Exhibit 15
CODE OF ETHICS
MERRILL LYNCH INVESTMENT MANAGERS (MLIM)
REGISTERED INVESTMENT COMPANIES
AND THEIR INVESTMENT ADVISERS
AND PRINCIPAL UNDERWRITER
Section 1 - Background
This Code of Ethics is adopted under Rule 17j-1 under the Investment
Company Act of 1940 ("1940 Act") and Rule 204-2(a) under the Investment Advisers
Act of 1940 and has been approved by the Boards of Directors of each of the MLIM
funds.1 Except where noted, the Code applies to all MLIM employees.
Section 17(j) under the Investment Company Act of 1940 makes it unlawful
for persons affiliated with investment companies, their principal underwriters
or their investment advisers to engage in fraudulent personal securities
transactions. Rule 17j-1 requires each Fund, investment adviser and principal
underwriter to adopt a Code of Ethics that contains provisions reasonably
necessary to prevent an employee from engaging in conduct prohibited by the
principles of the Rule. The Rule also requires that reasonable diligence be used
and procedures be instituted which are reasonably necessary to prevent
violations of the Code of Ethics.
On August 23, 1999, the SEC adopted amendments to Rule 17j-1 which require
greater board oversight of personal trading practices, more complete reporting
of employee securities trading and preclearance of employee purchases of initial
public offerings and private placements. The amendments require, among other
things, that MLIM provide its fund boards annually a written report that (i)
describes issues that arose during the previous year under the Code, including
information about material code violations and sanctions imposed and (ii)
certifies to the board that MLIM has adopted procedures reasonably necessary to
prevent access persons from violating the Code.
Section 2 - Statement of General Fiduciary Principles
The Code of Ethics is based on the fundamental principle that MLIM and its
employees must put client interests first. As an investment adviser, MLIM has
fiduciary responsibilities to its clients, including the registered investment
companies (the "Funds") for which it serves as investment adviser. Among MLIM's
fiduciary responsibilities is the responsibility to ensure that its employees
conduct their personal securities
----------
1 As applicable herein, MLIM includes all AMG investment advisory affiliates
and the affiliated principal underwriter of investment companies
registered under the 1940 Act.
<PAGE>
transactions in a manner which does not interfere or appear to interfere with
any Fund transactions or otherwise take unfair advantage of their relationship
to the Funds. All MLIM employees must adhere to this fundamental principle as
well as comply with the specific provisions set forth herein. It bears emphasis
that technical compliance with these provisions will not insulate from scrutiny
transactions which show a pattern of compromise or abuse of an employee's
fiduciary responsibilities to the Funds. Accordingly, all MLIM employees must
seek to avoid any actual or potential conflicts between their personal interest
and the interest of the Funds. In sum, all MLIM employees shall place the
interest of the Funds before personal interests.
Section 3 - Insider Trading Policy
All MLIM employees are subject to MLIM's Insider Trading Policy, which is
considered an integral part of this Code of Ethics. MLIM's Insider Trading
Policy, which is set forth in the MLIM Code of Conduct, prohibits MLIM employees
from buying or selling any security while in the possession of material
nonpublic information about the issuer of the security. The policy also
prohibits MLIM employees from communicating to third parties any material
nonpublic information about any security or issuer of securities. Additionally,
no MLIM employee may use inside information about MLIM activities or the
activities of any Merrill Lynch & Co., Inc. entity to benefit the Funds or to
gain personal benefit. Any violation of MLIM's Insider Trading Policy may result
in sanctions, which could include termination of employment with MLIM. (See
Section 10--Sanctions).
Section 4 - Restrictions Relating to Securities Transactions
A. General Trading Restrictions for all Employees
The following restrictions apply to all MLIM employees:
1. Accounts. No employee, other than those employed by Merrill Lynch
Investment Managers International Limited ("MLIM"), may engage in
personal securities transactions other than through an account
maintained with Merrill Lynch, Pierce, Fenner & Smith Incorporated
or another Merrill Lynch broker/dealer entity ("Merrill Lynch")
unless written permission is obtained from the Compliance Director.
Similarly, no MLIMI employee may engage in personal securities
transactions other than through an account maintained with Merrill
Lynch or The Bank of New York Europe Limited ("BNYE") unless written
permission is obtained from the Compliance Director.
