PIMCO ADVISORS L.P.
CODE OF ETHICS
Effective June 1, 2000
INTRODUCTION
This Code of Ethics is based on the principle that you, as an officer or
employee of PIMCO Advisors L.P., its divisions or its subsidiaries, including
Cadence Capital Management, NFJ Investment Group, Oppenheimer Capital, PIMCO
Equity Advisors and Parametric Portfolio Associates (collectively, PIMCO
Advisors), owe a fiduciary duty to the shareholders of the registered investment
companies (the Funds) and other clients (together with the Funds, the Advisory
Clients) for which PIMCO Advisors serves as an adviser or subadviser.
Accordingly, you must avoid activities, interests and relationships that might
interfere or appear to interfere with making decisions in the best interests of
our Advisory Clients. If you are covered by another code in the PIMCO Advisors
or Allianz group of companies, this Code shall not apply to you.
At all times, you must:
1. Place the interests of our Advisory Clients first. In other words, as a
fiduciary you must scrupulously avoid serving your own personal interests ahead
of the interests of our Advisory Clients. You may not cause an Advisory Client
to take action, or not to take action, for your personal benefit rather than the
benefit of the Advisory Client. For example, you would violate this Code if you
caused an Advisory Client to purchase a Security you owned for the purpose of
increasing the price of that Security. If you are an employee who makes (or
participates in making) recommendations regarding the purchase or sale of
securities by any Advisory Client, (each a Portfolio Manager) or provides
information or advice to a Portfolio Manager or has access to or obtains
information regarding such recommendations or helps execute a Portfolio
Manager's recommendations (together with Portfolio Managers, each a Portfolio
Employee), you would also violate this Code if you made a personal investment in
a Security that might be an appropriate investment for an Advisory Client
without first considering the Security as an investment for the Advisory Client.
2. Conduct all of your personal Securities transactions in full compliance
with this Code and the PIMCO Advisors Insider Trading Policy. PIMCO Advisors
encourages you and your family to develop personal investment programs. However,
you must not take any action in connection with your personal investments that
could cause even the appearance of unfairness or impropriety. Accordingly, you
must comply with the policies and procedures set forth in this Code under the
heading Personal Securities Transactions. In addition, you must comply with the
policies and procedures set forth in the PIMCO Advisors Insider Trading Policy,
which is attached to this Code as Appendix I. Doubtful situations should be
resolved against your personal trading.
3. Avoid taking inappropriate advantage of your position. The receipt of
investment opportunities, gifts or gratuities from persons seeking business with
PIMCO Advisors directly or on behalf of an Advisory Client could call into
question the independence of your business judgment. Accordingly, you must
comply with the policies and procedures set forth in this Code under the heading
Fiduciary Duties. Doubtful situations should be resolved against your personal
interest.
TABLE OF CONTENTS
PERSONAL SECURITIES TRANSACTIONS...........................................3
Trading in General....................................................3
Securities............................................................3
Purchase or Sale of a security .......................................3
Exempt Securities.....................................................3
Beneficial Ownership..................................................4
Exempt Transactions...................................................5
Additional Exempt Transactions........................................5
Caution...............................................................7
Preclearance Procedures...............................................7
Initial Public Offerings..............................................8
Private Placements....................................................8
Short-Term Trading Profits............................................8
Puts, Calls, Short Sales..............................................8
Use of Broker-Dealers.................................................9
REPORTING..................................................................9
Reporting of Transactions and Brokerage Accounts......................9
Initial and Annual Reports............................................9
FIDUCIARY DUTIES..........................................................10
Gifts................................................................10
Service as a Director................................................10
COMPLIANCE................................................................10
Certificate of Receipt...............................................10
Annual Certificate of Compliance.....................................10
Remedial Actions.....................................................11
REPORTS TO MANAGEMENT AND TRUSTEES........................................11
Reports of Significant Remedial Action...............................11
Annual Reports.......................................................11
THE FOLLOWING APPENDICES ARE ATTACHED AND ARE A PART OF THIS CODE:
I. PIMCO Advisors L.P. Insider Trading Policy and Procedures.............12
II. Form for Acknowledgement of Receipt of this Code......................19
III. Form for Initial and Annual Report of Personal Securities Holdings....20
IV. Form for Reporting Brokerage Accounts and Non-Broker Transactions.....22
V. Form for Annual Certification of Compliance with this Code............24
VI. Form for Preclearance of Personal Securities Transactions.............25
Questions
Questions regarding this Code should be addressed to your local Compliance
Officer. As of the effective date of this Code, the Compliance Officers are:
Frank Poli and Joe DiBartolo (PIMCO Advisors and Oppenheimer Capital), Dave
Breed and Mary Ellen Melendez (Cadence), Betty Herman and John Johnson (NFJ) and
Andy Abramsky and David Stein (Parametric). The Compliance Committee members are
Richard Weil and Frank Poli who are also Compliance Officers for each above
referenced entity.
PERSONAL SECURITIES TRANSACTIONS
Trading in General
You may not engage, and you may not permit any other person or entity to
engage, in any purchase or sale of any Security (other than an Exempt Security),
of which you have, or by reason of the transaction will acquire, Beneficial
Ownership, unless (i) the transaction is an Exempt Transaction or (ii) you have
complied with the procedures set forth under Preclearance Procedures. Securities
The following are Securities:
Any note, stock, treasury stock, bond, debenture, evidence of indebtedness,
certificate of interest or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or subscription,
transferable share, investment contract, voting-trust certificate, certificate
of deposit for a security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option or privilege on any security
(including a certificate of deposit) or on any group or index of securities
(including any interest therein or based on the value thereof), or any put,
call, straddle, option or privilege entered into on a national securities
exchange relating to foreign currency, or, in general, any interest or
instrument commonly known as a security, or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any security.
