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Kensington Investment Group, Inc.
Code of Ethics
(Rule 17j-1 Policy)
Governing Purchase and Sale of Securities by Each
Officer, Director, Trustee and Employee
I. Legal Requirement
Rule 17j-1 under the Investment Company Act of 1940 makes it unlawful for any
director, trustee, officer or employee of a fund in the Kensington Funds (each
a "Fund") or of its investment adviser (as well as other persons), in
connection with the purchase and sale by such person of a security "held or to
be acquired" by the Fund:
1. To employ any device, scheme or artifice to defraud the Fund;
2. To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not misleading;
3. To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Fund; or
4. To engage in any manipulative practice with respect to the Fund.
A security is "held or to be acquired" if within the most recent 15 days it (i)
is or has been held by a Fund, or (ii) is being considered by a Fund or
Kensington Investment Group, Inc. (the "Adviser") for purchase by the Fund.
To assure compliance with these restrictions, each Fund and the Adviser adopt
and agree to be governed by the provisions contained in this Code of Ethics,
provided that the Adviser shall provide to the Compliance Officer, information
regarding any violations of the Code of Ethics of the Adviser, involving
persons who would otherwise be Access Persons hereunder whose violations were
relevant to the Fund.
II. General Principles
Each Fund shall be governed by the following principles and shall apply them to
their directors, trustees, officers, employees and "Access Persons," as
applicable.(1)
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(1) An "Access Person" is (1) each director, trustee, or officer of the
particular Fund, or the Adviser; (2) any natural person in a control
relationship (25% ownership) to the particular Fund, or the Adviser; (3)
each of those employees of a Fund, or the Adviser who in connection with
his or her regular duties obtains information about the purchase or sale of
a security by the Fund or whose functions relate to the making of such
recommendations.
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A. No Access Person shall engage in any act, practice or course of conduct
that would violate the provisions of Rule 17j-I set forth above.
B. The interests of the Funds and their shareholders are paramount and come
before the interests of any Access Person or employee.
C. Personal investing activities of all Access Persons and employees shall be
conducted in a manner that shall avoid actual or potential conflicts of
interest with the Funds and their shareholders.
D. Access Persons shall not use such positions, or any investment
opportunities presented by virtue of such positions, to the detriment of the
Funds and their shareholders.
III. Substantive Restrictions
A. The price paid or received by a Fund for any security should not be
affected by a buying or selling interest on the part of an Access Person, or
otherwise result in an inappropriate advantage to the Access Person. To that
end:
(a) no Access Person shall enter an order for the purchase or sale of a
security which a Fund is, or is considering, purchasing or selling until the
day after the Fund's transactions in that security have been completed unless
the Compliance Officer determines that it is clear that, in view of the nature
of the security and the market for such security, the order of the Access
Person will not affect the price paid or received by the Fund, provided that
the provisions of this paragraph III.A shall not apply to any director or
trustee of a Fund who is not an "interested person" of the Fund (as defined in
Section 2(a)(19) of the Investment Company Act of 1940) except with respect to
securities transactions where such director or trustee knew or, in the ordinary
course of fulfilling his or her official duties as a director or trustee of the
Fund, should have known that such security was being purchased or sold by that
Fund or a purchase or sale of such security was being considered by or with
respect to the Fund; and
(b) a Portfolio Manager of a Fund may not buy or sell a security within seven
days before or after that Fund trades in the security.(2)
B. No "Investment Person" may acquire any securities issued as part of an
initial public offering of the issuer.(3)
C. Each Investment Person must seek prior approval from the Compliance
Officer for private placement transactions. Such approval shall take into
account, among other factors, whether the investment opportunity should be
reserved for a Fund and whether the opportunity is being offered to such person
because of his or her position with a Fund. Any such Investment Person who has
been authorized to acquire securities in a private placement must disclose his
or her interest if he or she is involved in a Fund's consideration of an
investment in such issuer. Any decision to acquire
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(2) "Portfolio Managers" include those employees of a Fund, or the Adviser
authorized to make investment decisions on behalf of the Fund.