2. Accounts Include Family Members and Other Accounts. Accounts of
employees include the accounts of their spouses, dependent
relatives, trustee and custodial accounts or any other account in
which the employee has a financial interest or over which the
employee has investment discretion (other than MLIM-
-2-
<PAGE>
managed Funds).
3. Preclearance. All employees must obtain approval from the Compliance
Director or preclearance delegatee prior to entering any securities
transaction (with the exception of exempted securities as listed in
Section 5) in all accounts. Approval of a transaction, once given,
is effective only for the business day on which approval was
requested or until the employee discovers that the information
provided at the time the transaction was approved is no longer
accurate. If an employee decides not to execute the transaction on
the day preclearance approval is given, or the entire trade is not
executed, the employee must request preclearance again at such time
as the employee decides to execute the trade.
Employees may preclear trades only in cases where they have a
present intention to transact in the security for which preclearance
is sought. It is MLIM's view that it is not appropriate for an
employee to obtain a general or open-ended preclearance to cover the
eventuality that he or she may buy or sell a security at some point
on a particular day depending upon market developments. This
requirement would not prohibit a price limit order, provided that
the employee shall have a present intention to effect a transaction
at such price. Consistent with the foregoing, an employee may not
simultaneously request preclearance to buy and sell the same
security.
4. Restrictions on Purchases. No employee may purchase any security
which at the time is being purchased, or to the employee's knowledge
is being considered for purchase, by any Fund managed by MLIM. This
restriction, however, does not apply to personal trades of employees
which coincide with trades by any MLIM index fund.
5. Restrictions on Sales. No employee may sell any security which at
the time is actually being sold, or to the employee's knowledge is
being considered for sale, by any Fund managed by MLIM. This
restriction, however, does not apply to personal trades of employees
which coincide with trades by any MLIM index fund.
6. Restrictions on Related Securities. The restrictions and procedures
applicable to the transactions in securities by employees set forth
in this Code of Ethics shall similarly apply to securities that are
issued by the same issuer and whose value or return is related, in
whole or in part, to the value or return of the security purchased
or sold or being contemplated for purchase or sale during the
relevant period by the Fund. For example, options or warrants to
purchase common stock, and convertible debt and convertible
preferred stock of a particular issuer would be considered related
to the underlying common stock of that issuer for purposes of this
policy. In sum, the related security would be treated as if it were
the underlying security for the purpose of the pre-clearance
procedures described
-3-
<PAGE>
herein.
7. Private Placements. Employee purchases and sales of "private
placement" securities (including all private equity
partnerships, hedge funds, limited partnership or venture
capital funds) must be precleared directly with the Compliance
Director or designee. No employee may engage in any such
transaction unless the Compliance Director or his designee and
the employee's senior manager have each previously determined
in writing that the contemplated investment does not involve
any potential for conflict with the investment activities of
the Funds.
If, after receiving the required approval, an employee has any
material role in the subsequent consideration by any Fund of
an investment in the same or affiliated issuer, the employee
must disclose his or her interest in the private placement
investment to the Compliance Director and the employee's
department head. The decision to purchase securities of the
issuer by a Fund must be independently reviewed and authorized
by the employee's department head.
8. Initial Public Offerings. As set forth in Paragraph A.3. of
this Section 4, the purchase by an employee of securities
offered in an initial public offering must be precleared. As a
matter of policy, employees will not be allowed to participate
in so-called "hot" offerings as such term may be defined by
Merrill Lynch or appropriate regulators (e.g., offerings that
are oversubscribed or for which the demand is such that there
is the possibility of oversubscription).
B. Additional Trading Restrictions for Investment Personel
The following additional restrictions apply to investment personnel.
Investment personnel are persons who, in connection with their regular functions
or duties, make or participate in making recommendations regarding the purchase
or sale of securities by a Fund). The Compliance Department will retain a
current a list of investment personnel.
1. Notification. An investment person must notify the Compliance
Department or preclearance designee of any intended
transactions in a security for his or her own personal account
or related accounts which is owned or contemplated for
purchase or sale by a Fund for which the employee has
investment authority.
