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EXHIBIT 16(c)
CODE OF ETHICS
BACHE CAPITAL MANAGEMENT, INC.
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BACHE CAPITAL MANAGEMENT, INC.
CODE OF ETHICS AND CONDUCT
As an investment adviser, Bache Capital Management, Inc. ("BCM") is
a fiduciary. As such it owes its clients the highest duty of diligence and
loyalty. Accordingly, one of the fundamental policies of BCM is to avoid any
conflict of interest or even the appearance of such a conflict in connection
with the performance of investment advisory and portfolio management services
for its clients. In furtherance of such fundamental policy and applicable
regulatory requirements, BCM has adopted this Code of Ethics and Conduct
("Code"), which applies to each Employee of BCM, who is involved in the
provision of investment advisory or portfolio management services - whether
by way of security analysis or recommendation, portfolio recommendation,
financial planning, or otherwise.
Please carefully read the policies and procedures detailed below.
When you believe that you sufficiently understand them, sign, date, and
return one copy of this memorandum to our Compliance Officer, and keep the
other copy for your reference. Employees should consult with BCM's Compliance
Officer regarding any questions about these items and other issues relating
to BCM's fiduciary obligations to its clients.
Please also note that the Insider Trading and Securities Fraud
Enforcement Act of 1988 and Section 204A of the Investment Advisers Act of
1940 ("Advisers Act") require every investment adviser to establish,
maintain, and enforce policies and procedures to detect and prevent the
misuse of material, non-public information. In response to those
requirements, BCM has developed a Compliance Manual, as well as Policies and
Procedures Concerning the Misuse of Material Non-Public Information
("Policies and Procedures"). Please refer to those Policies and Procedures as
appropriate.
I. DEFINITIONS
A. ACCESS PERSONS. The term "Access Person" means any officer,
director, or Advisory Employee of BCM.
B. ADVISORY EMPLOYEE. The term "Advisory Employee" means (a) any
employee of BCM who, in connection with his1 regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale of a
Covered Security by or on behalf of Clients or (b) any employee of BCM whose
functions relate to the making of any recommendations with respect to such
purchases or sales. If any individual or company is in a control relationship
with BCM, that person would be treated as an "Advisory Employee" for purposes of
this Code.
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1 The use of the masculine pronoun is for convenience of reference only and
is intended to include the feminine in all cases, unless the context requires
otherwise.
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C. BENEFICIAL OWNERSHIP. "Beneficial Ownership" has the same meaning
as would be used in determining whether an Employee is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
and regulations thereunder, except that the determination of direct or
indirect beneficial interest will apply to all securities that an Employee
has or acquires. "Beneficial Ownership" includes accounts of a spouse, minor
children who reside in an Employee's home and any other relatives (parents,
adult children, brothers, sisters, etc.) whose investments the Employee
directs or controls, whether the person lives with him or not, as well as
accounts of another person (individual, corporation, trust, custodian, or
other entity) if, by reason of any contract, understanding, relationship,
agreement or other arrangement, the Employee obtains or may obtain therefrom
benefits substantially equivalent to those of ownership. A person does not
derive a beneficial interest by virtue of serving as a trustee or executor
unless he or a member of his immediate family has a vested interest in the
income or corpus of the trust or estate. A copy of a Release issued by the
Securities and Exchange Commission on the meaning of the term "beneficial
ownership" is available upon request, and should be studied carefully by any
Employee concerned with this definition before preparing any report required
hereunder.
D. BEING CONSIDERED FOR PURCHASE OR SALE. A security is "Being
Considered for Purchase or Sale" when a recommendation to purchase or sell
such security has been made and communicated by an Employee, in the course of
his duties and, with respect to the person making the recommendation, when
such person seriously considers making such a recommendation.
E. CONTROL. The term "Control" has the same meaning as that set
forth in Section 2(a)(9) of the 1940 Act.
F. COVERED SECURITY. The term "Covered Security" has the same
meaning as the term "security" as set forth in Section 2(a)(36) of the 1940
Act, except that it shall not include shares of registered open-end
investment companies, direct obligations of the Government of the United
States, bankers' acceptances, bank certificates of deposit, commercial paper,
and high quality short-term debt instruments, including repurchase
agreements. For these purposes, "high quality short-term debt instruments"
means any instrument that has a maturity at issuance of less than 366 days
and that is rated in one of the two highest rating categories by a nationally
recognized statistical rating organization.
