UNION BANK AND TRUST COMPANY
CODE OF ETHICS
FOR STRATUS FUND, INC. COVERED PERSONS
August 15, 2000
WHEREAS, Union Bank and Trust Company (the "Bank") has contracted
to provide investment advisory services to Stratus Fund, Inc. (the "Fund"), a
registered investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, Rule 17j-1 under the 1940 Act requires the Bank to adopt
a Code of Ethics (the "Code") to apply to the directors, officers and employees
of the Bank who are Covered Persons, as defined herein.
NOW THEREFORE, the Bank hereby adopts the following Code of
Ethics (the "Code"), effective as of August 15, 2000.
I. PURPOSE OF THE CODE
A. This Code is intended to maintain the highest standards of ethical
conduct for Covered Persons. In doing so, this Code addresses three primary
areas of concern:
o Observing the general anti-fraud provisions of the
Federal Securities laws.
o Avoiding conflicts of interest with the Fund or the
appearance of such conflicts.
o Avoiding trading on the basis of material non-public
information or information about securities transactions
made or being considered for the Fund.
B. The Code is based on the principle that Covered Persons are
fiduciaries to the Fund. Accordingly, Covered Persons must avoid activities,
interests and relationships that might interfere or appear to interfere with
their ability to make decisions in the best interests of the Fund. At all times
Covered Persons must:
o PLACE THE INTERESTS OF THE FUND FIRST.
o AVOID TAKING INAPPROPRIATE ADVANTAGE OF THEIR POSITION.
o CONDUCT ALL PERSONAL SECURITIES TRANSACTIONS IN FULL
COMPLIANCE WITH THIS CODE, INCLUDING ALL PRE-CLEARANCE
AND REPORTING REQUIREMENTS.
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C. You must not take any action that could cause even the appearance
that an unfair or improper action has been taken. You must follow the policies
set forth in this Code and you must resolve doubtful situations in favor of the
Fund. Any questions concerning this Code should be addressed to the Compliance
Officer.
II. DEFINITIONS
Listed below are definitions for some of the terms used in this
Code, many of which are defined by law:
"COVERED PERSON" means any director or officer of the Bank, or any
employee of the Bank who, with respect to the Fund, makes any recommendation,
participates in the determination of which recommendation will be made, or whose
principal function or duties relate to the determination of which recommendation
will be made, or who, in connection with his or her duties, obtains any
information concerning recommendations on Securities being made by the Bank to
the Fund. This term also includes affiliates of Covered Persons who obtain
information concerning recommendations made to the Fund with regard to the
purchase or sale of Securities by the Fund.
"BENEFICIAL OWNERSHIP/BENEFICIAL OWNER" means any person who has or
shares, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, a direct or indirect pecuniary
interest in a security within the meaning of Securities Exchange Act Rule
16a-1(a)(2). "Pecuniary Interest" means the opportunity, directly or indirectly,
to profit or share in any profit derived from a transaction in the security.
"Indirect Pecuniary Interest" includes, but is not limited to, Securities held
by members of your immediate family who share your household, including your
spouse, children and stepchildren, parents, grandparents, brothers and sisters,
and any of your in-laws.
If you need help in determining whether you have beneficial ownership of
any Security for purposes of this Code, you should consult the Compliance
Officer.
"CONTROL" means the power to exercise a controlling interest over the
management or policies of a company, unless such power is solely the result of
an official position. Any person is presumed to "control" a company if that
person owns, directly or indirectly through one or more controlled companies,
more than twenty-five percent (25%) of the voting securities of the company.
Despite this presumption, a person may not be a control person if facts, other
than security ownership, demonstrate that such person does not have a
controlling interest. Similarly, persons owning less than twenty-five percent
(25%) of the voting securities of the company may be deemed to have "control"
depending on the facts and circumstances.
"PERSONAL TRADING" means the purchase or sale of Securities by an
individual for his or her own account, any other account in which he or she has
a "beneficial ownership" interest, or any account "controlled" by him or her. An
account is "controlled" by a person when that person
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decides what securities transactions will be effected for the account, either by
making recommendations to the account owner or by entering orders directly with
the broker handling the account.
"PURCHASE OR SALE OF A SECURITY" includes, among other things, the
writing of an option to purchase or sell Securities.
"SECURITY" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral- trust certificate, reorganization
certificate or subscription, transferrable share, investment contract,
voting-trust certificate, certificate of deposit for security, fractional
undivided interest in oil, gas or other mineral rights, any put, call, straddle,
option or privilege on any security or on any group or index of securities
(including any interest therein 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 generally any interest or instrument commonly
known as a "security" or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or warrant or
right to subscribe to or purchase any of the foregoing.