2. Blackout Periods. An investment person may not buy or sell a
security within 7 calendar days either before or after a
purchase or sale of the same or related security by a Fund or
portfolio management group for which the investment person has
investment authority. For example, if a Fund trades a security
on day 0, day 8 is the first day the manager, analyst or
portfolio management group member of that Fund may trade the
security for his or her own account. An investment person's
personal trade, however, shall have no affect on the Fund's
ability to trade. For example, if within the seven-day period
following his or her
-4-
<PAGE>
personal trade, an investment person believes that it is in
the best interests of the Fund for which he or she has
investment authority to purchase or sell the same security on
behalf of the Fund, the trade should be done for the Fund, and
an explanation of the circumstances must be provided to the
Compliance Department.
3. Establishing Positions Counter to Fund Positions. No
investment person may establish a long position in his or her
personal account in a security if the Fund for which he or she
has investment authority maintains a position that would
benefit from a decrease in the value of such security. For
example, the investment person would be prohibited from
establishing a long position if (1) the Fund holds a put
option on such security (aside from a put purchased for
hedging purposes where the fund holdings the underlying
security); (2) the Fund has written a call option on such
security; or (3) the Fund has sold such security short, other
than "against-the-box."
No investment person may purchase a put option or write a call
option where a Fund for which such person has investment
authority holds a long position in the underlying security.
No investment person may short sell any security where a Fund
for which such person has investment authority holds a long
position in the same security or where such Fund otherwise
maintains a position in respect of which the Fund would
benefit from an increase in the value of the security.
4. Purchasing an Investment for a Fund that is a Personal
Holding. An investment person may not purchase an investment
for a Fund that is also a personal holding of the investment
person or any other account covered by this Code of Ethics, or
the value of which is materially linked to a personal holding,
unless the investment person has obtained prior approval from
his or her senior manager.
5. Index Funds. The restrictions of this Section 4.B. do not
apply to purchases and sales of securities by investment
personnel which coincide with trades by any MLIM index fund.
6. Prohibition on Short-Term Profits. Investment personnel are
prohibited from profiting on any sale and subsequent purchase,
or any purchase and subsequent sale of the same (or
equivalent) securities occurring within 60 calendars days
("short-term profit"). This holding period also applies to all
permitted options transactions; therefore, for example, an
investment person may not purchase or write an option if the
option will expire in less than 60 days (unless such a person
is buying or writing an option on a security that he or she
has held more than 60 days). In determining short-term
profits, all transactions within a 60-day period in all
accounts related to the investment person will be taken into
consideration in
-5-
<PAGE>
determining short-term profits, regardless of his or her
intentions to do otherwise (e.g., tax or other trading
strategies). Should an investment person fail to preclear a
trade that results in a short-term profit, the trade would be
subject to reversal with all costs and expenses related to the
trade borne by the investment person, and he or she would be
required to disgorge the profit. Transactions not required to
be precleared under Section 5 will not be subject to this
prohibition.
C. Trading Restrictions for Disinterested Directors of the MLIM Funds
The following restrictions apply only to disinterested directors of the
MLIM Funds (i.e., any director who is not an "interested person" of a MLIM fund
within the meaning of Section 2(a)(10) of the 1940 Act):
1. Restrictions on Purchases. No disinterested director may
purchase any security which, to the director's knowledge at
the time, is being purchased or is being considered for
purchase by any Fund for which he or she is a director.
2. Restrictions on Sales. No disinterested director may sell any
security which, to the director's knowledge at the time, is
being sold or is being considered for sale by any Fund for
which he or she is a director.
3. Restrictions on Trades in Securities Related in Value. The
restrictions applicable to the transactions in securities by
disinterested directors shall similarly apply to securities
that are issued by the same issuer and whose value or return
is related, in whole or in part, to the value or return of the
security purchased or sold by any Fund for which he or she is
a director(see Section 4.A.6.).
Section 5 - Exempted Transactions/Securities
MLIM has determined that the following securities transactions do not
present the opportunity for improper trading activities that Rule 17j-1 is
designed to prevent; therefore, the restrictions set forth in Section 4 of this
Code (including preclearance, prohibition on short-term profits and blackout
periods) shall not apply.
A. Purchases or sales in an account over which the employee has no direct or
indirect influence or control (e.g., an account managed on a fully
discretionary basis by an investment adviser or trustee).
B. Purchases or sales of direct obligations of the U.S. Government.
C. Purchases or sales of open-end investment companies (including money
market funds), variable annuities and unit investment trusts. (However,
unit investment trusts traded on a stock exchange (e.g., MITS, DIAMONDS,
NASDAQ 100, etc.) must be precleared.)