(3) An "Investment Person" includes any Portfolio Manager or employee of a
Fund, or the Adviser, such as a securities analyst and trader, who advises
Portfolio Managers or executes their decisions.
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such issuer's securities on behalf of a Fund shall be subject to review by
Investment Persons with no personal interest in the issuer.
D. An Investment Person may not profit from the purchase and sale or sale and
purchase of the same or equivalent securities within sixty calendar days.
Nothing in this restriction shall be deemed to prohibit avoidance of a net loss
from a purchase and sale or sale and purchase of the same or equivalent
securities within a period shorter than sixty calendar days.
E. An Investment Person must not accept gifts in excess of limits contained
in Section 10(a) of the Rules of Fair Practice of The National Association of
Securities Dealers from any entity doing business with or on behalf of a Fund,
the Adviser or the Distributor.
F. An Investment Person shall not serve on the boards of directors of
publicly traded companies, or in any similar capacity, absent the prior
approval of such service by the Compliance Officer following the receipt of a
written request for such approval. In the event such a request is approved,
procedures shall be developed to avoid potential conflicts of interest.
G. Any profits derived from securities transactions in violation of
paragraphs A, B, C or D, above, shall be forfeited and paid to the appropriate
Fund or Funds for the benefit of its or their shareholders. Gifts accepted in
violation of paragraph E shall be forfeited, if practicable, and/or dealt with
in any manner determined appropriate and in the best interests of any affected
Fund and its shareholders.
H. The restrictions of this Section III shall not apply to the following
transactions unless the Compliance Officer determines that such transactions
violate the General Principles of this Code:
1 reinvestments of dividends pursuant to a plan;
2 transactions in: short-term securities issued or guaranteed by an agency
or instrumentality of the U.S. Government; bankers' acceptances; U.S. bank
certificates of deposit; and commercial paper;
3 transactions in which direct or indirect beneficial ownership is not
acquired or disposed of;
4 transactions in accounts as to which an Access Person has no investment
control, subject, as applicable, to subparagraph IV.A4(e);
5 transactions in accounts of an Access Person for which investment
discretion is not maintained by the Access Person but is granted to any of the
following that are unaffiliated with the Adviser or Manager: a registered
broker-dealer, registered investment adviser or other investment manager acting
in a similar fiduciary capacity, provided the following conditions are
satisfied:
(a) The terms of the account agreement ("Agreement") must be in writing and
filed with the Compliance Officer prior to any transactions;
(b) Any amendment to the Agreement must be filed with the Compliance Officer
prior to its effective date;
(c) The Agreement must require the account manager to comply with the
reporting provisions of paragraph 3 of this Section IV.A;
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(d) The exemption provided by this Section IV.A4(e) shall not be available for
a transaction or class of transactions which is suggested or directed by the
Access Person or as to which the Access Person acquires advance information; and
6 transactions in securities in connection with an employer sponsored or
other tax qualified plan, such as a 401(k) plan, an IRA, or ESOP, in an amount
not exceeding $1,000 in any calendar month.
IV. PROCEDURES
A. To enable each Fund to determine with reasonable assurance whether the
provisions of Rule 17j-l(a) and this Code of Ethics are being observed by its
Access Persons:
1 Upon commencement of employment by a Fund, the investment adviser, or
otherwise assuming the status of "Access Person", and annually thereafter, each
Access Person shall disclose in writing, in a form acceptable to the Compliance
Officer, all direct or indirect "Beneficial Ownership" interests of such Access
Person in "Reportable Securities."
2 Each Access Person shall obtain the prior approval of the Compliance
Officer of all personal securities transactions in Reportable Securities.
3 Each Access Person shall notify the Compliance Officer of all brokerage
accounts in which he or she has any beneficial interest (a) within two weeks of
receipt of this Code or (b) promptly after the later opening of any such
account.
4 Each Access Person, with respect to each brokerage account in which such
Access Person has any beneficial interest shall arrange that the broker shall
mail directly to the Compliance Officer at the same time they are mailed or
furnished to such Access Person (a) duplicate copies of brokers' advice covering
each transaction in Reportable Securities in such account and (b) copies of
periodic statements with respect to the account.
