Deduction Plans/Spousal Stock Option. Transactions
involving the purchase or exchange of securities by an employee's
spouse pursuant to a payroll deduction plan or the exercise by an
employee's spouse of a stock option issued by the spouse's
employer. Reporting of these transactions need only be made
quarterly.
Systematic Investment Plans. Transactions involving the purchase of securities
by an employee pursuant to a systematic investment plan. Reporting of these
transactions need only be made quarterly.
Report Form. If the executing broker/dealer provides a confirmation or
similar statement directly to Compliance, no further report must be made
by the employee. All other transactions must be reported on the form
designated "T. Rowe Price Associates, Inc. Employee's Report of
Securities Transactions," a supply of which is available from
Compliance.
When Reports are Due. A securities transaction must be reported within
ten (10) days after the trade date or within (10) days after the date on
which the employee first gains knowledge of the transaction (for
example, a bequest) if this is later. Reporting of transactions
involving either systematic investment plans or the purchase of
securities by an employee's spouse pursuant to a payroll deduction plan,
however, may be reported quarterly.
REPORTING REQUIREMENTS OF THE INDEPENDENT DIRECTORS OF PRICE ASSOCIATES AND THE
INDEPENDENT DIRECTORS OF THE PRICE FUNDS. The independent directors of Price
Associates and the independent directors of the Price Funds are subject to the
same reporting requirements as employees except that reports need only be filed
quarterly. Specifically: (1) a report for each securities transaction must be
filed with the Legal Department no later than ten (10) days after the end of the
calendar quarter in which the transaction was effected; (2) a report must be
filed for each quarter, regardless of whether there have been any reportable
transactions. Compliance will send the independent directors of the Price Funds
and Price Associates a reminder letter and reporting form ten days prior to the
end of each calendar quarter.
MISCELLANEOUS RULES REGARDING PERSONAL SECURITIES TRANSACTIONS.
Dealing with Clients. Employees and independent directors of Price
Associates and the Price Funds may not, directly or indirectly, sell to
or purchase from a client any security. This prohibition does not
preclude the purchase or redemption of shares of any mutual fund that is
a client of Price Associates.
Client Investment Partnerships.
Co-Investing. Employees, employee partnerships, and the
independent directors of Price Associates and the Price Funds are
not permitted to co-invest in client investment partnerships of
Price Associates, RPFI, or their affiliates, such as Strategic
Partners, Threshold, and
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International Partners.
Direct Investment. The Independent Directors of the Price Funds
are not permitted to invest as limited partners in client
investment partnerships of Price Associates, RPFI, or their
affiliates.
Large Company Exemption. Although subject to prior clearance,
transactions involving securities in certain large companies, within the
parameters set by the Ethics Committee (the "Exempt List"), will be
approved under normal circumstances, as follows:
Transactions Involving Exempt List Securities. This exemption
applies to transactions involving no more than $10,000 or the
nearest round lot (even if the amount of the transaction
marginally exceeds $10,000) per security per week in securities
of companies with market capitalizations of $5 billion or more,
unless the rating on the security as reported in the firm's Daily
Research News has been changed to a 1 or a 5 within the seven (7)
calendar days immediately prior to the date of the proposed
transaction. If such a rating change has occurred, the exemption
is not available.
Transactions Involving Options on Exempt List Securities.
Employees may not purchase uncovered put options or sell
uncovered call options unless otherwise permitted under the
"Options and Futures" discussion on p. 4-12. Otherwise, in the
case of options on an individual security on the Exempt List (if
it has not had a prohibited rating change), an employee may trade
the greater of 5 contracts or sufficient option contracts to
control $10,000 in the underlying security; thus an employee may
trade 5 contracts even if this permits the employee to control
more than $10,000 in the underlying security. Similarly, the
employee may trade more than 5 contracts as long as the number of
contracts does not permit him or her to control more than $10,000
in the underlying security.
These parameters are subject to change by the Ethics Committee.
Exchange-Traded Index Options. Although subject to prior clearance,
transactions involving exchange-traded index options, within the
parameters set by the Ethics Committee, will be approved under normal
circumstances. Generally, an employee may trade the greater of 5
contracts or sufficient contracts to control $10,000 in the underlying
securities; thus an employee may trade 5 contracts even if this permits
the employee to control more than $10,000 in the underlying securities.
Similarly, the employee may trade more than 5 contracts as long as the
number of contracts does not permit him or her to control more than
$10,000 in the underlying security.
These parameters are subject to change by the Ethics Committee.
Margin Accounts. While brokerage margin accounts are discouraged,
employees may open and maintain margin accounts for the purchase of
securities provided such accounts are with brokerage firms with which
the employee maintains a regular brokerage account.
New Issues.
Investment Personnel. Investment Personnel may not purchase securities,
including corporate and municipal debt securities, which are the subject of an
underwritten new or secondary issue.
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Non-Investment Personnel. Employees other than Investment
Personnel ("Non-Investment Personnel") may not purchase
securities, including corporate and municipal debt securities,
which are the subject of an underwritten new or secondary issue
unless prior written approval has been obtained from the
Chairperson of the Ethics Committee or his or her designee
("Designee"), which may include N. Morris, S. McCafferty or A.
Brooks. In considering such a request for approval, the
Chairperson will determine whether the proposed transaction
presents a conflict of interest with any of the firm's clients or
otherwise violates the Code and secure approval of the proposed
transaction from the chairperson of the applicable investment
steering committee. The Chairperson will also determine whether
the following conditions have been met:
1. The purchase is made through the Non-Investment Personnel's regular broker;
2. The number of shares to be purchased is commensurate with the normal size and
activity of the Non-Investment Personnel's account;
3. The transaction otherwise meets the requirement of the NASD's rules on free
riding and
withholding.
Non-Investment Personnel will not be permitted to purchase in an
underwritten new or secondary issue if any of the firm's clients are
prohibited from doing so. This prohibition will remain in effect until
the firm's clients have had the opportunity to purchase in the secondary
market once the underwriting is completed -- commonly referred to as the
aftermarket.
Investment Clubs. An employee may not form or participate in a stock or
investment club unless prior written approval has been obtained from the
Chairperson of the Ethics Committee. All transactions by such a stock or
investment club are subject to the same preclearance and reporting
requirements applicable to an individual employee's trades.
Private Placements.
Prior Clearance Procedure. Employees may not invest in a private
placement of securities, including the purchase of limited
partnership interests, unless prior written approval has been
obtained from the Chairperson of the Ethics Committee or a
Designee. In considering such a request for approval, the
Chairperson will determine whether the investment opportunity
(private placement) should be reserved for the firm's clients,
and whether the opportunity is being offered to the employee by
virtue of his or her position with the firm. The Chairperson will
also secure approval of the proposed transaction from the
chairperson of the applicable investment steering committee.
Continuing Obligation. An employee who has received approval to
invest in a private placement of securities and who, at a later
date, anticipates participating in the firm's investment decision
process regarding the purchase or sale of securities of the
issuer of that private placement on behalf of any client, must
immediately disclose his or her prior investment in the private
placement to the Chairperson of the Ethics Committee.
Options and Futures. Please consult the specific section on Exchange-Traded
Index Options (p. 4- 12) for transactions in those options.
Before engaging in options and future transactions, employees should understand
the impact that the 60-day rule may have upon their ability to close out a
position with a profit (see page 4-13).
Options and Futures on Securities and Indices Not Held by Price
Associates' or RPFI's Clients. There are no specific restrictions
with respect to the purchase, sale or writing of put or call
options or any other option or futures activity, such as multiple
writings, spreads and straddles, on securities of companies (and
options or futures on such securities) which are not held by any
of Price Associates' or RPFI's clients.
Options on Securities of Companies Held by Price Associates' or
RPFI's Clients. With respect to options on securities of
companies which are held by any of Price Associates' or RPFI's
clients, it is the firm's policy that an employee should not
profit from a price decline of a security owned by a client
(other than an Index account). Therefore, an employee may: (i)
purchase call options and sell covered call options and (ii)
purchase covered put options and sell put options. An employee
may not purchase uncovered put options or sell uncovered call
options, even if the issuer of the underlying securities is
included on the Exempt List, unless purchased in connection with
other options on the same security as part of a straddle,
combination or spread strategy which is designed to result in a
profit to the employee if the underlying security rises in or
does not change in value. The purchase, sale and exercise of
options are subject to the same restrictions as those set forth
with respect to securities, i.e., the option should be treated as
if it were the common stock itself.
Other Options and Futures Held by Price Associates' or RPFI's
Clients. Any other option or futures transaction with respect to
domestic or foreign securities held by any of Price Associates'
clients or with respect to foreign securities held by RPFI's
clients will be approved or disapproved on a case-by-case basis
after due consideration is given as to whether the proposed
transaction or series of transactions might appear to or actually
create a conflict with the interests of any of Price Associates'
or RPFI's clients. Such transactions include transactions in
futures and options on futures involving financial instruments
regulated solely by the CFTC.
Short Sales. Short sales are subject to prior clearance. In addition,
employees may not sell any security short which is owned by any client
of Price Associates or RPFI, except that short sales may be made
"against the box" for tax purposes. A short sale "against the box" is
one in which the seller owns an amount of securities equivalent to the
number he or she sells short.
Trading Activity.
General Rule. Employees are discouraged from engaging in a pattern of securities
transactions which are either:
1. So excessively frequent as to potentially impact an employee's ability to
carry out
his or her assigned responsibilities, or
Involve securities positions which are disproportionate to
the employee's net assets.
60 Day Rule. Employees are prohibited from profiting from the purchase and sale
or sale and purchase, of the same (or equivalent) securities within 60 calendar
days. An "equivalent" security means any option, warrant, convertible security,
stock appreciation right, or similar
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right with an exercise or conversion privilege at a price related
to the subject security, or similar securities with a value
derived from the value of the subject security. The 60 day rule
does not apply:
o to any transaction exempt from prior clearance (see p. 4-6);
o to the purchase and sale or sale and purchase of exchange traded index
options;
o to any transaction in Price Associates' stock effected through the ESPP; and
o to the cashless exercise of options/same-day sale of Price Associates' stock
if the options are Ain the money and have been held for at least 60 days.
Employees may request a waiver from the 60 day rule. Such
requests should be directed in writing to the Chairperson of the
Ethics Committee. Employees should be aware that waivers are not
routinely granted.
Investments in Non-Listed Securities Firms. Employees may not purchase
or sell the shares of a broker/dealer, underwriter or federally
registered investment adviser unless that entity is traded on an
exchange or listed as a NASDAQ stock or permission is given under the
Private Placement Procedures (see p. 4-11).
OWNERSHIP REPORTING REQUIREMENTS - ONE-HALF OF ONE PERCENT OWNERSHIP.
If an employee or an independent director of Price Associates or an independent
director of the Price Funds owns more than 2 of 1% of the total outstanding
shares of a public or private company, he or she must immediately report in
writing such fact to the Legal Department: Attention Compliance, providing the
name of the publicly owned company and the total number of such company's shares
beneficially owned.
DISCLOSURE OF PERSONAL SECURITIES HOLDINGS BY CERTAIN EMPLOYEES. Upon
commencement of employment or appointment (no later than 10 days after starting
date) and thereafter on an annual basis (to be provided in conjunction with the
annual verification form) each managing director, trader, portfolio manager, and
research analyst of Price Associates is required to disclose in writing all
securities holdings in which he or she is considered to have beneficial
ownership and control (see page 4-3 for definition of the term Beneficial
Ownership). The form will be provided upon commencement of employment or
appointment and should be submitted to the Compliance Department.
CONFIDENTIALITY OF RECORDS. Price Associates makes every effort to protect the
privacy of its Covered Persons in connection with Personal Securities Holdings
and Personal Securities Transaction Reports.
SANCTIONS. Strict compliance with the provisions of this Statement is considered
a basic provision of association with Price Associates and the Price Funds. The
Ethics Committee and the Compliance section of the Legal Department are
primarily responsible for administering this Statement. In fulfilling this
function, the Ethics Committee will institute such procedures as it deems
reasonably necessary to monitor Covered Persons' compliance with this Statement
and to otherwise prevent and detect violations.
Violations by Employees and Directors of Price Associates. Upon discovering a
material violation of this Statement by a Covered Person other than an
independent director of a Price Fund, the Ethics
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Committee will impose such sanctions as it deems appropriate and as are
approved by the Management Committee or the Board of Directors
including, inter alia, a letter of censure or suspension or termination
of employment, and/or officership of the violator. In addition, the
violator may be
required to surrender to Price Associates, or to the party or parties it
may designate, any profit realized from any transaction which is in
violation of this Statement. All material violations of this Statement
shall be reported to the Board of Directors of Price Associates and to
the Board of Directors of any Price Fund with respect to whose
securities such violations may have been involved.
Violations by Independent Directors of Price Funds. Upon discovering a
material violation of this Statement by an independent director of a
Price Fund, the Ethics Committee shall report such violation to the
Board on which the director serves. The Price Fund Boards will impose
such sanctions as they deem appropriate.
Violations by Baltimore Employees of RPFI. Upon discovering a material
violation of this Statement by a Baltimore-based employee of RPFI, the
Ethics Committee shall report such violation to the Board of Directors
of RPFI and to the Board of Directors of any RPFI Fund with respect to
whose securities such violations may have been involved.
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T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
CORPORATE RESPONSIBILITY
Price Associates' Fiduciary Position. As an investment adviser, T. Rowe Price
Associates, Inc. ("Price Associates") is in a fiduciary relationship with each
of its clients. This fiduciary duty obligates Price Associates to act with an
eye only to the benefit of its clients. Accordingly, when managing its client
accounts (whether private counsel clients, mutual funds, limited partnerships,
or otherwise), Price Associates' primary responsibility is to optimize the
financial returns of its clients consistent with their objectives and investment
program.
Definition of Corporate Responsibility Issues. Concern over the behavior of
corporations has been present since the Industrial Revolution. Each generation
has focused its attention on specific issues. Concern over the abuses of the use
of child labor in the 1800's was primarily addressed by legislative action which
mandated corporate America to adhere to new laws restricting and otherwise
governing the employment of children. In other instances, reform has been
achieved through shareholder action -- namely, the adoption of shareholder
proposals. The corporate responsibility issues most often addressed during the
past decade have involved:
o Ecological issues, including toxic hazards and pollution of the air and
water; o Employment practices, such as the hiring of women and minority
groups; o Product quality and safety; o Advertising practices; o Animal
testing; o Military and nuclear issues; and o International politics and
operations, including the world debt crisis, infant formula, U.S. corporate
activity in Northern Ireland, and the policy of apartheid in South Africa.
Corporate Responsibility Issues in the Investment Process. Price Associates
recognizes the legitimacy of public concern over the behavior of business with
respect to issues of corporate responsibility. Price Associates' policy is to
carefully review the merits of such issues that pertain to any issuer which is
held in a client portfolio or which is being considered for investment. Price
Associates believes that a corporate management's record of identifying and
resolving issues of corporate responsibility is a legitimate criteria for
evaluating the investment merits of the issuer. Enlightened corporate
responsibility can enhance a issuer's long term prospects for business success.
The absence of such a policy can have the converse effect.
Corporate Responsibility Committee. Since 1971, Price Associates has had a
Corporate Responsibility Committee, which is responsible for:
o Reviewing and establishing positions with respect to corporate
responsibility issues that are
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presented in the proxy statements of portfolio companies; and
o Reviewing questions and inquiries received from clients and mutual
fund shareholders pertaining to issues of corporate responsibility.
Questions Regarding Corporate Responsibility. Should an employee have any
questions regarding Price Associates' policy with respect to a corporate
responsibility issue or the manner in which Price Associates has voted or
intends to vote on a proxy matter, he or she should contact a member of the
Corporate Responsibility Committee or Price Associates' Proxy Administrator.
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<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
WITH RESPECT TO COMPLIANCE WITH COPYRIGHT LAWS
Purpose of Statement of Policy. To protect the interests of Price Associates and
its employees, Price Associates has adopted this Statement of Policy with
Respect to Compliance with Copyright Laws ("statement") to: (1) inform its
employees regarding the legal principles governing copyrights, trademarks, and
service marks; and (2) ensure that Price Associates' various copyrights,
trademarks, and service marks are protected from infringement.
Definition of Trademark, Service Mark, and Copyright
Trademark. A trademark is normally a word, phrase, or symbol used to
identify and distinguish a product or a company. For example, Kleenex is a
trademark for a particular brand of facial tissues.
Service Mark. A service mark is normally a word, phrase, or symbol used
to identify and distinguish a service or the provider of a service. For
example, Invest With Confidence is a registered service mark which
identifies and distinguishes the mutual fund management services
offered by Price Associates. The words "trademark" and "service mark"
are often used interchangeably, but as a general rule a trademark is
for a tangible product, whereas a service mark is for an intangible
good or service. Because most of Price Associates' business activities
involve providing services (e.g.: investment management; transaction
processing and account maintenance; information, etc.), most of Price
Associates' registered marks are service marks.
Copyright. In order to protect the authors and owners of books,
articles, drawings, music, or computer programs and software, the U.S.
copyright law makes it a crime to reproduce, in any manner, any
copyrighted material without the express written permission of the
author or publisher. Under current law, all original works are
copyrighted at the moment of creation; it is no longer necessary to
register a copyright. Copyright infringements may result in judgments
of actual damages (i.e., the cost of additional subscriptions), as well
as punitive damages, which can be as high as $100,000 per infringement.
Registered Trademarks and Service Marks. Once Price Associates has registered a
trademark or service mark with the U.S. Patent and Trademark Office, it has the
exclusive right to use that mark. In order to preserve rights to a registered
trademark or service mark, Price Associates must (1) use the mark on a
continuous basis and in a manner consistent with the Certificate of
Registration; (2) place an encircled "R" (7) next to the mark in the first, or
most prominent, occurrence in all publicly distributed media; and (3) take
action against any party infringing upon the mark.
Establishing a Trademark or Service Mark. The Legal Department has the
responsibility to register and maintain all trademarks and service marks and
protect them against any infringement. If Price Associates or a subsidiary
wishes to utilize a particular word, phrase, or symbol as a trademark or service
mark, the Legal Department must be notified as far in advance as possible so
that a search may be conducted to
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determine if the proposed mark has already been registered or used by another
entity. Until clearance is obtained from the Legal Department, no new mark
should be used. This procedure has been adopted to ensure that Price Associates
does not unknowingly infringe upon another company's mark. Once a proposed mark
is cleared for use, it must be accompanied by the abbreviations "TM" or "SM," as
appropriate, until it has been registered. All trademarks and service marks
which have been registered with the U.S. Patent and Trademark Office must be
accompanied by an encircled "R" when used in any public document. These symbols
need only accompany the mark in the first or most prominent place it is used in
each publicly circulated document. Subsequent use of the same trademark or
service mark in such material does not need to be marked. The Legal Department
maintains a written summary of all Price Associates' registered and pending
trademarks and service marks. All registered and pending trademarks and service
marks are also listed in the T. Rowe Price Style Guide. If you have any
questions regarding the status of a trademark or service mark, you should
contact the Legal Department.
Infringement of Price Associates' Registered Marks. If an employee notices that
another entity is using a mark similar to one which Price Associates has
registered, the Legal Department should be notified immediately so that
appropriate action can be taken to protect Price Associates' interests in the
mark.
Reproduction of Articles and Similar Materials for Internal Distribution, or for
Distribution to Shareholders, Clients and Others Outside the Firm. In general,
the reproduction of copyrighted material is a federal offense. Exceptions under
the "fair use" doctrine include reproduction for scholarly purposes, criticism,
or commentary, which ordinarily do not apply in a business environment.
Occasional copying of a relatively small portion of a newsletter or magazine to
keep in a file, circulate to colleagues with commentary, or send to a client
with commentary is generally permissible under the "fair use" doctrine. Written
permission from the author or publisher must be obtained by any employee wishing
to reproduce copyrighted material for internal or external distribution,
including distribution via the Internet or the T. Rowe Price Associates'
intranet. It is the responsibility of each employee to obtain permission to
reproduce copyrighted material. Such permission must be in writing and forwarded
to the Legal Department. If the publisher will not grant permission to reproduce
copyrighted material, then the requestor must purchase from the publisher either
additional subscriptions to the periodical or the reprints of specific articles.
The original article or periodical may be circulated as an alternative to
purchasing additional subscriptions or reprints.
Personal Computer Software Programs. Software products and on-line
information services purchased for use on Price Associates' personal
computers are generally copyrighted material and may not be reproduced
without proper authorization from the software vendor. See the T. Rowe
Price Associates, Inc. Statement of Policy With Respect to Computer
Security and Related Issues for more information.
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T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY WITH RESPECT TO
COMPUTER SECURITY AND RELATED ISSUES
PURPOSE OF STATEMENT OF POLICY. The central and critical role of computer
systems in our firm's operations underscores the importance of ensuring the
integrity of these systems. The data stored on our firm's computers, as well as
the specialized software programs and systems developed for the firm's use, are
extremely valuable assets and very confidential.
This Statement of Policy ("Statement") establishes a comprehensive computer
security program which has been designed to:
o prevent the unauthorized use of or access to our firm's computer
systems, including the firm's electronic mail ("e-mail") system
(collectively the "Systems");
o prevent breaches in computer security;
o maintain the integrity of confidential information; and
o prevent the introduction of computer viruses into our Systems
that could imperil the firm's operations.
In addition, the Statement describes various issues that arise in connection
with the application of U.S. Copyright Law to computer software.
Any material violation of this Statement may lead to sanctions, which
may include dismissal of the employee or employees involved.
TYPES OF COMPUTERS. Our firm currently utilizes four basic types of
computers or platforms:
Mainframe and Mid-Range Computers: Large, multi-user systems maintained by
T. Rowe Price
Investment Technologies Inc. ("TRPIT").
LocalArea Network File Servers: Computers that store data for Personal
Computer ("PC") users who are connected via a Local Area Network
("LAN"). The LAN environment is also maintained by TRPIT.
Personal Computers: LAN-attached or stand-alone Personal Computers
maintained by individuals.
External Systems: Computer systems of any type which are maintained by a
third party but to which Price Associates' staff has access.
SECURITY ADMINISTRATION. The Data Security Group ("Data Security") in TRPIT
maintains a data base of all security-related information and is
responsible for identifying security needs and overseeing the
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maintenance of computer security. The Internet Services and Support Group
("Internet Services") is responsible for Internet-related security issues.
AUTHORIZED SYSTEMS USERS. In general, access to any type of System is restricted
to authorized users who need access in order to support their business
activities. Access for mainframe, LAN and external Systems must be requested in
writing on a "Systems Access Request Form". This form is available from Data
Security and must be approved by the appropriate supervisor or manager in the
user's department.
AUTHORIZED APPLICATION USERS. Specific computer applications (i.e., Finance,
Retirement Plan Services systems, etc.) can also be requested. Many application
systems have an additional level of security, such as extra passwords. If a user
wants access to an application that is outside the normal scope of his or her
business activity, additional approval may be required from the "Owner" of such
application. The "Owner" is the employee who is responsible for making judgments
and decisions on behalf of the firm with regard to the application, including
the authority to decide who may have access to the application.
USER-IDS, PASSWORDS, AND OTHER SECURITY ISSUES. Once a request for access is
approved, a unique "User-ID" will be assigned the user. Each User-ID has a
password that must be kept confidential by the user. User-IDs and passwords may
not be shared. Users can be held accountable for work performed with their
User-IDs. Personal Computers must not be left logged on and unattended unless
screen savers with passwords or software-based keyboard locks are utilized.
EXTERNAL COMPUTER SYSTEMS. Our data processing environment includes access to
data stored not only on our firm's computers, but also on external systems, such
as DST. Although the security practices governing these outside systems are
established by the providers of these external systems, requests for access to
such systems should be directed to Data Security. User-IDs and passwords to
these systems must be kept confidential by the user.
ACCESS TO THE INTERNET AND OTHER ON-LINE SERVICES.