-6-
<PAGE>
D. Purchases or sales of bank certificates, bankers acceptances, commercial
paper and other high quality short-term debt instruments, including
repurchase agreements.
E. Purchases or sales of Merrill common stock (and securities related in
value to Merrill Lynch common stock). Also exempt is employer stock
purchased and sold through employer-sponsored benefit plans in which the
spouse of a MLIM employee may participate (e.g., employee stock purchase
plans or 401(k) plans) and sales of employer stock (or the exercise of
stock options) that is received as compensation by a MLIM employee's
spouse.
F. Purchases or sales which are non-volitional on the part of the employee
(e.g., an in-the-money option that is automatically exercised by a broker;
a security that is called away as a result of an exercise of an option; or
a security that is sold by a broker, without employee consultation, to
meet a margin call not met by the employee).
G. Purchases which are made by reinvesting cash dividends pursuant to an
automatic dividend reinvestment plan.
H. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer.
I. Purchases or sales of commodities, futures (including currency futures and
futures on broad-based indices), options on futures and options on
broad-based indices. Currently, "broad-based indices" include only the S&P
100, S&P 500, FTSE 100 and Nikkei 225. Also exempted are exchange-traded
securities which are representative of, or related closely in value to,
these broad-based indices.
J. The receipt of a bona fide gift of securities. (Donations of securities,
however, require preclearance.)
Exempted transactions/securities may not be executed/held in brokerage
accounts maintained outside of Merrill Lynch.
The reporting requirements listed in Section 6 of this Code, however,
shall apply to the securities and transaction types set forth in paragraphs F-J
of this section.
Section 6 - Reporting by Employees
The requirements of this Section 6 apply to all MLIM employees. The
requirements will also apply to all transactions in the accounts of spouses,
dependent relatives and members of the same household, trustee and custodial
accounts or any other account in which the employee has a financial interest or
over which the employee has investment discretion. The requirements do not apply
to securities acquired for accounts
-7-
<PAGE>
over which the employee has no direct or indirect control or influence. All
employees whose accounts are maintained at Merrill Lynch or BNYE are deemed to
have automatically complied with the requirements of this Section 6.B. and C. as
to reporting executed transactions and personal holdings. Transactions and
holdings in such accounts are automatically reported to the Compliance
Department through automated systems.
Employees who have approved accounts outside of Merrill Lynch or BNYE are
deemed to have complied with the requirements of this Section 6.B. and C.
provided that the Compliance Department receives duplicate statements and
confirmations directly from their brokers.
Employees who effect reportable transactions outside of a brokerage
account (e.g., optional purchases or sales through an automatic investment
program directly with an issuer) will be deemed to have complied with this
requirement by preclearing transactions with the Compliance Department and by
reporting their holdings annually on the "Personal Securities Holdings" form, as
required by the Compliance Department.
A. Initial Holdings Report. Each new MLIM employee will be given a copy of
this Code of Ethics upon commencement of employment. All new employees
must disclose their personal securities holdings to the Compliance
Department within 10 days of commencement of employment with MLIM.
(Similarly, securities holdings of all new related accounts must be
reported to the Compliance Department within 10 days of the date that such
account becomes related to the employee.) With respect to exempt
securities referred to in Section 5 which do not require
preclearance/reporting, employees must nonetheless initially report those
exempt securities defined in Section 5.F.-J. (This reporting requirement
does not apply to holdings that are the result of transactions in exempt
securities as defined in Section 5.A.-E.) Initial holdings reports must
identify the title, number of shares, and principal amount with respect to
each security holding. Within 10 days of commencement of employment, each
employee shall file an Acknowledgement stating that he or she has read and
understands the provisions of the Code.
B. Records of Securities Transactions. All employees must preclear each
securities transaction (with the exception of exempt transactions in
Section 5) with the Compliance Department or preclearance designee. At the
time of preclearance, the employee must provide a complete description of
the security and the nature of the transaction. As indicated above,
employees whose accounts are maintained at Merrill Lynch or BNYE or who
provide monthly statements directly from their brokers/dealers are deemed
to have automatically complied with the requirement to report executed
transactions.
C. Annual Holdings Report. All employees must submit an annual holdings
report reflecting holdings as of a date no more than 30 days before the
report is submitted. As indicated above, employees whose accounts are
maintained at Merrill Lynch or BNYE or who provide monthly statements
directly from their brokers/dealers are
-8-
<PAGE>
deemed to have automatically complied with this requirement.
