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EXHIBIT (P-2)
THE ASSET MANAGEMENT DIVISION of BANK OF HAWAII
Code of Ethics
1. Purposes
This Code of Ethics (the "Code") has been adopted in accordance with
Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the "1940
Act"). Rule 17j-1 generally proscribes fraudulent or manipulative practices with
respect to purchases or sales of securities held or to be acquired by investment
companies, if effected by associated persons of such companies. The purpose of
this Code of Ethics is to provide regulations and procedures consistent with the
1940 Act and Rule 17j-1 designed to give effect to the general prohibitions set
forth in Rule 17j-1(a) as follows:
(a) It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company, or any
affiliated person of an investment adviser of or principal
underwriter for a registered investment company, in connection
with the purchase or sale, directly or indirectly, by such person
of a security held or to be acquired, as defined in this section,
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 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 any such
registered investment company; or
(4) To engage in any manipulative practice with respect to such
registered investment company.
Also, each Access Person has a duty to act in the best interest of the
Client. In addition to the various laws and regulations covering the Manager's
activities, it is clearly in the Manager's best interest to avoid potential
conflicts of interest or even
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the appearance of such conflict with respect to the conduct of Access Persons.
While it is not possible to anticipate all instances of potential conflict, the
standard is clear.
2. General Principles
We believe it is appropriate to restate and periodically distribute
this Code to all Access Persons. As a general principle, it is imperative that
Access Persons avoid any situation that might comprise, or call into question,
their exercise of fully independent judgment in the interests of Clients. If you
have any doubt as to the propriety of any activity, you should consult the
Review Officer.
While it is not possible to specifically define and prescribe rules
regarding all possible cases in which conflicts might arise, this code is
designed to set forth the policy regarding conduct in those situations in which
conflicts are most likely to develop. As you consider the more detailed portions
of the Code below, you should keep in mind the following fundamental fiduciary
principles that govern personal investment activities:
A. The interests of the Client must come first. In any decision
relating to your personal investments, you must scrupulously
avoid serving your own interests ahead of those of the Client.
B. Personal investment should comport with both the letter and the
spirit of this Code, and should avoid any actual or potential
conflicts of interest.
C. Access Persons should not take inappropriate advantage of their
position.
3. Definitions
(a) "Client" means all entities for whom the Manager acts in a
discretionary manner to invest funds in accordance with the
entity's investment objective(s), which includes any Registered
Investment Companies which may be subject to regulation by the
Securities and Exchange Commission.
(b) "Access Person" means any director, officer, general partner or
Advisory Person of the Bank of Hawaii , who, with respect to a
Client, makes any recommendation, participates in the
determination of which recommendation will be made, or whose
principal function or duties relate to the determination of which
recommendation will be made, or who, in connection with his or
her duties, obtains any information concerning recommendations on
securities being made by the Manager to any Client.
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(c) "Advisory Person" means any employee of the Bank of Hawaii , who,
in connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or
sale of a security or securities by a Client, or whose functions
relate to the making of any recommendations with respect to such
purchases or sales.
(d) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the
recommendation, when such person seriously considers making such
a recommendation.
(e) "Beneficial ownership" shall be interpreted with reference to the
definition contained in the provisions of Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder, as such provision may be interpreted by the
Securities and Exchange Commission. (See Appendix I attached.)
(f) "Control" shall have the meaning set forth in Section 2(a)(9) of
the 1940 Act.
(g) "Manager" shall mean the Asset Management Division of Bank of
Hawaii and its predecessors and/or successors.
(h) "Investment Personnel" means those Access Persons who have the
responsibility and authority to make investment decisions
affecting Clients or who assist in the process of making such
decisions (e.g., by providing information and advice with respect
to, or by executing, such decisions). Investment Personnel
include, but are not limited to, portfolio managers, securities
analysts and traders.
(i) "Personal Securities Transactions" means (i) transactions in
securities for your own account, including IRAs, or (ii)
transactions in securities for an account in which you have
indirect beneficial ownership, unless you have no direct or
indirect influence or control over the account. Accounts
involving family (including husband, wife, minor children or
other dependent relatives) and accounts in which you have a
beneficial interest (such as a trust of which you are an income
or principal beneficiary) are included within the meaning of
"indirect beneficial ownership."
(j) "Purchase or sale" of a security includes, among other things,
the writing, purchase or sale of an option or futures contract to
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purchase or sell a security, the conversion of a convertible
security and the exercise of a warrant for the purchase of a
security.
(k) "Review Officer" means the officer(s) of the Manager designated
from time-to-time by the Manager to receive and review reports of
purchases and sales by Access Persons.
