THE HOUGH GROUP OF FUNDS
and
WILLIAM R. HOUGH & CO.
CODE OF ETHICS
(Rule 17j-1 Policy)
Governing Purchase and Sale of Securities by Each
Officer, Trustee and Employee
Revised August 10, 2000
I. Legal Requirement
The Hough Group of Funds (the "Funds," and each series, a "Fund") and William
R. Hough & Co. ("WRH"), the Investment Adviser and Distributor for the Funds,
a are subject to the requirements imposed under Rule 17j-1 under the
Investment Company Act of 1940. Rule 17j-1 makes it unlawful for WRH or any
trustee, officer or employee of the Fund or WRH (as well as persons
controlling, controlled by or under common control with the Funds), 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 the Fund, or (ii) is being considered by the Fund
or WRH for purchase by the Fund.
II. Prohibitions
A. It is the policy of the Fund that no "Access Person"13 shall engage
in any act, practice or course of conduct that would violate the provisions
of Rule 17j-1 set forth above.
B. So that a buying or selling of an interest on the part of an access
person as well as on the part of the Fund will not affect the price paid or
received by the Fund for any security, it is also the policy of the Fund that:
No access person shall purchase or sell, directly or indirectly, any security
in which he or she has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership and which he or she knows or should have
known at the time of such purchase or sale is being considered for
purchase or sale by the Fund; or is being purchased or sold by the Fund.
No access person shall enter any such order for the purchase or sale of such
security until the day after the Fund's transactions in that security
have been completed.
III. Reporting Requirements
A. To the Board of Trustees
No less frequently than annually, the Fund and WRH shall furnish to
the Fund's Board of Trustees and the Board of Trustees shall consider,
a written report that:
1. Describes any issues arising under the Code of Ethics or procedures since
the last report to the Board of Trustees, including, but not limited to,
information about material violations of the Code of Ethics or procedures and
sanctions imposed in response to the material violations; and
2. Certifies that the Fund and WRH have adopted procedures
reasonably necessary to prevent Access
Persons from violating the code.
B. Reports by Access Persons
The following reports are intended to provide the Fund with information
to enable it to determine with reasonable assurance whether the
provisions of Rule 17j-l(a) are being observed by Access Persons of the
Fund or WRH. No report is required with respect to transactions or
accounts over which the person has no direct or indirect influence or
control (except an independent trustee):
1. Initial Holdings Reports. No later than (10) days after an individual
becomes an Access Person, the following information must be reported to the
Fund and WRH on the form attached hereto as Exhibit B:
(a) The title, number of shares and principal amount of each Covered Security
in which the Access Person had any direct or indirect beneficial ownership
when the person became an Access Person;
(b) The name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the direct or
indirect benefit of the Access Person as of the date the person became an
Access Person; and
(c) The date that the report is submitted by the Access Person.
2. Quarterly Transaction Reports.
(a) Each Access Person, other than (i) a trustee who is not an
interested person of the Fund, and (ii) Access Persons required to
report their securities transactions pursuant to Rule 204-2(a)(12)
under the Investment Advisers Act, shall submit reports in the form
attached hereto as Exhibit A to the Fund's Compliance Officer
showing all transactions in Covered Securities in which the person
has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership. 14 Such reports shall be
filed not later than 10 days after the end of each calendar quarter,
but need not show transactions if such person had no direct or
indirect influence or control over the transaction.
(b) Each trustee who is not an interested person of the Fund
shall submit the same quarterly report as required under paragraph
(a), but only for a transaction in a Covered Security where he knew
at the time of the transaction or, in the ordinary course of
fulfilling his official duties as a trustee, should have known
that during the 15 day period immediately preceding or after the
date of the transaction, such Security is or was purchased or sold,
or considered for purchase or sale, by the Fund. No report is
required if the trustee has no direct or indirect influence or
control over the transaction.
(c) Each Access Person required to submit reports pursuant to
the provisions of subparagraphs (a) and (b) above, may, in the
alternative, arrange for duplicate copies of brokers advices covering
each reportable transaction for the account of such access person to
be mailed by the broker executing the transaction directly
to the Compliance Officer of the Fund simultaneously with furnishing
the advice of such transaction to such access person.
(d) Access Persons of WRH and the Fund shall also report on the
Securities Transaction Report within 10 days after the end of each
calendar quarter any factors potentially relevant to a conflicts of
interest analysis of which they are aware, including the existence
of any substantial economic relationship between his or her
transactions and securities held or to be acquired by the Fund.
