EXHIBIT 99.(p)(2)
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BABSON-STEWART IVORY INTERNATIONAL
INSIDE INFORMATION STATEMENT
AND
CODE OF ETHICS RELATING TO PERSONAL SECURITIES TRANSACTIONS
DATED AS OF MAY 12, 2000
PART ONE - INTRODUCTION
This Inside Information Statement and Code of Ethics Relating to Personal
Securities Transactions (the "Code") establishes policies and procedures that
are reasonably necessary to detect and prevent insider trading and activities
that are, or might be, an abuse of fiduciary duties or create conflicts of
interest. Any person having questions as to the meaning or applicability of
these policies and procedures should contact the designated Compliance Director.
This Code of Ethics applies to:
1. all employees, officers, directors, and general partners ("Associates") of
(Babson-Stewart Ivory International ("BSII").
2. all employees, officers, directors, and general partners of any company in
a control relationship to BSII (e.g., David L. Babson and Company
Incorporated ("Babson"), Stewart Ivory & Company (International) Limited
("Stewart Ivory International") and Stewart Ivory & Co. Limited ("Stewart
Ivory")) (together with Associates, "BSII Associates") to the extent that
any such individual, in connection with his or her regular functions or
duties, makes, participates in or obtains information regarding, the
Securities being purchased, sold or considered for purchase or sale by BSII
or by BSII investment clients, including, without limitation, the series of
the DLB Fund Group for which BSII serves as investment sub-adviser and the
Babson-Stewart Ivory International Fund ("Advisory Clients").
BSII expects all of those associated with it to conduct business in accordance
with the highest ethical standards and in full accordance with the letter and
spirit of all applicable laws and regulations.
Capitalized terms used in this Code that are not otherwise defined have the
meanings contained in PART FIVE, Article V: Definitions.
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PART TWO - INSIDE INFORMATION STATEMENT
ARTICLE I: GENERAL POLICIES ON THE USE OF INSIDE INFORMATION
From time-to-time BSII Associates may, either on or off the job, come into
possession of Inside Information. It is important for all BSII Associates to
understand that anytime they come into
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possession of Inside Information, that same information may become attributable
to BSII as a whole. The mere possession of Inside Information is not illegal,
unethical or against BSII policy; however, misuse of it is against the law and
this Code. The following procedures and guidelines apply to all BSII Associates.
A. NO TRADING
Except as (1) permitted below, or (2) with prior written approval from the
Compliance Director, no BSII Associate, may directly or indirectly trade
Securities either for his or her personal account or for BSII and/or
Advisory Client accounts while:
o they are in possession of Inside Information regarding the issuer of
such Securities; or
o the issuer of such Securities appears on the Restricted List.
Notwithstanding the above, a BSII Associate, on behalf of BSII and/or its
Advisory Clients, may purchase private placement Securities of an issuer
even if the issuer has provided BSII and/or its Advisory Clients with
Inside Information as part of BSII and/or its Advisory Client's
consideration as to whether it will invest in such Securities.
B. NO COMMUNICATION OF INSIDE INFORMATION
No BSII Associate may communicate Inside Information or the content of the
Restricted List to others who do not have a clear need to know. Any BSII
Associate having Inside Information as the result of a fiduciary
relationship they might have by reason of a position as an officer or
director of another corporation or entity, should not disclose such
information to anyone, including the Compliance Director.
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ARTICLE II: GUIDELINES FOR IDENTIFYING INSIDE INFORMATION
The following guidelines have been established to assist BSII Associates in
avoiding illegal Insider Trading and to aid BSII in preventing, detecting and
imposing sanctions against Insider Trading.
A. IDENTIFYING INSIDE INFORMATION
Before trading for yourself or for others (including BSII and its Advisory
Clients) in the Securities of a company about which you may have Inside
Information, you should ask yourself the following questions:
1. IS THE INFORMATION MATERIAL INFORMATION? "Material Information" in this
context means information for which there is a substantial likelihood
that a reasonable investor would consider it important in making an
investment decision, or information that is reasonably certain to have
a significant effect on the price of a company's Securities.