Use of Internet -- Dial - Out Access. Access to the Internet
(including, but not limited to, remote FTP, Telnet, World Wide Web and
Gopher) presents special security considerations due to the world-wide
nature of the connection and the security weaknesses present in
Internet protocols and services. The firm can provide authorized
employees and other staff with access to Internet e-mail and other
Internet services (such as the World Wide Web) through a direct
connection from the firm's network.
Access to the Internet or Internet services from our firm's computers,
including the firm's e-mail system, is permitted only for appropriate
purposes. Such access must be requested through the Help Desk and
approved by the employee's supervisor. All firm policies apply to the
use of the Internet or Internet services. See Employee Handbook. In
accordance with these policies, employees are prohibited from accessing
inappropriate sites, including, but not limited to, adult and gambling
sites. Using a modem or an Internet connection on a firm computer
housed at any of the firm's offices to access an Internet service
provider using one's home or personal account is prohibited, unless
this account is being used by authorized personnel to service Price
Associates' connection to the Internet. When Internet access is
granted, the employee will be asked to reaffirm his or her
understanding of this Statement.
7-2
<PAGE>
On-Line Services. Access to America OnLine ("AOL"), CompuServe, or
other commercial on-line service providers is not permitted from a firm
computer except for a legitimate business purpose approved by the
employee's supervisor and obtained through the Help Desk.
Participation on Bulletin Boards. Because communications by our firm or
any of its employees on on-line service bulletin boards are subject to
federal, state and NASD advertising regulations, unsupervised
participation can result in serious securities violations. Certain
designated employees have been authorized to use AOL to monitor and
respond to inquiries about our firm and its investment services and
products. Any employee other than those assigned to this special group
must first receive the authorization of a member of the Board of T.
Rowe Price Investment Services, Inc. and the Legal Department before
initiating or responding to a message on any computer bulletin board
relating to the firm, a Price Fund or any investment option or service.
This policy applies whether or not the employee intends to disclose his
or her relationship to the firm, whether or not our firm sponsors the
bulletin board, and whether or not the firm is the principal focus of
the bulletin board.
DIAL-IN ACCESS. The ability to access our firm's computer Systems using a modem
from a remote location is also limited to authorized users. Phone numbers used
to access our firm's computer Systems are confidential. Except for computerized
client services (i.e., TRPOnline), a special security system that uses a
one-time password or other strong authentication method must be employed when
accessing our firm's network from a remote computer. Authorization for remote
access can be requested by completing a "Systems Access Request" form. Any
employee who requires remote access should contact the Help Desk.
VIRUS PROTECTION. A computer virus is a program designed to damage or impair
software on a computer system. Software from any outside source may contain a
computer virus. Therefore, any use of outside software on our firm's personal
computers must be requested through the Help Desk and installed by the
Distributed Processing Support Group in TRPIT. The following specific procedures
should be followed:
Non-Price Associates' Diskettes. All diskettes brought in from the
outside or not produced by Price Associates must be scanned for known
viruses prior to their use on a stand-alone or LAN-attached Price
Associates PC. If a diskette is scanned, then taken out of the office
and used, it must be re- scanned before being used on a Price
Associates computer. The scanning procedure will verify that the
diskette is free of known viruses. Contact the Help Desk for the
scanning location in your area.
Downloading or Copying. The user of a PC with a modem or with an
Internet connection has the ability to connect to other computers or
on-line services outside of the firm's network. There may be business
reasons to download or copy software from other computers or on-line
services; however, downloading or copying software, which includes
documents, graphics, programs or other computer-based materials, from
any outside source is not permitted unless it is for a legitimate
business purpose. PC-based virus protection and scanning software will
be installed on any Price Associates PC using browser software with an
Internet connection.
E-mail Attachments. Do not send e-mail attachments via the Internet unless
they have been scanned for viruses first.
Other Considerations. Users must log off the System each night. Unless the
user logs off, virus
7-3
<PAGE>
software on each workstation cannot pick up the most current
"signatures" of known viruses or the most current software updates for
the user's System. Employees must call the Help Desk when
7-4
<PAGE>
viruses are detected so that it can ensure that appropriate tracking
and follow-up take place. Do not forward any "virus warning" mail
received to other staff until you have contacted the Help Desk, since
many of these warnings are hoaxes. When notified that a user has
received "virus warning" mail, the Help Desk will contact Data
Security, whose personnel will check to determine the validity of the
virus warning.
CONFIDENTIALITY OF SYSTEMS ACTIVITIES AND INFORMATION. Systems activities and
information stored on our firm's computers (including e-mail) may be subject to
monitoring by firm personnel or others. All such information, including messages
on the firm's e-mail system, are records of the firm and the sole property of
the firm. The firm reserves the right to monitor, access and disclose for any
purpose all information, including all messages sent, received, or stored
through the Systems. The use of the firm's computer Systems is for the
transaction of firm business and is for authorized users only. All firm policies
apply to the use of the Systems. See Employee Handbook.
By using the firm's Systems, you agree to be bound by this Statement and consent
to the access to and/or disclosure of all information, including e-mail
messages, by the firm. Employees do not have any expectation of privacy in
connection with the use of the Systems, or with the transmission, receipt, or
storage of information in the Systems. In addition, employees should understand
that e-mail sent through the Internet is not secure and could be intercepted by
a third party. Therefore, if you have a need to exchange secure e-mail using the
Internet, you should contact the Help Desk for assistance.
Information entered into our firm's computers but later deleted from the Systems
may continue to be maintained permanently on our firm's back-up tapes. Employees
should take care so that they do not create documents that might later be
embarrassing to them or to our firm. This policy applies to e-mail as well to
any other communication on a System.
APPLICATION OF U.S. COPYRIGHT LAW TO SOFTWARE PROGRAMS. Software products and
on-line information services purchased for use on Price Associates' personal
computers are generally copyrighted material and may not be reproduced without
proper authorization from the software vendor. This includes both the software
diskette(s) and any program manuals or documentation as well as data retrievable
from on-line information systems. Unauthorized reproduction of such material or
information or downloading or printing such material is a federal offense, and
the software vendor can sue to protect the developer's rights. In addition to
criminal penalties such as fines and imprisonment, civil damages can be awarded
in excess of $50,000.
Guidelines for Using Personal Computer Software
Acquisition and Installation of Software. Any software program that is
to be used by an employee of Price Associates in connection with the
business of the firm must be ordered through the Help Desk and
installed by the Distributed Processing Support Group of TRPIT.
Licensing. Software residing on firm LAN servers will be either: (1)
maintained at an appropriate license level for the number of users, or (2)
made accessible only for those for whom it is licensed.
7-5
<PAGE>
Original Diskettes and Copies. In most cases, software is installed by
the Distributed Processing Support Group and original software
diskettes are not provided to the user. In the event that original
diskettes are provided, they must be stored properly to reduce the
possibility of damage or theft. Diskettes should be protected from
extreme heat, cold, or contact with anything that may act as a magnet.
Employees may not make additional copies of software or software
manuals obtained through the firm.
Recommendations, Upgrades, and Enhancements. All recommendations
regarding computer hardware and software programs are to be forwarded
to the Help Desk, which will coordinate upgrades and enhancements.
QUESTIONS REGARDING THIS STATEMENT. Any questions regarding this Statement
should be directed to Data Security or Internet Services, as appropriate,
in TRPIT.
7-6
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
COMPLIANCE WITH ANTITRUST LAWS
Purpose
To protect the interests of the company and its employees, Price
Associates has adopted this Statement of Policy on Compliance with Antitrust
Laws ("Statement") to:
(1) Inform employees about the legal principles governing prohibited
anticompetitive activity in the conduct of Price Associates' business; and
(2) Establish guidelines for contacts with other members of the
investment management industry to avoid violations of the
antitrust laws.
The Basic Anticompetitive Activity Prohibition
Section 1 of the Sherman Antitrust Act (the "Act") prohibits
agreements, understandings, or joint actions between companies that constitute a
"restraint of trade," i.e., reduce or eliminate competition.
This prohibition is triggered only by an agreement or action among two
or more companies; unilateral action never violates the Act. To constitute an
illegal agreement, however, an understanding does not need to be formal or
written. Comments made in conversations, casual comments at meetings, or even as
little as "a knowing wink," as one case says, may be sufficient to establish an
illegal agreement under the Act.
The agreed upon action must be anticompetitive. Some actions are "per
se" anticompetitive, while others are judged according to a "rule of reason."
o Some activities have been found to be so inherently anticompetitive
that a court will not even permit the argument that they have a
procompetitive component. Examples of such per se illegal activities
are agreements between competitors to fix prices or divide up markets
in any way, such as exclusive territories.
o Other joint agreements or activities will be examined by a court using
the rule of reason approach to see if the procompetitive results of the
arrangement outweigh the anticompetitive effects. Permissible
agreements among competitors may include a buyers' cooperative, or a
syndicate of buyers for an IPO. In rare instances, an association of
sellers (such as ASCAP), may be permissible.
There is also an exception for joint activity designed to influence
government action. Such activity is protected by the First Amendment to the U.S.
Constitution. For example, members of an industry may agree to lobby Congress
jointly to enact legislation that may be manifestly anticompetitive.
8-1
<PAGE>
Penalties for Violating the Sherman Act
A charge that the Act has been violated can be brought as a civil or a
criminal action. Civil damages can include treble damages, plus attorneys fees.
Criminal penalties for individuals can include fines of up to $350,000 and three
years in jail, and $100 million or more for corporations.
Situations in Which Antitrust Issues May Arise
To avoid violating the Act, any agreement with other members of the
investment management industry regarding which securities to buy or sell and
under what circumstances we buy or sell them, or about the manner in which we
market our mutual funds and investment and retirement services, must be made
with the prohibitions of the Act in mind.
Trade Association Meetings and Activities. A trade association is a
group of competitors who join together to share common interests and
seek common solutions to common problems. Such associations are at a
high risk for anticompetitive activity and are closely scrutinized by
regulators. Attorneys for trade associations, such as the Investment
Company Institute, are typically present at meetings of members to
assist in avoiding violations.
Permissible Activities:
Discussion of how to make the industry more competitive.
An exchange of information or ideas that have
procompetitive or competitively neutral effects, such as:
methods of protecting the health or safety of workers;
methods of educating customers and preventing abuses; and
information regarding how to design and operate training
programs.
Collective action to petition government entities.
Activities to be Avoided:
Any discussion or direct exchange of current information
about prices, salaries, fees, or terms and conditions of
sales. Even if such information is publicly available,
problems can arise if the information available to the
public is difficult to compile or not as current as that
being exchanged.
Exception: A third party consultant can, with appropriate
safeguards, collect, aggregate and disseminate some of this
information, such as salary information.
Discussion of future business plans, strategies, or
arrangements that might be considered to involve
competitively sensitive information.
Discussion of specific customers, markets, or territories.
Negative discussions of service providers that could give
rise to an inference of a joint refusal to deal with the
provider (a "boycott").
8-2
Investment-Related Discussions
Permissible Activities: Buyers or sellers with a common
economic interest may join together to facilitate securities
transactions that might otherwise not occur, such as the
formation of a syndicate to buy in a private placement or
initial public offering of a company's stock, or negotiations
among creditors of an insolvent or bankrupt company.
Competing investment managers are permitted to serve on
creditors committees together and engage in other similar
activities in connection with bankruptcies and other judicial
proceedings.
Activities to be Avoided: It is important to avoid anything
that suggests involvement with any other firm in any threats
to "boycott" or "blackball" new offerings, including making
any ambiguous statement that, taken out of context, might be
misunderstood to imply such joint action. Avoid careless or
unguarded comments that a hostile or suspicious listener might
interpret as suggesting prohibited coordinated behavior
between T. Rowe Price and any other potential buyer.
Example: After an Illinois municipal bond default
where the state legislature retroactively abrogated
some of the bondholders' rights, several investment
management complexes organized to protest the state's
action. In doing so, there was arguably an implied
threat that members of the group would boycott future
Illinois muni bond offerings. Such a boycott would be
a violation of the Act. The investment management
firms' action led to an 18-month Department of
Justice investigation. Although the investigation did
not lead to any legal action, it was extremely
expensive and time consuming for the firms and
individual managers involved.
If you are present when anyone outside of T. Rowe Price
suggests that two or more investors with a grievance against
an issuer coordinate future purchasing decisions, you should
immediately reject any such suggestion. As soon as possible
thereafter, you should notify the Legal Department, which will
take whatever further steps are necessary.
Benchmarking. Benchmarking is the process of measuring and comparing
an organization's processes, products and services to those of
industry leaders for the purpose of adopting innovative practices for
improvement.
Because benchmarking usually involves the direct exchange of
information with competitors, it is particularly subject
to the risk of violating the antitrust laws.
The list of issues that may and may not be discussed in the
context of a trade association also applies in the
benchmarking process.
All proposed benchmarking agreements must be reviewed by the
T. Rowe Price Legal Department before T. Rowe Price agrees
to participate in such a survey.
8-3
<PAGE>
8-4
<PAGE>
CODE OF ETHICS
ROWE PRICE-FLEMING INTERNATIONAL, INC.
<PAGE>
CODE OF ETHICS
OF
ROWE PRICE-FLEMING INTERNATIONAL, INC.
GENERAL POLICY STATEMENT
PURPOSE AND SCOPE OF CODE OF ETHICS. In recognition of Rowe Price-Fleming
International, Inc.'s ("RPFI") commitment to maintain the highest standards of
professional conduct and ethics, the firm's Board of Directors has adopted this
Code of Ethics ("Code") composed of Standards of Conduct and the following
Statements of Policy ("Statements"):
1. Statement of Policy on Material, Inside (Non-Public) Information
2. Statement of Policy on Securities Transactions
3. Statement of Policy on Corporate Responsibility
4. Statement of Policy with Respect to Compliance with Copyright Laws
5. Statement of Policy with Respect to Computer Security
6. Statement of Policy on Compliance with United States Antitrust Laws
The purpose of this Code is to help preserve our most valuable asset - the
reputation of RPFI and its employees.
WHO IS SUBJECT TO THE CODE. Except as provided below, RPFI and its officers,
directors and employees are all subject to the Code. In addition, the following
persons are also subject to the Code:
o Any temporary or consultant where his or her assignment at RPFI exceeds
or will exceed four weeks or when his or her cumulative assignment
exceeds eight weeks over a twelve- month period; and
<PAGE>
o Any contingent worker immediately at the time of engagement if his or
her assignment is more than casual in nature or if he or she will be
exposed to the kinds of information and situations that would create
conflicts on matters covered in the Code.
Employees in the Baltimore office are subject to the Code of Ethics of T. Rowe
Price Associates, Inc. ("Price Associates"), rather than this Code.
RPFI'S STATUS AS A FIDUCIARY. The primary responsibility of RPFI as an
investment adviser is to render to its clients on a professional basis unbiased
and continuous advice regarding their investments. As an investment adviser,
RPFI has a fiduciary relationship with all of its clients, which means that it
has an absolute duty of undivided loyalty, fairness and good faith toward its
clients and mutual fund shareholders and a corresponding obligation to refrain
from taking any action or seeking any benefit for itself which would, or which
would appear to, prejudice the rights of any client or shareholder or conflict
with his or her best interests.
WHAT CODE DOES NOT COVER. The Code was not written for the purpose of covering
all policies, rules and regulations to which employees may be subject. As an
example, RPFI is also subject to the rules and regulations of the Investment
Management Regulatory Organization ("IMRO").
COMPLIANCE WITH CODE. Strict compliance with the provisions of this Code is
considered a basic condition of employment with the firm. An employee may be
required to surrender any profit realized from a transaction which is deemed to
be in violation of the Code. In addition, any breach of the Code may constitute
grounds for disciplinary action, including dismissal from employment. Employees
may appeal to the Ethics Committee any ruling or decision rendered with respect
to the Code.
QUESTIONS REGARDING THE CODE. Questions regarding the Code should be referred as
follows:
1. Standards of Conduct of RPFI and its employees: The Ethics Committee or Legal
Department, Baltimore.
2. Statement of Policy on Material, Inside (Non-Public) Information: Legal
Depart ment, Baltim ore or the London Compl iance Team.
3. Statement of Policy on Securities Transactions: The Ethics Committee.
4. Statement of Policy on Corporate Responsibility: Corporate Responsibility
Committee.
5. Statement of Policy with Respect to Compliance with United States Copyright
Laws: Legal Department, Baltimore.
6. Statement of Policy with Respect to Computer Security and Related Issues:
Local Help Desk or Information Security area.
7. Statement of Policy on Compliance with United States Antitrust Laws: Legal
Department, Baltimore.
LIST OF COMMITTEES AND PERSONNEL. The following Committees and compliance and
management personnel are referenced in the Code:
Brokerage/Trading Committee
Ethics Committee
Baltimore Legal Department
Martin Wade
Carol Eve
Christine To
Dottie Jones
Public Relations Department, Baltimore
London Compliance Team
Robert Fleming ("RF") Group Compliance
RF Dealing Desk
RF Head Dealer
Henry Hopkins
M. David Testa
Secretary of T. Rowe Price Associates, Inc.
Baltimore Compliance
Hong Kong Head Dealer
JF Compliance
John Ford
Corporate Responsibility Committee
<PAGE>
Help Desk
Information Security
March, 1999
<PAGE>
STANDARDS OF CONDUCT OF ROWE PRICE-FLEMING INTERNATIONAL, INC.
AND ITS EMPLOYEES
ALLOCATION OF CLIENT BROKERAGE. The firm=s policies with respect to the
allocation of client brokerage are set forth in Part II of Form ADV, RPFI's
registration statement filed with the United States Securities and Exchange
Commission ("SEC"). It is imperative that all employees -- especially those who
are in a position to make recommendations regarding brokerage allocation, or who
are authorized to select brokers who will execute securities transactions on
behalf of our clients -- read and become fully knowledgeable concerning our
policies in this regard. Any questions regarding our firm's allocation of client
brokerage should be addressed to the RPFI Brokerage/Trading Committee.
ANTITRUST. The United States antitrust laws are designed to ensure fair
competition and preserve the free enterprise system. Some of the most common
antitrust issues with which an employee may be confronted are in the areas of
pricing (adviser fees) and trade association activity. To ensure its employees=
understanding of these laws, RPFI has adopted a Statement of Policy on
Compliance with United States Antitrust Laws. All employees should read and
understand this Statement (see page 8-1).
COMPLIANCE WITH COPYRIGHT LAWS. To protect RPFI and its employees, RPFI has
adopted a Statement of Policy with Respect to Compliance with United States
Copyright Laws. All employees should read and understand this Statement (see
page 6-1).
COMPUTER SECURITY. Computer systems and programs play a central role in RPFI's
operations. To establish appropriate computer security to minimize potential for
loss or disruptions to our computer operations, RPFI has adopted the computer
security policies of its affiliates in London, Buenos Aires, Tokyo, Singapore,
Paris, and Hong Kong. Employees in each location should read and understand the
policy in effect for his or her location. (see page 7-1).
CONFLICTS OF INTEREST. A direct or indirect interest in a supplier, creditor,
debtor or competitor may conflict with the interests of RPFI. All employees must
avoid placing themselves in a "compromising position" where their interests may
be in conflict with those of RPFI or its clients.
Relationships with Profitmaking Enterprises, Including Investment
Clubs. A conflict may occur when an employee of RPFI is also employed
by another firm, directly or as a consultant or independent contractor;
has a direct financial interest in another firm; has an immediate
family financial interest in another firm; or is a director, officer or
partner of another firm.
Employees of our firm sometimes serve as directors, officers, partners,
or in other capacities with profitmaking enterprises not related to
RPFI or its mutual funds. Employees are
<PAGE>
generally prohibited from serving as officers or directors of
corporations which are approved or are likely to be approved for
purchase in our firm's client accounts. An employee may not accept
outside employment that would require him or her to become registered
(or dually registered) as a representative of an unaffiliated
broker/dealer, investment adviser, or an insurance broker or company.
An employee may also not become independently registered as an
investment adviser. An employee who is contemplating obtaining another
interest or relationship that might conflict or appear to conflict with
the interests of RPFI, such as accepting employment with or an
appointment as a director, officer or partner of or as a consultant or
independent contractor to, an outside profitmaking enterprise or
forming or participating in a stock or investment club, must receive
the prior approval of the Ethics Committee. Upon review by the Ethics
Committee, the employee will be advised in writing of the Committee's
decision. In addition, transactions through investment clubs are
subject to the firm's Statement of Policy on Securities Transactions.
Decisions by the Ethics Committee regarding outside directorships in
profitmaking enterprises will be reviewed by the Board of Directors
before becoming final. Outside business interests (such as part-time
employment, or acting as a consultant for or independent contractor to
an outside profitmaking enterprise) that will not conflict or appear to
conflict with the interests of the firm need not be reviewed by the
Ethics Committee, but must be approved by the employee's supervisor.
Certain employees may serve as directors or in similar positions for
non-public, for-profit entities in connection with their professional
activities at RPFI. An employee must obtain the permission of the Board
of Directors before accepting such a position and must relinquish the
position if the entity becomes publicly held, unless otherwise
determined by the Board of Directors.
Service With Nonprofitmaking Enterprises. RPFI encourages its employees
to become involved in community programs and civic affairs. However,
employees should not permit such activities to affect the performance
of their job responsibilities. Prior to accepting a position as a
trustee or member of the Board of Directors of any non-profit
organization, an employee should receive the approval of the Ethics
Committee.
Relationships With Financial Service Firms. In order to avoid any
actual or apparent conflicts of interest, employees are prohibited from
investing in or entering into any relationship, either directly or
indirectly, with corporations, partnerships, or other entities which
are engaged in business as a broker, a dealer, an underwriter
(including an underwriter of insurance), and/or an investment adviser.
As described above, this prohibition extends to the registration and/or
licensure with an unaffiliated firm. This prohibition, however, is not
meant to prevent employees from purchasing publicly traded securities
of broker/dealers, investment advisers or other companies engaged in
the mutual fund industry. Of course, all such purchases are subject to
normal prior clearance and reporting procedures. This policy does not
preclude an employee from engaging an outside investment adviser to
manage his
<PAGE>
or her assets.
If any member of an employee's immediate family is employed by, has a
partnership interest in, or has an equity interest of .5% or more in a
broker/dealer, investment adviser or other company engaged in the
mutual fund industry, the relationship must be reported to the Ethics
Committee.
CONFIDENTIALITY. The exercise of confidentiality extends to four major areas of
our operations: internal operating procedures and planning; clients and fund
shareholders; investment advice; and investment research. The duty to exercise
confidentiality applies not only when an employee is with the firm, but also
after he or she terminates employment with the firm.
Internal Operating Procedures and Planning. During the years we have
been in business, a great deal of creative talent has been used to
develop specialized and unique methods of operations and portfolio
management. In many cases, we feel these methods give us an advantage
over our competitors, and we do not want these ideas disseminated
outside our firm. Accordingly, employees should be guarded in
discussing our business practices with outsiders. Any requests from
outsiders for specific information of this type should be cleared with
your supervisor before it is released.
Also, from time to time management holds meetings with employees in
which material, non-public information concerning the future plans of
the firm or any of its affiliates is disclosed. Employees should never
discuss confidential information with, or provide copies of written
material concerning the firm's internal operating procedures or
projections for the future to, unauthorized persons outside the firm.
Clients and Fund Shareholders. In many instances, when clients
subscribe to our services, we ask them to disclose fully their
financial status and needs. This is done only after we have assured
them that every member of our organization will hold this information
in strict confidence. It is essential that we respect their trust. A
simple rule for employees to follow is that the names of our clients or
fund shareholders or any information pertaining to their investments
must never be divulged to anyone outside the firm, not even to members
of their immediate families and must never be used as a basis for
personal trades over which the employee has beneficial interest or
control.
Investment Advice. Because of the fine reputation our firm enjoys,
there is a great deal of public interest in what we are doing in the
market. There are two major considerations that dictate why we must not
provide investment "tips":
o From the point of view of our clients, it is not fair to give
other people information which clients must purchase.