G. EMPLOYEE. The term "Employee" means any "Access Person" or
"Advisory Representative", as well as all other employees of BCM.
H. CLIENTS. The term "Clients" means Pacific Advisors Balanced Fund
and/or Pacific Advisors Income and Equity Fund and individual investment
management clients.
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I. INITIAL PUBLIC OFFERING. The term "Initial Public Offering" means
an offering of securities registered under the Securities Act of 1933, the
issuer of which, immediately before the registration, was not subject to the
reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act
of 1934.
J. LIMITED OFFERING. The term "Limited Offering" means an offering
that is exempt from registration under the Securities Act of 1933 pursuant to
Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506
under the Securities Act of 1933.
K. SECURITY HELD OR TO BE ACQUIRED. The phrase "Security Held or to
be Acquired" by Clients means:
1. any Covered Security which, within the most recent
fifteen (15) calendar days:
a. is or has been held by Clients; or
b. is being or has been considered for purchase by
Clients; and
2. any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security
described in paragraph II.F. above.
II. RULE 17j-1 -- GENERAL ANTI-FRAUD PROVISIONS.
Rule 17j-1 under the 1940 Act provides that it is unlawful for any
affiliated person of a registered investment company, or any affiliated
person of such company's investment adviser or principal underwriter, in
connection with any purchase or sale, directly or indirectly, by such person
of a Security Held or to be Acquired by such investment company, to engage in
any of the following acts, practices or courses of business:
A. employ any device, scheme, or artifice to defraud such investment
company;
B. make to such investment company any untrue statement of a
material fact or omit to state to such investment company a material fact
necessary in order to make the statements made, in light of the circumstances
under which they are made, not misleading;
C. engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any such investment company; and
D. engage in any manipulative practice with respect to such
investment company.
III. CONFLICTS OF INTEREST-PERSONAL INVESTMENTS
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A. GENERAL. BCM believes that every Employee should have reasonable
freedom with respect to their investment activities and those of their
families. At the same time, conflicts of interest could arise between BCM's
clients and the personal investment activities of BCM or its Employees.
BCM's fundamental policy is to avoid conflicts of interest or
even the appearance of such conflicts whenever possible. However, if a
conflict were to unavoidably occur, it is also BCM's policy to resolve such
conflict in favor of the client. Even in instances in which there is an
identity of interest among an BCM client, BCM and its Employees, an Employee
must recognize that Clients have priority in their right to benefit from
BCM's investment advice over any rights of BCM, the Employee, or any
non-client members of the Employee's family whom he or she may advise. This
condition inevitably places some restriction on freedom of investment for
Employees and their families.
This Code does not attempt to describe all possible conflicts of
interest, but rather, attempts to establish general principles and to
highlight possible problem areas. Employees should be conscious that areas
other than personal securities transactions may involve conflicts of
interest. For example, one such area would be accepting gifts or favors from
persons such as brokers since such gifts or favors could impair the
Employee's objectivity. Thus, the requirements set forth below are not
intended to cover all situations that may involve a possible conflict of
interest. Rather they are intended (i) to provide a framework for
understanding such conflicts and (ii) to provide a mechanism for monitoring
and reporting personal securities transactions. If there is any doubt about a
matter, the Compliance Officer should be consulted BEFORE any action
regarding such matter is taken.
B. PROHIBITED PERSONAL TRADING.
1. IMPROPER USE OF INFORMATION. No Employee may use their
knowledge concerning BCM's advisory clients' securities transactions for
trading in their personal account, any account in which he or she has a
Beneficial Ownership interest, or in any account controlled by or under the
influence of such Employee.
2. PURCHASE AND SALES. No Employee may purchase or sell, directly
or indirectly, any security in which he has, or by reason of the transaction
acquires, any direct or indirect Beneficial Ownership without obtaining prior
clearance as described in Section III.C. of this Code, proved that this
prohibition shall not apply to transactions that:
a. are exempt under Section III.D. of this Code; or
b. do not involve a Covered Security.
C. PRIOR CLEARANCE
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1. GENERAL REQUIREMENT. Every Employee shall obtain prior
written clearance from the Compliance Officer before directly or indirectly
initiating, recommending, or in any other way participating in the purchase or
sale of a Covered Security, or directly or indirectly acquiring any security
made available in an Initial Public Offering or in a Limited Offering, in which
the Employee has, or by reason of the transaction may acquire, any direct or
indirect beneficial interest. When requesting prior clearance, each Employee
should be aware that:
a. all requests for prior clearance must be set forth in
writing on the standard Personal Request and Trading
Authorization Form (SEE attached sample of the form); and
b. prior clearance of a securities transaction is effective
for three (3) business days from and including the date
clearance is granted.