For the purpose of subparagraphs 2 (a), (b) and (c) above, a "reportable
security" means generally all securities except securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities, bankers' acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment companies.
3. Annual Holdings Report. Annually, the following information (which
information must be current as of a date no more than 30 days before the
report is submitted) shall be reported on the form attached hereto as
Exhibit C:
(a) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect beneficial
ownership;
(b) The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct or
indirect benefit of the Access Person; and
(c) The date that the report is submitted by the Access Person.
4. Pre-approval of Investments in IPO's and Limited Offerings. Investment
Personnel of the Fund or WRH must obtain approval from the Compliance
officer for WRH before directly or indirectly acquiring beneficial
ownership in any securities in an Initial Public Offering or in a Limited
Offering.
For the purpose of Paragraph 4 above, "Investment Personnel" means any
employee of the Fund or WRH (or of any company in a control relationship to
the Fund or WRH) who, in connection with his or her regular functions or
duties, makes or participates in making recommendations regarding the
purchase or sale of securities by the Fund. At the commencement of this
revised Code of Ethics, this will apply to Fund Management personnel.
B. The Compliance Officer shall notify in writing each Access
Person who may be required to make reports pursuant to these policies that
such person is subject to this reporting requirement, and shall deliver a
copy of this policy to Access Person.
C. The Compliance Officer shall be responsible for
reviewing the reports required by this code of ethics.
D. The Compliance Officer shall report to the Board of
Trustees:
1. At the next meeting following the receipt of any report on
Exhibit A 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 Compliance Officer, the Fund or WRH was considering
the purchase or sale of such security, unless (i) the transaction
was a reinvestment of dividends pursuant to a plan, or (ii) the
amount involved in the transaction was less than $100,000 in the
case of debt securities, or $50,000 in the case of equity-oriented
securities such as common stocks and convertible securities.
2. With respect to any transaction not required to be reported
to the Board by the operation of subparagraph 1 that he believes
nonetheless may evidence violation of this policy.
3. Apparent violations of the reporting requirement.
E. The Compliance Officer shall have discretion not to make a report to
the Board under paragraph D if he 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
the Fund in connection with its holding or acquisition of the security or
that no other material violation of this policy has occurred. A written
memorandum of any such finding shall be filed with reports made pursuant to
this policy.
F. SANCTIONS - The Board shall consider reports made to it hereunder
and upon discovering that a violation of this Code has occurred, the Board
may impose such sanctions as it deems appropriate, including inter alia, a
letter of sanction or suspension or termination of the employment of the
violator. In addition, the Board shall review the operation of these
policies at least once a year.
G. The Compliance Officer shall on an as-needed basis, report to
management (i) an evaluation of the current compliance procedures to detect
violations of the Code of Ethics, (ii) a summary of existing procedures to
detect violations of the Code of Ethics, and (iii) a description of the
continuing educational program regarding the Code of Ethics.
H. The Compliance Officer shall keep records of routine reviews of the
Securities Transactions Reports and any of steps taken to rectify
non-compliance with the Code of Ethics.
I. This policy, a copy of each report by (or duplicate brokers' advices
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 the Fund records of the Compliance
Officer for the period required by Rule 17j-1.
J. SANCTIONS BY WRH - Upon discovering a violation of this Code by an
access person of WRH, WRH may impose such sanctions as it deems appropriate
including, inter alia, a letter of sanction or suspension or
termination of the employment of the violator. All material violations of
this Code and any sanctions imposed with respect thereto shall be reported
periodically to the Board of Trustees of the Fund with respect to whose
securities the violation occurred.
K. Recordkeeping Requirements. The Fund and WRH must maintain records as set
forth below and must make these records available to the Securities and
Exchange Commission or any representative of the Securities and
Exchange Commission at any time and from time to time for reasonable
periodic, special, or other examination:
1. A copy of the code of ethics that is in effect, or at any time within the
past 5 years was in effect, must be maintained in an easily accessible place;
2. A record of any violation of the code of ethics, and of any action taken
as a result of the violation, must be maintained in an easily accessible
place for at least 5 years after the end of the fiscal year in which the
violation occurs;
3. A copy of each report made by an Access Person as required by this code
of ethics, including any information provided in lieu of the reports, must
be maintained for at least 5 years after the end of the fiscal year in which
the report is made or the information is provided, the first 2 years in an
easily accessible place.
4. A record of all persons, currently or within the past five years, who are
or were required to make reports, or who are or were responsible for
reviewing these reports, must be maintained in an easily accessible place;
and
5. A copy of each annual report from WRH to the Board of Trustees will be
maintained for at least 5 years after the end of the fiscal year in which it
is made, the first 2 years in an easily accessible place.