The following are not Securities:
Commodities, futures and options traded on a commodities exchange,
including currency futures. However, futures and options on any group or index
of Securities are Securities.
Purchase or Sale of a Security
The purchase or sale of a Security includes, among other things, the
writing of an option to purchase or sell a Security.
Exempt Securities
The following are Exempt Securities:
1. Direct obligations of the Government of the United States.
2. Bankers' acceptances, bank certificates of deposit, commercial paper and
high quality short-term debt instruments (defined as 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), including repurchase agreements.
3. Shares of registered open-end investment companies.
Beneficial Ownership
The following section is designed to give you a practical guide with
respect to Beneficial Ownership. However, for purposes of this Code, Beneficial
Ownership shall be interpreted in the same manner as it would be under Rule
16a-1(a)(2) of the Exchange Act of 1934 (the 'Exchange Act') in determining
whether a person is the beneficial owner of a security for purposes of Section
16 of the Exchange Act and the rules and regulations thereunder.
You are considered to have Beneficial Ownership of Securities if you have
or share a direct or indirect Pecuniary Interest in the Securities.
You have a Pecuniary Interest in Securities if you have the opportunity,
directly or indirectly, to profit or share in any profit derived from a
transaction in the Securities.
The following are examples of an indirect Pecuniary Interest in Securities:
1. Securities held by members of your immediate family sharing the same
household; however, this presumption may be rebutted by convincing evidence that
profits derived from transactions in these Securities will not provide you with
any economic benefit.
Immediate family means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and includes any
adoptive relationship.
2. Your interest as a general partner in Securities held by a general or
limited partnership.
3. Your interest as a manager-member in the Securities held by a limited
liability company.
You do not have an indirect Pecuniary Interest in Securities held by a
corporation, partnership, limited liability company or other entity in which you
hold an equity interest, unless you are a controlling equityholder or you have
or share investment control over the Securities held by the entity.
The following circumstances constitute Beneficial Ownership by you of
Securities held by a trust:
1. Your ownership of Securities as a trustee where either you or members of
your immediate family have a vested interest in the principal or income of the
trust.
2. Your ownership of a vested beneficial interest in a trust.
3. Your status as a settlor of a trust, unless the consent of all of the
beneficiaries is required in order for you to revoke the trust.
Exempt Transactions
The following are Exempt Transactions:
1. Any transaction in Securities in an account over which you do not have
any direct or indirect influence or control. There is a presumption that you can
exert some measure of influence or control over accounts held by members of your
immediate family sharing the same household, but this presumption may be
rebutted by convincing evidence.
2. Purchases of Securities under dividend reinvestment plans.
3. Purchases of Securities by exercise of rights issued to the holders of a
class of Securities pro rata, to the extent they are issued with respect to
Securities of which you have Beneficial Ownership.
4. Acquisitions or dispositions of Securities as the result of a stock
dividend, stock split, reverse stock split, merger, consolidation, spin-off or
other similar corporate distribution or reorganization applicable to all holders
of a class of Securities of which you have Beneficial Ownership.
5. Subject to the restrictions on participation in private placements set
forth below under Private Placements, acquisitions or dispositions of Securities
of a private issuer. A private issuer is a corporation, partnership, limited
liability company or other entity which has no outstanding publicly-traded
Securities, and no outstanding Securities which are exercisable to purchase,
convertible into or exchangeable for publicly-traded Securities. However, you
will have Beneficial Ownership of Securities held by a private issuer whose
equity Securities you hold, unless you are not a controlling equityholder and do
not have or share investment control over the Securities held by the entity.
6. Such other classes of transactions as may be exempted from time to time
by the Compliance Committee based upon a determination that the transactions are
unlikely to violate Rule 17j-1 under the Investment Company Act of 1940, as
amended. The Compliance Committee may exempt designated classes of transactions
from any of the provisions of this Code except the provisions set forth below
under Reporting.
7. Such other specific transactions as may be exempted from time to time by
a Compliance Officer. On a case-by-case basis when no abuse is involved a
Compliance Officer may exempt a specific transaction from any of the provisions
of this Code except the provisions set forth below under Reporting. The form for
requesting approval from Compliance is attached to this Code as Appendix VI.
Additional Exempt Transactions
The following classes of transactions have been designated as Exempt
Transactions by the Compliance Committee:
1. Purchases or sales of up to $100,000 per calendar month per issuer of
fixed-income Securities.
2. Any purchase or sale of fixed-income Securities issued by agencies or
instrumentalities of, or unconditionally guaranteed by, the Government of the
United States.
3. Purchases or sales of up to $1,000,000 per calendar month per issuer of
fixed-income Securities issued by qualified foreign governments.
A qualified foreign government is a national government of a developed
foreign country with outstanding fixed-income securities in excess of fifty
billion dollars.
4.* Purchases or sales of up to 2,000 shares per day per issuer, of
large-cap issuers.
A large-cap issuer is an issuer with a total market capitalization in
excess of one billion dollars and an average daily trading volume during the
preceding calendar quarter, on the principal securities exchange (including
NASDAQ) on which its shares are traded, in excess of 100,000 shares.
Information concerning large-cap issuers is available on the Internet. If
you are unsure whether a security is a large-cap issue, contact a Compliance
Officer.
5.* Purchases or sales of up to the lesser of 1000 shares or $10,000 per
calendar week, per issuer, of stock of issuers other than large-cap issuers.
*Exemptions 4 and 5 do not apply to officers and employees of Oppenheimer
Capital, PIMCO Equity Advisors and NFJ. These employees must preclear all
transactions unless another exemption applies.
