Exhibit (p)(iii) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
FLAHERTY & CRUMRINE INCORPORATED
CODE OF ETHICS/STATEMENT OF POLICY AND PROCEDURES
REGARDING PERSONAL SECURITIES TRANSACTIONS
I. POLICY STATEMENT ON PERSONAL SECURITIES TRANSACTIONS
Flaherty & Crumrine Incorporated ("F&C") forbids any officer, director or
employee of F&C ("Covered Persons") from taking any action in conflict
with or potentially in conflict with F&C's investment advisory clients
("Clients") including registered investment companies ("Funds") and
private accounts. Personal securities (as hereinafter defined)
transactions are permitted by such Covered Persons if no reasonable basis
exists for believing that a transaction would disadvantage Clients. This
Code of Ethics/Statement of Policies and Procedures Regarding Personal
Securities Transactions (the "Code") establishes rules of conduct for
Covered Persons regarding securities transactions in their personal
accounts and those accounts in which they have a direct or indirect
beneficial ownership (as defined in Attachment A to this Code) consistent
with F&C Policy.
II. RESTRICTIONS ON ACTIVITIES
A. BLACKOUT PERIODS
1. No Covered Person shall purchase or sell, directly or indirectly, any
security (as hereinafter defined) in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership (as defined in
Attachment A to this Code) on a day during which Clients have pending "buy" or
"sell" orders in the same security until such orders are executed or withdrawn.
2. No Covered Person shall 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 (as defined in Attachment A to this
Code) within seven (7) calendar days before or after the Funds trade in that
security.
B. INTERESTED TRANSACTIONS
No Covered Person shall recommend or complete any securities
transactions by the Clients without having disclosed to F&C his or
her interest, if any, in such securities or the issuer thereof,
including without limitation:
1. Any direct or indirect beneficial ownership (as defined in Attachment A
to this Code) of any securities of such issuer;
2. Any contemplated transaction by such person in such securities;
3. Any position with such issuer or its affiliates; and
4. Any present or proposed business relationship between such issuer or its
affiliates and such person or any parties in which such person has a significant
interest.
C. INITIAL PUBLIC OFFERINGS
No Covered person shall acquire, directly or indirectly, beneficial
ownership of any securities in an initial public offering without
the prior approval of the Designated Supervisory Person (as
hereinafter defined) who has been provided by such Covered Person
with full details of the proposed transaction. In granting this
prior approval, the Designated Supervisory person shall take into
consideration, among other factors, whether the investment
opportunity should be reserved for the Clients and whether the
opportunity is being offered to the Covered Person by virtue of his
or her position with F&C and the Funds. Purchases of initial public
offerings of volatile securities which are difficult to obtain, such
as certain common stocks, will ordinarily not be approved. In
contrast, purchases of generally available initial public offerings
of less volatile securities such as municipal bonds would usually be
approved.
D. PRIVATE PLACEMENTS
No Covered Person shall acquire, directly or indirectly, beneficial
ownership of any securities in a private placement without the prior
approval of the Designated Supervisory Person who has been provided
by such Covered Person with full details of the proposed
transaction. In granting this prior approval, the Designated
Supervisory Person shall take into consideration, among other
factors, whether the investment opportunity should be reserved for
the Clients and whether the opportunity is being offered to the
Covered Person by virtue of his or her position with F&C and the
Funds. Covered Persons who have been authorized to acquire
securities in a private placement are required to disclose that
investment when they play a part in the subsequent consideration of
an investment in the issuer by the Clients. In such circumstances,
the decision to purchase securities of the issuer will be subject to
an independent review by persons with no personal interest in the
issuer.
E. BROKERAGE OR INVESTMENT BANKING SECURITIES
No transaction may be effected in the publicly owned securities of
any company, the primary business of which is stock brokerage or
investment banking.
F. GIFTS
No Covered Person shall receive any gift or other things of more
than DE MINIMUS value from any person or entity that does business
with or on behalf of F&C or the Funds.
G. SERVICE AS A DIRECTOR
No Covered Person shall serve on the board of directors of any
publicly traded company without prior authorization from a committee
comprised of a Designated Supervisory Person and two others (the
"Compliance Committee") based upon a determination that such board
service would be consistent with the interests of the Clients'. If
such service is authorized, the Covered Person will be isolated from
making investment decisions relating to such service through the
implementation of appropriate "Chinese Wall" procedures established
by the Compliance Committee.