Requests by Employees for prior clearance of personal securities transactions
must be made in writing on the standard Personal Request and Trading
Authorization Form ("Authorization Form") and submitted to the Compliance
Officer, who will be responsible for reviewing and processing all such
requests. Responses to such requests will also be provided by BCM's
Compliance Officer on the Authorization Form. The requesting Employee should
retain a copy of the Authorization Form for their recordkeeping purposes.
Prior clearance of a securities transaction is effective for three (3)
business days from and including the date clearance is granted.
2. BASES FOR DENIAL OF PRIOR CLEARANCE. Except as provided
in Section III.D.3. below, the Compliance Officer shall deny a request for
prior clearance if he determines that the security at issue is a Covered
Security or is being made available in an Initial Public Offering or Limited
Offering and:
a. is Being Considered for Purchase or Sale by Clients;
b. has been purchased or sold by Clients within the prior
two business days;
c. is being purchased or sold on behalf of Clients. In
this instance, "sold" includes an order to sell that has
been entered but not executed; or
d. the granting of prior clearance would, in the judgment
of the Compliance Officer, be inconsistent with the
purposes of this Code. If a prior clearance request is
denied under this Section III.D.2.d, the Compliance
Officer shall explain in writing the reasons therefore.
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3. BASES FOR GRANTING OF PRIOR CLEARANCE. The Compliance
Officer shall grant a request for prior clearance if he determines that the
transaction at issue:
a. is not potentially harmful to Clients;
b. would be very unlikely to affect the market in which the
Clients' portfolio securities are traded; or
c. clearly is not related economically to the securities to
be purchased, sold, or held by Clients,
AND the decision to purchase or sell the security is not the result of
material non-public information obtained in the course of the Employee's
relationship with BCM. The Compliance Officer shall document the reasons for
granting any request involving securities otherwise covered by Section
III.C.2.a., b., or c. above.
D. EXEMPT TRANSACTIONS. The prohibitions of Section III.C.2. above
and the preclearance procedures described in Section III.C.3. above do not
apply to the following transactions:
1. purchases or sales effected in any account over which an
Employee has no direct or indirect influence or control
or in any account of the Employee which is managed on a
discretionary basis by a person other than the Employee
and, with respect to which the Employee does not in fact
influence or control purchase or sale transactions;
2. purchases or sales which are non-volitional on the part
of the Employee;
3. purchases which are part of an automatic dividend
reinvestment plan;
4. purchases effected upon the exercise of rights issued
pro rata to all holders of a class of securities, to the
extent such rights were acquired from such issuer, and
sales of such rights so acquired; and,
5. purchases of sales of securities which are not eligible
for purchase or sale by any Clients.
E. SPECIFIC RULES. The following rules govern Employee investment
activities for the Employee's personal account or for accounts in which the
Employee has any direct or indirect Beneficial Ownership interest. These
rules are in addition to those noted in III.B. above.
1. NEW ISSUES. An Employee may not purchase any securities
available in an initial public offering ("IPO") of common stock or
convertible securities unless he or she
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obtains the prior written approval of the Compliance Officer and:
a. the purchase is made through the Employee's
regular broker;
b. the number of shares is commensurate with the
normal size and activity of such Employee's
account; and
c. no orders for the purchase of such securities
have been entered by BCM for ANY client account.
2. PRIVATE PLACEMENTS. No Employee may purchase a security
that is the subject of a private offering unless prior written
approval by the Compliance Officer been obtained.
3. SHORT SALES. No Employee may sell a security short that
is owned by any BCM client, except "short sales against the box" for
tax purposes.
4. DEALING WITH CLIENTS. No Employee may directly or
indirectly sell to or purchase from a client any security, except
purchases and sales with respect to Clients.
5. CLIENT OWNERSHIP. No Employee may purchase a security
of a company with respect to which 5% or more of its outstanding
stock is owned, in the aggregate, by Clients, unless prior written
approval of the BCM's Compliance Officer is obtained.
6. DAY TRADING. No day trading (I.E., the purchase and
sale of securities on a short term basis, such as one to five days)
by Employees is permitted, without written approval of the
Compliance Officer.