(l) "Security" shall have the meaning set forth in Section 2(a)(36)
of the 1940 Act, except that it shall not include shares of
registered open-end investment companies, securities issued or
guaranteed as to principal and interest by the Government of the
United States, short term debt securities which are "government
securities" within the meaning of Section 2(a)(16) of the 1940
Act, bankers' acceptances, bank certificates of deposit,
commercial paper and such high quality short term debt
instruments (including repurchase agreements) as may be
designated by the Manager.
(m) "Security held or to be acquired" by a Client means any security
which, within the most recent 15 days, (i) is or has been held by
a Client, or (ii) is being or has been considered by the Manager
for purchase for a Client.
4. Restrictions and Procedures on Personal Securities Transactions
(a) Prohibited Purchases and Sales: Except as otherwise provided in
Section 5 hereof.
(1) No Access Person shall purchase or sell, directly or
indirectly, any Security in which he or she has, or by
reason of such transactions acquires, any direct or indirect
beneficial ownership and which to his or her actual
knowledge at the time of such purchase or sale is being
purchased or sold by a Client
(2) No Access Person shall reveal to any other person (except in
the normal course of his or her duties) any information
regarding Clients' transactions or consideration by the
Manager of any such transactions.
(3) No Access Person shall recommend any securities transaction
to or for a Client if the Access Person has an interest in
such securities or their issuer without first disclosing his
or her interest to the Review Officer and obtaining the
Review Officer's approval either (i) to disclose the
conflict to the Client at or before the
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recommendation is made or (ii) to make the recommendation
without disclosing the conflict to the Client. The Review
Officer may determine that disclosing such a conflict to the
Client is not necessary or appropriate, provided the Review
Officer is satisfied that the interest of the Access Person
in such securities or their issuer is not material, both in
terms of the Access Person's personal net worth and in
absolute dollar amount, and that any contemplated
transactions by the Client on the basis of such
recommendation is not likely to have a material impact on
the interest of the Access Person in such security or
issuer. For purposes of this provision, an interest in a
security or its issuer that must be disclosed to the Review
Officer shall include, without limitation, (i) direct or
indirect beneficial ownership in the security or any other
security of the same issuer; (ii) any contemplated
transaction by the Access Person in such securities; (iii)
any position with the issuer or its affiliates; and (iv) any
present or proposed business relationship between such
issuer or any of its affiliates, on the one hand, and the
Access Person or another party in which the Access Person
has a significant interest, on the other.
(b) Initial Public Offerings: Access persons shall not acquire any
securities in an initial public offering, in order to preclude
any possibility of their profiting improperly from their
positions on behalf of Clients.
(c) Private Placements: Access persons shall not acquire any
securities in a private placement without the prior approval of
the Review Officer. In reviewing any such request, the Review
Officer shall take into account, among other factors, whether the
investment opportunity should be reserved for Clients and whether
the opportunity is being offered to an individual by virtue of
his or her position with the Manager. Access persons who have
been authorized to acquire securities in a private placement
should disclose such private placement investment if he or she
plays a material role in a Client's subsequent investment
decision regarding the same issuer. In the foregoing
circumstances, a Client's decision to purchase securities of the
issuer shall be subject to an independent review by Investment
Personnel with no personal interest in such issuer.
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(d) Blackout Periods: Investment Personnel shall not execute a
securities transaction on a day during which a Client has a
pending "buy" or "sell" order in that same security, nor shall
Investment Personnel execute such a transaction until one trading
day after the Client's order is executed or withdrawn. In
addition, no Investment Personnel shall purchase or sell a
security within seven days before and after a Client who is a
Registered Investment Company and whose portfolio he or she
directly manages trades in that security.
(e) Gifts: Access persons shall not receive any gift or other thing
of more than de minimis value ($100) from any person or entity
that does business with the Manager
(f) Service as a Director: Investment Personnel shall not serve on
the boards of directors of publicly traded companies, absent
prior authorization by the Review Officer based upon a
determination that the board service would be consistent with the
interests of the Clients. As a general matter, directorships in
unaffiliated public companies or companies which may reasonably
be expected to become public companies will not be authorized
because of the potential for conflicts which may impede a
Client's freedom to act in their best interest. Service with
charitable organizations generally will be authorized, subject to
considerations related to time required during working hours and
use of proprietary information.
(g) Other Conflicts of Interest: Access persons should also be aware
that the areas other than Personal Securities Transactions or
gifts and sensitive payments may involve conflicts of interest.
The following should be regarded as examples of situations
involving real or potential conflicts rather than a complete list
of situations to avoid.
(1) "Inside Information" - The use of "inside information"
applies to personal securities transactions as well as to
Client transactions.
(2) "Use of Information" - Information acquired in connection
with your position as an Access Person may not be used in
any way which might be contrary to or in competition with
the interest of Clients.