III. EXEMPT TRANSACTIONS
A. For purposes of this Code, the term "security" shall not include the
following:
1. Securities issued or guaranteed as to principal or interest by the
Government of the United States or its instrumentalities;
2. Bankers' acceptances;
3. Bank certificates of deposit;
4. Commercial paper;
5. High quality short-term debt instruments, including repurchase
agreements1; and
6. Shares of registered open-end investment companies.
"Security" or "securities" shall include options, futures contracts
and other derivative securities as well as related securities, such
as convertible securities and warrants.
B. The prohibitions described in Paragraph A. of Article II shall not apply
to:
1. Purchases or sales effected in any account over which the Covered Person
has no direct or indirect influence or control;
2. Purchases or sales of securities that are non-volitional on the part of
the Covered Person;
3. Purchases that are part of an automatic dividend reinvestment plan;
4. Purchases effected upon the exercise of rights issued by an issuer PRO
RATA to all holders of a class of its securities, to the extent such rights were
acquired from the issuer, and sales of such rights so acquired; or
5. Subject to the advance approval by a Designated Supervisory Person,
purchases or sales which are only remotely potentially harmful to the Clients
because such purchases or sales would be unlikely to affect a highly
institutional market, or because such purchases or sales are clearly not related
economically to the securities held, purchased or sold by the Clients.
IV. COMPLIANCE PROCEDURES
A. PRECLEARANCE
A Covered Person may directly or indirectly, acquire or dispose of
beneficial ownership of a security, including shares of the Funds, only if (1)
such purchase or sale has been approved by a supervisory person designated by
F&C (the "Designated Supervisory Person" or "DSP"), (2) the approved transaction
is completed on the same day approval is received and (3) the Designated
Supervisory Person has not rescinded such approval prior to execution of the
transaction. On the effective date of this Code, Robert M. Ettinger and Donald
F. Crumrine are such Designated Supervisory Persons. Mr. Ettinger shall act as a
DSP for Mr. Crumrine, Mr. Crumrine for Mr. Ettinger, and, if either Mr. Ettinger
or Mr. Crumrine is not available, Robert T. Flaherty shall, in these instances,
act as a DSP for Mr. Crumrine or Mr. Ettinger.
B. REPORTING
Every Covered Person must report certain information about EACH non-exempt
transaction by which the Covered Person acquires ANY direct or indirect
beneficial ownership (as defined in Attachment A to this Code) of a security,
PROVIDED, HOWEVER, that a Covered Person shall not be required to make a report
with respect to any transaction effected for any account over which such person
does not have any direct or indirect influence or control or which would
duplicate information recorded pursuant to Rules 204-2(a)(12) or 204-2(a)(13)
under the Investment Advisors Act of 1940, as amended.
After verbal prior approval for each non-exempt securities transaction
required this Article IV. is granted, the Covered Person must ensure that
written approval of the DSP is filed in the Covered Person's confidential
Personal Securities Transaction File (the "Transaction File") except as provided
for below. The broker or futures commission merchant through which the
transaction was effected shall be directed by the Covered Person to supply to
the Designated Supervisory Person, on a timely basis, duplicate confirmations of
each transaction. Such confirmations will then be matched with the written prior
approval in the Covered Person's Transaction File.
By the seventh day of each month, all Covered Persons must file with F&C a
confidential Personal Securities Transaction Report (the "Transaction Report")
for the immediately preceding month including all non-exempt transactions. A
Transaction Report must be filed whether or not there were any reportable
transactions. Participation in dividend reinvestment plans of publicly held
companies need be indicated only on the line provided under "Purchases" on the
monthly Transaction report. The Transaction Report must contain the following
information:
1. The date of the transaction, the title including interest rate and
maturity date (if applicable), and the number of shares, contracts, or the
principal amount of each security involved;
2. The nature of the transaction (i.e., purchase , sale or other
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 whom the
transaction was effected; and
5. The date that the report is submitted by the Covered Person.
Any report submitted to comply with the requirements of this Article
IV. may contain a statement that the report shall not be construed
as an admission by the person making such report that such person
has any direct or indirect beneficial ownership (as defined in
Attachment A to this Code) in the securities to which the report
relates.