7. COMMISSIONS. Commissions on personal transactions may
be negotiated by the Employee, but payment of a commission rate
which is better than the rate available to Clients through similar
negotiation is prohibited.
8. OPTIONS AND FUTURES. The purchase, sale, and
utilization of options and futures contracts on specific securities
by the Employee are subject to the same restrictions as those set
forth in this Code with respect to securities, I.E., the option or
futures contract should be treated as if it were the security for
these purposes.
IV. GENERAL STANDARDS
A. WRITTEN RECORD OF SECURITIES RECOMMENDATIONS. Every
recommendation for the purchase or sale of securities for clients, excluding
recommendations to increase or decrease existing securities positions, must
be memorialized in writing either prior to or immediately after
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the recommendation is made. A standard Security Trading Advice form for
purchase or sale orders must be used for this purpose and should be provided
to or otherwise made available to the BCM's Compliance Officer.
B. USE OF SECURITIES RECOMMENDATIONS. Any investment ideas
developed by an Employee in the course of their work for BCM will be made
available for use by Clients PRIOR to any personal trading or investment by
any Employee based on such ideas. SEE ALSO the prohibitions against
self-dealing and front-running described in Sections IV.E. and F. below.
C. GIFTS, FAVORS, AND GRATUITIES. No Employee should seek from a
broker-dealer, securities salesperson, approved company (I.E., a company the
securities of which are held by Clients), supplier, client or other person or
option with whom BCM has a business relationship, any gift, favor, gratuity,
or preferential treatment that is or may appear to be connected with any
present or future business dealings between BCM and that person or
organization or which may create or appear to create a conflict of interest.
As one consequence, no Employee may purchase New Issues in primary or
secondary distributions, unless prior written approval is obtained and
certain other requirements are met, as described above in Section III. C.1.
No gifts may be accepted, other than those offered as a courtesy. All gifts,
favors, or gratuities with a fair market value in excess of $100 should be
reported and described on the Monthly Securities Transaction Report ("Monthly
Report") and will be reviewed by BCM's Compliance Officer; gifts with a value
of less than $100 need only be reported. After such review, a determination
will be made whether such gifts, favors or gratuities should be returned. In
addition, discretion should be used in accepting invitations for dinners,
evening entertainment, sporting events or theater. While in certain
circumstances it may be appropriate to accept such invitations, all
invitations whose value exceeds $100 should also be reported to our
Compliance Officer on the Monthly Report. Any invitations from any person or
organization involving free travel for more than one day must receive prior
approval from our Compliance Officer. No Employee should offer any gifts,
favors or gratuities that could be viewed as influencing decision-making or
otherwise could be considered as creating a conflict of interest on the part
of their recipient.
D. INSIDE INFORMATION. No Employee may seek any benefit for himself,
a client, or anyone else from material, non-public information about issuers,
whether or not held in the portfolios of Clients or suitable for inclusion in
their portfolios. Any Employee who believes he or she is in possession of
such information must contact our Compliance Officer IMMEDIATELY. This
prohibition should not preclude an Employee from contacting officers and
employees of issuers or other investment professionals in seeking information
about issuers that is publicly available. Please remember, in this regard, to
review BCM's Policies and Procedures.
E. FAIR DEALING VS. SELF-DEALING. An Employee shall act in a manner
consistent with the obligation to deal fairly with all clients when taking
investment action. Self-dealing for personal benefit or the benefit of BCM,
at the expense of Clients, will not be tolerated. The receipt of "special
favors" from a stock promoter, such as participation in a private placement
or New Issue, as an inducement to purchase other securities for Clients is
not permitted. The
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existence of any substantial economic relationship between a proposed
personal securities transaction and any securities held or to be acquired by
BCM or Clients must be disclosed on the Authorization Form.
F. FRONT-RUNNING. An Employee shall not engage in "front-running" an
order or recommendation, even if the Employee is not handling either the
order or the recommendation and even if the order or recommendation is for
someone other than Clients. Front-running consists of executing a transaction
in the same or underlying securities, options, rights, warrants, convertible
securities or other related securities, in advance of block or large
transactions of a similar nature likely to affect the value of the
securities, based on the knowledge of the forthcoming transaction or
recommendation.
G. SERVICE AS A DIRECTOR. No Employee shall serve on the board of a
publicly traded company without prior authorization. Any such authorization
shall be supported by a determination that such service is consistent with
the interests of Clients.