6. Purchases or sales of exchange-traded options on broadly-based indices
and units, and/or exchange traded trusts or funds representing a group, index or
a basket of securities (e.g., HHH, QQQ, and SPY).
7. Any purchase or sale of shares of registered closed-end investment
companies other than Municipal Advantage Fund and PIMCO Commercial Mortgage
Trust.
8. For employees of NFJ Investment Group, shares of any issuer not owned in
NFJ's Advisory Client's accounts and not contemplated for purchase for any
Advisory Clients, based upon the determination by NFJ that because of the
investment objectives and policies of the Advisory Clients, such securities are
not eligible for purchase by NFJ for the Advisory Clients.
9. If you are not a Portfolio Employee, short sales of any Security
otherwise permitted hereunder or puts, calls, straddles or options where the
underlying amount of Securities controlled is an amount or transaction otherwise
permitted hereunder.
CAUTION
Qualified foreign governments, large-cap issuers and broadly based indices
may change from time to time. Accordingly, you may purchase Securities in an
Exempt Transaction only to find that when you wish to sell them, you may not do
so without approval of a Compliance Officer and preclearance.
Preclearance Procedures
If a Securities transaction requires preclearance:
1. The Securities may not be purchased or sold if at the time of
preclearance there is a pending buy or sell order on behalf of an Advisory
Client in the same Security or an equivalent Security or if you knew or should
have known that an Advisory Client would be trading in that security or an
equivalent Security on the same day.
An equivalent Security of a given Security is (i) a Security issuable upon
exercise, conversion or exchange of the given Security, (ii) a Security
exercisable to purchase, convertible into or exchangeable for the given
Security, or (iii) a Security otherwise representing an interest in or based on
the value of the given Security.
2. If you are a Portfolio Manager (or a person identified by the Chief
Investment Officer (CIO) as having access to the same information), the
Securities may not be purchased or sold during the period which begins seven
days before and ends seven days after the day on which an Advisory Client trades
in the same Security or an equivalent Security; except that you may, if you
preclear the transaction, (i) trade 'same way' to an Advisory Client after its
trading is completed, or (ii) trade 'opposite way' to an Advisory Client before
its trading is commenced.
If you are a Portfolio Manager (or a person identified by the CIO as having
access to the same information), and you preclear a Securities transaction and
trade same way to an Advisory Client before its trading is commenced, the
transaction is not a violation of this Code unless you knew or should have known
that the Advisory Client would be trading in that Security or an equivalent
Security within seven days after your trade.
3. The Securities may be purchased or sold only if you have asked a
Compliance Officer to preclear the purchase or sale, the Compliance Officer has
given you preclearance in writing, and the purchase or sale is executed by the
close of business on the day preclearance is given. The form for requesting
preclearance is attached to this Code as Appendix VI.
4. In addition to the foregoing, if you are an officer or employee of
Oppenheimer Capital, PIMCO Equity Advisors or NFJ Investment Group, the
Securities may be purchased or sold only if you have asked the Trading
Department to preclear the purchase or sale, the Trading Department has given
you preclearance in writing, and the purchase or sale is executed by the close
of business on the day preclearance is given. The form for requesting
preclearance is attached to this Code as Appendix VI. Preclearance forms must be
submitted immediately upon trade execution to the Compliance Department.
5. If you are an officer or employee of Oppenheimer Capital, preclearance
may be granted if, in comparing the net value of OpCap's trading in the Security
to the total market volume of trading in the Security: (i) the net volume of
OpCap's trading in the Security amounts to less than 1% of the total market
volume of trading in the Security for the past five days; (ii) the net volume of
OpCap's trading in the Security amounts to less than 1% of the total volume of
trading in the Security for the previous day; and (iii) OpCap has not transacted
in the Security on the day of preclearance and has no pending orders in the
Security at the time of preclearance.
Initial Public Offerings
If you are a Portfolio Employee, you may not acquire Beneficial Ownership
of any Securities in an initial public offering (as defined in Rule 17j-1).
Private Placements
If you are a Portfolio Employee, you may not acquire Beneficial Ownership
of any Securities in a private placement (a limited offering as defined in Rule
17j-1), unless you have received the prior written approval from a member of the
Compliance Committee. Approval will be not be given unless a determination is
made that the investment opportunity should not be reserved for one or more
Advisory Clients, and that the opportunity to invest has not been offered to you
by virtue of your position.
If you are a Portfolio Employee, and you have acquired Beneficial Ownership
of Securities in a private placement, you must disclose your investment when you
play a part in any consideration of an investment by an Advisory Client in the
issuer of the Securities, and any decision to make such an investment must be
independently reviewed by a Portfolio Manager who does not have Beneficial
Ownership of any Securities of the issuer.
Short-Term Trading Profits
If you are a Portfolio Employee, you may not profit from the purchase and
sale, or sale and purchase, within 60 calendar days, of the same Securities or
equivalent Securities (other than Exempt Securities) of which you have
Beneficial Ownership. Any such short-term trade must be unwound, or if that is
not practical, the profits must be contributed to a charitable organization.
Puts, Calls, Short Sales
If you are a Portfolio Employee, you are prohibited from transactions
involving puts, calls, straddles, options and/or short sales except for: Exempt
Transactions, transactions in Exempt Securities or transactions approved by a
Compliance Officer. If you are an Oppenheimer Capital Non-Portfolio Employee,
you may not acquire Beneficial Ownership of any put, call, straddle, option or
privilege on any Securities on the Approved List or any Securities which are not
shares of a large-cap issuer.
You are considered to profit from a short-term trade if Securities of which
you have Beneficial Ownership are sold for more than the purchase price of the
same Securities or equivalent Securities, even though the Securities purchased
and the Securities sold are held of record or beneficially by different persons
or entities.