<PAGE>
o From the point of view of the firm, it is not desirable to
create an outside demand for a stock when we are trying to buy
it for our clients, as this will only serve to push the price
up. The reverse is true if we are selling.
In light of these considerations, employees must never disclose to
outsiders our buy and sell recommendations, securities we are
considering for future investment, or the portfolio holdings of our
clients or mutual funds unless the disclosure is required by law.
The practice of giving investment advice informally to members of your
immediate family should be restricted to very close relatives. Any
transactions resulting from such advice are subject to the prior
approval and reporting requirements of the Statement of Policy on
Securities Transactions. Under no circumstances should an employee
receive compensation directly or indirectly (other than from RPFI or an
affiliate) for rendering advice to either clients or non-clients.
Investment Research. Any report circulated by a research analyst is
confidential in its entirety and should not be reproduced or shown to
anyone outside of our organization, except our clients where
appropriate.
Understanding as to Clients' Accounts and Company Records at time of
Employee Termination. The accounts of clients and mutual fund
shareholders are the sole property of RPFI. This applies to all clients
for whom RPFI acts as investment adviser, regardless of how or through
whom the client relationship originated and regardless of who may be
the (counselor) for a particular client. At the time of termination of
employment with RPFI, an employee must: (1) surrender to RPFI in good
condition any and all materials, reports or records (including all
copies in his or her possession or subject to his or her control)
developed by him or her or any other person which are considered
confidential information of RPFI (except copies of any research
material in the production of which the employee participated to a
material extent); and (2) refrain from communicating, transmitting or
making known to any person or firm any information relating to any
materials or matters whatsoever which are considered by RPFI to be
confidential.
Employees must use care in disposing of any confidential records or
correspondence. Confidential material that is to be discarded should be torn up
or shredded.
CORPORATE RESPONSIBILITY. As a major institutional investor with a fiduciary
duty to its clients, including its mutual fund shareholders, RPFI has adopted a
Statement of Policy on Corporate Responsibility (see page 5-1). The purpose of
this Statement is to establish formal standards and procedures to guide RPFI
with respect to its responsibilities to deal with matters of corporate and
social responsibilities which may affect the companies in which client assets
are invested.
<PAGE>
EMPLOYMENT OF FORMER GOVERNMENT EMPLOYEES. United States laws and
regulations govern the employment of former employees of the U.S. Government and
its agencies, including the SEC. In addition, certain states have adopted
similar statutory restrictions. Finally, certain states and municipalities which
are clients of RPFI have imposed contractual restrictions in this regard. Before
any action is taken to discuss employment by RPFI of a former government
employee, guidance must be obtained from the Legal Department in Baltimore
("Baltimore Legal Department").
EMPLOYMENT PRACTICES.
Equal Opportunity. RPFI is committed to the principles of Equal
Employment. We belive our continued success depends on talented people,
without regard to race, color, religion, national origin, gender, age,
disability, sexual orientation, Vietnam era military service or any
other classification protected by law.
This commitment to Equal Opportunity covers all aspects of the
employment relationship, including recruitment, application and initial
employment, promotion and transfer, selection for training
opportunities, wage and salary administration, and the application of
service, retirement, and employee benefit plan policies.
All members of RPFI's staff are expected to comply with the spirit and
intent of this Equal Employment Opportunity Policy.
If you feel you have not been treated in accordance with this Policy,
contact your immediate supervisor, your manager or the Baltimore Legal
Department. No retaliation will be taken against any employee who
reports an incident of alleged discrimination.
Harassment. RPFI intends to provide employees a workplace free from any
form of harassment. This includes sexual harassment which may result
from unwelcome advances, requests for favors or any verbal or physical
conduct of a sexual nature. Such actions or statements may or may not
be accompanied by explicit or implied promises of preferential
treatment or negative consequences in connection with one's employment.
Harassment might include uninvited sex-oriented conversations,
touching, comments, jokes, suggestions or innuendos. This type of
behavior can create a stressful, intimidating and offensive atmosphere;
it may adversely affect morale and work performance.
Any employee who feels offended by the action or comments of another,
or any employee who has observed such behavior, should report the
matter, in confidence, to his or her immediate supervisor or manager.
If that presents a problem, report the matter to Martin Wade or the
Baltimore Legal Department. All complaints will be investigated
immediately
<PAGE>
and confidentially. Any employee who has behaved in a reprehensible
manner will be subject to disciplinary action in keeping with the
gravity of the offense.
Drug and Alcohol Abuse. RPFI's policy is to maintain a drug-free
workplace and prevent alcohol abuse. This policy fosters a safe,
healthful and productive environment for its employees and customers
and protects RPFI's property, equipment, operations and reputation in
the community and the industry.
PAST AND CURRENT LITIGATION. As a condition of employment, new employees answer
a questionnaire regarding certain regulatory and related matters. RPFI uses the
information obtained through these questionnaires and others to answer questions
asked on United States, state, IMRO and other governmental registration forms
and for insurance and bonding purposes. Each employee is responsible for keeping
answers on the questionnaire current. If an employee becomes party to any
proceeding that could lead to his or her conviction for any felony or
misdemeanor (other than traffic or other minor offenses) or becomes the subject
of a regulatory action by the SEC, IMRO, a state, or any government, regulatory
agency, or self-regulatory organization relating to securities or investment
activities, he or she should notify the Baltimore Legal Department promptly.
FINANCIAL REPORTING. RPFI's records are maintained in a manner that provides for
an accurate record of all financial transactions in conformity with generally
accepted accounting principles. No false or deceptive entries may be made and
all entries must contain an appropriate description of the underlying
transaction. All reports, vouchers, bills, invoice, payroll and service records
and other essential data must be accurate, honest and timely and should provide
an accurate and complete representation of the facts.
HEALTH AND SAFETY IN THE WORKPLACE. RPFI recognizes its responsibility to
provide employees a safe and healthful workplace and proper facilities to help
them do their jobs effectively.
ILLEGAL PAYMENTS AND INDUCEMENTS. U.S., U.K., state, and certain foreign laws
prohibit the payment of bribes, kickbacks, inducements or other illegal
gratuities or payments by or on behalf of RPFI. RPFI, through its policies and
practices, is committed to comply fully with these laws. The United States
Foreign Corrupt Practices Act makes it a crime to corruptly give, promise or
authorize payment, in cash or in kind, for any service to a foreign official or
political party in connection with obtaining or retaining business. If an
employee is solicited to make or receive an illegal payment, he or she should
contact the Baltimore Legal Department.
MARKETING AND SALES ACTIVITIES. All written and oral marketing materials and
presentations (including performance data) must be in compliance with applicable
SEC, National Association of Securities Dealers, Inc. ("NASD"), IMRO and
Association of Investment Management and Research ("AIMR") requirements. All
advertisements, sales literature, and other
<PAGE>
written marketing materials must be reviewed and approved by the advertising
section of the Baltimore Legal Department prior to use. All performance data
distributed outside the firm, including total return and yield information, must
be obtained from the Baltimore RPFI Performance Group before distribution.
POLICY REGARDING ACCEPTANCE AND GIVING OF GIFTS AND GRATUITIES. The
firm, as well as its employees and members of their families, should not accept
or give gifts that might in any way create or appear to create a conflict of
interest or interfere with the impartial discharge of our responsibilities to
clients or place our firm in a difficult or embarrassing position.
Such gifts would include gratuities or other accommodations from or to business
contacts, brokers, securities salespersons, approved companies, suppliers,
clients, or any other individual or organization with whom our firm has a
business relationship, but would not include certain types of business
entertainment as described later in this section.
Receipt of Gifts. Personal contacts may lead to gifts which are offered
on a friendship basis and may be perfectly proper. It must be
remembered, however, that business relationships cannot always be
separated from personal relationships and that the integrity of a
business relationship is always susceptible to criticism in hindsight
where gifts are received.
Under no circumstances may employees accept gifts from any business or
business contact in the form of cash or cash equivalents, including
gift certificates. There may be an occasion where it might be awkward
to refuse a token expression of appreciation given in the spirit of
friendship. In such cases, the value should not exceed $100 (U.S.
dollars) from each business or business contact in any twelve-month
period. Gifts received which are unacceptable according to this policy
must be returned to the donors.
Giving of Gifts. An employee may never give a gift to a business
contact in the form of cash or cash equivalents, including gift
certificates. Token gifts may be given to business contacts, but the
aggregate value of all such gifts given to the business contact may not
exceed $100 (U.S. dollars) in any twelve-month period without the
permission of the Ethics Committee. If an employee believes that it
would be appropriate to give a gift with a value exceeding $100 to a
business contact in a specific situation, he or she must submit a
written request to the Ethics Committee. The request should specify:
o the name of the giver;
o the name of the intended recipient and his or her employer;
o the nature of the gift and its monetary value;
o the nature of the business relationship; and
o the reason the gift is being given.
NASD regulations prohibit exceptions to the $100 (U.S. dollars) limit for gifts
given in
<PAGE>
connection with Investment Services= business. The Corporate Gift
Department in Baltimore or compliance personnel in London (the "London
Compliance Team"), as appropriate, will retain a record of all gifts
given in connection with Investment Services= business, as required by
NASD Conduct Rule 3060.
Entertainment. Our firm's $100 (U.S. dollars) limit on the acceptance
and giving of gifts not only applies to gifts of merchandise, but also
covers the enjoyment or use of property or facilities for weekends,
vacations, trips, dinners, and the like. However, this limitation does
not apply to dinners, sporting events and other activities which are a
normal part of a business relationship. The acceptance of an invitation
from brokers to sporting or other events is an appropriate way to
maintain good relationships. However, if any employee engages in such
activities in excess, serious conflict of interest questions can arise.
When such invitations involve time away from the office, they should be
checked by the employee's supervisor. As a matter of firm policy,
employees are limited to two days in any calendar year for such
entertainment events. Further invitations may be accepted, but they
must be accommodated within the employee's own time or holiday leave.
Acceptance of invitations under this rule should be advised to the
relevant recordkeeper of holiday entitlements, otherwise these days
will be deducted from holiday entitlements.
To illustrate the principle behind the entertainment policy, the
following examples are provided:
First Example: The head of institutional research at brokerage
firm "X" (whom you have known and done business with for a
number of years) invites you and your husband to join her and
her husband for dinner and afterwards a theatrical production.
Second Example: You wish to see a recent hit musical in
London, but are told it is sold out. You call a broker friend
who works at company "X" to see if he can get tickets for you.
The broker says yes and offers you two tickets free of charge.
Third Example: You have been invited by a vendor to a
multi-day excursion to a resort where the primary focus is
entertainment as opposed to business. The vendor has offered
to pay your travel and lodging for this trip.
In the first example, it would be proper for you to accept the
invitation.
With respect to the second example, it would not be proper to solicit a
person doing business with the firm for free tickets to any event. You
could, however, accept the
<PAGE>
tickets if you pay for them at their fair value or, if greater, at the cost to
the broker.
With respect to the third example, trips of substantial value, such as
multi-day excursions to resorts, hunting locations or sports events,
where the primary focus is entertainment as opposed to business
activities, would not be considered a normal part of a business
relationship. Generally, such invitations may not be accepted unless
our firm or the employee pays for the cost of the excursion and the
employee has obtained approval from Martin Wade or his designee.
The same principles apply if an employee wishes to entertain a business
contact. Inviting business contacts and, if appropriate, their guests,
to an occasional meal, sporting event, the theater, or comparable
entertainment is acceptable as long as it is neither so frequent nor so
extensive as to raise any question of propriety. If an employee wishes
to pay for a business guest=s transportation (e.g., airfare) and/or
accommodations as part of business entertainment, he or she must first
receive the permission of the Ethics Committee.
RESEARCH TRIPS. Occasionally, brokers or portfolio companies invite employees of
our firm to attend or participate in research conferences, tours of portfolio
companies' facilities, or meetings with the management of such companies. These
invitations may involve traveling extensive distances to and from the sites of
the specified activities and may require overnight lodging. Employees may not
accept any such invitations until approval has been secured from Martin Wade or
his designee. As a general rule, such invitations should only be accepted after
a determination has been made that the proposed activity constitutes a valuable
research opportunity which will be of primary benefit to our clients. All travel
expenses to and from the sites of the activities and the expenses of any
overnight lodging, meals or other accommodations provided in connection with
such activities, should be paid for by our firm except in situations where the
costs are considered to be insubstantial and are not readily ascertainable.
Employees may not accept reimbursement from brokers or portfolio companies for
travel and hotel expenses; speaker fees or honoraria for addresses or papers
given before audiences; or consulting services or advice they may render.
Likewise, employees may neither request nor accept loans or personal services
from brokers or portfolio companies.
POLITICAL ACTIVITIES. Employees are encouraged to participate and vote in all
national and local elections.
No political contribution of corporate funds, direct or indirect, to any
political candidate or party, or to any other organization that might use the
contribution for a political candidate or party, or use of corporate property,
services or other assets may be made without the written approval of the
Baltimore Legal Department. These prohibitions cover not only direct
contributions but also
<PAGE>
indirect assistance or support of candidates or political parties through
purchase of tickets to special dinners or other fund raising events, or the
furnishing of any other goods, services or equipment to political parties or
committees.
PROTECTION OF CORPORATE ASSETS. All employees are responsible for taking
measures to ensure that RPFI's assets are properly protected. This
responsibility not only applies to our business facilities, equipment and
supplies, but also to intangible assets such as: proprietary, research or
marketing information; corporate trademarks and servicemarks; and copyrights.
QUALITY OF SERVICES. It is a continuing policy of RPFI to provide investment
products and services which: (1) meet applicable laws, regulations and industry
standards; (2) are offered to the public in a manner which ensures that each
client/shareholder understands the objectives of each investment product
selected; and (3) are properly advertised and sold in accordance with all
applicable SEC, IMRO, state and NASD rules and regulations.
The quality of RPFI's investment products and services and operations affects
our reputation, productivity, profitability and market position. RPFI's goal is
to be quality leader and to create conditions that allow and encourage all
employees to perform their duties in an efficient, effective manner.
RECORD RETENTION. Under various U.S., U.K., and other governmental laws and
regulations, RPFI is required to produce, maintain and retain various records,
documents and other written (including electronic) communications. Each employee
is responsible for adhering to RPFI's record maintenance and retention policies.
Any questions regarding this requirement should be addressed to the Baltimore
Legal Department.
REFERRAL FEES. United States securities laws strictly prohibit the payment of
any type of referral fee unless certain conditions are met. This would include
any compensation to persons who refer clients or shareholders to us (e.g.,
brokers, registered representatives or any other persons) either directly in
cash, by fee splitting, or indirectly by the providing of gifts or services
(including the allocation of brokerage). IMRO also prohibits the payment of
certain inducements. No arrangements involving referral fees or inducements
should be entered into obligating RPFI or any employee unless approved by the
Baltimore Legal Department.
RELEASE OF INFORMATION TO THE PRESS. All requests for information from the media
concerning RPFI's corporate affairs, mutual funds, investment services,
investment philosophy and policies, and related subjects should be referred to
Martin Wade, David Testa, or to the Public Relations Department in Baltimore for
reply. Investment professionals who are contacted directly by the press
concerning a particular fund's investment strategy or market outlook may use
their own discretion, but are advised to check with the Public Relations
Department in Baltimore if they do not know the reporter or feel it may be
inappropriate to comment on a particular matter.
<PAGE>
RESPONSIBILITY TO REPORT VIOLATIONS. Every employee who becomes aware of a
violation of this Code is encouraged to report, on a confidential basis, the
violation to his or her supervisor. If the supervisor appears to be involved in
the wrongdoing, the report should be made to the next level of supervisory
authority or to Martin Wade. Upon notification of the alleged violation, the
supervisor is obligated to advise the Baltimore Legal Department.
It is RPFI's policy that no adverse action will be taken against any employee
who reports a violation in good faith.
SERVICE AS TRUSTEE, EXECUTOR OR PERSONAL REPRESENTATIVE.
Employees may serve as trustees, co-trustees, executors or personal
representatives for the estates of or trusts created by close family members.
Employees may also serve in such capacities for estates or trusts created by
nonfamily members. However, if an employee expects to be actively involved in an
investment capacity in connection with an estate or trust created by a nonfamily
member, he or she must first be granted permission by the Ethics Committee. If
an employee serves in any of these capacities, securities transactions effected
in such accounts will be subject to the prior approval and reporting
requirements of our Statement of Policy on Securities Transactions.
If any employees presently serve in any of these capacities for nonfamily
members, they should report these relationships in writing to the Ethics
Committee.
SPEAKING ENGAGEMENTS AND PUBLICATIONS. Employees are often asked to accept
speaking engagements on the subject of investments, finance, or their own
particular specialty with our organization. This is encouraged by the firm, as
it enhances our public relations, but you should obtain approval from Martin
Wade before you accept such requests.
You may also accept an offer to teach a course on investments or related topics
(for example, at a local college) in your individual capacity with the approval
of the head of your Division. You should also contact the Baltimore Legal
Department in this instance to discuss any guidelines triggered by NASD or other
regulatory requirements.
Before making any commitment to write or publish any article or book on a
subject related to investments or your work at RPFI, approval should be obtained
from Martin Wade.
TRADING IN SECURITIES WITH INSIDE INFORMATION. The purchase or sale of
securities while in possession of material, inside information is prohibited by
U.S., U.K., and other governmental laws. Information is considered inside and
material if it has not been publicly disclosed and is sufficiently important
that it would affect the decision of a reasonable person to buy, sell or hold
stock in an issuer, including T. Rowe Price Associates' stock. Under no
circumstances may an employee transmit such information to any other person,
except to other employees who are required to be kept informed on the subject.
All employees should read and understand the Statement of Policy on Material,
Inside (Non-Public) Information (see page
<PAGE>
3-1). Any questions regarding the firm's policies in this area should be
addressed to the Baltimore Legal Department, the London Compliance Team, Robert
Fleming Group Compliance in London ("RF Group Compliance"), or the Jardine
Fleming Compliance Office in Hong Kong ("JF Compliance").
<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
MATERIAL, INSIDE (NON-PUBLIC) INFORMATION
PURPOSE OF STATEMENT OF POLICY. The purpose of this Statement of Policy
("Statement") is to comply with the requirement of the United States Insider
Trading and Securities Fraud Enforcement Act to establish, maintain, and enforce
written procedures designed to prevent insider trading. This Statement explains:
(i) the general legal prohibitions and sanctions regarding insider trading; (ii)
the meaning of the key concepts underlying the prohibitions; (iii) the
obligations of each officer, director, and employee ("Employee") of Rowe
Price-Fleming International, Inc. ("RPFI") in the event he or she comes into
possession of material, non-public information; and (iv) the firm's educational
program regarding insider trading. RPFI has also adopted a Statement of Policy
on Securities Transactions ("Securities Transactions Statement"), which requires
certain persons to obtain prior clearance with respect to their personal
securities transactions and to report such transactions on a timely basis.
The general principles of this Statement also apply to Personnel of Related
Entities as that term is defined in the Securities Transactions Statement;
Personnel of Related Entities, however, should follow the specific procedures
regarding inside information established by their respective firms.
THE BASIC INSIDER TRADING PROHIBITION. The "insider trading" doctrine under
United States securities laws generally prohibits any person (including
investment advisers) from:
o trading in a security while in possession of material, non-public information
regarding the security;
o tipping such information to others;
o recommending the purchase or sale of securities while in possession of such
information;
o assisting someone who is engaged in any of the above activities.
Thus, "insider trading" is not limited to insiders of the company whose
securities are being traded. It can also apply to non-insiders, such as
investment analysts, portfolio managers and stockbrokers. In addition, it is not
limited to persons who trade. It also covers persons who tip material,
non-public information or recommend transactions in securities while in
possession of such information.
POLICY OF RPFI ON INSIDER TRADING. It is the policy of RPFI to prohibit any of
its
<PAGE>
Employees, while in possession of material, non-public information, from trading
securities or recommending transactions, either personally or in its proprietary
accounts or on behalf of others (including mutual funds and private accounts),
or communicating material, non-public information to others in violation of the
securities laws of the United States or any other country that has jurisdiction
over its activities.
"NEED TO KNOW" POLICY. All information regarding planned, prospective or ongoing
securities transactions must be treated as confidential. Such information must
be confined, even within the firm, to only those individuals and departments who
must have such information in order for RPFI to carry out its engagement
properly and effectively.
TRANSACTIONS INVOLVING T. ROWE PRICE ASSOCIATES, INC. STOCK. One of
RPFI's parents is T. Rowe Price Associates, Inc. ("Price Associates"), which is
a public company whose stock is traded on the NASDAQ/NMS System. Certain
Employees of RPFI could, under certain circumstances, be deemed to be "insiders"
with respect to Price Associates. It is therefore important that these persons
not discuss with family, friends or other persons any matter concerning Price
Associates which might involve material, non-public information, whether
favorable or unfavorable.
SANCTIONS. Penalties for trading on material, non-public information are severe,
both for the individuals involved in such unlawful conduct and their employers.
An Employee of RPFI who violates the insider trading laws can be subject to some
or all of the penalties described below, even if he or she does not personally
benefit from the violation:
o Injunctions;
o Treble damages;
o Disgorgement of profits;
o Criminal fines;
o Jail sentences;
o Civil penalties for the person who committed the violation (which would,
under normal circumstances, be the Employee and not the firm) of up to
three times the profit gained or loss avoided, whether or not the
individual actually benefitted; and
o Civil penalties for RPFI (and other persons, such as managers and supervisors,
who are deemed to be controlling persons) of up to the greater of $1,000,000 or
three times the amount of the profit gained or loss avoided under U.S. law.
Fines can be unlimited under U.K. law.
In addition, any violation of this Statement can be expected to result in
serious sanctions being
<PAGE>
imposed by RPFI, including dismissal of the person(s) involved.
The provisions of both U.S. and U.K. law discussed below are complex and wide
ranging. So if you are in any doubt about how they affect you, you must consult
a member of the RPFI Compliance Team in London (the "London Compliance Team") or
the Legal Department in Baltimore ("Baltimore Legal Department").
<PAGE>
U.S. LAW REGARDING INSIDER TRADING PROHIBITIONS.
Introduction. "Insider trading" is a top enforcement priority of the United
States Securities and Exchange Commission ("SEC"). In 1988, the United States
Insider Trading and Securities Fraud Enforcement Act (the "Act") was signed into
law. This Act has had a far reaching impact on all public companies and
especially those engaged in the securities brokerage or investment advisory
industries, including directors, executive officers and other controlling
persons of such companies. While the Act does not provide a statutory definition
of "insider trading," it contains major changes to the previous law.
Specifically, the Act:
Written Procedures. Requires SEC-registered brokers, dealers and
investment advisers to establish, maintain and enforce written policies
and procedures reasonably designed to prevent the misuse of material,
non-public information by such persons.
Civil Penalties. Imposes severe civil penalties on brokerage firms,
investment advisers, their management and advisory personnel and other
"controlling persons" who fail to take adequate steps to prevent insider
trading and illegal tipping by Employees and other "controlled persons."
Persons who directly or indirectly control violators, including entities
such as RPFI, and their officers and directors, now face penalties to be
determined by the court in light of the facts and circumstances, but not
to exceed the greater of $1,000,000 (U.S. dollars) or three times the
amount of profit gained or loss avoided as a result of the violation.
Criminal Penalties. Provides penalties for criminal securities law violations:
o Maximum jail term -- ten years;
o Maximum criminal fine for individuals -- $1,000,000;
o Maximum criminal fine for entities --$2,500,000.
Private Right of Action. Establishes a statutory private right of action
on behalf of contemporaneous traders against insider traders and their
controlling persons.
Bounty Payments. Authorizes the SEC to award bounty payments to persons
who provide information leading to the successful prosecution of insider
trading violations. Bounty payments are at the discretion of the SEC, but
may not exceed 10% of the penalty imposed.
Basic Concepts of Insider Trading. The four critical concepts in United States
insider trading cases are: (1) fiduciary duty/misappropriation, (2) materiality,
(3) non-public, and (4) possession. Each concept is discussed below.
