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PROPRIETARY CAPITAL LLC
CODE OF ETHICS
I. LEGAL REQUIREMENTS
A. This Code of Ethics ("the Code") has been adopted by Proprietary Capital
LLC ("Proprietary Capital") in compliance with Rule 17j-1(b)(1) promulgated
by the Securities and Exchange Commission ("SEC") under the Investment
Company Act of 1940. That rule requires each investment adviser of a
registered investment company to adopt a written code of ethics. In certain
respects the Code imposes requirements that exceed those imposed by law.
B. The purpose of the Code is to establish general principles governing the
conduct of Proprietary Capital's employees in connection with Proprietary
Capital's services as investment adviser to registered investment
companies, and to establish procedures to enhance compliance with those
general principles and in particular, to prevent Access Persons from
engaging in any act, practice, or course of business prohibited by SEC Rule
17-j1(a).
II. PURPOSES
A. In general, the following policies govern the personal investment
activities of employees and directors of Proprietary Capital. It is the
duty of such persons to place the interests of the Proprietary Capital
Funds or any portfolios advised by Proprietary Capital first. All such
persons shall also conduct personal securities transactions in a manner
that is consistent with this Code of Ethics and that avoids any actual or
potential conflict of interest or any abuse of a position of trust and
responsibility. Further, no such person shall take inappropriate advantage
of his or her position.
B. Rule 17j-1(a) renders it unlawful for any affiliated person of an
investment adviser of a registered investment company, in connection with
the purchase or sale, directly of indirectly, by such person of a security
"held or to be acquired", by such registered investment company:
(1) To employ any device, scheme or artifice to defraud such registered
investment company;
(2) 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 were made, not misleading;
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(3) 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
(4) To engage in any manipulative practice with respect to such registered
investment company.
C. A security is "held or to be acquired" if within the most recent 15 days it
(i) is or has been held by the investment company, or (ii) is being or has
been considered by the investment company, or by Proprietary Capital as an
investment adviser, for purchase by the investment company. A purchase or
sale includes the writing of an option to purchase or sell.
III. DEFINITIONS
A. The following words have the following meanings, regardless of whether such
terms are capitalized or not in this Code:
(1) Portfolio Manager - the individuals responsible and authorized to make
decisions regarding Fund investments.
(2) Investment Personnel - the individuals who provide information and
advice to portfolio managers, or who help execute portfolio decisions.
(3) Access Persons - all individuals who make any recommendations,
participate in the determination of which recommendation shall be
made, or whose principal functions or duties relate to the
determination of which recommendation shall be made to an Investment
Company; or who, in connection with his or her duties, obtains any
information concerning securities recommendations being made by
Proprietary Capital to an Investment Company.
(4) Beneficial Interest - an individual has a beneficial interest in an
account in which he or she may profit or share in the profit from
transactions. Without limiting the foregoing, an individual has a
beneficial interest when the securities in the account are held:
(i) in his or her name
(ii) in the name of any of his or her Immediate Family;
(iii) in his or her name as trustee for himself of herself or
for his or her Immediate Family;
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(iv) in a trust in which he or she has a beneficial interest
or is the settlor with power to revoke;
(v) by another person and he or she has a contract or an
understanding with such person that the securities held
in that person's name are for his or her benefit;
(vi) in the form of a right to acquisition of such
securities through the exercise of warrants, options,
rights, or conversion rights;
(vii) by partnership of which he or she uses as a personal
trading medium;
(viii) by corporation of which he or she is a member;
(ix) by a holding company which he or she controls; or
(x) any other relationship in which a person would have
beneficial ownership under Section 16 of the Securities
Exchange Act of 1934 and rules and regulations
thereunder, except that the determination of direct or
indirect beneficial interest shall apply to all
securities which an Access Person has or acquires.
Any person who wishes to disclaim a beneficial interest
in any securities must submit a written request to the
Compliance Department explaining the reasons therefor.