Use of Broker-Dealers and Brokerage Accounts
You may not engage, and you may not permit any other person or entity to
engage, in any purchase or sale of publicly traded Securities (other than Exempt
Securities) of which you have, or by reason of the transaction will acquire,
Beneficial Ownership, except through a registered broker-dealer. Oppenheimer
Capital and PIMCO Advisors employees located in New York may only engage in
purchases or sales of publicly traded Securities through Charles Schwab & Co. or
such other registered broker-dealer as may be specified by the Compliance
Committee unless an exemption has been requested and approved in writing by a
Compliance Officer.
REPORTING
Reporting of Transactions and Brokerage Accounts
You must report all brokerage accounts and all Securities Transactions that
are not transactions in Exempt Securities. To satisfy these requirements; (i)
you must cause each registered broker-dealer which maintains an account for
Securities of which you have Beneficial Ownership, to provide to a Compliance
Officer, within 10 days of the end of each calendar quarter, duplicate copies:
(a) of confirmations of all transactions in the account and (b) periodic
statements (no frequently less than quarterly) for the account, and (ii) you
must report (on the Form attached as Appendix IV hereto) to a Compliance
Officer, within 10 days of the occurrence, the opening of a new or previously
unreported brokerage account and all transactions effected without the use of a
registered broker-dealer for Securities (other than Exempt Securities) of which
you have Beneficial Ownership.
The confirmations and statements required by (i)(a) and (i)(b) above must
in the aggregate provide all of the information required by the form attached as
Appendix IV hereto. If they do not, you must complete and submit a Brokerage
Account and Non-Broker Transaction Report within 10 days of the end of each
calendar quarter.
Initial and Annual Reports
You must disclose your holdings of all Securities (other than Exempt
Securities) of which you have Beneficial Ownership no later than 10 days after
becoming an employee and annually thereafter. The form for this purpose is
attached to this Code as Appendix III.
Anyone filing a report required hereunder may disclaim Beneficial Ownership
of any Security listed thereon.
FIDUCIARY DUTIES
Gifts
You may not accept any investment opportunity, gift, gratuity or other
thing of more than nominal value, from any person or entity that does business,
or desires to do business, with PIMCO Advisors directly or on behalf of an
Advisory Client. You may accept gifts from a single giver so long as their
aggregate annual value does not exceed the equivalent of $100. You may attend
business meals, business related conferences, sporting events and other
entertainment events at the expense of a giver, so long as the expense is
reasonable and both you and the giver are present. You must obtain prior written
approval from your supervisor (the person to whom you report) for all air
travel, conferences, and business events that require overnight accommodations.
You must provide a copy of such written approval to the Compliance Committee.
Service as a Director
If you are a Portfolio Employee, you may not serve on the board of
directors or other governing board of a publicly traded entity, unless you have
received the prior written approval of the General Counsel of PIMCO Advisors.
Approval will not be given unless a determination is made that your service on
the board would be consistent with the interests of our Advisory Clients. If you
are permitted to serve on the board of a publicly traded entity, you will be
isolated from those Portfolio Employees who make investment decisions with
respect to the securities of that entity, through a "Chinese Wall" or other
procedures.
COMPLIANCE
Certificate of Receipt
You are required to acknowledge receipt of your copy of this Code. A form
for this purpose is attached to this Code as Appendix II.
Annual Certificate of Compliance
You are required to certify upon commencement of your employment or the
effective date of this Code, whichever occurs later, and annually thereafter,
that you have read and understand this Code and recognize that you are subject
to this Code. Each annual certificate will also state that you have complied
with the requirements of this Code during the prior year, and that you have
disclosed, reported, or caused to be reported all holdings required hereunder
and all transactions during the prior year in Securities (other than Exempt
Securities) of which you had or acquired Beneficial Ownership. A form for this
purpose is attached to this Code as Appendix V.
Remedial Actions
If you violate this Code, you are subject to remedial actions, which may
include, but are not limited to, disgorgement of profits, imposition of a
substantial fine, demotion, suspension or termination.
REPORTS TO MANAGEMENT AND TRUSTEES
Reports of Significant Remedial Action
The General Counsel of PIMCO Advisors or his delegate will on a timely
basis inform the management of PIMCO Advisors and trustees of each Fund which is
an Advisory Client of each significant remedial action taken in response to a
violation of this Code. A significant remedial action means any action that has
a significant financial effect on the violator, such as disgorgement of profits,
imposition of a significant fine, demotion, suspension or termination.
Annual Reports
The General Counsel of PIMCO Advisors or his delegate will report annually
to the management of PIMCO Advisors and the trustees of each Fund which is an
Advisory Client with regard to efforts to ensure compliance by the directors,
officers and employees of PIMCO Advisors with their fiduciary obligations to our
Advisory Clients.
The annual report will, at a minimum:
1. Describe any issues arising under the Code of Ethics or procedures since
the last report to the trustees, as the case may be, including, but not limited
to, information about material violations of the Code or procedures and
sanctions imposed in response to the material violations; and;
2. Certify that PIMCO Advisors has adopted procedures reasonably necessary
to prevent all employees from violating the Code.
PIMCO ADVISORS
Insider Trading Policy and Procedures
Section I. Policy Statement on Insider Trading
A. Policy Statement on Insider Trading
PIMCO Advisors L.P. ("PIMCO Advisors"), its affiliates, PIMCO Partners,
G.P., Cadence Capital Management, NFJ Investment Group, Oppenheimer Capital,
Parametric Portfolio Associates and PIMCO Fund Distributors LLC (collectively
the "Company" or "PIMCO Advisors") forbid any of their officers, directors or
employees from trading, either personally or on behalf of others (such as,
mutual funds and private accounts managed by PIMCO Advisors), on the basis of
material non-public information or communicating material non-public information
to others in violation of the law. This conduct is frequently referred to as
"insider trading". This is a group wide policy.