Fiduciary Duty/Misappropriation. In two decisions, Dirks v. SEC and Chiarella v.
United States,
<PAGE>
the United States Supreme Court held that insider trading and tipping violate
the federal securities law if the trading or tipping of the information results
in a breach of duty of trust or confidence.
A typical breach of duty arises when an insider, such as a corporate officer,
purchases securities of his or her corporation on the basis of material,
non-public information. Such conduct breaches a duty owed to the corporation's
shareholders. The duty breached, however, need not be to shareholders to support
liability for insider trading; it could also involve a breach of duty to a
client, an employer, employees, or even a personal acquaintance.
The concept of who constitutes an "insider" is broad. It includes officers,
directors and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a confidential relationship in the conduct of
a company's affairs and, as a result, is given access to information solely for
the company's purpose. A temporary insider can include, among others, a
company's attorneys, accountants, consultants, and bank lending officers, as
well as the employees of such organizations. In addition, any person may become
a temporary insider of a company if he or she advises the company or provides
other services, provided the company expects such person to keep any material,
non-public information disclosed confidential.
Court decisions in the United States have held that, under a "misappropriation"
theory, an outsider (such as an investment analyst) may be liable if he or she
breaches a duty to anyone by: (1) obtaining information improperly or (2) using
information that was obtained properly for an improper purpose. For example, if
information is given to an analyst on a confidential basis and the analyst uses
that information for trading purposes, liability could arise under the
misappropriation theory. Similarly, an analyst who trades in breach of a duty
owed either to his or her employer or client may be liable under the
misappropriation theory. For example, the United States Supreme Court upheld the
misappropriation theory when a lawyer received material, non-public information
from a law partner who represented a client contemplating a tender offer, where
that lawyer used the information to trade in the securities of the target
company.
The situations in which a person can trade while in possession of material,
non-public information without breaching a duty are so complex and uncertain
that the only safe course is not to trade, tip or recommend securities while in
possession of material, non-public information.
Materiality. Insider trading restrictions arise only when the information that
is used for trading, tipping or recommendations is "material." The information
need not be so important that it would have changed an investor's decision to
buy or sell; rather, it is enough that it is the type of information on which
reasonable investors rely in making purchase or sale decisions.
Resolving Close Cases. The United States Supreme Court has held that, in
close cases, doubts about whether or not information is material should be
resolved in favor of a finding of materiality. You should also be aware
that your judgment regarding materiality may be reviewed by a court or the
SEC with the 20-20 vision of hindsight.
<PAGE>
Effect on Market Price. Any information that, upon disclosure, is likely
to have a significant impact on the market price of a security should be
considered material.
Future Events. The materiality of facts relating to the possible
occurrence of future events depends on the likelihood that the event will
occur and the significance of the event if it does occur.
Illustrations. The following list, though not exhaustive, illustrates the
types of matters that might be considered material: a joint venture,
merger or acquisition; the declaration or omission of dividends; the
acquisition or loss of a significant contract; a change in control or a
significant change in management; a call of securities for redemption; the
borrowing of a significant amount of funds; the purchase or sale of a
significant asset; a significant change in capital investment plans; a
significant labor dispute or disputes with subcontractors or suppliers; an
event requiring a company to file a current report on Form 8-K with the
SEC; establishment of a program to make purchases of the company's own
shares; a tender offer for another company's securities; an event of
technical default or default on interest and/or principal payments;
advance knowledge of an upcoming publication that is expected to affect
the market price of the stock.
These illustrations are equally applicable to Price Associates as a public
company and should serve as examples of the types of matters that
Employees should not discuss with persons outside the firm. Remember, even
though you may have no intent to violate any securities law, an offhand
comment to a friend might be used unbeknownst to you by such friend to
effect purchases or sales of Price Associates' stock. If such transactions
were discovered and your friend were prosecuted, your status as an
informant or "tipper" would directly involve you in the case.
Non-public vs. Public Information. Any information which is not "public" is
deemed to be "non- public." Just as an investor is permitted to trade on the
basis of information that is not material, he or she may also trade on the basis
of information that is public. Information is considered public if it has been
disseminated in a manner making it available to investors generally. An example
of non- public information would include material information provided to a
select group of analysts but not made available to the investment community at
large. Set forth below are a number of ways in which non-public information may
be made public:
Disclosure to News Services and National Papers. The U.S. stock exchanges
require each exchange-traded issuer to disseminate material, non-public
information about itself to: (1) the national business and financial
newswire services (Dow Jones and Reuters); (2) the national service
(Associated Press); and (3) The New York Times and The Wall Street
Journal.
Local Disclosure. An announcement by an issuer in a local newspaper might
be sufficient for a company that is only locally traded, but might not be
sufficient for a company that has a national market.
<PAGE>
Information in SEC Reports. Information contained in reports filed with
the SEC will be deemed to be public.
Information in Brokerage Reports. Information published in bulletins and
research reports disseminated by brokerage firms will, as a general
matter, be deemed to be public.
If RPFI is in possession of material, non-public information with respect to a
security before such information is disseminated to the public (i.e., such as
being disclosed in one of the public media described above), RPFI and its
Employees must wait a sufficient period of time after the information is first
publicly released before trading or initiating transactions to allow the
information to be fully disseminated.
Concept of Possession. It is important to note that the SEC takes the position
that the United States law regarding insider trading prohibits any person from
trading in a security in violation of a duty of trust and confidence while in
possession of material, non-public information regarding the security. This is
in contrast to trading on the basis of the material, non-public information. To
illustrate the problems created by the use of the "possession" standard, as
opposed to the "caused" standard, the following three examples are provided:
First, if the investment committee to the International Stock Fund were to
obtain material, non- public information about one of its portfolio
companies from an RPFI equity research analyst, that fund would be
prohibited from trading in the securities to which that information
relates. The prohibition would last until the information is no longer
material or non-public.
Second, if the investment committee to the International Stock Fund
obtained material, non- public information about a particular portfolio
security but continued to trade in that security, then the committee
members, RPFI, and possibly management personnel might be liable for
insider trading violations.
Third, even if the investment committee to the Fund does not come into
possession of the material, non-public information known to an RPFI equity
research analyst, if it trades in the security, it may have a difficult
burden of proving to the SEC or to a court that it was not in possession
of such information.
Tender Offers. Tender offers are subject to particularly strict regulation under
the United States securities laws. Specifically, trading in securities which are
the subject of an actual or impending tender offer by a person who is in
possession of material, non-public information relating to the offer is illegal,
regardless of whether there was a breach of fiduciary duty. Under no
circumstances should you trade in securities while in possession of material,
non-public information regarding a potential tender offer.
U.K. LAW REGARDING INSIDER TRADING PROHIBITIONS.
<PAGE>
The U.K. Act. The Criminal Justice Act 1993 (the "U.K. Act") prohibits an
"insider" from:
o dealing in "securities" about which he or she has "inside information";
o encouraging another person to deal in those securities;
o disclosing the "inside information" otherwise than in the proper performance
of the insider's employment office or profession.
The definition of "securities" is very wide and is not limited to U.K.
securities. The U.K. Act also covers all dealing in "securities," whether on or
off market and whether done within or without the U.K.
The following flow chart illustrates the core concepts under the U.K. Act:
DOES A DEFENSE APPLY?
DOES THE
TRANSACTON
INVOLVE
"SECURITIES"
<PAGE>
DO YOU
HAVE THE
INFORMATION AS AN
"INSIDER"?
<PAGE>
ARE YOU DEALING ON
A "REGULATED
MARKET"?
DOES DEALING INVOLVE
A "PROFESSIONAL
INTERMEDIARY"?
GO TO JAIL
GO FREE
ARE YOU
"DISCLOSING"?
ARE YOU
"ENCOURAGING"
DEALING?
<PAGE>
ARE YOU AN
INDIVIDUAL
WITH "INSIDE
INFORMATION"
<PAGE>
Who is an Insider? A person has information as an "insider" if:
o it is, and he or she knows that it is, "inside information" and;
o he or she has it, and knows that he or she has it, directly or
indirectly from an "inside source". An "inside source" is any
director, employee or shareholder of an issuer of securities or
anyone having access to the information by virtue of his or her
employment, profession, office and duties.
What is Inside Information Under the U.K. Act? "Inside Information" is
information which:
o relates to particular securities, or particular issuers of securities;
o is specific or precise;
o has not been "made public"; and
o is likely to have a significant effect on the price if it were "made public".
Ex a m pl es of pri c e- se ns iti ve inf or m ati on w ou ld in cl ud e
<PAGE>
knowledge of any:
o proposed takeover or merger;
o potential company insolvency;
o unpublished information as to profits or losses of any company for any period;
o decision by a company concerning dividends or other distributions;
o proposed change in the capital structure of a company;
o material acquisitions or realizations of assets by a company;
o substantial acquisition or disposal of shares of a company;
o proposal to change the general character or nature of the business of a
company or group;
o proposed change in the directors or senior executives of a company; and
o substantial borrowing by a company.
When is Information Made Public? Information is "made public" if it:
o is published in accordance with the rules of a regulated market for
the purpose of informing investors and their professional advisers;
o is contained in records open to public inspection;
o can be readily acquired by any person likely to deal in the
securities
o to which the information relates, or
o of an issuer to which the information relates;
<PAGE>
o is derived from information which has been "made public".
Criminal Penalties. The penalties under the U.K. Act are a maximum of
seven years imprisonment and an unlimited fine.
PROCEDURES TO BE FOLLOWED WHEN RECEIVING MATERIAL, NON-PUBLIC
INFORMATION.
All Employees stationed in London, Paris, and Buenos Aires will be referred to
in this portion of the Statement as "London Employees." All Employees stationed
in Hong Kong, Singapore and Tokyo will be referred to in this portion of the
Statement as "Hong Kong Employees." Unless specified in this manner, the
Statement applies to all RPFI Employees, except those who are subject to the
Price Associates Code of Ethics and its Procedures. The list of issuers about
which Employees have material, inside information will be referred to in this
Statement as the RPFI Restricted List. Although the general principles of this
Statement apply to Personnel of Related Entities, they should follow the
specific procedures regarding inside information established by their respective
firms.
A. Procedures for London Employees. Whenever a London Employee comes
into possession of material, non-public information about a security or an
issuer of a security, he or she should immediately inform Carol Eve of the
London Compliance Team that he or she is in possession of such information
and the nature of the information. Carol Eve will make a record of this
notification by placing the issuer on the RPFI Restricted List, noting the
person(s) in possession of the information, the reason for its inclusion,
and the local time and date on which the issuer was placed on this List.
She will also promptly relay this information to Dottie Jones in the
Compliance Department in Baltimore ("Baltimore Compliance"), Christine To,
the Head Dealer at the RPFI Hong Kong Dealing Desk ("Hong Kong Head
Dealer"), and the Head Dealer at the Robert Fleming Investment Management
Dealing Desk ("RF Dealing Desk") or his or her designee ("RF Head
Dealer"). Dottie Jones will add the issuer to the Price Associates=
Restricted List. If the London Employee is unsure about whether the
information is material and non-public, he or she should immediately
contact the London Compliance Team, the RF Group Compliance, or the
Baltimore Legal Department for advice. The London Employee shall refrain
from disclosing the information to anyone else, including persons within
RPFI, unless specifically advised to the contrary.
When the information is no longer material and/or non-public, Carol
Eve will remove the issuer from the RPFI Restricted List and note the
reason for and the date and local time of removal of the issuer from
this List. She will also promptly relay the information to Dottie
Jones, Christine To, and the RF Head Dealer. Dottie Jones will remove
the issuer from the Price Associates= Restricted List. If the London
Employee or Carol Eve is unsure whether the issuer should be removed
from the RPFI Restricted List, he or she should first contact RF Group
Compliance or the Baltimore Legal Department for advice.
B. Procedures for Hong Kong Employees. Whenever a Hong Kong Employee
comes into possession of material, non-public information about a
security or the issuer of any
<PAGE>
security, he or she should immediately inform Christine To that he or
she is in possession of such information and the nature of the
information. Christine To will make a record of this notification by
placing the issuer on the RPFI Restricted List, noting the person(s)
in possession of the information, the reason for its inclusion, and
the local time and date on which the issuer was placed on this List.
She will also promptly relay this information to JF Compliance, Dottie
Jones and Carol Eve. Carol Eve will relay this information to the RF
Head Dealer. Dottie Jones will add the issuer to the Price Associates=
Restricted List. If the Hong Kong Employee is unsure about whether the
information is material and/or non- public, he or she should
immediately contact the London Compliance Team, JF Compliance or the
Baltimore Legal Department for advice. The Hong Kong Employee shall
refrain from disclosing the information to anyone else, including
persons within RPFI, unless specifically advised to the contrary.
When the information is no longer material and/or non-public,
Christine To will remove the issuer from the RPFI Restricted List and
note the reason for and the date and local time of removal of the
issuer from this List. She will also promptly relay this information
to Dottie Jones, JF Compliance, and Carol Eve, who will inform the RF
Head Dealer. Dottie Jones will remove the issuer from the Price
Associates= Restricted List. If the Hong Kong Employee or Christine To
is unsure whether the issuer should be removed from the RPFI
Restricted List, he or she should first contact JF Compliance or the
Baltimore Legal Department for advice.
C. Procedures for Baltimore Employees. Employees working in Baltimore
("Baltimore Employees") are subject primarily to Price Associates=
Code of Ethics and Procedures. Under this Code and Procedures, if a
Baltimore Employee or a Price Associates= employee comes into
possession of material, non-public information about a security or the
issuer of any security, he or she must immediately inform the
Baltimore Legal Department. If that Department determines that the
information is both material and non-public, the issuer will be placed
on either the Price Associates= Watch or Restricted List and, if the
issuer is a non- U.S. issuer, on the RPFI Restricted List. If the
issuer is a non-U.S. issuer, Dottie Jones will promptly relay the
identity of the issuer, the person(s) in possession of the
information, the reason for its inclusion, and the local time and date
on which the issuer was placed on the RPFI List to Christine To and
Carol Eve, who will relay this information to the RF Head Dealer.
Dottie Jones will document the addition as required by Price
Associates= Procedures. The Baltimore Employee shall refrain from
disclosing the information to anyone else, including persons within
RPFI, unless specifically advised to the contrary.
When the information is no longer material and/or non-public, Dottie
Jones will remove the issuer from the Price Associates= List and, if
applicable, the RPFI List, and, if the issuer is a non-U.S. issuer,
promptly relay this information to Christine To and Carol Eve, who
will inform the RF Head Dealer. Dottie Jones will document the removal
as required by Price Associates= Procedures.
<PAGE>
Carol Eve will keep a record of all inclusions and removals of issuers
on the RPFI Restricted List for six(6) years.
D. General Procedures for All Employees. Specifically, Employees in
any office may not:
o Trade in securities to which the material, non-public information
relates;
o Disclose the information to others;
o Recommend purchases or sales of the securities to which the
information relates.
The RPFI Restricted List is highly confidential and should, under no
circumstances, be disseminated to anyone outside RPFI, the Dealing Desks, RF
Group Compliance, JF Compliance, the Baltimore Legal Department, and Baltimore
Compliance.
SPECIFIC PROCEDURES RELATING TO THE SAFEGUARDING OF INSIDE
INFORMATION.
To ensure the confidentiality of the RPFI Restricted List, it is important that
all Employees take the following steps to safeguard the confidentiality of
material, non-public information:
o Do not discuss confidential information in public places such as
elevators, hallways or social gatherings;
o To the extent practical, limit access to the areas of the firm where
confidential information could be observed or overheard to Employees
with a business need for being in the area;
o Avoid using speaker phones in areas where unauthorized persons may
overhear conversations;
o Where appropriate, maintain the confidentiality of client identities
by using code names or numbers for confidential projects;
o Exercise care to avoid placing documents containing confidential
information in areas where they may be read by unauthorized persons
and store such documents in secure locations when they are not in use;
and
o Destroy copies of confidential documents no longer needed for a
project.
RPFI has adopted specific written procedures, Procedures Pertaining to the
Administration of the Statement of Policy on Material, Inside (Non-Public)
Information ("Procedures"). They are considered a part of this Statement and
will be distributed to all appropriate personnel.
<PAGE>
EDUCATION PROGRAM. While the probability of research analysts and portfolio
managers being exposed to material, non-public information with respect to
issuers considered for investment by clients is greater than that of other
Employees, it is imperative that all Employees have a full understanding of this
Statement.
To ensure that all Employees are properly informed of and understand RPFI's
policy with respect to insider trading, the following program has been adopted:
Initial Review for New Employees. All new Employees and Personnel of
Related Entities will be given a copy of the Code of Ethics, which
includes this Statement. Each such person is required to read the Code and
acknowledge in writing that he or she will abide by its applicable
provisions. A member of the London Compliance Team will review this
Statement with each new portfolio manager, research analyst, and trader
promptly after the person=s assumption of one of these positions.
Distribution of Statement. Any time this Statement is materially revised,
copies will be distributed to all Employees and Personnel of Related
Entities.
Annual Review with Research Analysts, Portfolio Managers and Traders. A
member of the London Compliance Team will review this Statement at least
annually with RPFI portfolio managers, research analysts, and traders.
Annual Confirmation of Compliance. All Employees and Personnel of Related
Entities will be asked to confirm their understanding of and adherence to
this Statement on an annual basis.
QUESTIONS. If you have any questions with respect to the interpretation or
application of this Statement generally or in connection with a specific issuer,
you should consult with the London Compliance Team, RF Group Compliance, JF
Compliance or a member of the Baltimore Legal Department.
<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
SECURITIES TRANSACTIONS
BACKGROUND INFORMATION.
Legal Requirement. In accordance with the requirements of the securities
laws of the United States (i.e., the Securities Exchange Act of 1934,
the Investment Company Act of 1940, the Investment Advisers Act of 1940
and the Insider Trading and Securities Fraud Enforcement Act of 1988)
and the various United Kingdom laws and regulations, Rowe Price-Fleming
International, Inc. ("RPFI") and the mutual funds which it manages
("RPFI Funds") have adopted this Statement of Policy on Securities
Transactions ("Statement"). A similar Statement ("TRPA Statement") has
been adopted by T. Rowe Price Associates, Inc. ("Price Associates"), its
other affiliated companies and the Price Funds. Funds sponsored and
managed by Price Associates or RPFI may be referred to collectively in
this Statement as the "Price Funds."
RPFI's Fiduciary Position. As an investment adviser, RPFI is in a
fiduciary position which requires it to act with an eye only to the
benefit of its clients, avoiding those situations which might place, or
appear to place, the interests of RPFI or its officers, directors or
employees in conflict with the interests of clients.
Purpose of Statement. The Statement was developed to help guide RPFI and
its officers, non-affiliated directors and employees and the independent
directors of the RPFI Funds and Personnel of Related Entities in the
conduct of their personal investments and to:
o eliminate the possibility of a transaction occurring that
the United States Securities and Exchange Commission or
other regulatory bodies would view as illegal, such as
Front Running (see definition below);
o avoid situations where it might appear that RPFI or the
RPFI Funds or any of their officers, directors or
employees had personally benefitted at the expense of a
client or fund shareholder or taken inappropriate
advantage of their fiduciary positions; and
o prevent, as well as detect, the misuse of material, non-public
information.
All those covered by this Statement are urged to consider the reasons
for the adoption of this Statement. RPFI's and the RPFI Funds'
reputations could be adversely affected as the result
<PAGE>
of even a single transaction considered questionable in light of the
fiduciary duties of RPFI and the independent directors of the RPFI
Funds.
Front Running. Front Running is illegal. It is generally defined as the
purchase or sale of a security by an officer, director or employee of an
investment adviser or mutual fund in anticipation of and prior to the
adviser effecting similar transactions for its clients in order to take
advantage of or avoid changes in market prices effected by the clients'
transactions.
ETHICS COMMITTEE. RPFI has established an Ethics Committee which is
responsible for the administration of this Statement. Its members are
Martin Wade (London) and Henry Hopkins and M. David Testa (Baltimore).
LONDON COMPLIANCE OFFICER. The Ethics Committee has designated the London
Compliance Team to carry out the compliance functions described in this
Statement. The members of the London Compliance Team include Carol Eve and
Rachel Dickens.
PERSONS SUBJECT TO STATEMENT. The provisions of this Statement apply to the
following, who will be referred to as "Covered Persons." In the case of an
individual, the term "Covered Person" includes the individual's spouse, minor
children, and certain other relatives, as further described on page 4-5 of this
Statement.
RPFI. RPFI for its own account, including sponsored retirement plans
of the firm, if any.
RPFI Employees and Officers. Each officer and employee of RPFI
("Employees"). Employees shall be divided into the following categories:
Employees stationed in RPFI's Buenos Aires, Paris and London
offices will be referred to as "London Employees";
Employees stationed in RPFI's Hong Kong, Singapore and Tokyo
office will be referred to as "Hong Kong Employees";
Employees stationed in RPFI's Baltimore office will be referred
to as "Baltimore Employees". Baltimore Employees are subject to
all the provisions of the TRPA Statement, including its prior
clearance and various reporting requirements. Therefore, although
Baltimore Employees will be subject to this Statement's general
principles, they will not be subject to the Statement's prior
clearance or reporting requirements or the restrictions on the
use of non-affiliated brokers. The TRPA Statement is considered a
part of this Statement.
Certain Temporary Workers. These workers include:
o Any temporary or consultant when his or her assignment at RPFI
exceeds
<PAGE>
or will exceed four weeks or when his or her cumulative assignments
exceed eight weeks over a twelve-month period; and
o Any contingent worker immediately at the time of
engagement if his or her assignment is more than
casual in nature or if he or she will be exposed to
the kinds of information and situations that would
create conflicts on matters covered in the Code.
Personnel of Related Entities. Any officer, director or employee of one
of the entities ("Related Entities") listed below ("Personnel of Related
Entities") 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 any one of RPFI's clients, or whose
functions or duties relate to the making of any such recommendation with
respect to the purchase or sale of securities by any one or more of
RPFI's clients.
o Robert Fleming Holdings Limited, o Jardine Fleming
International Limited, o Jardine Fleming Holdings Limited,
or o Any other company in a control relationship to RPFI.
The London Compliance Team will keep a record of all such Related Entity
Personnel. This list, which shall be revised to reflect any changes on a
quarterly basis, shall be sent to the Compliance Section of the Legal
Department in Baltimore ("Baltimore Compliance").
Non-Affiliated Directors of RPFI. Directors of RPFI who are neither
officers nor employees of RPFI or Price Associates and who, in
connection with their regular functions or duties, do not make,
participate in, or obtain information regarding the purchase or sale of
a security by any one of RPFI=s clients, or whose functions or duties do
not relate to the making of any such recommendation with respect to the
purchase or sale of securities by any one of RPFI=s clients. They are
subject to:
o the Statement's general principles;
o the Statement=s transaction reporting requirements;
o dealing with clients restrictions;
o co-investing restrictions;
o investment in client investment partnership restrictions; and
o 1/2% ownership reporting requirements
They are exempt from:
o prior clearance requirements; and
o the requirements and rules dealing with:
o new issues;
<PAGE>
o investment clubs;
o private placements;
o short sales;
o trading activity;
o non-affiliated brokers;
o brokerage confirmations, periodic account statements and
notification of
broker/dealer accounts;
o the 60 day rule; and
o disclosure of personal securities holdings.
However, they are subject to personal securities transaction rules
adopted by their respective employers (Robert Fleming Holdings or
Jardine Fleming and their affiliates). In addition, any Non-Affiliated
Director who, in connection with his or her regular duties, receives
information that would create conflicts on matters covered by the Code,
will be treated as Personnel of Related Entities.
Independent Directors of RPFI Funds. The Independent Directors of the
RPFI Funds include those directors of the RPFI Funds who are not deemed
to be "interested persons" of RPFI. The Independent Directors of the
RPFI Funds are prohibited from owning the stock of Price Associates.