"SECURITY HELD OR TO BE ACQUIRED BY THE FUND" means any Security which,
within the most recent fifteen (15) days (i) is or has been held by the Fund, or
(ii) is being or has been considered by the Fund or any Covered Person for
purchase by the Fund, and any option to purchase or sell, and any security
convertible into or exchangeable for a Security that is or has been held by the
Fund or is or has been considered by the Fund or any Covered Person for purchase
by the Fund.
III. IDENTIFICATION OF ACCESS PERSONS
A. The Bank will maintain a list of all Covered Persons and will notify
each Covered Person in writing that such person is an Covered Person. Once a
person has been so identified, he/she shall continue to be an Covered Person
until otherwise notified in writing by the Fund.
B. Each Covered Person shall be given a copy of the Code at the time
such person
becomes an Covered Person.
IV. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND
PROCEDURES
A. Each Covered Person shall comply strictly with all applicable federal
and state laws and all rules and regulations of any governmental agency or
self-regulatory organization governing his or her activities.
B. Each Covered Person shall comply strictly with procedures established
by the Bank to ensure compliance with applicable federal and state laws and
regulations of governmental agencies and self-regulatory organizations.
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C. Covered Persons shall not knowingly participate in, assist or condone
any acts in violation of any statute or regulation governing securities matters,
nor any act that would violate any provision of the Code or any rules or
procedures adopted thereunder.
V. CONFIDENTIALITY OF TRANSACTIONS
A. Information relating to the Fund's portfolios and research and
studies activities is confidential until publicly available. Whenever
statistical information or research is supplied to or requested by Covered
Persons for the Fund, such information must not be disclosed to any persons
other than to other Covered Persons or the board of directors of the Fund. If
the Fund is considering a particular purchase or sale of a Security, this must
not be disclosed except to such duly authorized persons.
B. If any Covered Person should obtain information concerning the Fund's
portfolios (including the consideration by the Fund of acquiring or recommending
any Security for a portfolio), whether in the course of such person's duties or
otherwise, such person shall respect the confidential nature of this information
and shall not divulge it to anyone unless it is properly part of such person's
services to the Fund to do so or such person is specifically authorized to do so
by the president of the Fund.
VI. PROHIBITED TRANSACTIONS/ACTIVITIES
A. General. As a general matter, it is a violation of Federal law and
the policies of the Bank for Covered Persons to engage in any act, practice or
course of business in connection with the purchase or sale of any Security held
or to be acquired or sold by the Fund that violates any of the SEC's rules
designed to prevent fraudulent, deceptive, or manipulative acts.
B. Unlawful actions. It is unlawful for any Covered Person, in
connection with the purchase or sale, directly or indirectly by the person of a
Security held or to be acquired by the Fund:
o To employ any device, scheme or artifice to defraud the
Fund;
o To make any untrue statement of a material fact to the
Fund or omit to state a material fact necessary in order
to make statements made to the Fund, in light of the
circumstances under which they are made, not misleading;
o To engage in any act, practice or course of business
that operates or would operate as a fraud or deceit on
the Fund; or
o To engage in any manipulative practice with respect to
the Fund.
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C. Front-running. "Front-running" or "scalping" is defined as the
practice of trading on the basis of the anticipated market effect of trades for
the Fund's investment portfolios. "Front-running" and "scalping" constitute a
violation of the Federal securities laws. Therefore, it is absolutely prohibited
for any Covered Person to purchase or sell a Security or a derivative thereof
("Related Security"), such as an option or warrant, for his or her personal
account or any account in which he or she has a beneficial ownership interest or
which he or she controls:
o At a time when he/she knows of another person's
intention to purchase or sell that same Security or
Related Security on behalf of the Fund;
o Within one (1) calendar day of actively considering for
purchase or sale for the Fund such Security or Related
Security; or
o Within one (1) calendar day before or after a
transaction in that Security or Related Security by the
Fund.
D. Short-term Trading Activities. Covered Persons are prohibited from
profiting from the purchase and sale, or the sale and purchase, within thirty
(30) calendar days, of the same Securities if Securities of the same issuer are
held by the Fund. Any such trade must be reversed or the profits must be
disgorged and distributed in a manner determined by the Compliance Officer.
E. Short Sales. Covered Persons are prohibited from engaging in short
sales of Securities.