H. CONFIDENTIALITY. Information relating to any client's portfolio
or activities is strictly confidential and should not be discussed with
anyone outside BCM. In addition, from the time that an Employee anticipates
making a recommendation to purchase or sell a security, through the time that
ALL transactions for clients based on that recommendation have been
consummated, the "subject and content" of the recommendation may be
considered to constitute "inside information." Accordingly, Employees must
maintain the utmost confidentiality with respect to their recommendations
during this period and may not discuss a contemplated recommendation with
anyone outside of BCM. In this regard, please also see BCM's Policies and
Procedures.
Any written or oral disclosure of information concerning BCM, Clients,
or particular purchase or sale transactions for client accounts should be made
only by persons who are specifically authorized to release that information,
after consultation with BCM's President and company counsel, where appropriate.
Please note that this prohibition is NOT intended to inhibit exchanges of
information among BCM Employees.
V. REPORTS OF PERSONAL INVESTMENTS BY EMPLOYEES
A. CONTENT AND TIMING OF EMPLOYEE REPORTS. Every Employee shall make
the following reports to the Compliance Officer:
1. INITIAL HOLDINGS REPORT. No later than ten (10) days
after becoming an Employee, such Employee shall report
the following information:
a. the title, number of shares and principal
amount of each Covered Security in which the
Employee had any direct or indirect
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Beneficial Ownership when the person became an
Employee;
b. the name of any broker, dealer or bank with
whom the Employee maintained an account in
which ANY securities were held for the direct
or indirect benefit of the Employee as of the
date the person became an Employee; and
c. the date that the report is submitted by the
Employee.
Persons who became Employees before October 29, 1999
are not required to file initial holdings reports.
2. QUARTERLY TRANSACTION REPORTS. No later than ten (10)
days after the end of a calendar quarter, the Employee
shall report the following information:
a. With respect to any transaction during the
quarter in a Covered Security in which the
Employee had any direct or indirect Beneficial
Ownership or which the Employee manages (for
example, as trustee) or to whom the Employee
gives investment or voting advice:
i. 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 Covered
Security involved;
ii. the nature of the transaction
(I.E., purchase, sale or any
other type of acquisition or
disposition);
iii. the price of the Covered Security
at which the transaction was
effected;
iv. the name of the broker, dealer,
or bank with or through whom the
transaction was effected; and
v. the date that the report is
submitted by the Employee.
b. With respect to any account established by the
Employee in which ANY securities were held
during the quarter for the direct or indirect
benefit of the Employee:
i. the name of the broker, dealer or
bank with whom the Employee
established the Account;
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ii. the date the account was
established; and
iii. the date that the report was
submitted by the Employee.
c. In filing Quarterly Transaction Reports for
such accounts please note:
i. Employees must file a report
every quarter whether or not
there were any reportable
transactions for such accounts.
However, no Quarterly
Transactions Report is required
to be filed if confirmations and
account statements containing all
of the necessary information are
provided to the compliance
officer within ten days of the
end of the calendar quarter.
ii. All reportable transactions
should be listed, if possible, on
a single form. If necessary,
because of the number of
transactions, please attach a
second form and mark it
"continuation." For every
security listed on the Quarterly
Transaction Report, the
information called for must be
completed by all Employees.
iii. Quarterly Reports must show (i) the
date of the transaction, the name of
the issuer, and the number of shares
or principal amount of the security
involved; (ii) the nature of the
transaction (I. E., purchase, sale
or other acquisition or disposition,
including gifts, the rounding out of
fractional shares, exercises of
conversion rights and exercises or
sales of subscription rights); (iii)
the price at which the transaction
was effected; and (iv) the name of
the broker, dealer or bank with or
through whom the transaction was
effected.
iv. Quarterly Transactions Reports on
family and other accounts in which
an Employee has any direct or
indirect Beneficial Ownership, and
which are fee paying Clients, need
merely list the BCM account number.
Securities transactions for such
accounts need not be separately
itemized.
3. ANNUAL HOLDING REPORTS. No later than twenty (20) days
after the end of every calendar year, the Employee shall
report the following information
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(which information must be current as of December 31 of
the calendar year for which the report is being submitted):
i. the title, number of shares and principal
amount of each Covered Security in which
the Employee has any direct or indirect
beneficial ownership;
ii. the name of any broker, dealer or bank
with whom the Employee maintains an
account in which ANY securities are held
for the direct or indirect benefit of the
Employee; and
iii. the date that the report is being
submitted by the Employee.