(3) "Disclosure of Information" - Information regarding actual
or contemplated investment decisions, research priorities or
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Client interests should be treated confidentially and may
not be used in any way for personal gain.
(h) Ban on Short Term Trading Profits: Investment Personnel shall not
profit in the purchase and sale, or sale and purchase, of the
same (or equivalent) securities within 60 calendar days. Any
profit realized on short term trades, as defined, should be
disgorged.
5. Exempted Transactions.
The personal trading restrictions in Section 4(a), 4(d) and 4(h) and
the preclearance requirements in Section 7(a) of this Code shall not apply to
the following transactions:
(a) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by a Client
(c) Purchases or sales which are non-volitional on the part of either
the Access Person or a Client. Non-volitional transactions
include gifts to you over which you have no control of the timing
or transactions which result from corporate action applicable to
all similar security holders (such as splits, tender offers,
mergers, stock dividends, etc.).
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) 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, and sales
of such rights so acquired.
(f) Purchases or sales that receive the prior approval of the Review
Officer on the basis that they are unlikely to affect the market
price of those securities, in light of such factors as (i) the
size and nature of the proposed transaction in relation to the
depth and liquidity of the markets in those securities or (ii)
the institutional nature of the market, or because the securities
are not related economically to the securities purchased, sold or
held by Clients.
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(g) The Review Officer may grant exemptions from the personal trading
restrictions in this Code upon determining that the transaction
for which an exemption is requested would not violate any policy
embodied in this Code and that an exemption is appropriate to
avoid an injustice to the Access Person in the particular factual
situation presented. Factors to be considered may include : the
size and holding period of the Access Person's position in the
security, the market capitalization of the issuer, the liquidity
of the security, the reason for the Access Person's requested
transaction, the amount and timing of Client trading in the same
or a related security, and other relevant factors.
Any Access Person wishing an exemption should submit a written
request to the Review Officer setting forth the pertinent facts
and reasons why the Access Person believes that the exemption
should be granted. However, exemptions are intended to be
exceptions, and repetitive exemptive applications with respect to
any one individual will not be well received.
6. Compliance Procedures
(a) Preclearance: Except as otherwise provided in Section 5 hereof,
all Access Persons are to "preclear" Personal Securities
Transactions through the Review Officer prior to execution. This
includes bonds, stocks (including closed-end funds), convertible
securities, preferred securities, options on securities,
warrants, rights, etc. for domestic and foreign securities
whether publicly traded or privately placed. The Review Officer
may require other persons to preclear Personal Securities
Transactions as he or she may deem necessary and appropriate for
compliance with this Code.
(b) Records of Securities Transactions: Except as otherwise provided
in Section 6, all Access Persons are to direct their brokers to
supply to the Review Officer, on a timely basis, duplicate copies
of confirmations of all Personal Securities Transactions and
copies of periodic statements for all Securities accounts.
(c) Post-Trade Monitoring: The Review Officer shall review all
Personal Securities Transactions by Access Persons to ensure that
no conflict exists with Client trades.
(d) Disclosure of Personal Holdings: Access Persons are required to
disclose all personal securities holdings within ten days after
commencement of employment and thereafter on an annual basis.
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(e) Certification of Compliance With Code of Ethics: All Access
Persons are required to certify annually that they have read and
understand the Code and recognize that they are subject thereto.
Further, Access Persons are required to certify annually that
they have complied with the requirements of the Code and that
they have disclosed or reported all Personal Securities
Transactions required to be disclosed or reported pursuant to the
requirements of the Code.
8. Reporting
(a) The Securities and Exchange Commission requires that a record of
the reports of all Personal Securities Transactions required to
be kept available for inspection, and that these records be
maintained on at least a quarterly basis. To comply with these
rules, it is necessary to have every Access Person file a
quarterly report within 10 calendar days after the end of each
calendar quarter.(1) Quarterly Report forms will be distributed
to all Access Persons on the last business day of each quarter.
Completed forms should be sent to the Review Officer. The forms
and transactions in all personal accounts will be reviewed each
quarter on a confidential basis.
(b) The quarterly report must include the required information for
all Personal Securities Transactions. Transactions exempted under
Section 5 of this Code of Ethics must also be reported and the
nature of the transaction clearly specified in the report.
(c) Quarterly reports must be filed by all Access Persons even if
there were no reportable transactions during the quarter. (Write
"none" and return with your signature.)
(d) The report required by this section shall contain the following
information:
(i) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
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(1) Access Persons who provide copies of confirmations and periodic statements
pursuant to Section 8 hereof need only certify in such report that no other
transactions were executed during the quarter.
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(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.
(e) The 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.