The Fund or WRH must maintain a record of any decision, and the reasons
supporting the decision, to approve the acquisition by investment personnel
of securities in an IPO or Limited Offering for at least five years after
the end of the fiscal year in which the approval was granted.
IV. Insider Accounts - Policy Statement
In addition to Rhea's insider trading policy (which includes its Chinese
Wall policy) which is incorporated by reference herein, the following
policies and procedures will be in effect for WRH and the Fund with
particular respect to investment advisory services.
"Insider accounts" shall include the accounts of officers, directors and
employees of any affiliated organization of WRH, which has identical
shareholders as WRH, any estate or trust where an officer or employee is an
executor or trustee or other fiduciary with a beneficial interest in the
account; and, any person having knowledge of any proposed purchase and/or
sale of securities for the account of any mutual fund affiliated with WRH.
For the purpose of definition, the parents, mother-in-law, father-in-law,
son or daughter, son-in-law, or daughter-in-law, brother or sister,
brother-in-law or sister-in-law of any officer or employee, any relative to
whose support an officer or employee contributes, either directly or
indirectly, or any other members of his family living in the same household
shall be included in any reference to officers and employees.
A. Avoiding Potential Conflicts of Interest
1. Before a portfolio manager for a Fund client may execute any trade for
the client or others, he or she must determine whether he or she has access
to material non-public information. If the portfolio manager thinks he or she
may have access to material, nonpublic information, the portfolio manager
should take the following steps:
a. Report the information and proposed trade immediately to the
Compliance Officer, Chief Financial Officer or General Counsel.
b. Not purchase or sell the securities on behalf of self or others.
c. Not communicate the information other than to Compliance Officer,
Chief Financial Officer or General Counsel.
d. After the individual(s) in (c) have reviewed the issue, he/she/they
will determine whether the information is material and non-public and, if so,
what action the first should take.
The portfolio manager should consult with one of the individuals in (c)
above before taking any action. This degree of caution will protect the
portfolio manager and the firm.
2. No insider account shall effect a transaction in any
security in contemplation of a transaction in a security for an
investment company client. If an order is executed for the
Fund on the same day that a trade in such security was made for an
insider account, the Compliance Officer or his designee should
review the Fund trade as to when the adviser
for the Fund contemplated a transaction with regard to the security,
and such other details
as are necessary to establish that both trades were made on the same
day as a matter of coincidence.
3. No person with an insider account may enter an order
for himself or his clients in anticipation of a Fund trade.
4. It is the policy of WRH that on any given day no
insider account who has knowledge of a transaction by a Fund client
can receive a more favorable execution price than that
received by a Fund client. An exception to this policy can only be
made under very unusual or extenuating circumstances and then only
with the consent of the Compliance Officer.
5. No insider account may purchase or sell options which
is in anticipation of or in conflict with any activity of a Fund
client of WRH.
6. No insider account will be permitted to trade in any
security while there is a pending order in such security for any
Fund for which WRH acts as Investment Adviser.
7. The Fund shall not be deemed an insider account of
WRH for purposes of determining priority with regard to the use of
research information.
8. No short sales of any security for any insider
accounts shall be permitted when the Fund is long any security of
the same issuer (except U.S. Government).
9. The Portfolio Manager shall avoid any appearance of
impropriety in effecting securities transactions for its own account,
a firm account or otherwise.
V. Disclosure of Code of Ethics Policy. The Fund is required to disclose the
following information in its registration statement (the disclosure may be
in the Statement of Additional Information):
1. That the Fund and WRH have adopted a code of ethics;
2. Whether the code permits Fund personnel to invest in securities
for their own accounts; and
3. That the code is on public file with, and is available from, the
SEC
EXHIBIT A
THE HOUGH GROUP OF FUNDS RETURN TO SUSANA CREFT
WILLIAM R. HOUGH & CO.
Securities Transaction Report
For the Calendar Quarter Ended
Access Persons:
For each question below, please mark the appropriate boxes:
1. During the calendar quarter referred to above, I was involved in
securities transactions which would potentially create a conflict of
interest between the securities transactions and The Hough Group of Funds,
including the existence of any substantial economic relationships between my
securities transactions and securities held or to be acquired by The Hough
Group of Funds:
Yes No (If Yes, explain on the back of this
Securities Transaction Report.)