4. CONFLICT OF INTEREST REPORTS. Every Employee shall
immediately report in writing to the Compliance Officer
any factors of which he or she is aware that would be
relevant to a conflict of interest analysis, including
the existence of any substantial economic relationship
between the Employee's transactions and securities held
or to be acquired by Clients. These factors may include,
for example, officerships or directorships with
companies or beneficial ownership of more than 1/2 of 1%
of the total outstanding shares of any company whose
shares are publicly traded or that may be made available
in an Initial Public Offering or Limited Offering in the
foreseeable future.
B. NO HOLDINGS OR TRANSACTIONS TO REPORT. If an Employee has no
holdings to report on either an Initial Holdings Report or any Annual
Holdings Report nor transactions to report on any Quarterly Transaction
Report, that Employee shall nevertheless submit the appropriate Report
stating that the Employee had no holdings or transactions (as appropriate) to
report and the date the report is submitted by the Employee.
C. COPIES OF CONFIRMATIONS AND PERIOD ACCOUNT STATEMENTS. Each
Employee shall direct every broker or dealer through whom the Employee
effects ANY securities transactions to deliver to the Compliance Officer, on
a timely basis, duplicate copies of confirmations of all Employee securities
transactions and copies of periodic statements for all Employee securities
accounts.
D. EXCEPTIONS FROM REPORTING REQUIREMENTS.
1. A person need not make a report under this Section V.
with respect to transactions for, and Covered Securities
held in, any account over which the person has no direct
or indirect influence or control.
2. An Employee need not make a Quarterly Transaction
Report under
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Section V.A.2. if the confirmations or periodic account
statements delivered to the Compliance Officer under
Section V.C. are received within the time period
required by Section V.A.2., provided that all
information required by Section V.A.2. is contained in
such confirmations or account statements.
3. An Employee need not make a Quarterly Transaction
Report with respect to the "exempt transactions"
described in Section III.C., except to the extent
required by Section V.B.
E. REVIEW OF REPORTS. The Compliance Officer shall review all
reports submitted pursuant to Section V for the purpose of detecting and
preventing a potential or actual violation of this Code.
1. The Compliance Officer shall review an Initial Holdings
Report within fifteen (15) days of the date such Report
is submitted by an Employee.
2. The Compliance Officer shall review all Quarterly
Transaction Reports and all Annual Holding Reports
within thirty (30) days of the date such a Report is
submitted by an Employee.
3. The Compliance Officer shall review all Conflict of
Interest Reports promptly after receipt of such a Report.
4. The Compliance Officer shall maintain a record of each
report reviewed and the date such review was completed.
Such record shall indicate whether the Compliance
Officer's review detected a potential or actual
violation of this Code. If the Compliance Officer
detects a potential or actual material violation of this
Code, the Compliance Officer shall promptly inform BCM's
President.
5. The Compliance Officer promptly after furnishing such
written notification of a potential or actual material
violation of this Code, shall take those measures the
Compliance Officer deems necessary and appropriate to
remedy such violation, including, but not limited to,
requiring the Employee to divest any inappropriate
securities holdings and recommending sanctions to the
Board.
6. The Compliance Officer shall take such other actions and
measures as he deems necessary and appropriate to carry
out his duties with respect to the review of reports
required under this Code.
F. NOTIFICATION OF REPORTING OBLIGATION. The Compliance Officer
shall identify all Employees who are required to make reports under Section
V. and shall inform those Employees
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of their reporting obligation. Once informed of the duty to file reports, an
Employee has a continuing obligation to file such reports in a timely manner.
G. ANNUAL CERTIFICATION OF COMPLIANCE. At the time of submission of
Annual Holding Reports, all Employees must certify that they have read,
understand and are subject to this Code, and have complied at all times with
this Code, including the execution of personal securities transactions
disclosures in connection with obtaining prior clearance of securities
transactions and the submission of all required reports. When a person
becomes an Employee, that person shall be given a copy of the Code. Within 72
hours after being given the Code, that person shall certify that he or she
has had an opportunity to ask questions, and has read and understands the
Code, and agrees to comply with the Code. All Employees shall be given a copy
of any amendment to the Code. Within three months after the amendment becomes
effective, all Employees shall certify that they have received a copy of the
amendment, that they have had an opportunity to ask questions, and that they
understand the Amendment and agree to comply with the amendment.