With respect to exempt securities referred to in Section 5 which do not
require preclearance/reporting, employees must nonetheless annually report
the holdings of those exempt securities that are defined in Section
5.F.-J. (This reporting requirement, however, does not apply to exempt
securities as defined in Section 5.A.-E.)
D. Annual Certification of Compliance. All MLIM employees must certify
annually to the Compliance Department that (1) they have read and
understand and agree to abide by this Code of Ethics; (2) they have
complied with all requirements of the Code of Ethics, except as otherwise
notified by the Compliance Department that they have not complied with
certain of such requirements; and (3) they have reported all transactions
required to be reported under the Code of Ethics.
E. Review of Transactions and Holdings Reports. All transactions reports and
holdings reports will be reviewed by department heads (or their
designeeds) or compliance personnel according to procedures established by
the Compliance Department.
Section 7 - Reporting by Disinterested Directors of MLIM Funds
A disinterested director of a Fund need only report a transaction in a
security if the director, at the time of that transaction, knew or, in the
ordinary course of fulfilling the official duties of a director of such Fund,
should have known that, during the 15-day period immediately preceding the date
of the transaction by the director, the security was purchased or sold by any
Fund or was being considered for purchase or sale by any Fund for which he or
she is a director. In reporting such transactions, disinterested directors must
provide: the date of the transaction, a complete description of the security,
number of shares, principal amount, nature of the transaction, price,
commission, and name of broker/dealer through which the transaction was
effected.
As indicated in Section 6.D. for MLIM employees, disinterested directors
are similarly required to certify annually to the Compliance Department that (1)
they have read and understand and agree to abide by this Code of Ethics; (2)
they have complied with all requirements of the Code of Ethics, except as
otherwise reported to the Compliance Department that they have not complied with
certain of such requirements; and (3) they have reported all transactions
required to be reported under the Code of Ethics.
Section 8 - Approval and Review by Boards of Directors
The Board of Directors of each MLIM Fund, including a majority of
directors who are disinterested directors, must approve this Code of Ethics.
Additionally, any material changes to this Code must be approved by the Board of
Directors within six
-9-
<PAGE>
months after adoption of any material change. The Board of Directors must base
its approval of the Code and any material changes to the Code on a determination
that the Code contains provisions reasonably necessary to prevent employees from
engaging in any conduct prohibited by Rule 17j-1. Prior to approving the Code or
any material change to the Code, the Board of Directors must receive a
certification from the Fund, the Investment Adviser or Principal Underwriter
that it has adopted procedures reasonably necessary to prevent employees from
violating the Code of Ethics.
Section 9 - Review of MLIM Annual Report
At least annually, the Fund, the Investment Adviser and the Principal
Underwriter must furnish to the Fund's Board of Directors, and the Board of
Directors must consider, a written report that (1) describes any issues arising
under this Code of Ethics or procedures since the last report to the Board of
Directors, including, but not limited to, information about material violations
of the Code of Ethics or procedures and sanctions imposed in response to the
material violations and (2) certifies that the Fund, Investment Adviser and
Principal Underwriter have adopted procedures reasonably necessary to prevent
employees from violating this Code of Ethics.
Section 10 - Sanctions
Potential violations of the Code of Ethics must be brought to the
attention of the Compliance Director or his designee, are investigated and, if
appropriate, sanctions are imposed. Upon completion of the investigation, if
necessary, the matter may also be reviewed by the Code of Ethics Review
Committee which will determine whether any further sanctions should be imposed.
Sanctions may include, but are not limited to, a letter of caution or warning,
reversal of a trade, disgorgement of a profit or absorption of costs associated
with a trade, supervisor approval to trade for a prescribed period, fine or
other monetary penalty, suspension of personal trading privileges, suspension of
employment (with or without compensation), and termination of employment.
Section 11 - Exceptions
An exception to any of the policies, restrictions or requirements set
forth herein may be granted only upon a showing by the employee to the Code of
Ethics Review Committee that such employee would suffer extreme financial
hardship should an exception not be granted. Should the subject of the exception
request involve a transaction in a security, a change in the employee's
investment objectives, tax strategies, or special new investment opportunities
would not constitute acceptable reasons for a waiver.
-10-