9. Sanctions
Upon receiving a report regarding a violation of this Code, the Manager
may impose such sanctions as it deems appropriate, including, among other
things, a letter of censure or suspension or termination of the employment of
the violator.
10. Monitoring by Review Officer
Adherence to the Code is considered a basic condition of employment
with the Manager. The Review Officer will monitor compliance with the Code and
review such violations of the Code as may occur and determine what action or
sanctions are appropriate in the event of a violation. The Review Officer will
report on Code compliance, upon request, to a Client where appropriate and
necessary.
We emphasize the importance of Access Persons obtaining prior clearance
of all Personal Securities Transactions as required by the Code, filing the
quarterly reports promptly and avoiding other situations which might involve
even the appearance of a conflict of interest. Questions regarding
interpretation of this policy or questions related to specific situations should
be directed to the Review Officer.
11. Effective Date
This Code was adopted at a meeting of the Investment Policy Committee
of the Manager. This Code shall become effective on September 1, 2000 and remain
in effect until amended or replaced by its Investment Policy Committee by
subsequent action.
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Appendix I
The term "beneficial ownership" of securities would include not only
ownership of securities held by an Access Person for his or her own benefit
whether in bearer form or registered in his or her own name or otherwise, but
also ownership of securities held for his or her benefit by others (regardless
of whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees (including, potentially, trusts in which he or she
has only a remainder interest), and securities held for his or her account by
pledgees, securities owned by a partnership in which he or she is a member, and
securities owned by any corporation which he or she should regard as a personal
holding corporation. Correspondingly, this term would exclude securities held by
an Access Person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which an Access Person is a legatee or beneficiary
unless there is a specific legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an Access Person where such person enjoys "benefits
substantially equivalent to ownership." The Securities and Exchange Commission
has said that although the final determination of beneficial ownership is a
question to be determined in the light of the facts of the particular case,
generally a person is regarded as the beneficial owner of securities held in the
name of his or her spouse and their minor children. Absent special circumstances
such relationship ordinarily results in such person obtaining benefits
substantially equivalent to ownership, e.g., application of the income derived
from such securities to maintain a common home, to meet expenses which such
person otherwise would meet from other sources, or the ability to exercise a
controlling influence over the purchase, sale or voting of such securities.
An Access Person also may be regarded as the beneficial owner of
securities held in the name of another person, if, by reason of any contract,
understanding, relationship, agreement, or other arrangement, he or she obtains
therefrom benefits substantially equivalent to those of ownership. Moreover, the
fact that the holder is a relative or relative of a spouse and sharing the same
home as an Access Person may in itself indicate that the Access Person would
obtain benefits substantially equivalent to those of ownership from securities
held in the name of such relative. Thus, absent countervailing facts, it is
expected that securities held by relatives who share the same home as an Access
Person will be treated as being beneficially owned by the Access Person.
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An Access Person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he or
she does not obtain therefrom the aforementioned benefits of ownership, if he or
she can vest or revest title in himself or herself at once or at some future
time.
The Securities and Exchange Commission staff has said in "no-action"
letters that, for purposes of Rule 17j-1 under the 1940 Act, the definition of
"beneficial owner" is determined by reference to Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934, as amended (the "Regulation"). The Regulation
defines the term "beneficial owner" to include any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has, or shares in, a direct or indirect pecuniary interest in
particular equity securities. The term pecuniary interest is defined by the
Regulation to include any opportunity, directly or indirectly, to profit, or
share in any profit, derived from a transaction in the subject securities.
The Regulation provides some guidance by defining an "indirect
pecuniary interest" in a transaction to include a general partner's interest in
portfolio securities held by a general or limited partnership, a person's
interest in securities held by a trust, and an individual's right, even if
currently unexercised, to acquire equity securities through the exercise or
conversion of any derivative securities, such as warrants. While these interests
are mentioned specifically in the Regulation, the "pecuniary interest" would, of
course, also include other interests not specifically noted in the Regulation.
The Regulation also specifies certain interests that do not qualify as
pecuniary interests in securities. Specifically, the Regulation states that a
shareholder does not have a pecuniary interest in the securities held by a
corporation or similar entity, provided he or she is not a control person of the
entity and does not have, or share, investment control over the entity's
portfolio. Furthermore, under the Regulation, a person does not have beneficial
ownership, by virtue of his or her ownership of an investment company's shares,
of the portfolio securities that are held by such investment company if it is
registered under the 1940 Act.
Because the determination of "beneficial ownership" may entail a highly
specific factual analysis, you may wish to seek guidance from the Review Officer
of the Manager or from counsel to the Manager.
FOOTNOTE 1-
Access Persons who provide copies of confirmations and periodic
statements pursuant to Section 8 hereof need only certify in such report that no
other transactions were executed during the quarter.
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