H. DISCLAIMER OF BENEFICIAL OWNERSHIP. The broad definition of
Beneficial Ownership is for purposes of this Code only. It does not
necessarily cover other securities or tax laws. No report required to be made
under Section V. shall 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. Such reports may contain a statement to
that effect.
Whether an Employee's Report should include such a disclaimer is a
personal matter on which BCM will make no recommendation. A disclaimer may be
important not only for securities law purposes, but also because it might be
some evidence of ownership for other purposes, such as estate taxes.
Accordingly, an Employee may wish to consult their own attorney on this issue.
I. FORM OF REPORTS. All reports required to be filed under Section
V. shall be prepared by Employees using the forms attached to this Code.
VI. REPORTS TO THE BOARD
A. No less than thirty (30) days prior to the first regular meeting
of the Board of Directors for Pacific Advisors Fund Inc. for each fiscal
year, the Compliance Officer for BCM shall furnish to the Board, and the
Board shall consider, a written report that:
i. Describes any issues arising under this Code since
the last report to the Board, including, but not limited to,
information about material violations of this Code and the
sanctions, if any, imposed in response to the material violations; and
ii. Certifies that BCM has adopted procedures
reasonably necessary to
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prevent Access Persons from violating the Code.
B. To the extent that immaterial violations of this Code (such as
late filings of required reports) may collectively indicate material problems
with the implementation and enforcement of this Code, the written report
shall describe any violations that are material in the aggregate.
VII. ADVISING NON-BCM CLIENTS
Employees may not render investment advice to persons other than
Clients or members of the Employee's immediate family, unless the advisory
relationship, including the identity of those involved and any fee
arrangements, has been disclosed to and cleared with our President. Such
advisory relationships are subject to the reporting provisions of Section V.,
above.
VIII. VIOLATIONS OF THIS CODE
Violations of this Code may result in the imposition of sanctions by
regulatory authorities and/or BCM, including forfeiture of any profit from a
transaction, reduction in salary, censure, suspension, or termination of
employment.
IX. RECORD RETENTION
A. BCM shall maintain records in the manner and to the extent set
forth below, which records may be maintained on microfilm under the
conditions described in Rule 31a-2(f)(1) under the 1940 Act, and shall be
available for examination by representatives of the Securities and Exchange
Commission:
1. RETENTION OF CODE. A copy of this Code and any Code that was in
effect at any time within the past five years shall be preserved
in an easily accessible place.
2. RECORD OF VIOLATIONS. A record of any violation of this Code and
of any action taken as a result of such violation shall be
preserved in an easily accessible place for a period of not less
than five years following the end of the fiscal year in which the
violation occurs.
3. COPY OF FORMS AND REPORTS. A copy of each Personal Trading
Request and Authorization Form and each Initial Holdings Report,
Quarterly Transaction Report, Annual Holdings Report and Conflict
of Interest Report prepared and submitted by an Employee pursuant
to this Code must be preserved by the Compliance Officer as
appropriate, for a period of not less than five years from the
end of the fiscal year in which such report is made, the first
two years in an easily accessible place.
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4. LIST OF ACCESS PERSONS. A list of all persons who are, or within
the past five years of business have been, required to file
Personal Trading Request and Authorization Forms and Initial
Holdings Reports, Quarterly Transaction Reports, Annual Holdings
Reports and Conflict of Interest Reports pursuant to this Code
and a list of those persons who are or were responsible for
reviewing such Forms and Reports shall be maintained in an easily
accessible place.
5. WRITTEN REPORTS TO THE BOARD. A copy of each written report
furnished to the Board under Section VI. of this Code shall be
maintained for at least five years after the end of BCM's fiscal
year in which it is made, the first two years in an easily
accessible place.
6. RECORDS RELATING TO DECISIONS INVOLVING INITIAL PUBLIC OFFERINGS
AND LIMITED OFFERINGS. BCM shall maintain a record of any
decision, and the reasons supporting the decision, to approve the
acquisition by Access Persons of securities made available in an
Initial Public Offering or Limited Offering for at least five
years after the end of BCM's fiscal year in which the approval is
granted.
7. SITES OF RECORDS TO BE KEPT. All such records and/or documents
required to be maintained pursuant to this Code and/or Rule 17j-1
under the 1940 Act shall be kept at the offices of BCM.
B. CONFIDENTIAL TREATMENT. All reports and other records required
to be filed or maintained under this Code shall be treated as confidential.