F. IPO's. Covered Persons are prohibited from acquiring any Securities
in an initial public offering, unless there is prior approval in writing by the
Compliance Officer after a determination that the purchase is not likely to
create any actual or potential conflict of interest.
G. Private Placements. Covered Persons are prohibited from acquiring
Securities in a private placement unless there is prior approval in writing by
the Compliance Officer after a determination that the purchase is not likely to
create any actual or potential conflict of interest.
H. Trading While in Possession of Material Non-Public Information. No
Covered Person may purchase or sell any Security, or be involved in any way in
the purchase or sale of a Security, while in possession of material non-public
information about the Security or its issuer, regardless of the manner in which
such information was obtained, except to the extent authorized by the Compliance
Officer. Furthermore, no Covered Person possessing material non-public
information may disclose such information to any person other than the
Compliance Officer, except to the extent authorized by the Compliance Officer.
This prohibition covers transactions for the Fund, as well as transactions for
your personal accounts and accounts of persons in privity with you.
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"Material information" is defined as information which an
investor would consider important in making an investment decision and which
would substantially effect the market price of a security if generally
disclosed. "Non-public information" is defined as information which has not been
effectively made available to the marketplace. Material non- public information
includes corporate information, such as undisclosed financial information about
a corporation, and market information, such as a soon-to-be-published article
about a corporation. Any questions as to whether certain information is material
non-public information should be directed to the Compliance Officer.
VII. PRE-CLEARANCE REQUIREMENTS FOR PERSONAL SECURITIES
TRANSACTIONS
A. General Requirement. Covered Persons may not engage in a personal
securities transaction unless it has been pre-cleared by the Compliance Officer
following a determination that the transaction does not give rise to an actual
or potential conflict of interest with the Fund's activity in the same Security.
B. Pre-Clearance Procedures.
1. All Covered Persons must obtain written approval from
the Compliance Officer (or designee) BEFORE executing a
personal securities transaction.
2. Covered Persons seeking pre-clearance of personal
securities transactions must complete a Pre-Clearance
Form (see Exhibit A) and submit the form to the
Compliance Officer (or designee).
3. Upon completion of the review process, the Compliance
Officer will date the completed pre-clearance form and
indicate whether the trade is authorized or denied.
4. All authorized personal securities transactions must be
completed within one (1) trading day following the date
of approval. If the trade is not executed within this
one (1) day time period, a new pre-clearance request
must be submitted to the Compliance Officer (or
designee).
5. NO EXPLANATIONS ARE REQUIRED FOR REFUSALS. In some
cases, trades may be rejected for a reason that is
confidential. The Compliance Officer is not required to
give any explanation for refusing to authorize a
securities transaction.
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VIII. REPORTING REQUIREMENTS
A. Initial Holdings Report. Within ten (10) days of employment or of
becoming an Covered Person, Covered Persons must provide a complete list in the
form of Exhibit B indicating (i) the title, number of shares and principal
amount of each Security in which the Covered Person had any direct or indirect
beneficial ownership at the time the person became an Covered Person and (ii)
the name of any broker, dealer or bank with whom the Covered Person maintained
an account in which any Securities were held for the direct or indirect benefit
of the Covered Person as of the date the person became an Covered Person.
B. Annual Holdings Reports. By July 30 of each year, each Covered Person
must file with the Compliance Officer an annual update to his or her Securities
holdings report which update must be current as of June 30 of each year. All
employees must also execute and provide to the Compliance Officer an annual
certificate of compliance with the Code and any policies adopted thereunder.
C. Quarterly Transaction Reports. No later than ten (10) days after the
end of a calendar quarter, each Covered Person must submit a quarterly
transaction report in the form of Exhibit C containing the following
information:
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;
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 submitted by the Covered
Person.
In addition, with respect to any account established by the
Covered Person in which any Securities were held during the quarter for the
direct or indirect benefit of the Covered Person, such Covered Person must
submit a report to the Compliance Officer containing the following information:
1. The name of the broker, dealer or bank with whom the
Covered Person established the account;
2. The date the account was established; and
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3. The date that the report is submitted by the Covered
Person.
IX. EXCEPTIONS TO PRE-CLEARANCE AND REPORTING REQUIREMENTS
A. Exempt Securities. Personal securities transactions in the following
Securities are not subject to either the pre-clearance requirements or the
reporting requirements set forth in Sections VII and VIII of this Code.
o Open-end mutual funds and open-end unit investment
trusts.
o Variable annuities, variable life products and other
similar unit-based insurance products issued by
insurance companies and insurance companies' separate
accounts.
o U.S. (Federal) government securities.
o Money market instruments (as defined by the Compliance
Officer).
o Securities acquired through automatic dividend
reinvestment plans.
o Securities acquired through the receipt or exercise of
rights or warrants issued by a company on a pro rata
basis to all holders of a class of Securities.
o Futures contracts, commodities contracts and futures or
options on a stock market index, a foreign currency or
commodity.