The term "insider trading" is not defined in the federal securities laws,
but generally is used to refer to the use of material non-public information to
trade in securities or to communications of material non-public information to
others in breach of a fiduciary duty.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
(1) trading by an insider, while in possession of material non-public
information, or
(2) trading by a non-insider, while in possession of material non-public
information, where the information was disclosed to the non-insider in violation
of an insider's duty to keep it confidential, or
(3) communicating material non-public information to others in breach of a
fiduciary duty.
This policy applies to every such officer, director and employee and
extends to activities within and outside their duties at the Company. Every
officer, director and employee must read and retain this policy statement. Any
questions regarding this policy statement and the related procedures set forth
herein should be referred to a Compliance Officer of PIMCO Advisors.
The remainder of this memorandum discusses in detail the elements of
insider trading, the penalties for such unlawful conduct and the procedures
adopted by the Company to implement its policy against insider trading.
1. To Whom Does This Policy Apply?
This Policy applies to all employees, officers and directors (direct or
indirect) of the Company ("Covered Persons"), as well as to any transactions in
any securities participated in by family members, trusts or corporations
controlled by such persons. In particular, this Policy applies to securities
transactions by:
the Covered Person's spouse;
the Covered Person's minor children;
any other relatives living in the Covered Person's household;
a trust in which the Covered Person has a beneficial interest, unless such
person has no direct or indirect control over the trust; a trust as to which the
Covered Person is a trustee; a revocable trust as to which the Covered Person is
a settlor; a corporation of which the Covered Person is an officer, director or
10% or greater stockholder; or a partnership of which the Covered Person is a
partner (including most
investment clubs) unless the Covered Person has no direct or indirect
control over the partnership.
2. What is Material Information?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" generally is defined as
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions,
or information that is reasonably certain to have a substantial effect on the
price of a company's securities.
Although there is no precise, generally accepted definition of materiality,
information is likely to be "material" if it relates to significant changes
affecting such matters as:
dividend or earnings expectations; write-downs or write-offs of assets;
additions to reserves for bad debts or contingent liabilities; expansion or
curtailment of company or major division operations; proposals or agreements
involving a joint venture, merger, acquisition, divestiture, or leveraged
buy-out; new products or services; exploratory, discovery or research
developments; criminal indictments, civil litigation or government
investigations; disputes with major suppliers or customers or significant
changes in the relationships with such parties; labor disputes including strikes
or lockouts; substantial changes in accounting methods; major litigation
developments; major personnel changes; debt service or liquidity problems;
bankruptcy or insolvency; extraordinary management developments; public
offerings or private sales of debt or equity securities; calls, redemptions or
purchases of a company's own stock; issuer tender offers; or recapitalizations.
Information provided by a company could be material because of its expected
effect on a particular class of the company's securities, all of the company's
securities, the securities of another company, or the securities of several
companies. Moreover, the resulting prohibition against the misuses of "material"
information reaches all types of securities (whether stock or other equity
interests, corporate debt, government or municipal obligations, or commercial
paper) as well as any option related to that security (such as a put, call or
index security).
Material information does not have to relate to a company's business. For
example, in Carpenter v. U.S., 108 U.S. 316 (1987), the Supreme Court considered
as material certain information about the contents of a forthcoming newspaper
column that was expected to affect the market price of a security. In that case,
a reporter for The Wall Street Journal was found criminally liable for
disclosing to others the dates that reports on various companies would appear in
the Journal and whether those reports would be favorable or not.
3. What is Non-public Information?
In order for issues concerning insider trading to arise, information must
not only be "material", it must be "non-public". "Non-public" information is
information which has not been made available to investors generally.
Information received in circumstances indicating that it is not yet in general
circulation or where the recipient knows or should know that the information
could only have been provided by an "insider" is also deemed "non-public"
information.
At such time as material, non-public information has been effectively
distributed to the investing public, it is no longer subject to insider trading
restrictions. However, for "non-public" information to become public
information, it must be disseminated through recognized channels of distribution
designed to reach the securities marketplace.
To show that "material" information is public, you should be able to point
to some fact verifying that the information has become generally available, for
example, disclosure in a national business and financial wire service (Dow Jones
or Reuters), a national news service (AP or UPI), a national newspaper (The Wall
Street Journal, The New York Times or Financial Times), or a publicly
disseminated disclosure document (a proxy statement or prospectus). The
circulation of rumors or "talk on the street", even if accurate, widespread and
reported in the media, does not constitute the requisite public disclosure. The
information must not only be publicly disclosed, there must also be adequate
time for the market as a whole to digest the information. Although timing may
vary depending upon the circumstances, a good rule of thumb is that information
is considered non-public until the third business day after public disclosure.
Material non-public information is not made public by selective
dissemination. Material information improperly disclosed only to institutional
investors or to a fund analyst or a favored group of analysts retains its status
as "non-public" information which must not be disclosed or otherwise misused.
Similarly, partial disclosure does not constitute public dissemination. So long
as any material component of the "inside" information possessed by the Company
has yet to be publicly disclosed, the information is deemed "non-public" and may
not be misused.
Information Provided in Confidence. Occasionally, one or more directors,
officers, or employees of the Company may become temporary "insiders" because of
a fiduciary or commercial relationship. For example, personnel at the Company
may become insiders when an external source, such as a company whose securities
are held by one or more of the accounts managed by the Company, entrusts
material, non-public information to the Company's portfolio managers or analysts
with the expectation that the information will remain confidential.