2. During the calendar quarter referred to above, I have caused all
broker confirms for all of my outside brokerage account(s), if any, be sent
to William R. Hough & Co.'s Compliance Officer:
Yes No N/A
3. Set forth below are any additional securities transactions in which
I had a direct or indirect beneficial ownership in the calendar quarter
referred to above (other than securities transactions in my account(s) at
William R. Hough & Co., or as set forth on broker confirms sent to William R.
Hough & Co.):
Security*
Date of Securities Transaction
Number of Shares or Principal Amount
Dollar Amount of Securities Transactions
Nature of Securities Transactions (Purchase, Sale, Other)
Price
Interest Rate and Maturity Date (if applicable)
Broker/Dealer or Bank Through Which Effected
4. Set forth below are securities accounts established during the calendar
quarter referred to above (other than accounts opened at William R. Hough &
Co.) in which I had a direct or indirect beneficial ownership:
Name of Broker, Dealer or Bank with whom Account was Established
Date Account Established
This report (i) excludes securities transactions with respect to which I had
no direct or indirect influence or control, (ii) excludes other securities
transactions not required to be reported, and (iii) is not an admission that
I have or had any direct or indirect beneficial ownership in the securities
listed above.
I have not effected any other securities transactions of which I had, or by
reason of such securities transactions acquired, direct or indirect
beneficial ownership and which are required to be reported pursuant to the
Rule 17j-1 Policy of the Hough Group of Funds and William R. Hough & Co.,
other than as referenced above.
Date: Signature:
Print Name:
EXHIBIT B
THE HOUGH GROUP OF FUNDS RETURN TO SUSANA CREFT
WILLIAM R. HOUGH & CO.
Initial Holdings Report
Access Persons:
The following information must be provided no later than ten (10) days after
receiving written notification that you are an "Access Person" as defined in
the Rule 17j-1 Policy of the Hough Group of Funds and William R Hough & Co.:
Set forth below are the title, number of shares and principal amount of each
security in which I have any direct or indirect beneficial ownership and the
name(s) of any broker, dealer or bank with whom I maintain an account in
which any securities are held for my direct or indirect benefit:
Security
Number of Shares
Principal Amount
Broker/Dealer or Bank Through Which an Account is maintained
This report (i) excludes securities transactions with respect to which I had
no direct or indirect influence or control, (ii) excludes other securities
transactions not required to be reported, and (iii) is not an admission that
I have or had any direct or indirect beneficial ownership in the securities
listed above.
I have no other securities holdings to report, direct or indirect, which are
required to be reported pursuant to the Rule 17j-1 Policy of the Hough Group
of Funds and William R. Hough & Co., other than as referenced above.
Date: Signature:
Print Name:
EXHIBIT C
THE HOUGH GROUP OF FUNDS RETURN TO SUSANA CREFT
WILLIAM R. HOUGH & CO.
Annual Holdings Report
Access Persons:
Please provide the following information which must be current as of a date
no more than 30 days prior to the date of this report. Although most of
this information duplicates information you have provided on other reports,
it is specifically required by the regulation that you set forth all your
holdings annually on this form.
Set forth below are the title, number of shares and principal amount of each
security in which I have any direct or indirect beneficial ownership and the
name(s) of any broker, dealer or bank with whom I maintain an account in
which any securities are held for my direct or indirect benefit:
Security
Number of Shares
Principal Amount
Broker/Dealer or Bank Through Which an Account is maintained
This report (i) excludes securities transactions with respect to which I had
no direct or indirect influence or control, (ii) excludes other securities
transactions not required to be reported, and (iii) is not an admission that
I have or had any direct or indirect beneficial ownership in the securities
listed above.
I have no other securities holdings to report, direct or indirect, which are
required to be reported pursuant to the Rule 17j-1 Policy of the Hough Group
of Funds and William R. Hough & Co., other than as referenced above.
Date: Signature:
Print Name:
13 An "Access Person" is (1) each trustee or officer of the Fund or of
WRH; (2) any natural person in a control relationship (25 % ownership) to
the Fund or the Investment Adviser who obtains information concerning
recommendations made to the Fund with regard to the purchase or sale of
Covered Securities by the Fund; (3) each of those employees, directors or
officers of the Fund or WRH, or a company in a control relationship to the
Fund or WRH who in connection with his or her regular duties obtains
information about the purchase or sale of a covered security by the Fund or
whose functions relate to the making of such recommendations or
participating in the determination of which recommendation shall be made.
14 Beneficial ownership is defined to be the concept of ownership used
in Section 16 of the Securities Exchange Act of 1934 and not the expanded
definition in Rule 13(d)(3) used for proxy statement reporting.
Wpdata/Funds/Code of Ethics-Rule17j-1Policy.doc
Revised August 10, 2000