B. Delegated Discretionary Accounts. Pre-clearance is not required for
transactions over which the person does not have direct or indirect control or
influence (i.e., trades in a blind trust or discretionary trades in which the
person is neither consulted nor contacted regarding the trade before it is
executed).
C. Duplicate Broker Confirmations or Account Statements. Covered Persons
need not make Quarterly Transaction Reports under Section XIII(C) of the Code if
the report would duplicate information contained in broker trade confirmations
or account statements received by the Fund in the time period required by
Section XIII(C) of the Code.
X. DEALINGS WITH PERSONS WHO DO BUSINESS WITH THE FUND
A. No Covered Person may seek or accept from any person that does
business with the Fund any item of material value or preferential treatment that
is or appears to be connected with the Fund directing business to that person.
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B. For purposes of this prohibition, "items of material value" shall
include but not be limited to:
o gifts amounting in value to more than $100 per person,
per year; and
o payment or reimbursement of travel expenses, including
overnight lodging, in excess of $100 per person, per
year.
C. "Items of material value" shall not include:
o An occasional meal, a ticket to a sporting event or the
theater or comparable entertainment, which is not
conditioned on directing business to the firm that
provided such meal or entertainment and is neither so
frequent nor so extensive as to raise any question of
propriety; or
o An unconditional gift of a typical item of reminder
advertising such as an ink pen with the name of the
advertiser inscribed, a calendar pad or other gifts
amounting in value to not more than $100 per person, per
year.
XI. ADMINISTRATION OF THE CODE
A. Approval and Amendment. The board of directors of the Bank must
approve the Code of Ethics and any material changes to the Code. The board of
directors of the Bank must approve a material change to the Code no later than
six (6) months after adoption of the material change.
B. Compliance Officer. The Bank shall designate a Compliance Officer for
the Code. The Compliance Officer shall oversee compliance with the Code by
Covered Persons. The Compliance Officer may designate an employee of the Bank to
assist in administrative matters relating to the Code.
C. New Employees. Upon commencement of employment with the Bank, each
new Covered Person will receive two copies of the Code. Immediately thereafter,
each such Covered Person must sign, date and return one copy of the Code to the
Compliance Officer. The other copy should be kept by the Covered Person for
his/her reference. On an annual basis, each employee must certify in writing
that he/she has reviewed and understands the Code.
D. Review and Reporting.
1. The Compliance Officer shall review all reports submitted
pursuant to this Code and compare all reported personal
securities transactions with completed portfolio
transactions of the Fund and a list of securities being
considered for purchase or sale by the Fund to determine
whether a violation of this Code may have occurred.
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2. If the Compliance Officer determines that a violation of
the Code may have occurred, he/she shall submit his/her
written determination, together with a confidential
monthly report and any additional explanatory material
provided by the individual to the executive vice-president
of the Bank who shall make an independent determination as
to whether a violation has occurred.
3. If the executive vice president finds that a violation has
occurred, the president shall impose upon the individual
such sanction as he or she deems appropriate and shall
report the violation and the sanction imposed to the board
of directors of the Bank.
4. No person shall participate in a determination of whether
he/she has committed a violation of the Code or of the
imposition of any sanction against himself or herself. If
a securities transaction of the executive vice- president
is under consideration, the president or any other
vice-president shall act in all respects in the manner
prescribed herein for the executive vice-president.
5. The Compliance Officer shall prepare and the executive
vice-president of the Bank shall, at least annually,
submit to the board of directors a written report that
describes any issues arising under the Code of Ethics
since the last report, including, but not limited to,
information about material violations of the Code or
sanctions imposed in response to the violations, and
certifies that the Bank has adopted procedures reasonably
necessary to prevent Covered Persons from violating the
Code.
E. Sanctions. Violations of the Code may result in the imposition of
sanctions by the SEC, other regulatory authorities or the Bank, including
forfeiture of any profit from a transaction, reduction in salary and suspension
or termination of employment.