As an "insider", the Company has a fiduciary responsibility not to breach
the trust of the party that has communicated the "material non-public"
information by misusing that information. This fiduciary duty arises because the
Company has entered or has been invited to enter into a commercial relationship
with the client or prospective client and has been given access to confidential
information solely for the corporate purposes of that client or prospective
client. This obligation remains whether or not the Company ultimately
participates in the transaction.
Information Disclosed in Breach of a Duty. Analysts and portfolio managers
at the Company must be especially wary of "material non-public" information
disclosed in breach of a corporate insider's fiduciary duty. Even where there is
no expectation of confidentiality, a person may become an "insider" upon
receiving material, non-public information in circumstances where a person
knows, or should know, that a corporate insider is disclosing information in
breach of the fiduciary duty he or she owes the corporation and its
shareholders. Whether the disclosure is an improper "tip" that renders the
recipient a "tippee" depends on whether the corporate insider expects to benefit
personally, either directly or indirectly, from the disclosure. In the context
of an improper disclosure by a corporate insider, the requisite "personal
benefit" may not be limited to a present or future monetary gain. Rather, a
prohibited personal benefit could include a reputational benefit, an expectation
of a 'quid pro quo' from the recipient or the recipient's employer by a gift of
the "inside" information.
A person may, depending on the circumstances, also become an "insider" or
"tippee" when he or she obtains apparently material, non-public information by
happenstance, including information derived from social situations, business
gatherings, overheard conversations, misplaced documents, and "tips" from
insiders or other third parties.
4. Identifying Material Information
Before trading for yourself or others, including investment companies or
private accounts managed by the Company, in the securities of a company about
which you may have potential material, non-public information, ask yourself the
following questions:
i. Is this information that an investor could consider important in making
his or her investment decisions? Is this information that could substantially
affect the market price of the securities if generally disclosed?
ii. To whom has this information been provided? Has the information been
effectively communicated to the marketplace by being published in The Financial
Times, Reuters, The Wall Street Journal or other publications of general
circulation?
Given the potentially severe regulatory, civil and criminal sanctions to
which you the Company and its personnel could be subject, any director, officer
and employee uncertain as to whether the information he or she possesses is
"material non-public" information should immediately take the following steps:
i. Report the matter immediately to a Compliance Officer or the General
Counsel of PIMCO Advisors;
ii. Do not purchase or sell the securities on behalf of yourself or others,
including investment companies or private accounts managed by PIMCO Advisors;
and
iii. Do not communicate the information inside or outside the Company,
other than to a Compliance Officer or the General Counsel of PIMCO Advisors.
After the Compliance Officer or General Counsel has reviewed the issue, you
will be instructed to continue the prohibitions against trading and
communication or will be allowed to trade and communicate the information.
5. Penalties for Insider Trading
Penalties for trading on or communicating material non-public information
are severe, both for individuals involved in such unlawful conduct and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
civil injunctions treble damages disgorgement of profits jail sentences
fines for the person who committed the violation of up to three times the profit
gained or loss avoided, whether or not the person actually benefited, and fines
for the employer or other controlling person of up to the greater of $1,000,000
or three times the amount of the profit gained or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by the Company, including dismissal of the persons
involved.
Section II. Procedures to Implement the Policy Against Insider Trading
A. Procedures to Implement the Policy Against Insider Trading
The following procedures have been established to aid the officers,
directors and employees of PIMCO Advisors in avoiding insider trading, and to
aid PIMCO Advisors in preventing, detecting and imposing sanctions against
insider trading. Every officer, director and employee of PIMCO Advisors must
follow these procedures or risk serious sanctions, including dismissal,
substantial personal liability and criminal penalties.
Trading Restrictions and Reporting Requirements
1. No employee, officer or director of PIMCO Advisors who possesses
material non-public information relating to PIMCO Advisors, may buy or sell any
securities of PIMCO Advisors Holdings L.P. or engage in any other action to take
advantage of, or pass on to others, such material non-public information.
2. No employee, officer or director of PIMCO Advisors who obtains material
non-public information which relates to any other company or entity in
circumstances in which such person is deemed to be an insider or is otherwise
subject to restrictions under the federal securities laws may buy or sell
securities of that company or otherwise take advantage of, or pass on to others,
such material non-public information.
3. No employee, officer or director of PIMCO Advisors shall engage in a
securities transaction with respect to the securities of PIMCO Advisors Holdings
L.P., except in accordance with the specific procedures published from time to
time by PIMCO Advisors.
4. Each employee, officer and director of PIMCO Advisors shall submit
reports of every securities transaction involving securities of PIMCO Advisors
Holdings L.P. (if applicable) to a Compliance Officer in accordance with the
terms of PIMCO Advisors' Code of Ethics as they relate to any other securities
transaction.
5. No employee shall engage in a securities transaction with respect to any
securities of any other company, except in accordance with the specific
procedures set forth in PIMCO Advisors' Code of Ethics.
6. Employees shall submit reports concerning each securities transaction in
accordance with the terms of the Code of Ethics and verify their personal
ownership of securities in accordance with the procedures set forth in the Code
of Ethics.
7. Because even inadvertent disclosure of material non-public information
to others can lead to significant legal difficulties, officers, directors and
employees of PIMCO Advisors should not discuss any potentially material
non-public information concerning PIMCO Advisors or other companies, including
other officers, employees and directors, except as specifically required in the
performance of their duties.