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(a) "Beneficial Ownership" generally means having a direct or indirect
pecuniary interest in a security and is legally defined to be
beneficial ownership as used in Rule 16a-1(a)(2) under Section 16 of
the Securities Exchange Act of 1934. Beneficial ownership is presumed
regarding securities and accounts held in the name of a spouse or any
other family member living in the same household. Beneficial ownership
also extends to transactions by entities over which a person has
ownership, voting or investment control, including corporations (and
similar entities), trusts and foundations.
(b) "Reportable Securities" include generally all securities, and
financial instruments related to securities, except: securities issued
by, or that are direct obligations of, the United States Government;
bankers' acceptances; bank certificates of deposit; commercial paper;
and shares or registered open-end investment companies.
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5 The provisions of this Section IV.A shall not apply to any director or
trustee of a Fund who is not an "interested person" of the Fund (as defined in
Section 2(a)(19) of the Investment Company Act of 1940) except with respect to
reporting of securities transactions where such director or trustee knew or, in
the ordinary course of fulfilling his or her official duties as a director or
trustee of a Fund, should have known that, during the 15-day period immediately
preceding or after the date of a transaction in a security by the director or
trustee, such security was purchased or sold by the Fund or a purchase or sale
of such security was considered by the Fund or the Adviser.
B. The Compliance Officer shall notify each Access Person that he or she is
subject to this reporting requirement, and shall deliver a copy of this policy
to each Access Person. The Compliance Officer shall annually obtain written
assurances from each Access Person that he or she is aware of his or her
obligations under this Code of Ethics and has complied with the Code and with
its reporting requirements.
C. The Compliance Officer shall cause a system of monitoring personal
investment activity by Access Persons to be designed that would identify abusive
or inappropriate trading patterns or other practices of Access Persons.
D. The Compliance Officer shall report to the Board of Directors at each
meeting regarding the following matters not previously reported:
1 Any information pursuant to Sections IV.A.4 and 5 with respect to each
reported transaction in a security which was held by or acquired by the Fund
within 15 days before or after the date of the reported transaction or at a time
when, to the knowledge of the individual responsible for monitoring compliance
with the Code of Ethics, the Fund or the investment adviser was considering the
purchase or sale of such security, unless the transaction was a reinvestment of
dividends pursuant to a plan.
2 With respect to any transaction not required to be reported to the Board of
Directors by the operation of subparagraph (1) that he believes nonetheless may
evidence violation of this policy.
3 Apparent violations of the reporting requirement.
4 Other material violations of this Code of Ethics of which the Compliance
Officer has become aware since the previous report pursuant to this Section
IV.D.
5 Any violations of the Code of Ethics of the Adviser reported by the Adviser
in accordance with Section I hereof.
6 The results of monitoring of personal investment activities of Access
Persons in accordance with the procedures referred to in Section IV.C hereof.
E. The Compliance Officer shall have discretion not to make a report to the
Board of Directors under paragraph IV.D if he or she finds that by reason of the
size of the transaction, the circumstances or otherwise, no fraud or deceit or
manipulative practice could reasonably be found to have been practiced on a Fund
in connection with its holding or acquisition of the security or that no other
material violation of this Code has occurred.
F. The Board of Directors shall consider reports made to it hereunder and upon
discovering that a violation of this Code has occurred, the Board of Directors
may impose such sanctions, in addition to any forfeitures imposed pursuant to
Section III.G. hereof, as it deems appropriate, including, among other things, a
letter of sanction or suspension or termination of the employment of the
violator.
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G. The Compliance Officer shall report to the Board of Directors on an annual
basis concerning existing personal investing procedures, violations during the
prior year and any recommended changes in existing restrictions or procedures.
H. The Board of Directors shall review the Code and its operation at least
once a year.
I. This Code and any related procedures, a copy of each report by (or
duplicate brokers' advice for the account of) an Access Person, any written
report or memorandum hereunder by the Compliance Officer, and lists of all
persons required to make reports shall be preserved with each Fund's records for
the period required by Rule 17j-l.