They are subject to:
o the Statement's general principles;
o the Statement=s transaction reporting requirements;
o dealing with clients restrictions;
o co-investing restrictions;
o investment in client investment partnership restrictions; and
o 1/2% ownership reporting requirements
They are exempt from:
o prior clearance requirements; and
o the requirements and rules dealing with:
o new issues;
o investment clubs;
o private placements;
o short sales;
o trading activity;
o non-affiliated brokers;
o brokerage confirmations, periodic account statements and
notification of broker/dealer accounts;
o the 60 day rule; and
o disclosure of personal securities holdings.
<PAGE>
Retired Employees of RPFI. Each retired officer, director or employee of
RPFI who continues to receive investment research information from RPFI
will be considered an Employee under this Statement.
Investment Personnel. The term "Investment Personnel" includes
those Employees and Personnel of Related Entities:
o who are authorized to make investment decisions or to
recommend securities transactions on behalf of the Firm's
clients (e.g., separate account managers and members of the
RPFI Fund Advisory groups and Cash Management Team);
o who are research analysts; and
o who are traders for RPFI.
QUESTIONS ABOUT THE STATEMENT. Covered Persons are urged to seek the advice of
Martin Wade or Henry Hopkins or their designees when they have questions as to
the application of this Statement to their individual circumstances.
TRANSACTIONS SUBJECT TO STATEMENT. Except as provided below, the provisions of
this Statement apply to every securities transaction in which a Covered Person
has, or by reason of the transaction may acquire, any direct or indirect
beneficial ownership interest and over which transaction the Covered Person has
direct or indirect control. This includes a right to dividends that is separated
or separable from the underlying securities (but not merely the right to
dividends alone), and the right to acquire equity securities through the
exercise or conversion of any derivative security, whether or not presently
exercisable.
Generally, a natural person is considered to have beneficial ownership in
securities:
o held in his or her name
o held in the name of a member of the person's immediate
family who resides with the person
o held by a trust for which the person acts as trustee, if
at least one trust beneficiary is a member of the person's
immediate family
o held by a trust of which the person is a beneficiary where
the trustee does not exercise exclusive investment control
<PAGE>
o held by a general or limited partnership of which the
person is a general partner
o held by a general or limited partnership of which the
person is a limited partner, if he or she has some control
over portfolio securities held by the partnership
o held by any entity or person (including partnership,
corporation or trust) if the person makes the investment
decisions for that entity or person.
If a Covered Person is involved in an investment account for a family situation,
trust, partnership, corporation, etc., which the Covered Person feels should not
be subject to the Statement's prior approval and/or reporting requirements, a
request for clarification or exemption may be submitted to the London Compliance
Team, which will refer the matter to a member of the Ethics Committee for
decision. An example of this type of situation is where a person has a direct or
indirect beneficial interest in an account, but has no direct or indirect
control over the investment management process. Any such request for
clarification or exemption should name the account, the interest of the Covered
Person in such account, the persons or firms responsible for its management, and
the basis upon which the exemption is being claimed.
PRIOR CLEARANCE OF SECURITIES TRANSACTIONS (OTHER THAN PRICE
ASSOCIATES' STOCK). Except as provided below, Covered Persons are required to
obtain prior clearance before directly or indirectly initiating, recommending,
or in any way participating in the purchase or sale of a security in which the
Covered Person has, or by reason of such transaction may acquire, any beneficial
interest. Prior clearance must be obtained regardless of how or through what
entity the transaction is effected. Receiving prior clearance does not relieve a
Covered Person from conducting his or her personal securities transactions in
full compliance with the Code including its prohibition on trading while in
possession of material, inside information, and with applicable law, including
the prohibition on Front Running (see page 4-1 for definition of Front Running).
Persons Exempt From Prior Clearance Requirements. These prior clearance
requirements (except the requirements applying to Price Associates=
stock) do not apply to the Non- Affiliated Directors of RPFI who, in
connection with their regular functions or duties, do not make,
participate in, or obtain information regarding the purchase or sale of
a security by any one of RPFI=s clients, or whose functions or duties do
not relate to the making of any such recommendation with respect to the
purchase or sale of securities by any one of RPFI=s clients, or to the
Independent Directors of the RPFI Funds (who are prohibited from owning
Price Associates= stock). Those Covered Persons who are subject to these
and related requirements are hereinafter referred to as "Clearing
Covered Persons."
If a Clearing Covered Person has been denied prior clearance, he or she
may apply to the London Compliance Team, which will refer the matter to
a member of the Ethics Committee for a waiver. All such requests must be
in writing and must fully describe the basis upon which the waiver is
being requested. Clearing Covered Persons should be aware that waivers
<PAGE>
are not routinely granted.
Transactions Exempt From Prior Clearance Requirements. All
securities transactions must receive prior clearance except
the following:
Open-ended Collective Investment Schemes, including Unit
Trusts and U.S. Mutual Funds. Purchases or redemptions of
shares of any open-ended collective investment scheme, unit
trust and U.S. open-end investment companies, including the
Price Funds, and similar foreign-registered investment
vehicles.
Government Obligations. Purchases or sales of direct U.S. or
Foreign Government obligations.
Securities of Robert Fleming Holdings, Ltd. Purchases or
sales of the securities of Robert Fleming Holdings, Ltd.
directly from or to the issuer.
Regular Savings Schemes. Purchases effected through a systematic
investment plan involving the automatic investment of a set
amount on predetermined dates (i.e., a regular savings scheme or
savings plan), provided that, if the underlying investment(s) in
the scheme or plan is not exempt from prior clearance, the London
Compliance Team has been previously notified by the Clearing
Covered Person that he or she will be participating in the scheme
or plan and any purchase to initiate participation in the scheme
or plan receives prior clearance.
Dividend Reinvestment Plans. Purchases effected through an
established Dividend Reinvestment Plan ("DRP"), provided the
London Compliance Team is first notified by the Clearing Covered
Persons that he or she will be participating in the DRP. A
Clearing Covered Person=s purchase of share(s) of the issuer to
initiate participation in the DRP or his or her purchase of
shares in addition to those purchased with dividends (a
"Connected Purchase") must receive prior clearance.
Corporate Actions (e.g., stock splits and similar transactions).
The acquisition of additional shares of an existing holding
through the reinvestment of income dividends and capital gains in
mutual funds and similar investment vehicles, stock splits, stock
dividends, exercise of rights, exchanges or conversions.
Mandatory Tenders. Purchases and sales of securities
pursuant to a mandatory tender
offer.
Payroll Deduction Plans. Purchases or exchanges by a Clearing
Covered Person=s spouse pursuant to a payroll deduction plan,
provided the London Compliance Team has been previously notified
by the Clearing Covered Person that the spouse will be
participating in the payroll deduction plan.
<PAGE>
Exercise of Stock Option of Corporate Employer by Spouse.
Transactions involving the exercise by a Clearing Covered
Person=s spouse of a stock option issued by the corporation
employing the spouse.
Inheritances. Acquisition of securities through inheritance.
Gifts. Acquisition or disposition of securities by gift.
Procedure for Obtaining Prior Clearance. Requests for prior clearance
may be made orally, by electronic mail, or by submitting a written form
to the London Compliance Team. The London Compliance Team, which is
responsible for processing all such requests, will enter on a standard
form entitled "Confirmation of Prior Clearance of Proposed Security
Transactions Form ("Confirmation Form") the following information: (i)
the date of the request, (ii) the person making the request, (iii) the
name of the security, (iv) the number of shares or amount of bond
involved, (v) the nature of the transaction, i.e., whether the
transaction is a purchase or sale, (vi) whether the request was approved
or disapproved, and the date and time of the approval or disapproval
(vii) if disapproved, the reason for the disapproval, (viii) if approval
was granted pursuant to an exemption being granted, the name of the
person granting the exemption, and (ix) whether the value of the
requested transaction exceeds U.S. $100,000.
Responses to all requests will be confirmed by the London Compliance
Team by electronic mail or on a standard written form documenting the
request and its approval/disapproval.
Requests will normally be processed on the same day; however, additional
time may be required.
Effectiveness of Prior Clearance. Prior clearance of a securities
transaction is effective for three (3) business days from and including
the date the clearance is granted. If the proposed securities
transaction is not executed within this time, a new clearance must be
obtained.
Reasons for Disallowing Proposed Transactions. A proposed
security transaction will be disapproved by the London
Compliance Team if:
Pending Client Orders by RPFI. An order has been placed by
RPFI to purchase or sell the security.
Pending Client Orders by Price Associates. An order has been
placed by Price Associates to purchase or sell the security.
Purchases and Sales Within Seven (7) Calendar Days. The security
has been purchased or sold by any client of RPFI or Price
Associates within the seven (7) calendar days immediately prior
to the date of the proposed transaction. For example,
<PAGE>
if a client transaction occurs on Monday, a Clearing Covered
Person may not purchase or sell that security until Tuesday of
the following week. If all clients have eliminated their holdings
in a particular security, the seven-day restriction is not
applicable to a Clearing Covered Person's transactions in that
security.
Securities Subject to Internal Trading Restrictions. The
issuer has been placed on
the RPFI Restricted List.
TRANSACTIONS IN STOCK OF PRICE ASSOCIATES. Because Price Associates is a public
company, ownership of its stock subjects its officers, inside and independent
directors, and employees to special legal requirements under the United States
securities laws. These requirements have been extended to apply to Covered
Persons, except the Independent Directors of the RPFI Funds, who are prohibited
from owning the stock of Price Associates. Each Covered Person (excluding the
Independent Directors of the RPFI Funds) is responsible for his or her own
compliance with these requirements. Price Associates= stock may be purchased
through any broker- dealer, including T. Rowe Price Investment Services, Inc=s
TRP Brokerage division, as long as all other requirements have been met. In
connection with these legal requirements, RPFI has adopted the following rules
and procedures:
Quarterly Earnings Report. Covered Persons must refrain from initiating
transactions in Price Associates' stock in which they have a beneficial
interest, generally from the sixth trading day following the end of the
quarter (or such other date as management shall from time to time
determine) until the third trading day following the public release of
earnings. Employees will be notified in writing through the Office of
the Secretary of Price Associates ("Secretary") from time to time as to
the controlling dates.
Prior Clearance. Covered Persons are required to obtain clearance prior
to effecting any proposed transaction (including gifts and transfers)
involving shares of Price Associates' stock owned beneficially. Requests
for prior clearance must be in writing on the form entitled
"Notification of Proposed Transaction" (available from the Price
Associates= Corporate Records Department) and submitted to the Secretary
who is responsible for processing and maintaining the records of all
such requests. Receiving prior clearance does not relieve Covered
Persons from conducting their personal securities transactions in full
compliance with the applicable securities laws and regulations,
including the prohibition on trading while in possession of material,
inside information. Transactions in Price Associates= stock effected
through certain options exercises are exempted from the application of
the 60 day rule. See p. 4-17.
All Covered Persons must obtain prior clearance of any
transaction involving Price Associates= stock from the
Office of the Secretary of Price Associates. Dividend
Reinvestment Plans. Purchases of Price Associates= stock
effected through a
<PAGE>
dividend reinvestment plan need not receive prior clearance if the
Secretary=s office has been previously notified by the Employee that he
or she will be participating in that plan. Reporting of transactions
effected through that plan need only be made quarterly, except that
Covered Persons who are subject to Section 16 of the United States
Securities Exchange Act of 1934 reporting must report such transactions
monthly.
Effectiveness of Prior Clearance. Prior clearance of transactions in
Price Associates' stock is effective for five (5) business days from and
including the date the clearance is granted, unless (i) advised to the
contrary by the Secretary prior to the proposed transaction, or (ii) the
person receiving the approval comes into possession of material,
non-public information concerning the firm. If the proposed transaction
in Price Associates' stock is not executed within this time period, a
new clearance must be obtained.
Reporting of Disposition of Proposed Transaction. Covered Persons must
notify the Secretary of the disposition (whether the proposed
transaction was effected or not) of each transaction involving shares of
Price Associates= stock owned directly within two business days of its
execution, or within seven days of the date of prior clearance, if not
executed. Insider Reporting and Liability. Under current rules, certain
officers, directors and 10% stockholders of a publicly traded company
("Insiders") are subject to the requirements of Section 16. The
Secretary will inform you if you are an Insider. If you are an Insider,
you should refer to the TRPA Code for further information on reporting
requirements for Insiders. Insiders include the directors and certain
managing directors of Price Associates.
Liability for Short-Swing Profits. Under United States securities laws,
profit realized by certain officers, as well as directors and 10%
stockholders of a company (including Price Associates) as a result of a
purchase and sale (or sale and purchase) of stock of the company within
a period of less than six months must be returned to the firm upon
request.
USE OF NON-AFFILIATED BROKERS.
Clearing Covered Persons must effect all their non-U.S. personal securities
transactions through the trading desks of Robert Fleming and Jardine Fleming,
respectively, unless otherwise exempted. The following transactions are exempt
from this requirement without approval by the London Compliance Team if approved
by RF Compliance or JF Compliance, as appropriate:
Open-ended Collective Investment Schemes, including Unit
Trusts and U.S. Mutual Funds
New Issues
Investments in Investment Trusts made through Personal
Equity Plans unless self-
managed
<PAGE>
Exercise of Options and Warrants
Acquisitions of shares in investment trusts under any
dividend reinvestment or regular savings scheme
Exercise of Price Associates= stock options, including cashless
exercises, if exercised through BT-Alex Brown and duplicate
account information is sent directly to RF Group Compliance by
BT-Alex Brown.
Application for any other exemption from this requirement, including for a
Clearing Covered Person=s spouse's securities transactions if the spouse is
subject to conflicting requirements due to his or her employment, must be made
to the London Compliance Team. If the London Compliance Team approves the
application, it will forward it to RF Group Compliance or to JF Compliance, as
appropriate, for its approval as well.
BROKERAGE CONFIRMATIONS AND PERIODIC ACCOUNT STATEMENTS. For
transactions other than those effected through the Robert Fleming and Jardine
Fleming trading desks, Clearing Covered Persons must request broker-dealers
executing transactions in which they are considered to have beneficial ownership
and control (see page 4-5 for definition of Beneficial Ownership) to send to the
attention of the London Compliance Team the following documents:
Duplicate Confirmations. A duplicate confirmation with
respect to each and every reportable transaction (see pp.
4-9, 4-11, 4-12), including any transaction in Price
Associates' stock.
Periodic Statements. A copy of all periodic statements for
all such securities accounts.
PERMISSION REGARDING BROKER/DEALER ACCOUNTS (OTHER THAN WITH
ROBERT FLEMING AND JARDINE FLEMING).
Clearing Covered Persons. Clearing Covered Persons must contact the
London Compliance Team to obtain RF Group Compliance or JF Compliance
permission, as appropriate, before opening or trading in a securities
account with any broker/dealer, including T. Rowe Price Investment
Services, Inc.=s TRP Brokerage division.
New Clearing Covered Persons. New Clearing Covered Persons must apply to
RF Group Compliance or JF Compliance, as appropriate, through the London
Compliance Team for permission to maintain any existing securities
accounts with any broker/dealer promptly upon joining the firm.
REPORTING REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK).
Transactions That Must Be Reported. Other than for the
transactions specified below as exempt, every Covered Person
is required to file with the London Compliance Team (or, in
<PAGE>
the case of the Independent Directors of the RPFI Funds, with Baltimore
Compliance) a report of the following securities transactions:
Cleared Transactions. Any transaction that is subject to the
prior clearance requirements, including purchases in underwritten
new or secondary issues, purchases and sales of shares of
Investment Trusts, and private placement transactions.
Securities of Robert Fleming Holdings, Ltd. Transactions
involving the purchase or sale of the securities of Robert
Fleming Holdings, Ltd. directly from or to the issuer.
Regular Savings Schemes. Transactions involving the purchase of
securities by a Covered Person pursuant to a systematic
investment plan, (i.e., a regular savings scheme or savings plan)
if the underlying investment(s) is not exempt from prior
clearance. Reporting of these transactions must be made promptly
after the Covered Person receives his or her reports regarding
these transactions (e.g., if the Covered Person receives reports
semi-annually only, he or she must report the transactions on
that basis).
Mandatory Tenders. Purchases and sales of securities
pursuant to a mandatory tender offer.
Payroll Deduction Plans/Spousal Stock Option. Transactions
involving the purchase or exchange of securities by a Covered
Person's spouse pursuant to a payroll deduction plan or the
exercise by a Covered Person's spouse of a stock option issued by
the spouse's employer. Reporting of these transactions must be
made promptly after the Covered Person receives his or her
reports regarding these transactions (e.g., if the Covered Person
receives reports semi-annually only, he or she must report the
transactions on that basis).
Inheritances. Acquisition of securities through inheritance.
Gifts. Acquisition or disposition of securities by gift.
Transactions Exempt From Reporting. The following
transactions are exempt from the reporting requirements:
Open-ended Collective Investment Schemes, including Unit Trusts
and U.S. Mutual Funds. Purchases or redemptions of shares of any
open-ended collective investment schemes, unit trust and U.S.
open-end investment companies, including the Price Funds and
similar, foreign-registered investment vehicles, except that any
Covered Person who serves as the president or executive vice
president of a Price Fund must report his or her beneficial
ownership or control of shares in that Fund to Baltimore
Compliance.
<PAGE>
Government Obligations. Purchases or sales of direct U.S. or
Foreign Government obligations.
Corporate Actions (e.g., stock splits and similar transactions).
The acquisition of additional shares of existing corporate
holdings through the reinvestment of income dividends and capital
gains in mutual funds and similar investment vehicles, stock
splits, stock dividends, exercise of rights, exchanges or
conversions.
Dividend Reinvestment Plans. The purchase of securities with dividends effected
through an established DRP. If, however, a Connected Purchase must receive prior
clearance (see p. 4-7), that transaction must also be reported.
Report Form. Reports should be made either:
For transactions conducted through Robert Fleming or Jardine
Fleming trading desks -- by submitting a printout, signed by the
reporting person, from the Robert Fleming or Jardine Fleming
mainframe that reports all transactions conducted through the
pertinent Robert Fleming or Jardine Fleming trading desk; or
For transactions not conducted through Robert Fleming or Jardine
Fleming trading desks -- on the form designated "Rowe
Price-Fleming International, Inc. Report of Personal Securities
Transactions," a supply of which is available from the London
Compliance Team, unless a transaction is executed through a
broker-dealer that sends duplicate confirmations and account
statements regarding the transaction to the London Compliance
Team or Baltimore Compliance, as required; when such duplicate
reporting occurs, the Covered Person does not need to make a
further report.
When Reports are Due. A securities transaction report must be filed
within ten (10) calendar days after the end of the calendar quarter,
regardless of whether there have been any reportable transactions.
London Employees, Personnel of Related Entities, and the Non-affiliated
Directors of RPFI must file these reports directly with the London
Compliance Team, which shall compare each signed report with the
appropriate prior clearance record. Hong Kong Employees must file these
reports with JF Compliance. JF Compliance shall forward the completed
signed reports promptly to the London Compliance Team, which will
compare each signed report with the appropriate prior clearance record.
The London Compliance Team will send a copy of all such reports to
Baltimore Compliance quarterly.
REPORTING REQUIREMENTS OF THE INDEPENDENT DIRECTORS OF THE RPFI
FUNDS. The Independent Directors of the RPFI Funds are subject to similar
reporting requirements as other Covered Persons. Specifically, each Independent
Director must file a report for each quarter's transactions with Baltimore
Compliance no later than ten (10) calendar days after the end
<PAGE>
of the calendar quarter in which the transactions were effected. Reports must be
filed for each quarter, regardless of whether there have been any reportable
transactions. Baltimore Compliance will send the Independent Directors of the
RPFI Funds a reminder letter and Reporting Form approximately ten (10) days
prior to the end of each calendar quarter.
MISCELLANEOUS RULES REGARDING PERSONAL SECURITIES TRANSACTIONS.
Dealing with Clients. Covered Persons may not, directly or indirectly,
sell to or purchase from a RPFI client any security. This prohibition
does not preclude the purchase or redemption of shares of any mutual
fund that is a client of RPFI.
Client Investment Partnerships.
Co-Investing. Covered Persons and the RPFI Funds are not
permitted to co-invest in client investment partnerships of RPFI,
Price Associates, or their affiliates, such as International
Partners, Strategic Partners and Threshold.
Direct Investment. The Independent Directors of the RPFI Funds
are not permitted to invest as limited partners in client
investment partnerships of RPFI, Price Associates, or their
affiliates.
Large Capitalization Exemption. Although subject to prior clearance,
transactions involving securities in certain large companies, within the
parameters set by the Ethics Committee, will be approved under normal
circumstances ("Large Capitalization Securities").
Transactions Involving Large Capitalization Securities. This
exemption applies to transactions involving no more than $10,000
(all dollar references are to U.S. dollars) or the nearest round
lot (if the amount of the transaction only marginally exceeds
$10,000) per security per week in securities of companies with
market capitalizations of $5 billion or more.
Transactions Involving Options on Large Capitalization
Securities. Clearing Covered Persons may not purchase uncovered
put options or sell uncovered call options unless otherwise
permitted under the "Options and Futures" discussion on p. 4-16.
Otherwise, in the case of options on an individual security
qualifying for the Large Capitalization Exemption, a Clearing
Covered Person may trade the greater of 5 contracts or sufficient
option contracts to control $10,000 in the underlying security;
thus a Clearing Covered Person may trade 5 contracts even if this
permits the Clearing Covered Person to control more than $10,000
in the underlying security. Similarly, the Clearing Covered
Person may trade more than 5 contracts as long as the number of
contracts does not permit him or her to control more than $10,000
in the underlying security.
<PAGE>
These parameters are subject to change by the Ethics Committee.
Margin Accounts. Clearing Covered Persons are not permitted to trade on margin
for the purchase of securities.
Underwritten New and Secondary Issues.
Investment Personnel. Although subject to prior clearance, Investment Personnel
may purchase securities which are the subject of an underwritten new or
secondary issue if:
o The issue is open to the general public and
allocations are made by the issuer / syndicate on a
purely random basis (lottery) or on a pro- rata
basis per application ( collectively "Pro-rata
Offering"); and
o No order for the purchase of any such securities has been entered by RPFI or
Price Associates on behalf of any client; and
o The number of shares to be purchased is commensurate with the normal size and
activity of the Investment Personnel's account; and
o The Investment Personnel wishing to purchase
the securities will not participate in the
firm=s investment decision regarding any
client investment in the underwritten issue.
This restriction extends to corporate and municipal debt
securities.
Non-Investment Personnel. Clearing Covered Persons other than
Investment Personnel ("Non-Investment Personnel") may purchase
securities in a Pro-rata Offering if the first three of the four
conditions described above are met. Non-Investment Personnel may
also purchase securities, including corporate and municipal debt
securities, which are the subject of an underwritten new or
secondary issue (and are not part of a Pro-rata Offering) if
prior approval has been obtained from the London Compliance Team.
In considering such a request for approval, the London Compliance
Team will determine whether the proposed transaction presents a
conflict of interest with any of the firm's clients or otherwise
violates the Code. The London Compliance Team will also consider
whether:
1. The purchase is made through the Non-Investment Personnel's regular broker,
bank, or from a syndicate member through a general solicitation or subscription
form, if relevant;
2. The number of shares to be purchased is commensurate with the normal size and
activity of the Non-Investment Personnel's account; and
<PAGE>
3. If the transaction is a public offering in the
United States, it otherwise meets the restrictions
on free riding and withholding set by the National
Association of Securities Dealers, Inc.
All Personnel. Neither Investment Personnel nor Non-Investment
Personnel will be permitted to purchase in an underwritten new or
secondary issue if any of RPFI=s or Price Associates= clients are
prohibited from doing so. This prohibition will remain in effect
until these clients have had the opportunity to purchase in the
secondary market once the underwriting is completed -- commonly
referred to as the aftermarket. In addition, the 60 day rule
applies to transactions in securities purchased in an
underwritten new or secondary issue.
Japanese New Issues. All Clearing Covered Persons are prohibited from purchasing
a security which is the subject of an underwritten new or secondary issue in
Japan.