X. INTERPRETATION OF PROVISIONS
The management of BCM may, from time to time, adopt such
interpretations of this Code as the management deems appropriate, provided
that the Board of the Fund approves any material changes to this Code
affecting compliance with Rule 17j-1 of the 1940 Act in accordance with such
Rule..
XI. AMENDMENTS TO THE CODE
Any amendment to the Code shall be effective thirty (30) calendar
days after written notice of such amendment shall have been received by the
Compliance Officer of BCM, unless the Board expressly determines that such
amendment shall become effective on an earlier date or shall not be adopted.
Any material change to this Code affecting compliance with Rule 17j-1 under
the 1940 Act shall be approved by the Board of BCM in accordance with such
Rule.
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XII. ACKNOWLEDGMENT OF RECEIPT
The undersigned has read, understands, and agrees to abide by the
guidelines set forth in this Code.
Name: Date:
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APPENDIX A
PROCEDURES FOR THE ENFORCEMENT OF BCM'S
CODE OF ETHICS
1. Upon the commencement of employment, each Employee of BCM is
provided with a copy of BCM's Code. Each Employee is at that time also
scheduled to discuss the Code with our Compliance Officer. The Employee is
required to acknowledge their understanding of the Code's prohibitions and
requirements by signing it and returning it to our Compliance Officer for
retention in BCM's files. Employees are encouraged to direct any questions
that may arise concerning the Code and its prohibitions to our Compliance
Officer. Each year BCM recirculates the Code to its Employees and requires
that each Employee sign and return the executed copy to our Compliance
Officer.
2. A list of all Employees is maintained and updated by our
Compliance Officer.
3. Before an Employee can place an order to effect a securities
transaction for any account in which the Employee has a direct or indirect
beneficial interest or for which the Employee exercises influence or control
over investment decisions, the Employee must obtain prior written approval
from BCM's Compliance Officer on a standard Personal Trading Request and
Authorization Form ("Authorization Form") supplied by BCM. BCM's Compliance
Officer, when appropriate, may inquire as to the reason for the personal
securities transaction and record that reason on the Authorization Form. The
original or a copy of the Authorization Form will be provided to our
Compliance Officer so that it can be matched at a later time with the
information reported on the Employee's Monthly Securities Transaction Report
("Monthly Report").
4. BCM's Code requires all Employees to report on the Quarterly
Transaction Report form any securities transaction for the prior calendar
quarter for accounts in which they have or will acquire a direct or indirect
beneficial interest or for accounts over which they exercise influence or
control. Employees are also asked to instruct the brokerage firm through
which the transaction is executed to send a duplicate confirmation to our
Compliance Officer. Upon receiving a confirmation, our Compliance Officer
will match the confirmation with the Authorization Form. If the confirmation
on its face reveals a violative trade, appropriate disciplinary action will
be taken.
In the event that a Quarterly Transaction Report or confirmation
discloses a securities transaction for which no prior written approval was
obtained, our Compliance Officer will discuss the circumstances of the
transaction and the reason for the failure to follow required procedures with
the Employee and a written record will be made of the matter. A copy of that
record will be attached to the Employee's Quarterly Transaction Report, which
is retained in that Employee's personal securities transactions file. Our
Compliance Officer will warn Employees that violations of BCM's Code may
result in disciplinary action including reduction in salary, censure,
suspension or termination of employment.
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5. On a quarterly basis each Employee's personal transactions files
will be reviewed by our Compliance Officer to identify and mark day trades
and situations where a personal trade in a security preceded a client trade
by one or more days. Our Compliance Officer will also review the files for
scalping, front-running, misuse of confidential information, or other abusive
personal securities transactions.
6. Our Compliance Officer will discuss any such questionable
transactions with the Employee who effected the trade. Our Compliance Officer
will make a written record of any determination indicating whether there has
been a violation of law or BCM's Code and the reasons underlying that
determination. In the event that our Compliance Officer determines that there
has been a securities law violation or a violation of BCM's Code, appropriate
disciplinary action will be taken and a report made to BCM's management.
7. These procedures, in conjunction with those procedures designed
to prevent the use of material non-public information, as contained in BCM's
Policies and Procedures Concerning the Misuse of Material Non-Public
Information, will be reviewed by BCM's management on an annual basis to
assess their effectiveness in preventing improper and illegal personal
securities trading by BCM Employees.