Any disclaimers granted by the Compliance Department
must be made in writing. Without limiting the
foregoing, if a disclaimer is granted to any person
with respect to shares held by a member or members of
his her Immediate Family, for which such disclaimer was
granted.
(5) Day - a calendar day.
(6) For His or Her Own Account - transactions in securities held in an
individual's own name or for any account in which he or she has
beneficial interest.
(7) Immediate Family - any of the following relatives sharing the same
household with an individual: child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, sister-in-law, including
adoptive relationships.
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(8) Security - any option, stock or option thereon, instrument, bond,
debenture, pre-organization certificate, investment contract, any
other interest commonly known as a security, and any security or
instrument related to but not necessarily the same as, those held or
be acquired by a fund; provided, however, that the following shall not
be considered a "security": securities issued by the United States
Government, Government-Sponsored Agencies and its instrumentalities,
bankers acceptances, bank certificates of deposit, commercial paper,
shares of registered open-end investment companies, commodities,
futures, and options and futures.
IV. STATEMENT OF GENERAL PRINCIPLES
A. The Code governs the conduct of each Access Person of Proprietary Capital.
B. All Access Persons shall act at all times to give priority to the interests
of each Investment Company and to the interests of the shareholders of each
Investment Company. All Access Persons shall conduct all personal
securities transactions consistent with the Code and in such manner as to
avoid any actual or potential conflict of interest or any abuse of the
Access Person's position of trust and responsibility with respect to any
Investment Company. A fundamental principle underlying the Code is that no
Access Person should take any inappropriate advantage of his or her
position. Violation of any of the foregoing principles or of any other
specific provision of the Code is grounds for disciplinary action,
including termination of employment.
V. PROHIBITED TRANSACTION FOR INVESTMENT PERSONNEL AND ACCESS PERSON
A. Investment Personnel securities transaction on a day when a Fund has a
pending "buy" or "sell" order in the same security. Portfolio Managers are
further restricted from executing personal security transactions seven
calendar days before or after executing a transaction of the same security
on behalf of a Fund. Any profit realized on trades within the proscribed
periods will be disgorged.
VI. PROHIBITED TRANSACTIONS FOR PORTFOLIO MANAGERS AND INVESTMENT PERSONNEL
A. Portfolio Managers and Investment Personnel are further prohibited:
(1) Shall obtain prior written approval from the Compliance Department
before personally investing in a private placement. Consideration
should be given to whether the investment would be appropriate for a
Fund, and therefor reserved for the fund.
(2) Should not serve on the boards of directors of publicly traded
companies.
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(3) Should not except gifts of more than de minimis value from any entity
doing business with or behalf of the Funds. De minimis value is to
mean that which is done as a gesture of goodwill and not influence
judgement.
(4) Should not profit from the purchase and sale or sale and purchase of
the same or equivalent securities within a 60 day calendar period.
Profits from short-term trading shall be disgorged.
VII. EXEMPTED TRANSACTIONS
A. The prohibition requirements of the immediately preceding Secitons V and VI
of this Code shall not apply to:
(1) Purchase or sales effected in any account over which the Access Person
has no direct or indirect influence or control, including blind trust.
(2) Securities transactions that are non-volitional on the part of either
the Access Person or the Fund.
(3) The acquisition of securities through stock dividends, dividend
reinvestment plans, payroll deductions plan of other similar automatic
investment programs, 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 securities.
(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 such issuer, or to sales of such rights so
acquired.
(5) Purchase or sales which are inconsequential to a Fund because they
would be very unlikely to affect a highly liquid market, or because
they clearly are not related economically to the securities to be
purchased, sold or held by a Fund.
(6) Securities transactions where neither the Portfolio Manager nor his or
her Immediate Family knows of the transaction before it is completed.
(7) Repurchase agreements.
(8) Options on the Standard & Poor's 500 Composite Stock Price Index.