Investment Clubs. Clearing Covered Persons may not form or participate
in a stock or investment club unless prior written approval has been
obtained from a member of the Ethics Committee. All transactions by such
a stock or investment club are subject to the same prior clearance and
reporting requirements applicable to an individual Clearing Covered
Person=s trades.
Private Placements.
Prior Clearance Procedure. Clearing Covered Persons may not
invest in a private placement of securities, including the
purchase of limited partnership interests, unless prior written
approval has been obtained from a member of the Ethics Committee
and the Baltimore Legal Department. In considering such a request
for approval, the member of the Ethics Committee and the
Baltimore Legal Department will determine whether the investment
opportunity (private placement) should be reserved for the firm's
clients, and whether the opportunity is being offered to the
employee by virtue of his or her position with the firm. The
member of the Ethics Committee or the Baltimore Legal Department
will inform the London Compliance Team whenever such an
investment has been approved. The London Compliance Team will
send written notice of the approval to Baltimore Compliance, and
to RF Group Compliance or JF Compliance, as appropriate.
Continuing Obligation. Any person who has received approval to
invest in a private placement of securities and who, at a later
date, anticipates participating in the firm's investment decision
process regarding the purchase or sale of securities of the
issuer of that private placement on behalf of any client, must
immediately disclose his or her prior investment in the private
placement to the London Compliance Team.
Options and Futures.
<PAGE>
Before engaging in options and futures transactions, Clearing Covered Persons
should understand the impact that the 60-day Rule may have on their ability to
close out a position (see page 4-17).
Options and Futures on Securities and Indices Not Held by RPFI's
or Price Associates= Clients. There are no specific restrictions
with respect to the purchase, sale or writing of put or call
options or any other option or futures activity, such as multiple
writings, spreads and straddles, on securities of issuers (and
options or futures on such securities) which are not held by any
of RPFI's or Price Associates= clients.
Options on Securities of Companies Held by RPFI=s or Price
Associates= Clients. With respect to options on securities of
issuers which are held by any of RPFI=s or Price Associate=s
clients, it is the Firm=s policy that a Clearing Covered Person
should not profit from a price decline of a security owned by a
client. Therefore, such a Clearing Covered Person may: (i)
purchase call options and sell covered call options and (ii)
purchase covered put options and sell put options. A Clearing
Covered Person may not purchase uncovered put options or sell
uncovered call options, even if the issuer of the underlying
security is eligible for the Large Capitalization Exemption,
unless purchased in connection with other options on the same
security as part of a straddle, combination or spread strategy
which is designed to result in a profit to the Clearing Covered
Person if the underlying security rises in or does not change in
value. The purchase, sale and exercise of options are subject to
the same restrictions as those set forth with respect to
securities, i.e., the option should be treated as if it were the
common stock itself.
Other Options and Futures Held by RPFI's or Price Associates=
Clients. Any other option or futures transaction with respect to
securities held by any of RPFI's or Price Associates= clients
will be approved or disapproved on a case-by-case basis after due
consideration is given as to whether the proposed transaction or
series of transactions might appear to or actually create a
conflict with the interests of any of RPFI's or Price Associates=
clients. Such transactions include transactions in futures and
options on futures involving financial instruments regulated
solely by the United States Commodity Futures Trading Commission
("CFTC").
Short Sales. Clearing Covered Employees may not sell any security short which is
owned by any client of RPFI or Price Associates.
Trading Activity.
General Rule. Clearing Covered Persons are discouraged from engaging in a
pattern
<PAGE>
of securities transactions which are either:
1. So excessively frequent as to potentially impact the person's ability to
carry out his or her assigned responsibilities, or
2. Involve securities positions which are disproportionate to the person's net
assets.
60 Day Rule. Robert Fleming and Jardine Fleming do not permit
Clearing Covered Persons to engage in any security transaction
(even a sale at a loss) unless the security has been held for 60
days. Under U.S. procedures, Clearing Covered Persons are
prohibited from profiting from the purchase and sale or sale and
purchase of the same (or equivalent) securities within 60
calendar days. An "equivalent" security means any option,
warrant, convertible security, stock appreciation right, or
similar right with an exercise or conversion privilege at a price
related to the subject security, or similar securities with a
value derived from the value of the subject security.
The 60 day rule does not apply:
o to any transaction exempt from prior clearance (see p. 4-6);
o to the purchase and sale or sale and purchase of exchange traded index
options; and
o to the cashless exercise of options/same day sale of
Price Associates= and/or Robert Fleming stock if the
options are "in the money" and have been held for at
least 60 days
Clearing Covered Persons may apply for a waiver from the 60 day
rule to the London Compliance Team, which will refer the matter
to a member of the Ethics Committee and to RF Group Compliance or
JF Compliance, as appropriate. All such requests must be in
writing and must fully describe the basis upon which the waiver
is being requested; such waivers are not routinely granted.
Investments in Non-Listed Securities Firms. Clearing Covered Persons may not
purchase or sell the shares of a broker/dealer, underwriter or a U.S. or other
government registered investment adviser unless that entity is traded on a
recognized U.S., U.K., or foreign exchange, listed as a NASDAQ/NMS stock, or
permission is given under the Private Placement Procedures (See p. 4-15).
OWNERSHIP REPORTING REQUIREMENTS - ONE-HALF OF ONE PERCENT OWNERSHIP. If a
Covered Person owns more than 2 of 1% of the total outstanding shares of a
public or private company, he or she must immediately report in writing such
fact to the London Compliance Team, providing the name of the company and the
total number of such company's shares beneficially owned. The London Compliance
Team will inform Baltimore Compliance about
<PAGE>
any such ownership promptly.
DISCLOSURE OF PERSONAL SECURITIES HOLDINGS BY CERTAIN EMPLOYEES.
Promptly after commencement of employment or appointment and thereafter on an
annual basis (to be provided in conjunction with the annual verification form),
each director (other than a Non- Affiliated Director, who, in connection with
his or her regular functions or duties, does not make, participate in, or obtain
information regarding the purchase or sale of a security by any one of RPFI=s
clients, or whose functions or duties do not relate to the making of any such
recommendation with respect to the purchase or sale of securities by any one or
more of RPFI=s clients), trader, portfolio manager, and research analyst of RPFI
is required to disclose in writing all securities holdings in which he or she is
considered to have beneficial ownership and control (see page 4-5 for the
definition of the term Beneficial Ownership). The form will be provided upon
commencement of employment or appointment and thereafter annually and should be
submitted directly to the London Compliance Team, which will provide a copy to
Baltimore Compliance.
CONFIDENTIALITY OF RECORDS. RPFI makes every effort to protect the privacy of
its Covered Persons in connection with Personal Securities Holdings and Personal
Securities Transaction Reports.
SANCTIONS. Strict compliance with the provisions of this Statement is considered
a basic provision of association with RPFI and the RPFI Funds. The Ethics
Committee and the London Compliance Team are primarily responsible for
administering this Statement. In fulfilling this function, the Ethics Committee
will institute such procedures as it deems reasonably necessary to monitor
Covered Persons' compliance with this Statement and to otherwise prevent and
detect violations.
Violations by Employees and Directors of RPFI. Upon discovering a
material violation of this Statement by a Covered Person other than an
Independent Director of a RPFI Fund, the Ethics Committee will impose
such sanctions as it deems appropriate or may, in its discretion, refer
the matter to the Board of Directors of RPFI to determine the
appropriate sanctions. Sanctions may include, inter alia, a letter of
censure or suspension or termination of employment, and/or officership
of the violator. In addition, the violator may be required to surrender
to RPFI, or to the party or parties it may designate, any profit
realized from any transaction that is in violation of this Statement.
All material violations of this Statement shall be reported to the Board
of Directors of RPFI and to the Board of Directors of any RPFI Fund with
respect to whose securities such violations may have been involved.
Violations by Independent Directors of RPFI Funds. Upon discovering a
material violation of this Statement by an Independent Director of a
RPFI Fund, the Ethics Committee shall report such violation to the Board
of Directors of RPFI and to the RPFI Fund Boards on which the director
serves. The RPFI Board of Directors and the RPFI Fund Boards will impose
such sanctions as they deem appropriate.
Violations by Baltimore Employees of RPFI. Upon discovering a material violation
of the Price Associates= Statement of Policy on Securities Transactions by a
Baltimore-based
<PAGE>
employee of RPFI, the Price Associates= Ethics Committee shall report
such violation to the Board of Directors of RPFI and to the Board of
Directors of any RPFI Fund with respect to whose securities such
violations may have been involved.
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March, 1999
<PAGE>
ROWE PRICE FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
CORPORATE RESPONSIBILITY
ROWE PRICE-FLEMING INTERNATIONAL, INC.=S FIDUCIARY POSITION. As an
investment adviser, Rowe Price-Fleming International, Inc. ("RPFI") is in a
fiduciary relationship with each of its clients. This fiduciary duty obligates
RPFI to act with an eye only to the benefit of its clients. Accordingly, when
managing its client accounts (whether private counsel clients, mutual funds,
limited partnerships, or otherwise), RPFI's primary responsibility is to
optimize the financial returns of its clients consistent with their objectives
and investment program.
DEFINITION OF CORPORATE RESPONSIBILITY ISSUES. Concern over the behavior of
corporations has been present since the Industrial Revolution. Each generation
has focused its attention on specific issues. Concern over the abuses of the use
of child labor in the 1800's was primarily addressed by legislative action which
mandated industrialized countries to adhere to new laws restricting and
otherwise governing the employment of children. In other instances, reform has
been achieved through shareholder action -- namely, the adoption of shareholder
proposals. The corporate responsibility issues most often addressed during the
past decade have involved:
o Ecological issues, including toxic hazards and pollution of the air
and water; o Employment practices, such as the hiring of women and
minority groups; o Product quality and safety; o Advertising practices;
o Animal testing; o Military and nuclear issues; and o International
politics and operations, including the world debt crisis, infant
formula, and
child labor laws.
CORPORATE RESPONSIBILITY ISSUES IN THE INVESTMENT PROCESS. RPFI
recognizes the legitimacy of public concern over the behavior of business with
respect to issues of corporate responsibility. RPFI's policy is to review the
merits of such issues that pertain to any issuer which is held in a client
portfolio or which is being considered for investment. RPFI believes that a
corporate management's record of identifying and resolving issues of corporate
responsibility is one of many criteria for evaluating the investment merits of
the issuer. Enlightened corporate responsibility can enhance an issuer=s long
term prospects for business success. The absence of such a policy can have the
converse effect.
<PAGE>
QUESTIONS REGARDING CORPORATE RESPONSIBILITY. Should an employee have
any questions regarding RPFI's policy with respect to a corporate responsibility
issue or the manner in which RPFI has voted or intends to vote on a proxy
matter, he or she should contact a member of the Corporate Responsibility
Committee, which is responsible for the administration of this Statement. Its
members are Martin Wade and John Ford (London) and M. David Testa (Baltimore).
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March, 1999
<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
WITH RESPECT TO COMPLIANCE WITH UNITED STATES COPYRIGHT LAWS
Purpose of Statement of Policy. To protect the interests of Rowe Price-Fleming
International, Inc. ("RPFI") and its employees, RPFI has adopted this Statement
of Policy with Respect to Compliance with Copyright Laws (AStatement@) to: (1)
inform its employees regarding the legal principles governing copyrights,
trademarks, and service marks; and (2) ensure that RPFI=s various copyrights,
trademarks, and service marks are protected from infringement.
Definition of Trademark, Service Mark, and Copyright under United States Law
Trademark. A trademark is normally a word, phrase, or symbol used to identify
and distinguish a product or a company. For example, Kleenex is a trademark for
a particular brand of facial tissues.
Service Mark. A service mark is normally a word, phrase, or symbol used
to identify and distinguish a service or the provider of a service. For
example, Invest With Confidence is a registered service mark which
identifies and distinguishes the mutual fund management services
offered by Price Associates. The words Atrademark@ and Aservice mark@
are often used interchangeably, but as a general rule a trademark is
for a tangible product, whereas a service mark is for an intangible
good or service. Because most of RPFI=s and Price Associates= business
activities involve providing services (e.g. investment management;
transaction processing and account maintenance; information, etc.),
most of RPFI=s and Price Associates= registered marks are service
marks.
Copyright. In order to protect the authors and owners of books,
articles, drawings, music, or computer programs and software, the U.S.
copyright law makes it a crime to reproduce, in any manner, any
copyrighted material without the express written permission of the
author or publisher. Under current law, all original works are
copyrighted at the moment of creation; it is no longer necessary to
register a copyright. Copyright infringements may result in judgments
of actual damages (i.e., the cost of additional subscriptions), as well
as punitive damages, which can be as high as $100,000 (U.S. dollars)
per infringement.
Registered Trademarks and Service Marks. Once RPFI has registered a trademark or
service mark with the United States Patent and Trademark Office, it has the
exclusive right to use that mark. In order to preserve rights to a registered
trademark or service mark, RPFI must (1) use the mark on a continuous basis and
in a manner consistent with the Certificate of Registration; (2) place an
encircled AR@ (7) next to the mark in the first, or most prominent, occurrence
in all publicly
<PAGE>
distributed media; and (3) take action against any party infringing upon the
mark.
Establishing a Trademark or Service Mark. The Baltimore Legal Department has the
responsibility to register and maintain all trademarks and service marks and
protect them against any infringement. If RPFI wishes to utilize a particular
word, phrase, or symbol as a trademark or service mark, the Baltimore Legal
Department must be notified as far in advance as possible so that a search may
be conducted to determine if the proposed mark has already been registered or
used by another entity. Until clearance is obtained from the Baltimore Legal
Department, no new mark should be used. This procedure has been adopted to
ensure that RPFI does not unknowingly infringe upon another company=s mark. Once
a proposed mark is cleared for use, it must be accompanied by the abbreviations
ATM@ or ASM,@ as appropriate, until it has been registered. All trademarks and
service marks which have been registered with the U.S. Patent and Trademark
Office must be accompanied by an encircled AR@ when used in any public document.
These symbols need only accompany the mark in the first or most prominent place
it is used in each publicly circulated document. Subsequent use of the same
trademark or service mark in such material does not need to be marked. The
Baltimore Legal Department maintains a written summary of all RPFI=s registered
and pending trademarks and service marks. All registered and pending trademarks
and service marks are also listed in the T. Rowe Price Style Guide. If you have
any questions regarding the status of a trademark or service mark, you should
contact the Baltimore Legal Department.
Infringement of RPFI=s Registered Marks. If an employee notices that another
entity is using a mark similar to one which RPFI has registered, the Baltimore
Legal Department should be notified immediately so that appropriate action can
be taken to protect RPFI=s interests in the mark.
Reproduction of Articles and Similar Materials for Internal Distribution, or for
Distribution to Shareholders, Clients and Others Outside the Firm. In general,
the reproduction of copyrighted material is a violation of United States law.
Exceptions under the Afair use@ doctrine include reproduction for scholarly
purposes, criticism, or commentary, which ordinarily do not apply in a business
environment. Occasional copying of a relatively small portion of a newsletter or
magazine to keep in a file, circulate to colleagues with commentary, or send to
a client with commentary is generally permissible under the Afair use@ doctrine.
Written permission from the author or publisher must be obtained by any employee
wishing to reproduce copyrighted material for internal or external distribution,
including distribution via the Internet (or the T. Rowe Price Associates=
intranet). It is the responsibility of each employee to obtain permission to
reproduce copyrighted material. Such permission must be in writing and forwarded
to the Baltimore Legal Department. If the publisher will not grant permission to
reproduce copyrighted material, then the requestor must purchase from the
publisher either additional subscriptions to the periodical or the reprints of
specific articles. The original article or periodical may be circulated as an
alternative to purchasing additional subscriptions or reprints.
Personal Computer Software Programs. Software products and on-line
information services
<PAGE>
purchased for use on RPFI=s personal computers are generally copyrighted
material under United States copyright laws and may not be reproduced without
proper authorization from the software vendor. See the RPFI Statement of Policy
With Respect to Computer Security and Related Issues (page 7-1 et seq.) for more
information.
O:\WPDATA\SARAH\CODEOFET.HIC\rpfi\CPYRT5.CDE.wpd
March, 1999
<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
WITH RESPECT TO COMPUTER SECURITY AND RELATED ISSUES
PURPOSE OF STATEMENT OF POLICY. The central role of computer systems ("Systems")
in the operations of Rowe Price-Fleming International, Inc. ("RPFI") underscores
the importance of minimizing potential loss or disruption to these systems. The
data stored on computers, as well as the specialized software programs and
systems developed for RPFI's use, are valuable assets and must be protected
accordingly. In addition, the data, programs and systems are highly
confidential. For these reasons, each office of the firm has developed computer
security measures to prevent unauthorized use, change, destruction, or
disclosure of information stored on computers, whether intentional or
unintentional. Employees in each office must familiarize themselves with and
adhere to their office's policies in this area.
PARTICIPATION ON BULLETIN BOARDS. Because communications by our firm or any of
its employees on on-line bulletin boards are subject to United States, state,
and NASD advertising regulations, unsupervised participation can result in
serious securities violations. An employee must first receive the authorization
of the Baltimore Legal Department before initiating or responding to a message
on any computer bulletin board relating to the firm, or RPFI or Price Fund, or
any investment option or service. This policy applies whether or not the
employee intends to disclose his or her relationship to the firm, whether or not
our firm sponsored the bulletin board, and whether or not the firm is the
principal focus of the bulletin board.
CONFIDENTIALITY OF SYSTEMS ACTIVITIES AND INFORMATION. Systems activities
and information stored on our firm's computers (including e-mail) may be subject
to monitoring by RPFI personnel or others. All such information, including
messages on the firm's e-mail system, are records of the firm and the sole
property of the firm. The firm reserves the right to monitor, access and
disclose for any purpose all information, including all messages sent, received,
or stored through the Systems. The use of the firm's computer Systems is for the
transaction of firm business and is for authorized users only.
By using the firm's Systems, you agree to be bound by this Statement and consent
to the access to and/or disclosure of all information, including e-mail
messages, by the firm. Employees do not have any expectation of privacy in
connection with the use of the Systems, or with the transmission, receipt, or
storage of information in the Systems. In addition, employees should understand
that e- mail sent through the Internet is not secure and could be intercepted by
a third party. Therefore, if you have a need to exchange secure e-mail using the
Internet, you should contact your Help Desk or Information Security area for
assistance.
<PAGE>
Information entered into our firm's computers but later deleted from the Systems
may continue to be maintained permanently on our firm's back-up tapes. Employees
should take care so that they do not create documents that might later be
embarrassing to them or to our firm. This policy applies to e-mail as well to
any other communication on the Systems.
APPLICATION OF U.S. COPYRIGHT LAW TO SOFTWARE PROGRAMS. Software
products and on-line information services purchased for use on RPFI=s personal
computers are generally copyrighted material under United States copyright laws
and may not be reproduced without proper authorization from the software vendor.
This includes both the software diskette(s) and any program manuals or
documentation as well as data retrievable from on-line information systems.
Unauthorized reproduction of such material or information or downloading or
printing such material is a violation of United States law, and the software
vendor can sue to protect the developer=s rights. In addition to criminal
penalties such as fines and imprisonment, civil damages can be awarded in excess
of $50,000 (U.S. dollars).
QUESTIONS REGARDING THIS STATEMENT. Employees should direct any questions
regarding this Statement to their office's Help Desk or Information Security
area or to the Baltimore Legal Department as appropriate.
<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
COMPLIANCE WITH UNITED STATES ANTITRUST LAWS
Purpose
To protect the interests of the company and its employees, Rowe
Price-Fleming International, Inc. ("RPFI") has adopted this Statement of Policy
on Compliance with United States Antitrust Laws ("Statement"). The Statement (1)
informs employees about the legal principles governing prohibited
anticompetitive activity in the conduct of RPFI=s business, and (2) establishes
guidelines for contacts with other members of the investment management industry
to avoid violations of United States antitrust laws.
The Basic Anticompetitive Activity Prohibition under United States Law
Section 1 of the United States Sherman Antitrust Act (the AAct@)
prohibits agreements, understandings, or joint actions between companies that
constitute a Arestraint of trade,@ i.e., reduce or eliminate competition.
This prohibition is triggered only by an agreement or action among two
or more companies; unilateral action never violates the Act. To constitute an
illegal agreement, however, an understanding does not need to be formal or
written. Comments made in conversations, casual comments at meetings, or even as
little as "a knowing wink," as one case says, may be sufficient to establish an
illegal agreement under the Act.
The agreed upon action must be anticompetitive. Some actions are Aper
se@ anticompetitive, while others are judged according to a Arule of reason.@
o Some activities have been found to be so inherently
anticompetitive that a United States court will not even
permit the argument that they have a procompetitive component.
Examples of such per se illegal activities are agreements
between competitors to fix prices or divide up markets into
exclusive territories.
o Other joint agreements or activities will be examined by a
court using the rule of reason approach to see if the
procompetitive results of the arrangement outweigh the
<PAGE>
anticompetitive effects. Permissible agreements among
competitors may include a buyers= cooperative, or a syndicate
of buyers for an initial public offering. In rare instances,
an association of sellers (such as ASCAP) may be permissible.
There is also an exception for joint activity designed to influence
government action. Such activity is protected by the First Amendment to the
United States Constitution. For example, members of an industry may agree to
lobby the Congress of the United States jointly to enact legislation that may be
manifestly anticompetitive.
Penalties for Violating the Sherman Act
A charge that the Act has been violated can be brought as a civil or a
criminal action. Civil damages can include treble damages, plus attorneys fees.
Criminal penalties for individuals can include fines of up to $350,000 and three
years in jail, and $100 million (U.S. dollars) or more for corporations.
Situations in Which Antitrust Issues May Arise
To avoid violating the Act, any agreement with other members of the
investment management industry regarding which securities to buy or sell and
under what circumstances we buy or sell them, or about the manner in which we
market our mutual funds and investment and other services, must be made with the
prohibitions of the Act in mind.
Trade Association Meetings and Activities. A trade association is a
group of competitors who join together to share common interests and
seek common solutions to common problems. Such associations are at a
high risk for anticompetitive activity and are closely scrutinized by
regulators. Attorneys for trade associations, such as the Investment
Company Institute, are typically present at meetings of members to
assist in avoiding violations.
Permissible Activities:
o Discussion of how to make the industry more competitive or
efficient.
o An exchange of information or ideas that have
procompetitive or competitively neutral effects, such
as: methods of protecting the health or safety of
workers; methods of educating customers and
preventing abuses; and information regarding how to
design and operate training programs.
o Collective action to petition government entities.
Activities to be Avoided:
o Any discussion or direct exchange of current information about prices,
<PAGE>
salaries, fees, or terms and conditions of sales.
Even if such information is publicly available,
problems can arise if the information available to
the public is difficult to compile or not as current
as that being exchanged.
Exception: A third party consultant can, with
appropriate safeguards, collect, compile and
disseminate some of this information, such as salary
information.
o Discussion of future business plans, strategies, or
arrangements that might be considered to involve
competitively sensitive information.
o Discussion of specific customers, markets, or territories.
o Negative discussions of service providers that could
give rise to an inference of a joint refusal to deal
with the provider (a "boycott").
Investment-Related Discussions
Permissible Activities: Buyers or sellers with a common economic
interest may join together to facilitate securities transactions that
might otherwise not occur, such as the formation of a syndicate to buy
in a private placement or initial public offering of an issuer=s stock,
or negotiations among creditors of an insolvent or bankrupt company.
Competing investment managers are permitted to serve on creditors
committees together and engage in other similar activities in
connection with bankruptcies and other judicial proceedings.
Activities to be Avoided: It is important to avoid anything that
suggests involvement with any other firm in any threats to "boycott" or
"blackball" new offerings, including making any ambiguous statement
that, taken out of context, might be misunderstood to imply such joint
action. Avoid careless or unguarded comments that a hostile or
suspicious listener might interpret as suggesting prohibited
coordinated behavior between RPFI and any other potential buyer.