F. Recordkeeping Requirements. It is the intention of the Bank to comply
with the record keeping requirements of Rule 17j-1(d) under the 1940 Act, which
includes maintaining:
1. A copy of this Code and any other code which is, or at
any time within the past five (5) years has been in
effect;
2. Records of any violations of this Code and actions taken
as a result of such violations;
3. Copies of each report made under this Code (i.e.,
reports required by Section XIII of the Code);
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4. A record of all persons, currently or within the past
five (5) years, who are or were required to make reports
under Section XIII of the Code, or who are or were
responsible for reviewing these reports; and
5. A record of any decision, and the reasons supporting the
decision, to approve the acquisition by Covered Persons
of securities under Section VI(E) and (F) of the Code.
XII. CODE OF ETHICS TO BE PROVIDED TO THE FUND
A. The board of directors of the Fund, including a majority of the
disinterested directors, must approve this Code and any material changes to this
Code. Before approving the Code or any amendment to the Code, the Fund's board
of directors must receive a certification from the Bank that it has adopted
procedures reasonably necessary to prevent Covered Persons from violating the
Code. The board of directors of the Fund must approve a material change to the
Code no later than six months after adoption of the material change.
B. The Bank shall:
1. Submit to the board of directors of the Fund a copy of
this Code of Ethics adopted pursuant to Rule 17j-1;
2. Promptly report to the Fund in writing any material
amendments to such code;
3. Promptly furnish to the Fund upon request copies of any
reports made pursuant to the Code by any person who is
an Covered Person as to the Fund;
4. Immediately furnish to the Fund, without request, all
material information regarding any violation of the Code
by any person who is an Covered Person as to the Fund;
and
5. At least annually, furnish a written report to the
Fund's board of directors that (i) describes any issues
arising under this Code since the last report,
including, but not limited to, information about
material violations of the Code or sanctions imposed in
response to the violations, and (ii) certifies that the
Bank has adopted procedures reasonably necessary to
prevent Covered Persons from violating this Code of
Ethics.
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CERTIFICATION
I have read the Union Bank and Trust Company Code of Ethics for
Stratus Fund, Inc. Covered Person in its entirety and I understand it. I agree
to comply fully with all of its provisions. Further, I agree to certify in
writing that I have complied with the terms of this Code of Ethics on an annual
basis.
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Printed Name
----------------------------
Date
----------------------------
Signature
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EXHIBIT A
PERSONAL SECURITY TRANSACTION PRE-CLEARANCE AND APPROVAL FORM
Date: ___________________
Pre-clearance is requested for a transaction involving
--------------------------------------------------------------------------------
(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 and have a beneficial interest. Pre-clearance for this transaction is
requested for the account of _______________________________
(name)
This transaction will be effected through ______________________________________
(name of broker, dealer or bank)
I hereby represent I have no material nonpublic information with respect to the
issuer of such security.
I understand this pre-clearance is valid only for transactions on the date shown
below.
------------------------------
(signature)
------------------------------
Date
The foregoing transaction is hereby approved.
By:____________________________
Compliance Officer
Date:__________________________
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EXHIBIT B
CONFIDENTIAL
Report of Securities Holdings
NAME: _________________ For the Year Ended ________ Initial Report ____________
Names of Security Type of Security Quantity/Principal Amount Held
----------------- ---------------- ------------------------------
Name of any Broker, Dealer or Bank in Which any Securities are Held for Your
Direct or Indirect Benefit:
I hereby represent that I had no material nonpublic information with respect to
the issuers of the securities covered by this report and that I have reported
all holdings that I am required to report.
------------------------ ----------
Signature Date
Please return to the Compliance Officer of the Company.
Date Report Submitted ________________
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EXHIBIT C
CONFIDENTIAL
Report of Securities Transactions
NAME: _____________________________ For the Quarter Ended _______________
<TABLE>
<CAPTION>
Interest Rate
Quantity or and Nature of Unit Broker, Dealer or Bank Date of
Name of Security Type of Security Principal Amount Maturity Date Transaction Price Effecting Transaction Transaction
---------------- ---------------- ---------------- ------------- ----------- ----- --------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
I hereby represent that I had no material nonpublic information with respect to
the issuers of the securities covered by this report.
Check if the following is applicable:
__ This report shall not be construed as an admission that I have any
direct or any indirect beneficial ownership in the security.
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I have reported all transactions which I am required to report. I have omitted
any transactions in thrift plans, federal government securities, money market
instruments, open-end mutual funds (note: transactions in shares issued by the
Company and in closed-end funds must be reported) or automatic reinvestment
plans, or purchases through the exercise of pro-rata rights.
------------------------ ----------
Signature Date
Please return to the Compliance Officer of the Company.
Date Report Submitted _______________________
C-2