VIII. PRE-CLEARANCE
A. Access Persons, Investment Personnel and Portfolio Managers shall receive
pre-clearance for all personal for all personal securities investment using
the Securities Transactions Pre-Clearance Form. Using the form, the
Compliance Department must indicate approval for the transaction prior to
its execution. The form must be completed for all securities transactions
except for the purchase or sale of Proprietary Capital stock, automatic
dividend reinvestments, U.S. Governments, Government-Sponsored Agencies and
its instrumentalities, bank
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deposits, commercial paper and open-ended mutual funds. Following the
transaction a duplicate copy of the trade confirmation must also be
submitted.
B. For Access Persons and Investment Personnel, a record of the daily volume
of trading in a security must be attached to the Pre-Clearance Form if a
Fund buy or sale is pending. In the case of Portfolio Managers, this record
must be attached if a trade in the same security has occurred seven days
before or after in the Fund.
C. For private placements, in addition to pre-clearance, Portfolio Managers
and Investment Personnel shall disclose their involvement, if any, in a
decision to invest in such an issuer on behalf of the Fund. The
pre-clearance decision for such investments shall be reviewed by the
Compliance Department.
IX. REPORTING
A. All Access Persons, Investment Personnel and Portfolio Managers shall
report, using the Securities Transaction Report to the Compliance
Department the information described in Section IX B of this Code with
respect to transactions in any security in which such person has, or by
reason of such transaction acquires, any direct or indirect beneficial
ownership in the security; provided, however, that such persons shall not
be required to make a report with respect to (I) transactions in U.S.
Government securities, Government-Sponsored Agencies and its
instrumentalities, bank certificates of deposit, commercial paper and
shares of registered, open-end investment companies; (ii) transactions
effected for any account over which such person does not have any direct or
indirect influence; (iii) transactions effected pursuant to an automatic
dividend reinvestment plan; or (iv) transactions in securities which the
Funds are not eligible to purchase.
B. The Securities Transaction Report shall be submitted 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 contain the following information.
(1) The date of the transaction, the issuer and 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 at which the transaction was effected; and,
(4) The name of the broker, dealer or bank with or through whom the
transaction was effected.
C. The Securities Transaction report 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
security to which the report relates.
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D. Portfolio Managers and Investment Personnel shall submit a report of their
personal investment holdings at the time of their hiring and annually
thereafter. The securities listed in this report shall be those held at the
time of the report and which conform to the criteria required under the
transactions guidelines provided in Section IX A and B of this Code.
E. All Access Persons shall be required to direct their brokers to have
duplicate copies of trade confirmations and account statements mailed, on a
confidential basis, to the designated compliance official.
F. All Access Persons must certify on an annual basis that they have read and
understand their obligations under the Code of Ethics and that they have
complied with the Code and with securities reporting requirements.
G. On an annual basis, Proprietary Capital shall prepare an annual report to
the Board of Directors of each Fund that:
(1) Summarizes existing procedures concerning personal investing and any
changes in the procedures made during the past year.
(2) Identifies any violations requiring significant remedial action during
the past year; and
(3) Identifies any recommended changes in existing restrictions or
procedures based upon the Fund's experience under the Code of Ethics,
evolving industry practices, or developments in applicable laws or
regulations.
X. COMPLIANCE BY SUB-ADVISERS
A. Any Access Person of a Sub-Adviser, as those are identifies in the Fund's
current prospectus, shall be deemed in compliance with this Code if the
Code of Ethics of such Sub-Adviser has been approved by the Board of
Directors of the Fund, and the Sub-Adviser, has been approved by the Board
of Directors of the Fund, and the Sub-Adviser, on a quarterly basis,
provides the Fund with a statement of compliances by the Access Person with
Sub-Adviser's Code of Ethics.
XI. SANCTIONS
A. Upon discovering a violation of this Code, the Board of Directors of a Fund
may impose such sanctions as it deems appropriate, including, among other
things, forfeit of certain profits, unwinding of trades, a letter of
censure or suspension or termination of the violator's relationship with
the Fund.
Date Adopted: July 28, 1999