Example: After an Illinois municipal bond default
where the state legislature retroactively abrogated
some of the bondholders= rights, several investment
management complexes organized to protest the state=s
action. In doing so, there was arguably an implied
threat that members of the group would boycott future
Illinois municipal bond offerings. Such a boycott
would be a violation of the Act. The investment
management firms= action led to an 18-month United
States Department of Justice investigation. Although
the investigation did not lead to any legal action,
it was extremely expensive and time consuming for the
firms and individual managers involved.
<PAGE>
If you are present when anyone outside of RPFI suggests that two or
more investors with a grievance coordinate future purchasing decisions,
you should immediately reject any such suggestion. As soon as possible
thereafter, you should notify the Baltimore Legal Department, which
will take whatever further steps are necessary.
Benchmarking. Benchmarking is the process of measuring and comparing an
organization=s processes, products and services to those of industry
leaders for the purpose of adopting innovative practices for improvement.
o Because benchmarking usually involves the direct
exchange of information with competitors, it is
particularly subject to the risk of violating the
antitrust laws.
o The list of issues that may and should not be
discussed in the context of a trade association also
applies in the benchmarking process.
o All proposed benchmarking agreements must be reviewed
by the Baltimore Legal Department before RPFI agrees
to participate in such a survey.
<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
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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
(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
<PAGE>
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 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;
<PAGE>
(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.
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.
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
<PAGE>
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.
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
*This Form may only be signed by Dana Schmidt or
Mark Geist.
TRADES MUST BE EXECUTED WITHIN TWO BUSINESS DAYS OF THE APPROVAL DATE!
<PAGE>
(No exceptions will be given for unfilled limit
orders.)
<PAGE>
<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
Reviewing
Amount/No. Nature of Officers
Date Security of Shares Price Broker Account Initials
- --------- -------- --------- ------- ------ ---------- ---------
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*
-----------------------------------------------------------
Charles Schwab Accounts
1. Account Name
Account Number
2. Account Name
Account Number
Outside Accounts (All other brokerage accounts holding
securities or mutual funds)
1. Account Name
Account Number
Firm Name
Are statements with confirms being sent to Compliance?
2. Account Name
Account Number
Firm Name
Are statements with confirms being sent to Compliance?
Accounts Managed by Investment Advisors
Name of Advisor
Account Name/Number
Are statements with confirms being sent to Compliance?
Partnerships (Limited and General)
Account Name
Are you a limited or general partner?
Can you make or influence securities investments by the partnership?
Are statements with confirms being sent to Compliance?
Private Placements or Stock Certificates Held at Home
Name of Security
Private Placement or Stock Certificate?
Acquisition Date
Employee Name: __________________Signature:_______________ Date: ____________
*New MAM employees must submit a list of all security holdings within 10 days of
their employment commencement.
<PAGE>
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 (defined in Section 2(k) of this Code) 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:
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:
(a) To employ any device, scheme or artifice to defraud the Fund;
(b) 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;
(c) To engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit on the Fund; or
(d) 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.
<PAGE>
(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 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 described in Section
2(k)(i) of this Code.
3. Statement of Principles
It is understood that the following general fiduciary principles
<PAGE>
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.
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 based on certain
quidelines set forth from time to time by the Adviser's compliance Department.
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
<PAGE>
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. Advisory Persons are subject to blackout periods 7
calendar days before and after the trade date of a Covered Security where such
Advisory Person makes, participates in, or obtains information regarding the
purchase or sale of such Covered Security for any of their client accounts. In
addition, Access Persons are prohibited from executing a transaction in a
Covered Security during a period in which there is a pending buy or sell order
on the Adviser's trading desk.
(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
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
<PAGE>
partnership established solely for investment purposes);
-An executor, trustee, guardian, or similar fiduciary advisor
(other than for a family member).
6. Reporting Requirements
Every Access Person must report to the Adviser:
(i)Initial Holdings 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.
(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 Holdings 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:
<PAGE>
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 or New Account Report
under Sections 6(a)(ii) or (iii) 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 Sections 6(a)(ii) or (iii), as the
case may be, 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
Transaction 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
(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;
<PAGE>
(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>
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANELY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MILLER ANDERSON & SHERRARD, LLP
("MAS", AND TOGETHER WITH MSDW INVESTMENT MANAGEMENT, THE "INVESTMENT
MANAGERS")
AND
MORGAN STANLEY & CO. INCORPORATED
("MS&Co.")
CODE OF ETHICS
Purposes
This Code of Ethics has been adopted by the Funds, the Investment
Managers (MAS with respect to its acting as an investment manager of Morgan
Stanley Dean Witter Universal Funds, Inc.), and MS&Co., the principal
underwriter of the Open-End Funds, in accordance with Rule 17j-1 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 affiliated persons (as defined under the Act) of such companies.
Specifically, Rule 17j-1 provides that it is unlawful for any affiliated person
of or principal underwriter for a registered investment company, or any
affiliated person of an investment adviser of or principal underwriter for a
registered investment company, in connection with the purchase or sale,
<PAGE>
directly or indirectly, by such person of a security held or to be acquired by
such registered investment company:
(a) To employ any device, scheme or artifice to defraud such
registered investment company;
(b) To make to such registered investment company any untrue
statement of a material fact or omit to state to such
registered investment company a material fact necessary in
order to make the statements made, in light of the
circumstances under which they are made, not misleading;
(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such
registered investment company; or
(d) To engage in any manipulative practice with respect to
such registered investment company.
While Rule 17j-1 is designed to protect only the interests of the Funds
and their stockholders, the Investment Managers apply the policies and
procedures described in this Code of Ethics to all employees of the Investment
Managers to protect the interests of their non-Fund clients as well
(hereinafter, where appropriate, non-Fund clients of the Investment Managers are
referred to as "Advisory Clients" and any reference to an Advisory Client(s)
relates only to the activities of employees of the Investment Managers).
The purpose of this Code of Ethics is to (i) ensure that Access Persons
conduct their personal securities transactions in a manner which does not (a)
create an actual or potential conflict of interest with the Funds' or an
Advisory Client's portfolio transactions, (b) place their personal interests
before the interest of the Funds and their stockholders or an Advisory Client or
(c) take unfair advantage of their relationship to the Funds or an Advisory
Client and (ii) provide policies and procedures consistent with the Act and Rule
17j-1 designed to give effect to the general prohibitions set forth in Rule
17j-l.
Among other things, the procedures set forth in this Code of Ethics
require that all (i) Access Persons review this Code of Ethics at least
annually, (ii) Access Persons, unless excepted by Sections 8. (d) and (e) of
this Code of Ethics, report transactions in Covered Securities, (iii) Access
Persons refrain from engaging in certain transactions, and (iv) employees of the
Investment Managers pre-clear with the Compliance Department or the trading desk
at MAS any transactions in Covered Securities.
2. Definitions
(a) "Access Person" means any director, officer or Advisory
Person of the Funds or of the Investment Managers, and any
director or officer of MS&Co., who, in the ordinary course
of business, makes, participates in or obtains information
regarding the purchase or sale of Covered Securities by the
<PAGE>
Funds.
(b) "Advisory Person" means any employee of the Funds, or of the
Investment Managers (or of any company in a control
relationship to the Funds or the Investment Managers), 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 by the Funds or an Advisory
Client, or whose functions relate to the making of any
recommendations with respect to such purchases or sales.
(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,
except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an Access Person
has or acquires.
(d) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.
(e) "Compliance Department" means the MSDW Investment Management or MAS
Compliance Department.
(f) "Covered Security" means a security as defined in Section
2(a)(36) of the Act, except that it does not include: (i)
shares of registered open-end investment companies, (ii)
direct obligations of the Government of the United States, and
(iii) bankers' acceptances, bank certificates of deposit,
commercial paper, and high quality short-term debt
instruments, including repurchase agreements.
(g) "Disinterested Director" means a director of a Fund who is not
an "interested person" of such Fund within the meaning of
Section 2(a)(19) of the Act.
(h) "Purchase or sale (or sell)" with respect to a Covered
Security means any acquisition or disposition of a direct or
indirect beneficial interest in a Covered Security, including,
inter alia, the writing or buying of an option to purchase or
sell a Covered Security.
(i) "Security held or to be acquired" means (i) any Covered
Security which, within the most recent 15 days, is or has been
held by a Fund or an Advisory Client, or is being or has been
considered by a Fund or an Advisory Client of the Investment
Managers for purchase by a Fund or an Advisory Client; and
(ii) any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security
described in this paragraph.
Prohibited Transactions
<PAGE>
(a) No Access Person or employee of the Investment Managers shall purchase
or sell any Covered Security which to his or her actual knowledge at
the time of such purchase or sale:
(i) is being considered for purchase or sale by a Fund or an
Advisory Client; or
(ii) is being purchased or sold by a Fund or an Advisory Client.
(b) No employee of the Investment Managers shall purchase or sell a Covered
Security while there is a pending "buy" or "sell" order in the same or
a related security for a Fund or an Advisory Client until that order is
executed or withdrawn.
(c) No Advisory Person shall purchase or sell a Covered Security within
seven calendar days before or after any portfolio(s) of the Funds over
which such Advisory Person exercises investment discretion or an
Advisory Client over which the Advisory Person exercises investment
discretion purchases or sells the same or a related Covered Security.
Any profits realized or unrealized by the Advisory Person on a
prohibited purchase or sale within the proscribed period shall be
disgorged to a charity.
(d) No employee ofthe Investment Managers shall profit from the purchase
and sale or sale and purchase of the same (or equivalent) Covered
Security within 60 calendar days. Any profits realized on such purchase
or sale shall be disgorged to a charity.
(e) No Access Person or employee of the Investment Managers shall purchase
any securities in an initial public offering.
(f) No employee of the Investment Managers shall purchase privately-placed
securities unless such purchase is pre-approved by the Compliance
Department. Any such person who has previously purchased privately-
placed securities must disclose such purchases to the Compliance
Department before such person participates in a Fund's or an Advisory
Client's subsequent consideration of an investment in the securities of
the same or a related issuer. Upon such disclosure, the Compliance
Department shall appoint another person with no personal interest in
the issuer, to conduct an independent review of such Fund's or such
Advisory Client's decision to purchase securities of the same or a
related issuer.
(g) No Access Person or employee of the Investment Managers shall recommend
the purchase or sale of any Covered Securities to a Fund or to an
Advisory Client without having disclosed to the Compliance Department
his or her interest, if any, in such Covered Securities or the issuer
thereof, including without limitation (i) his or her direct or indirect
beneficial ownership of any securities of such issuer, (ii) any
<PAGE>
contemplated purchase or sale by such person of such securities, (iii)
any position with such issuer or its affiliates, and (iv) any present
or proposed business relationship between such issuer or its
affiliates, on the one hand, and such person or any party in which such
person has a significant interest, on the other; provided, however,
that in the event the interest of such person in such securities or the
issuer thereof is not material to his or her personal net worth and any
contemplated purchase or sale by such person in such securities cannot
reasonably be expected to have a material adverse effect on any such
purchase or sale by a Fund or an Advisory Client or on the market for
the securities generally, such person shall not be required to disclose
his or her interest in the securities or the issuer thereof in
connection with any such recommendation.
(h) No Access Person or employee of the Investment Managers shall reveal to
any other person (except in the normal course of his or her duties on
behalf of a Fund or an Advisory Client) any information regarding the
purchase or sale of any Covered Security by a Fund or an Advisory
Client or consideration of the purchase or sale by a Fund or an
Advisory Client of any such Covered Security.
4. Pre-Clearance of Covered Securities Transactions and Permitted
Brokerage Accounts
No employee of MSDW Investment Management shall purchase or sell
Covered Securities without prior written authorization from its Compliance
Department. No employee of MAS shall purchase or sell Covered Securities without
prior written authorization from the appropriate trading desk. Pre-clearance of
a purchase or sale shall be valid and in effect only for the business day in
which such pre-clearance is given; provided, however, that the approval of an
unexecuted purchase or sale is deemed to be revoked when the employee becomes
aware of facts or circumstances that would have resulted in the denial of
approval of the approved purchase or sale were such facts or circumstances made
known to the Compliance Department or MAS trading desk, as appropriate, at the
time the proposed purchase or sale was originally presented for approval. The
Investment Managers require all of their employees to maintain their personal
brokerage accounts at MS&Co. or a broker/dealer affiliated with MS&Co.
(hereinafter, a "Morgan Stanley Account"). Outside personal brokerage accounts
are permitted only under very limited circumstances and only with express
written approval by the Compliance Department. The Compliance Department has
implemented procedures reasonably designed to monitor purchases and sales
effected pursuant to the aforementioned pre-clearance procedures.
5. Exempted Transactions
(a) The prohibitions of Section 3 and Section 4 of this Code of Ethics
shall not apply to:
(i) Purchases or sales effected in any account over which an Access Person
or an employee of the Investment Managers has no direct or indirect
influence or control;
<PAGE>
(ii) Purchases or sales which are non-volitional;
(iii) Purchases which are part of an automatic dividend reinvestment plan;
or
(iv) Purchases effected upon the exercise of rights issued
by an issuer pro rata to all holders of a class of
its securities and sales of such rights so acquired,
but only to the extent such rights were acquired from
such issuer.
(b) Notwithstanding the prohibitions of Sections 3. (a), (b) and (c) of
this Code of Ethics, the Compliance Department or MAS trading desk, as
appropriate, may approve a purchase or sale of a Covered Security by
employees of the Investment Managers which would appear to be in
contravention of the prohibitions in Sections 3. (a), (b) and (c) if it is
determined that (i) the facts and circumstances applicable at the time of
such purchase or sale do not conflict with the interests of a Fund or an
Advisory Client, or (ii) such purchase or sale is only remotely potentially
harmful to a Fund or an Advisory Client because it would be very unlikely
to affect a highly institutional market, or because it is clearly not
related economically to the securities to be purchased, sold or held by
such Fund or Advisory Client, and (iii) the spirit and intent of this Code
of Ethics is met.
6. Restrictions on Receiving Gifts
No employee of the Investment Managers shall receive any gift or other
consideration in merchandise, service or otherwise of more than de minimis value
from any person, firm, corporation, association or other entity that does
business with or on behalf of the Funds or an Advisory Client.
7. Service as a Director
No employee of the Investment Managers shall serve on the board of
directors of a publicly-traded company without prior written authorization from
the Compliance Department. Approval will be based upon a determination that the
board service would not conflict with the interests of the Funds and their
stockholders or an Advisory Client.
8. Reporting
(a) Unless excepted by Section 8. (d) and (e) of this Code of
Ethics, each Access Person must disclose all personal holdings
in Covered Securities to the Compliance Department for its
review no later than 10 days after becoming an Access Person
and annually thereafter. The initial and annual holdings
reports must contain the following information:
<PAGE>
(i) The title, number of shares and principal amount of each Covered
Security in which the Access Person has any direct or indirect beneficial
ownership;
(ii) The name of any broker, dealer or bank with or
through whom the Access Person maintained an account
in which any securities were held for the direct or
indirect benefit of the Access Person; and
(iii) The date the report was submitted to the Compliance Department
by the Access Person.
(b) Unless excepted by Section 8. (d) and (e) of this Code of
Ethics, each Access Person and each employee of the Investment
Managers must report to the Compliance Department for its
review within 10 days of the end of a calendar quarter the
information described below with respect to transactions in
Covered Securities in which such person has, or by reason of
such transactions acquires any direct or indirect beneficial
interest:
(i) The date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares and the principal amount of each Covered
Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price of the Covered Security at which the purchase or sale
was effected;
(iv) The name of the broker, dealer or bank with or through which the
purchase or sale was effected; and
(v) The date the report was submitted to the Compliance Department by
such person.
(c) Unless excepted by Section 8. (d) and (e) of this Code of
Ethics, each Access Person and each employee of the Investment
Managers must report to the Compliance Department for its
review within 10 days of the end of a calendar quarter the
information described below with respect to any account
established by such person in which any securities were held
during the quarter for the direct or indirect benefit of such
person:
(i) The name of the broker, dealer or bank with whom the account was
established;
(ii) The date the account was established; and
<PAGE>
(iii) The date the report was submitted to the Compliance Department
by such person.
(d) An Access Person will not be required to make any reports
described in Sections 8. (a), (b) and (c) above for any account over
which the Access Person has no direct or indirect influence or
control. An Access Person or an employee of the Investment Managers
will not be required to make the annual holdings report under Section
8. (a) and the quarterly transactions report under Section 8. (b) with
respect to purchases or sales effected for, and Covered Securities
held in: (i) a Morgan Stanley Account, (ii) an account in which the
Covered Securities were purchased 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), or (iii) an account for
which the Compliance Department receives duplicate trade confirmations
and quarterly statements. In addition, an employee of MSDW Investment
Management will not be required to make a report under Section 8. (c)
for any account established with MS&Co. or any broker/dealer
affiliated with MS&Co.
(e) A Disinterested Director of a Fund, who would be required to make
a report solely by reason of being a Fund director, is not required to
make initial and annual holdings reports. Additionally, such
Disinterested Director need only make a quarterly transactions report
for a purchase or sale of Covered Securities if he or she, at the time
of that transaction, knew or, in the ordinary course of fulfilling his
or her official duties as a Disinterested Director of a Fund, should
have known that, during the 15-day period immediately preceding or
following the date of the Covered Securities transaction by him or
her, such Covered Security is or was purchased or sold by a Fund or
was being considered for purchase or sale by a Fund.
(f) The reports described in Sections 8. (a), (b) and (c) above
may contain a statement that the reports shall not be
construed as an admission by the person making such reports
that he or she has any direct or indirect beneficial ownership
in the Covered Securities to which the reports relate.
Annual Certifications
All Access Persons and employees of the Investment Managers must
certify annually that they have read, understood and complied with the
requirements of this Code of Ethics and recognize that they are subject to this
Code of Ethics by signing the certification attached hereto as Exhibit A.
Board Review
The management of the Funds and representatives or officers of the
Investment Managers and, with respect
<PAGE>
to the Open-End Funds, MS&Co., shall each provide each Fund's Board of
Directors, at least annually, with the following:
(a) a summary of existing procedures concerning personal investing and
any changes in the procedures made during the past year;
(b) a description of any issues arising under this Code of Ethics
or procedures since the last such report, including, but not
limited to, information about material violations of this Code
of Ethics or procedures and sanctions imposed in response to
material violations;
(c) any recommended changes in the existing restrictions or
procedures based upon a Fund's or the Investment Managers'
experience under this Code of Ethics, evolving industry
practices or developments in applicable laws and regulations;
and
(d) a certification (attached hereto as Exhibits B, C, D, and E,
as appropriate) that each has adopted procedures reasonably
necessary to prevent its Access Persons from violating this
Code of Ethics.
11. Sanctions
Upon discovering a violation of this Code of Ethics, the Board of
Directors of such Fund or of the Investment Managers, as the case may be, may
impose such sanctions as it deems appropriate.
12. Recordkeeping Requirements
The management of the Funds and representatives or officers of the
Investment Managers and, with respect to the Open-End Funds, MS&Co., each shall
maintain, as appropriate, the following records for a period of five years, the
first two years in an easily accessible place, and shall make these records
available to the Securities and Exchange Commission or any representative of
such during an examination of the Funds or of the Investment Managers:
(a) a copy of this Code of Ethics or any other Code of Ethics which
was in effect at any time within the previous five years;
(b) a record of any violation of this Code of Ethics during the
previous five years, and of any action
taken as a result of the violation;
(c) a copy of each report required by Section 8. of this Code of
Ethics, including any information
<PAGE>
provided in lieu of each such report;
(d) a record of all persons, currently or within the past five years,
who are or were subject to this Code of Ethics and who are or were
required to make reports under Section 8. of this Code of Ethics;
(e) a record of all persons, currently or within the past five years,
who are or were responsible for reviewing the reports required under
Section 8. of this Code of Ethics; and
(f) a record of any decision, and the reasons supporting the decision,
to approve the acquisition of securities described in Sections 3. (e)
and (f) of this Code of Ethics.
<PAGE>
EXHIBIT A
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MORGAN STANLEY & CO., INCORPORATED
("MS&Co.")
CODE OF ETHICS
ANNUAL CERTIFICATION
I hereby certify that I have read and understand the Code of Ethics
(the "Code") which has been adopted by the Funds, MSDW Investment Management and
MS&Co. and recognize that it applies to me and agree to comply in all respects
with the policies and procedures described therein. Furthermore, I hereby
certify that I have complied with the requirements of the Code in effect, as
amended, for the year ended December 31, ____, and that all of my reportable
transactions in Covered Securities were executed and reflected accurately in a
Morgan Stanley Account (as defined in the Code) or that I have attached a report
that satisfies the annual holdings disclosure requirement as described in
Section 8. (a) of the Code.
Date: , Name:______________________________
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Signature:___________________________
<PAGE>
EXHIBIT B
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "FUNDS")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") and pursuant to the Code of
Ethics for the Funds, Morgan Stanley Dean Witter Investment Management, Inc. and
Morgan Stanley & Co., Incorporated (the "Code of Ethics"), each of the Funds
hereby certifies to such Fund's Board of Directors that such Fund has adopted
procedures reasonably necessary to prevent Access Persons (as defined in the
Code of Ethics) from violating the Code of Ethics.
Date:_________________
By:________________________________
Name: Mary E. Mullin
Title: Secretary
<PAGE>
EXHIBIT E
MORGAN STANLEY & CO., INCORPORATED
("MS&Co.")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended (the
"1940 Act") and pursuant to the Code of Ethics for MS&Co., the Open-End Funds
(as defined in the Code of Ethics) and Morgan Stanley Dean Witter Investment
Management Inc. (the "Code of Ethics"), MS&Co. hereby certifies to the Board of
Directors of the Open-End Funds that MS&Co. has adopted procedures reasonably
necessary to prevent Access Persons (as defined in the Code of Ethics) from
violating the Code of Ethics.
Date:_________________
By:________________________________
Name: Harold J. Schaaff, Jr.
Title: Managing Director
<PAGE>
EXHIBIT C
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, INC.
("MSDW INVESTMENT MANAGEMENT")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended
(the "1940 Act") and pursuant to the Code of Ethics for MSDW Investment
Management, the Funds (as defined in the Code of Ethics) and Morgan Stanley &
Co., Incorporated (the "Code of Ethics"), MSDW Investment Management hereby
certifies to the Board of Directors of the Funds that MSDW Investment Management
has adopted procedures reasonably necessary to prevent Access Persons (as
defined in the Code of Ethics) from violating the Code of Ethics.
Date:_________________
By:________________________________
Name: Harold J. Schaaff, Jr.
Title: General Counsel
<PAGE>
EXHIBIT D
MILLER, ANDERSON & SHERRERD, LLP ("MAS")
ANNUAL CERTIFICATION UNDER RULE 17j-1
OF THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 17j-1 under the Investment Company Act of 1940, as
amended (the "1940 Act") and pursuant to the Code of Ethics for MAS, the Funds
(as defined in the Code of Ethics) and Morgan Stanley & Co., Incorporated (the
"Code of Ethics"), MAS hereby certifies to the Board of Directors of the Funds
that MAS has adopted procedures reasonably necessary to prevent Access Persons
(as defined in the Code of Ethics) from violating the Code of Ethics.
Date:_________________ By:__________________________________
Name: Paul A. Frick
Title: Compliance Officer
<PAGE>
MASSACHUSETTS FINANCIAL SERVICES COMPANY
STATEMENT OF POLICY ON
PERSONAL SECURITIES TRANSACTIONS
(Code of Ethics)
As Adopted by the Audit Committee
Effective as of March 1, 2000
As an investment advisory organization with substantial
responsibilities to clients, Massachusetts Financial Services Company ("MFS")
has an obligation to implement and maintain a meaningful policy governing the
securities transactions of its Directors, officers and employees ("MFS
representatives").1 This policy is intended to minimize conflicts of interest,
and even the appearance of conflicts of interest, between members of the MFS
organization and its clients in the securities markets as well as to effect
compliance with the Investment Company Act, the Investment Advisers Act and the
Securities Exchange Act. This policy inevitably will restrict MFS
representatives in their securities transactions, but this is the necessary
consequence of undertaking to furnish investment advice to clients. In addition
to complying with the specific rules, we all must be sensitive to the need to
recognize any conflict, or the appearance of conflict, of interest whether or
not covered by the rules. When such situations occur, the interests of our
clients must supersede the interest of MFS representatives.