B. Chinese Wall Procedures
The Insider Trading and Securities Fraud Enforcement Act in the US requires
the establishment and strict enforcement of procedures reasonably designed to
prevent the misuse of "inside" information1. Accordingly, you should not discuss
material non-public information about PIMCO Advisors or other companies with
anyone, including other employees, except as required in the performance of your
regular duties. In addition, care should be taken so that such information is
secure. For example, files containing material non-public information should be
sealed; access to computer files containing material non-public information
should be restricted.
C. Resolving Issues Concerning Insider Trading
The federal securities laws, including the US laws governing insider
trading, are complex. If you have any doubts or questions as to the materiality
or non-public nature of information in your possession or as to any of the
applicability or interpretation of any of the foregoing procedures or as to the
propriety of any action, you should contact your Compliance Officer. Until
advised to the contrary by a Compliance Officer, you should presume that the
information is material and non-public and you should not trade in the
securities or disclose this information to anyone.
APPENDIX II
PIMCO ADVISORS
ACKNOWLEDGMENT CERTIFICATION
CODE OF ETHICS
and
INSIDER TRADING POLICY AND PROCEDURES
I hereby certify that I have read and understand the attached PIMCO
Advisors Code of Ethics and Insider Trading Policy and Procedures. Pursuant to
such Code, I recognize that I must disclose or report all personal securities
holdings and transactions required to be disclosed or reported thereunder and
comply in all other respects with the requirements of the Code. I also agree to
cooperate fully with any investigation or inquiry as to whether a possible
violation of the foregoing Code has occurred2. I understand that any failure to
comply in all aspects with the foregoing and these policies and procedures may
lead to sanctions including dismissal.
Date: __________________________ ______________________________
Signature
______________________________ Print Name
PIMCO ADVISORS
INITIAL AND ANNUAL REPORT OF
PERSONAL SECURITIES HOLDINGS
In accordance with the Code of Ethics, please provide a list of all
Securities (other than Exempt Securities) in which you or any account, in which
you have a Pecuniary Interest, has a Beneficial Interest and all Securities
(other than Exempt Securities) in non-client accounts for which you make
investment decisions. This includes not only securities held by brokers, but
also Securities held at home, in safe deposit boxes, or by an issuer.
(1) Name of employee: ____________________________
(2) If different than #1, name of the person in whose name the account is
held: ____________________________
(3) Relationship of (2) to (1): ____________________________
(4) Broker(s) at which Account is Maintained: ____________________________
____________________________
____________________________
____________________________
(5) Account Number(s): ____________________________
(6) Telephone number(s) of Broker: ____________________________
Appendix III - (cont'd)
(7) For each account, attach your most recent account statement listing
Securities in that account. This information must be current as of a date no
more than 30 days before this report is submitted. If you own Securities that
are not listed in an attached account statement, list them below:
Name of Security* Quantity Value Custodian
1. __________________ ___________ ___________ __________________
2. __________________ ___________ ___________ __________________
3. __________________ ___________ ___________ __________________
4. __________________ ___________ ___________ __________________
5. __________________ ___________ ___________ __________________
*Including principal amount, if applicable.
(Attached separate sheet if necessary)
I certify that this form and the attached statements (if any) constitute
all of the Securities of which I have Beneficial Ownership as defined in the
Code.
______________________________
Signature
______________________________
Print Name
Dated: _________________
PIMCO ADVISORS
BROKERAGE ACCOUNT AND NON-BROKER TRANSACTION REPORT
You may not engage, and you may not permit any other person or entity to
engage, in any purchase or sale of publicly-traded securities (other than Exempt
Securities) of which you have, or by reason of the transaction will acquire,
Beneficial Ownership, except through a registered broker-dealer.
You must also cause each broker-dealer who maintains an account for
Securities of which you have beneficial ownership, to provide to a Compliance
Officer, on a timely basis, duplicate copies of confirmations of all
transactions in the account and duplicate statements for the account and you
must report to the Compliance Officer, within 10 days of the occurrence, all
transactions effected without the use of a registered broker-dealer in
Securities (other than transactions in Exempt Securities).
I have requested that you receive duplicate confirms on my behalf from the
following brokers:
Name Broker Account Number Date Account Opened
--------------------------------------------------------------------------------
The following are securities transactions that have not been reported
and/or executed other than through a Broker-Dealer (i.e., direct purchase of a
private placement.)
--------------------------------------------------------------------------------
Date Buy/Sell Security Name Amount Price Broker/Issuer
--------------------------------------------------------------------------------
By signing this document, I am certifying that I have caused duplicate
confirms and duplicate statements to be sent to the Compliance Officer for every
brokerage account that trades in Securities other than Exempt Securities (as
defined in the PIMCO Advisors Code of Ethics).
________________ _____________________________________
Date Signature
Appendix D (cont'd)
1. Transactions required to be reported. You should report every
transaction in which you acquired or disposed of any beneficial ownership of any
security during the calendar quarter. The term 'beneficial ownership' is the
subject of a long history of opinions and releases issued by the Securities and
Exchange Commission and generally means that you would receive the benefits of
owning a security. The term includes, but is not limited to the following cases
and any other examples in the Code:
(A) Where the security is held for your benefit by others (brokers,
custodians, banks and pledgees);
(B) Where the security is held for the benefit of members of your immediate
family sharing the same household;
(C) Where securities are held by a corporation, partnership, limited
liability company, investment club or other entity in which you have an equity
interest if you are a controlling equityholder or you have or share investment
control over the securities held by the entity;
(D) Where securities are held in a trust for which you are a trustee and
under which either you or any member of your immediate family have a vested
interest in the principal or income; and
(E) Where securities are held in a trust for which you are the settlor,
unless the consent of all of the beneficiaries is required in order for you to
revoke the trust.