A Covered Person will be deemed to be in full compliance with the
reporting requirements of this Article IV. Paragraph B. by causing
duplicate confirmations AND monthly brokerage statements on which
all transactions required to be reported hereunder are described to
be sent to the Designated Supervisory Person. The maintenance of
records for the Covered Person's beneficial ownership of securities
and commodities holdings on F&C's standard client account record
keeping system will be deemed to be full compliance with the
approval, reporting and disclosure requirements of this Code.
C. DISCLOSURE OF PERSONAL HOLDINGS - INITIAL AND ANNUAL HOLDINGS REPORTS
1. Initial Holdings Report. No later than 10 days after a person becomes a
Covered Person, the following information shall be submitted to the Designated
Supervisory Person:
A. The title, number of shares, contracts or the principal amount of all
Covered Securities owned directly or indirectly by the Covered Person when the
Covered Person became a Covered Person;
B. The name of any broker, dealer or bank with whom the
Covered Person maintained an account in which any
Covered Securities were held for the benefit of the
Covered Person as of the date the person became a
Covered Person; and
C. The date that the report is submitted by the Covered Person.
2. Annual Holdings Report. Each Covered Person shall submit to the
Designated Supervisory Person the information listed in C. 1.a., b. and c. above
on an annual basis, which information shall not be more than 30 days old.
D. CERTIFICATION OF COMPLIANCE
Each Covered Person is required to certify annually that he or she
has read and understood the Code and recognizes that he or she is
subject to such Code. Further, each Covered Person is required to
certify annually that he or she has complied with all the
requirements of the Code and that he or she has disclosed or
reported all personal securities transactions required to be
disclosed or reported pursuant to the requirements of the Code.
V. SANCTIONS
Upon discovering that a Covered Person has not complied with the
requirements of this Code, F&C may impose on that Covered Person whatever
sanctions it deems appropriate, including, among other things,
disgorgement of profits, censure, suspension or termination of employment.
VI. CONFIDENTIALLY
All information obtained from any Covered Person hereunder shall be kept
in strict confidence, except that reports of securities transactions
hereunder may be made available to the Securities and Exchange Commission
or any other regulatory or self-regulatory organization, and may otherwise
be disclosed to the extent required by law or regulation.
VII. AMENDMENTS
Any material change to this Code must be approved by F&C's Board of
Directors within six months of such change.
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 Designated
Supervisory Person.
DATED: FEBRUARY 17, 2000
IX. ACKNOWLEDGMENT
I have read and understand the foregoing Code and will comply in all
respects with it.
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NAME DATE
ATTACHMENT A
The term "beneficial ownership" as used in the attached Code of Ethics
(the "Code") is to be interpreted by reference to Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934 (the "Rule"), except that the determination of
direct or indirect beneficial ownership for purposes of the Code must be made
with respect to all securities that a Covered Person has or acquires. Under the
Rule, a person is generally deemed to have beneficial ownership of securities if
the person, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or indirect
pecuniary interest in the securities.
The term "pecuniary interest" in particular securities is generally
defined in the Rule to mean the opportunity, directly or indirectly, to profit
or share in any profit derived from a transaction in the securities. A person is
refutably deemed to have an "indirect pecuniary interest" within the meaning of
the Rule in any securities held by members of the person's immediate family
sharing the same household, the term "immediate family" including any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law, as well as adoptive relationships. Under the Rule, an indirect
pecuniary interest also includes, among other things: a general partner's
proportionate interest in the portfolio securities held by a general or limited
partnership; a performance-related fee, other than an asset-based fee, received
by any broker, dealer, bank, insurance company, investment company, investment
adviser, investment manager, trustee or person or entity performing a similar
function; a person's right to dividends that is separated or separable from the
underlying securities; a person's interest in securities held by certain trusts;
and a person's right to acquire equity securities through the exercise or
conversion of any derivative security, whether or not presently exercisable, the
term "derivative security being generally defined as any option, warrant,
convertible security, stock appreciation right, or similar right with an
exercise or conversion privilege at a price related to an equity security, or
similar securities with, or value derived from, the value of an equity security.
For purposes of the Rule, a person who is a shareholder of a corporation or
similar entity is NOT deemed to have a pecuniary interest in portfolio
securities held by the corporation or the entity and does not have or share
investment control over the corporation's or the entity's portfolio.