1. General Fiduciary Principles. All personal investment activities
conducted by MFS representatives are subject to compliance with the following
principles: (i) the duty at all times to place the interests of MFS' clients
first; (ii) 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; and (iii) the fundamental standard that
MFS representatives should not take inappropriate advantage of their positions.
2. Applicability of Restrictions and Procedures. In recognition of the
different circumstances surrounding each MFS representative's employment,
various categories of MFS employees are subject to different restrictions under
this Code of Ethics. For purposes of applying this Code of Ethics, MFS employees
are divided into the general categories of Portfolio Managers, Investment
Personnel, Access Persons and Non-Access Persons, as each such term is defined
in Appendix A to this Code of Ethics, as amended from time to time by the Audit
Committee.
As used in this Code of Ethics, the term "securities" includes not only
publicly traded equity securities, but also privately issued equity securities,
shares of closed-end funds, fixed income securities (including municipal bonds
and many types of U.S. Government securities), futures, options, warrants,
rights, swaps, commodities and other similar instruments. Moreover, the
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1 Employees of MFS Institutional Advisors, Inc., MFS Fund Distributors,
Inc., MFS Retirement Services, Inc., MFS International Ltd., MFS International
(U.K.) Ltd., MFS Service Center, Inc., Vertex Investment Management Inc. and MFS
Heritage Trust Company also are covered by this Code of Ethics.
<PAGE>
restrictions of this Code of Ethics apply to transactions by Access Persons
involving securities and other instruments related to, but not necessarily the
same as, securities held or to be acquired on behalf of an MFS client.
3. Restrictions on Personal Securities Transactions. No Access Person shall
trade in any security which is subject to a pending "buy" or "sell" order, or is
being considered for purchase or sale,2 for a client of MFS until such order is
executed or withdrawn or such a transaction is no longer being considered. In
addition, no Investment Personnel shall trade in any security after an MFS
client trades in such security or such security has been considered for purchase
or sale on behalf of an MFS client until: (i) the next business day following
such trade or consideration (in the case of a proposed trade by an Investment
Personnel in the same direction as the MFS client); or (ii) the eighth calendar
day thereafter (in the case of a proposed trade by an Investment Personnel in
the opposite direction from the MFS client's trade). No Portfolio Manager shall
trade in any security within at least seven calendar days before or after an MFS
client whose account he or she manages trades in such security or such security
has been considered for purchase or sale on behalf of such an MFS client. Any
profits realized on trades within these proscribed periods must be disgorged to
the affected MFS client or, in the event that the amount to be disgorged is
relatively minor or difficult to allocate, to charity. In addition, no MFS
representative shall provide any information about such transaction or
recommendation to any person other than in connection with the proper execution
of such purchase or sale for an MFS client's account.
Portfolio Managers should consider the problems inherent in purchasing for
their own account securities that are or may be suitable for a client's
portfolio. For example, a fortuitous early sale by the Manager for his or her
personal account may be criticized in hindsight if the same security later is
sold from the client's account at a lower price.
Gifts and Transfers. A gift or transfer shall be excluded from
the preclearance requirements provided that the recipient
represents in writing that he, she, they or it has no present
intention of selling the donated security.
Short Sales. No Access Person shall effect a short sale in any
security held in a portfolio managed by MFS. Access Persons may
engage in transactions in options and futures, subject to
special preclearance rules applicable to certain of those
transactions as described in Section 5 below.
Initial Public Offerings. The purchase by Access Persons of
securities (other than securities of registered open-end
investment companies) offered at fixed public offering price by
underwriters or a selling group is prohibited.3 Rights
(including
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2 A security is deemed to have been "considered for purchase or sale" when
a recommendation to purchase or sell such security has been made and
communicated to a portfolio manager and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
3 The reason for this rule is that it precludes any
possibility that Access Persons might use MFS' clients' market
stature as a means of obtaining for themselves "hot" issues
which otherwise might not be offered to them. In addition, this
rule eliminates the possibility that underwriters and selling
group members might seek by this means to gain favor with
individuals in order to obtain preferences from MFS.
<PAGE>
rights purchased to acquire an additional full share) issued in
respect of securities any Access Persons owns may be exercised,
subject to preclearance; the decision whether or not to grant
preclearance shall take into account, among other factors,
whether the investment opportunity should be reserved for an MFS
client and whether the investment opportunity is being or was
offered to the individual by virtue of his or her position with
MFS.
Private Placements. Any acquisition by Access Persons of securities
issued in a private placement is subject to preclearance. The decision
whether or not to grant preclearance shall take into account, among
other factors, whether the investment opportunity should be reserved
for an MFS client and whether the investment opportunity is being
offered to the individual by virtue of his or her position with MFS.
Investment Personnel who have been precleared to acquire securities in
a private placement are required to disclose that investment when they
play a part in any subsequent consideration of an investment in the
issuer for an MFS client. In such circumstances, the decision to
purchase securities of the issuer for the MFS client shall be subject
to an independent review by Investment Personnel with no personal
interest in the issuer.
Note: Acquisitions of securities in private placements by country
clubs, yacht clubs and other similar entities need not be precleared,
but are subject to the reporting, disclosure and independent review
requirements.
Prohibition on Short-Term Trading Profits. All Investment Personnel are
prohibited from profiting in the purchase and sale, or sale and
purchase, of the same (or equivalent) securities within 60 calendar
days. Any profits realized on such short-term trades must be disgorged
to the affected MFS client (if any) or, in the event that the amount to
be disgorged is relatively minor or difficult to allocate, to charity.
This restriction on short-term trading profits shall not apply to
transactions exempt from preclearance requirements, as described in
Section 8 below.
It is expected that all MFS representatives will follow these
restrictions in good faith and conduct their personal trading in keeping with
the intended purpose of this Code of Ethics. Note: Any Non-Access Person who
receives any information about any particular investment recommendation or
executed or proposed transaction for any MFS client is required to comply with
all preclearance and other requirements of this Code of Ethics applicable to
Access Persons. Any individual should feel free to take up with the Audit
Committee any case in which he or she feels inequitably burdened by these
policies. The Audit Committee may, in its sole discretion, grant appropriate
exceptions from the requirements of this Code of Ethics where warranted by
applicable facts and circumstances.
4. Beneficial Ownership. The requirements of this Code of Ethics apply to
any account in which an MFS representative has (i) "direct or indirect
beneficial ownership" or (ii) any "direct or indirect influence or control."
Under applicable SEC interpretations, such "beneficial ownership" includes
accounts of a spouse, minor children and dependent relatives resident in the MFS
representative's house, as well as any other contract, relationship,
understanding or other arrangement which results in an opportunity for the MFS
representative to profit or share profits from a transaction in securities.
NOTE: The exception for accounts with respect to which an MFS
representative lacks "direct or indirect influence or control" is extremely
narrow, and should only be relied upon in cases which have been pre-approved in
writing by Stephen E. Cavan or Robert T. Burns of the Legal Department. Certain
"blind trust" arrangements approved by the Legal Department may be excluded from
the preclearance (but not the quarterly reporting) requirements of this Code of
Ethics.
5. Preclearance Requirements. In order to facilitate compliance with this
Code of Ethics, preclearance requests must be made and approved before any
transaction may be made by
<PAGE>
an Access Person or for any other account beneficially owned by an Access
Person. A preclearance request in the form set forth in MFS' automated Code of
Ethics system, as amended from time to time, should be completed and submitted
electronically for any order for an Access Person's own account or one described
in Section 4 above, or, in the case of an Access Person who wishes to preclear
while outside of the Boston area, should either: (i) be completed in the form
attached hereto, as amended from time to time, signed and submitted by facsimile
machine, to the Compliance Department; or (ii) be submitted by telephone call to
the Compliance Department. Any preclearance request received before 3:00 p.m. on
a business day will be responded to as soon as available on the following
business day. Preclearance requests will be reviewed by Equity and Fixed Income
Department personnel who will be kept apprised of recommendations and orders to
purchase and sell securities on behalf of MFS clients, the completion or
cancellation of such orders and the securities currently held in portfolios
managed by MFS. Their advice will be forwarded to the Compliance Department.
The preclearance process imposes significant burdens on the investment
and administrative departments within MFS. Accordingly, if the MFS Audit
Committee determines that an Access Person is making an excessive number of
preclearance requests, it reserves the right to limit such Access Person to a
certain number of preclearance requests per day or per period.
An Access Person who obtains electronic or written notice from the
Compliance Department indicating consent to an order which the Access Person
proposes to enter for his or her own account or one described in Section 4 above
may execute that order only on the day when such notice is received unless
otherwise stated on the notice. Such notices will always be electronic or in
writing; however, in the case of an Access Person who wishes to preclear a
transaction while outside the Boston area, the Compliance Department will also
provide oral confirmation of the content of the written notice.
Preclearance requests may be denied for any number of appropriate
reasons, most of which are confidential. For example, a preclearance request for
a security that is being considered for purchase or sale on behalf of an MFS
client may be denied for an extended period (e.g. 10 business days).
Accordingly, an Access Person is not entitled to receive any explanation or
reason if his or her preclearance request is denied, and repetitive requests for
an explanation by an Access Person will be deemed a violation of this Code of
Ethics.
Significant Ownership by MFS Clients. In cases where MFS clients own,
in the aggregate, 8% or more of the outstanding equity securities of an
issuer, requests by Access Persons to purchase the securities of such
issuer will be denied. Requests to preclear sales of such securities
may be granted, subject to the standard requirements set forth in
Section 3 above.
Securities Subject to Automatic Purchases and Sales for MFS Clients.
Certain MFS funds and institutional accounts are managed such that the
securities held in such portfolios are regularly purchased or sold on
an equal proportionate basis so as to preserve specified percentage
weightings of such securities across such portfolios. Requests to
preclear purchases of securities held in such portfolios will be
denied. Requests to sell such securities may be granted, subject to the
standard preclearance requirements set forth in Section 3 above.
Options and Futures Transactions. Access Persons may purchase (to open)
and sell (to close) call and put options and futures contracts on
securities, subject to the preclearance and other requirements of this
Code of Ethics; however, an Access Person may neither buy
<PAGE>
a put option on any security held in a portfolio managed by MFS nor
write (sell to open) options and futures contracts. In the case of
purchased put and call options, the preclearance of the exercise of
such options as well as their purchase and sale, is required.
Preclearance of the exercise of purchased put and call options shall be
requested on the day before the proposed exercise or, if notice to the
writer of such options is required before the proposed exercise date,
the date before notice is proposed to be given, setting forth the
proposed exercise date as well as the proposed notice date.4 Purchases
and sales of options or futures contracts to "close out" existing
options or futures contracts must be precleared.5
MFS Closed-End Funds. All transactions effected by any MFS
representative in shares of any closed-end fund for which MFS or one of
its affiliates acts as investment adviser shall be subject to
preclearance and reporting in accordance with this Code of Ethics. Non-
Access Persons are exempt from the preclearance and reporting
requirements set forth in this Code of Ethics with respect to
transactions in any other type of securities, so long as they have not
received any information about any particular investment recommendation
or executed or proposed transaction for any MFS client with respect to
such security.
6. Duplicate Confirmation Statement Requirement. In order to implement and
enforce the above policies, every Access Person shall arrange for his or her
broker to send MFS duplicate copies of all confirmation statements issued with
respect to the Access Person's transactions and all periodic statements for such
Access Person's securities accounts (or other accounts beneficially owned by
such Access Person). The Compliance Department will coordinate with brokerage
firms in order to assist Access Persons in complying with this requirement.
7. Reporting Requirement. Each Access Person shall report on or before the
tenth day of each calendar quarter any securities transactions during the prior
quarter in accounts covered by Section 4 above. Employees who fail to complete
and file such quarterly reports on a timely basis will be reported to the Audit
Committee and will be subject to sanctions. Reports shall be reviewed by the
Compliance Department.
In filing the reports for accounts within these rules, please note:
(i) You must file a report for every calendar quarter even if you
had no reportable transactions in that quarter; all such reports
shall be completed and submitted in the form set forth in MFS'
automated Code of Ethics system.
(ii) Reports must show any sales, purchases or other acquisitions or
dispositions, including gifts, exercises of conversion rights
and exercises or sales of subscription rights. See Section 8
below for certain exceptions to this requirement.
4 Access Persons should note that this requirement may result in
their not being allowed to exercise an option purchased by them on the
exercise date they desire, and in the case of a "European" option on
the only date on which exercise is permitted by the terms of the
option.
5 Access Persons should note that as a result of this requirement,
they may not be able to obtain preclearance consent to close out an
option or futures contract before the settlement date. If such an
option or futures contract is automatically closed out, the gain, if
any, on such transaction will be disgorged in the manner described in
Section 3 above.
<PAGE>
(iii) Reports will be treated confidentially unless a review of
particular reports with the representative is required by the
Audit Committee.
(v) Reports are made available for review by the Boards of Trustees
of MFS investment company clients upon their request.
Note: Any Access Person who maintains all of his or her personal
securities accounts with one or more broker-dealer firms that send
confirmation and periodic account statements in an electronic format
approved by the Compliance Department, and who arranges for such firms
to send such statements (no less frequently than quarterly) required by
Section 6 above, shall not be required to prepare and file the
quarterly reports required by this Section 7. However, each such Access
Person shall be required to verify the accuracy and completeness of all
such statements on at least an annual basis.
8. Certain Exceptions.
Mutual Funds. Transactions in shares of any open-end investment companies,
including funds for which the MFS organization is investment adviser, need not
be precleared or reported.
Closed-End Funds. Automatic reinvestments of distributions of
closed-end funds advised by MFS pursuant to dividend reinvestment plans of such
funds need only be reported. All other closed-end fund transactions must be
precleared and reported.
MFS Common Stock. Transactions in shares of stock of MFS need not be
precleared or reported.
Large Capitalization Stocks. Transactions in securities issued by
companies with market capitalizations of at least $5 billion generally will be
eligible for automatic preclearance (subject to certain exceptions), but must be
reported and are subject to post-trade monitoring. The Compliance Department
will maintain a list of issuers that meet this market capitalization
requirement. A preclearance request for a large capitalization company will be
denied whenever deemed appropriate.
U.S. Government Securities. Transactions in U.S. Treasury securities (including
options and futures contracts and other derivatives with respect to such
securities) need not be precleared or reported. Option and futures contracts on
U.S. Government obligations (other than U.S. Treasury securities) and securities
indices need not be precleared but must be reported. Transactions in U.S.
Government securities offered on the basis of "non-competitive tender" need not
be precleared or reported. However, U.S. Government obligations (other than U.S.
Treasury securities) offered by "subscription" must be precleared and reported.
Other Exceptions. Transactions in money market instruments and in
options on broad- based indices need not be precleared, although such
transactions must be reported. In addition, the following types of transactions
need not be precleared or reported: (i) stock dividends and stock splits; (ii)
foreign currency transactions; and (iii) transactions in real estate limited
partnership interests.
9. Disclosure of Personal Securities Holdings. All Access Persons are required
to disclose all personal securities holdings within 10 days after becoming an
Access Person (i.e. upon commencement of employment with MFS or transfer within
MFS to an Access Person position) and thereafter on an annual basis. Reports
shall be reviewed by the Compliance Department.
<PAGE>
10. Gifts, Entertainment and Favors. MFS representatives must not make
business decisions that are influenced or appear to be influenced by giving or
accepting gifts, entertainment or favors. Investment Personnel are prohibited
from receiving any gift or other thing of more than de minimis value from any
person or entity that does business with or on behalf of MFS or its clients.
Invitations to an occasional meal, sporting event or other similar activity will
not be deemed to violate this restriction unless the occurrence of such events
is so frequent or lavish as to suggest an impropriety.
11. Service as a Director. All MFS representatives are prohibited from
serving on the boards of directors of commercial business enterprises, absent
prior authorization by the Management Committee based upon a determination that
the board service would be consistent with the interests of MFS' clients. In the
relatively small number of instances in which board service is authorized, MFS
representatives serving as directors may be isolated from other MFS
representatives through "Chinese Wall" or other appropriate procedures.
12. Certification of Compliance with Code of Ethics. All MFS
representatives (including Non-Access Persons) shall be required to certify
annually that (i) they have read and understand this Code of Ethics and
recognize that they are subject to its requirements applicable to them and (ii)
they have complied with all requirements of this Code of Ethics applicable to
them, and (in the case of Access Persons) have reported all personal securities
transactions (whether pursuant to quarterly reports from the Access Person or
duplicate confirmation statements and periodic reports from the Access Person's
broker-dealer) required to be reported pursuant to this Code of Ethics. This
certification shall apply to all accounts beneficially owned by an MFS
representative.
13. Boards of Trustees of MFS Funds. Any material amendment to this Code of
Ethics shall be subject to the approval by each of the Boards of Trustees
(including a majority of the disinterested Trustees on each such Board) of each
of the registered investment companies with respect to which MFS, or any
subsidiary of MFS, acts as investment adviser. In addition, on at least an
annual basis, MFS shall provide each such Board with a written report that: (i)
describes issues that arose during the preceding year under this Code of Ethics,
including without limitation information about any material violations of this
Code of Ethics and any sanctions imposed with respect to such violations; and
(ii) certifies to each such Board that MFS has adopted procedures reasonably
necessary to prevent Access Persons from violating this Code of Ethics.
14. Sanctions. Any trading for an MFS representative's account which does
not evidence a good faith effort to comply with these rules will be subject to
Audit Committee review. If the Audit Committee determines that a violation of
this Code of Ethics or its intent has occurred, it may impose such sanctions as
it deems appropriate including forfeiture of any profit from a transaction
and/or termination of employment. Any violations resulting in sanctions will be
reported to the Boards of Trustees of MFS investment company clients and will be
reflected in the employee's personnel file.
<PAGE>
APPENDIX A
CERTAIN DEFINED TERMS
As used in this Code of Ethics, the following shall terms shall have
the meanings set forth below, subject to revision from time to time by the Audit
Committee:
Portfolio Managers -- employees who are authorized to make investment decisions
for a mutual fund or client portfolio. Note: research analysts are deemed to be
Portfolio Managers with respect to the entire portfolio of any fund managed
collectively by a committee of research analysts (e.g. MFS Research Fund).
Investment Personnel -- all Portfolio Managers as well as research
analysts, traders and other members of the Equity Trading, Fixed Income
and Equity Research Departments.
Access Persons -- all Portfolio Managers, Investment Personnel and
other members of the following departments or groups: Institutional
Advisors; Compliance; Fund Accounting; Investment Communications; and
Technology Services & Solutions ("TS&S") (excluding, however, TS&S
employees who are employed at Lafayette Corporate Center and certain
TS&S employees who may be specifically excluded by the Compliance or
Legal Departments); also included are members of the MFS Management
Committee, the MFS Administrative Committee and the MFS Operations
Committee. In certain instances, non-employee consultants and other
independent contractors may be deemed Access Persons and therefore be
subject to some or all of the requirements set forth in this Code of
Ethics.
Non-Access Persons -- all employees of the following departments or
groups: Corporate Communications; Corporate Finance; Facilities
Management; Human Resources; Internal Audit (unless undergoing an audit
of an access area); Legal; MFS Service Center, Inc. (other than TS&S
employees who are employed at 500 Boylston Street); Retired Partners;
Travel and Conference Services; the International Division; MFS
International Ltd.; MFS Fund Distributors, Inc.; and MFS Retirement
Services, Inc. Note: Any Non-Access Person who receives any information
about any particular investment recommendation or executed or proposed
transaction for any MFS client is required to comply with all
preclearance and other requirements of this Code of Ethics applicable
to Access Persons. Any Non-Access Person who regularly receives such
information will be reclassified as an Access Person. In addition,
transactions in shares of the MFS closed- end funds by all MFS
representatives are subject to all such preclearance and reporting
requirements (see Section 5 of this Code of Ethics).
<PAGE>
PERSONAL SECURITIES TRANSACTION
PRECLEARANCE REQUEST
[Only For Use By MFS Employees
Not Located In Boston]
Date:_________________________, _____
All transactions must be precleared, regardless of their size, except those in
certain specific categories of securities that are exempted under the MFS Code
of Ethics. If necessary, continue on the reverse side. Please note that special
rules apply to the preclearance of option and futures transactions. If the
transaction is to be other than a straightforward sale or purchase of
securities, mark it with an asterisk and explain the nature of the transaction
on the reverse side. Describe the nature of each account in which the
transaction is to take place, i.e., personal, spouse, children, charitable
trust, etc.
SALES
CUSIP/TICKER AMOUNT OR BROKER NATURE* OF
SECURITY NO. OF SHARES ACCOUNT
PURCHASES
I represent that I am not in possession of material non-public information
concerning the securities listed above or their issuer. If I am an MFS access
person charged with making recommendations to MFS with respect to any of the
securities listed above, I represent that I have not determined or been
requested to make a recommendation in that security except as permitted by the
MFS Code of Ethics.
---------------------------------------
Signature and Date
---------------------------------------
Name of MFS Access Person
(please print)
Explanatory Notes: This form must be filed by 3:00 p.m. on the business day
prior to the business day on which you wish to trade and covers 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 influence or control
over it) and non-client accounts over which you act in an advisory or
supervisory capacity. No trade can be effected until approval from the
Compliance Department has been obtained.
- -----------------------
* Check if you wish to claim that the reporting of the account or 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>
CONFIDENTIAL INFORMATION AND
SECURITIES TRADING POLICY
<PAGE>
CONTENTS
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
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
<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.
<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.
<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.
<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.
<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:
oa proposal or agreement for a merger, acquisition or divestiture, or for the
sale or purchase of substantial assets;
otender 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;
odividend declarations or changes; extraordinary borrowings or liquidity
problems;
odefaults under agreements or actions by creditors, customers or suppliers
relating to a company's credit standing;
oearnings and other financial information, such as large or unusual write-offs,
write-downs, profits or losses;
o pending discoveries or developments, such as new products, sources of
materials, patents, processes, inventions or discoveries of mineral deposits;
o a proposal or agreement concerning a financial restructuring;
o a proposal to issue or redeem securities, or a development with respect to a
pending issuance or redemption of securities;
o a significant expansion or contraction of operations;
o information about major contracts or increases or decreases in orders;
o the institution of, or a development in, litigation or a regulatory
proceeding;
o developments regarding a company's senior management;
o information about a company received from a director of that company; and
o 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.
<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.
<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.
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:
o 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.
o 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.
<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.
<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.
<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").
<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.
<PAGE>
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.
<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:
o 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"):
- - 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
o 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;
o employed by a broker/dealer subsidiary of a Mellon entity other than
Dreyfus;
o 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
o an associate specifically designated as an Insider Risk Associate by
the Manager of Corporate Compliance.
<PAGE>
Investment Associate -
You are considered to be an Investment Associate
if you are:
o 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;
o a Dreyfus associate;
o an associate of a Mellon entity registered under the Investment
Advisers Act of 1940;
o 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
o 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.
<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:
- - 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
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.
<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:
o 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
o 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.
<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);
o 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;
<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.
<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.
<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;
o 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.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<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
<PAGE>
EXHIBIT A
Sample Report to Manager of Corporate Compliance
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.
<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)
<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
<PAGE>
EXHIBIT C1
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:
<PAGE>
EXHIBIT C2
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:
<PAGE>
EXHIBIT D1
Return to: Manager, Corporate Compliance
Mellon Bank
P.O. Box 3130
Pittsburgh, PA 15230-3130
STATEMENT OF SECURITY HOLDINGS
As of
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
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:
- -----
<PAGE>
EXHIBIT D2
Return to: Compliance Officer at the Dreyfus Corporation
200 Park Avenue
Legal Department
New York, NY 10166
STATEMENT OF SECURITY HOLDINGS
As of
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
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:
- -----
<PAGE>