Notwithstanding the foregoing, none of the following transactions need be
reported:
(A) Transactions in securities which are direct obligations of the United
States;
(B) Transactions effected in any account over which you have no direct or
indirect influence or control; or
(C) Shares of registered open-end investment companies.
2. Security Name. State the name of the issuer and the class of the
security (e.g., common stock, preferred stock or designated issue of debt
securities) including the interest rate, principal amount and maturity date, if
applicable. In the case of the acquisition or disposition of a futures contract,
put, call option or other right (hereinafter referred to as 'options'), state
the title of the security subject to the option and the expiration date of the
option.
3. Futures Transactions. Please remember that duplicates of all
Confirmations, Purchase and Sale Reports, and Month-end Statements must be send
to the firm by your broker. Please double check to be sure this occurs if you
report a futures transaction. You should use the address below.
4. Transaction Date. In the case of a market transaction, state the trade
date (not the settlement date).
5. Nature of Transaction (Buy or Sale). State the character of the
transaction (e.g., purchase or sale of security, purchase or sale of option, or
exercise of option).
6. Amount of Security Involved (No. of Shares). State the number of shares
of stock, the face amount of debt securities or other units of other securities.
For options, state the amount of securities subject to the option. If your
ownership interest was through a spouse, relative or other natural person or
through a partnership, trust, other entity, state the entire amount of
securities involved in the transaction. In such cases, you may also indicate, if
you wish, the extent of your interest in the transaction.
7. Purchase or Sale Price. State the purchase or sale price per share or
other unit, exclusive of brokerage commissions or other costs of execution. In
the case of an option, state the price at which it is currently exercisable. No
price need be reported for transactions not involving cash.
8. Broker, Dealer or Bank Effecting Transaction. State the name of the
broker, dealer or bank with or through whom the transaction was effected.
9. Signature. Sign the form in the space provided.
10. Filing of Report. A report should be filed NO LATER THAN 10 CALENDAR
DAYS after establishing a new brokerage account or effecting a non-reported
securities transaction with your local Compliance Officer.
PIMCO ADVISORS
ANNUAL CERTIFICATION OF COMPLIANCE
I hereby certify that I have complied with the requirements of the Code of
Ethics and the Insider Trading Policy and Procedures, for the year ended
December 31, ____. Pursuant to the Code, I have disclosed or reported all
personal securities holdings and transactions required to be disclosed or
reported thereunder, and complied in all other respects with the requirements of
the Code. I also agree to cooperate fully with any investigation or inquiry as
to whether a possible violation of the Code has occurred.
Date: __________ _______________________________________
Signature
_______________________________________
Print Name
Appendix VI
EMPLOYEE TRADE PRECLEARANCE FORM
PLEASE USE A SEPARATE FORM FOR EACH SECURITY
Name of Employee (please print)
--------------------------------------------------------------------------------
Department Supervisor Telephone Date
--------------------------------------------------------------------------------
Broker Account Number Telephone Sales Representative
--------------------------------------------------------------------------------
|_| Buy |_| Sell Ticker Symbol Price: Limit _______ Market |_|
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Quantity Issue (Full Security Description)
--------------------------------------------------------------------------------
Private Traded Security Special
Portfolio Employee IPO Placement in Prior 60 days Short Sale Instructions
--------------------------------------------------------------------------------
|_| Yes |_| No |_| Yes |_| No |_| Yes |_| No |_| Yes |_| No |_| Yes |_| No
--------------------------------------------------------------------------------
Approvals
--------------------------------------------------------------------------------
This area reserved for Trading Department use only
--------------------------------------------------------------------------------
Trade Has Been Date Approved Approved By
|_| Approved |_| Not Approved
--------------------------------------------------------------------------------
Legal / Compliance (if required)
--------------------------------------------------------------------------------
Approvals are valid until the close of business on the day approval has
been granted. Accordingly, GTC (good till canceled) orders are prohibited. If a
trade is not executed by the close of business resubmitting a new preclearance
form is required. It is each employee's responsibility to comply with all
provisions of the Code. Obtaining preclearance satisfies the preclearance
requirements of the Code and does not imply compliance with the Code's other
provisions.
Preclearance procedures apply to all employees and their immediate family
(as defined by the Code) including: a) all accounts in the name of the employee
or the employee's spouse or minor children; b) all accounts in which any of such
persons have a beneficial interest; and c) all other accounts over which any
such person exercises any investment discretion. Please see the Code for the
complete definition of immediate family.
By signing below the employee certifies the following: The employee agrees
that the above order is in compliance with the Code of Ethics and is not based
on knowledge of an actual client order within the previous seven calendar days
in the security that is being purchased or sold, or knowledge that the security
is being considered for purchase or sale in one or more specific client
accounts, or knowledge of a change or pendency of a change of an investment
management recommendation. The employee also acknowledges that he/she is not in
possession of material, inside information pertaining to the security or issuer
of the security.
--------------------------------------------------------------------------------
Employee Signature Date
--------------------------------------------------------------------------------
PLEASE SEND A COPY OF THIS COMPLETED FORM TO THE COMPLIANCE DEPARTMENT FOR ALL
EXECUTED TRADES
--------
1 The antifraud provisions of United States securities laws reach insider
trading or tipping activity worldwide which defrauds domestic securities
markets. In addition, the Insider Trading and Securities Fraud Enforcement Act
specifically authorizes the SEC to conduct investigations at the request of
foreign governments, without regard to whether the conduct violates United
States law.
2 The antifraud provisions of United States securities laws reach insider
trading or tipping activity worldwide which defrauds domestic securities
markets. In addition, the Insider Trading and Securities Fraud Enforcement Act
specifically authorizes the SEC to conduct investigations at the request of
foreign governments, without regard to whether the conduct violates United
States law.