Information that officers, directors and employees should consider
material includes, but is not limited to: dividend changes, earnings
estimates, changes in previously released earnings estimates, merger,
acquisition or divestiture proposals or agreements, major litigation,
liquidity problems, significant management developments, expansion or
curtailment of operations, significant increases or decreases in
purchase orders, new products or discoveries, extraordinary borrowing,
purchase or sale of substantial assets, fraud, accounting errors and
irregularities, and capital restructuring (including issue of rights,
warrants or convertible Securities).
Material Information about a company does not have to originate from
such company. For example, information about the contents of a
forthcoming newspaper column or "leaks" from an insider of the issuer
that may be expected to affect the market price of a Security can be
considered material information.
2. IS THE INFORMATION NON-PUBLIC INFORMATION? Non-Public Information in
this context means information that has not been effectively
communicated to the market place. In order for information to be
considered "public", one must be able to point to some fact to show
that the information is generally available to the public and the
Securities markets have had a reasonable time to respond. For example,
the following information would be considered public information: (a)
information found in a public filing with the SEC or a stock exchange;
(b) information disseminated by the issuer or Securities analysts to
the investment community through written reports or public meetings; or
(c) information appearing in Bloomberg, Dow Jones News Service, Reuters
Economic Services, The Wall Street Journal or other publications of
general circulation.
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Information has not been effectively communicated to the public if
there has been: (a) selective disclosure to BSII or other institutional
investors or to select groups of analysts or brokers; (b) partial
disclosure as long as a material component of the Inside Information
remains undisclosed; or (c) insufficient time for the relevant
Securities market(s) to trade on the information.
B. ACTION TO TAKE
No simple tests exist to determine if information is Material Information
or Non-Public Information. If after consideration of the above, you believe
that there is any possibility that the information is Material Information
and Non-Public Information or if you have any questions whatsoever as to
whether the information is Inside Information:
1. Report the matter immediately to the Compliance Director;
2. Do not purchase or sell the Securities on behalf of yourself or others,
including Advisory Clients;
3. Do not communicate the information inside or outside BSII, other than
to the Compliance Director or legal counsel;
4. After the Compliance Director has reviewed the issue, you will be
instructed to continue the prohibitions against trading and
communication, or you will be allowed to trade and communicate the
information; and
5. Keep such information secure. For example, files containing Inside
Information should be locked in filing cabinets or desks and access to
computer files containing Inside Information should be restricted.
C. RESPONSIBILITY TO UPDATE RESTRICTED LIST
Each analyst, trader or portfolio manager is individually responsible for
ensuring that all issuers, (1) about or whom they have Inside Information
or (2) that are Being Considered For Purchase or Sale, are reflected on the
Restricted List.
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ARTICLE III: "FIREWALL" PROCEDURES
The general partners of BSII have established "Firewalls" between their
respective organizations. The Firewalls exist so that, to the extent
practicable, Inside Information that BSII Associates have will not be passed or
imputed from one general partner to the other without clear need to know. The
Firewalls also exist to ensure, to the extent practicable, that the voting and
investment powers over Securities held by each general partner and their
respective affiliates are exercised independently from the other. Each general
partner of BSII may adopt additional or amend existing Firewalls. The primary
guidelines for such policies and procedures are as follows:
A. CONFIDENTIALITY
BSII Associates shall make every effort to maintain the confidentiality of
information entrusted to them.
B. MEETINGS
BSII Associates should avoid placing themselves in a position where they
might receive Inside Information from another BSII Associate or officer,
unless they have a legitimate need to know. When meetings occur with BSII
Associates representing different general partners of BSII to discuss
investment related matters or to make presentations to the same client or
prospective client, the respective individuals shall determine if Inside
Information is likely to be disclosed at the meeting. Where appropriate
they should take steps, in consultation with the Compliance Director, to
ensure that Inside Information does not "pass over" a Firewall. This may
require alteration of the presentation or separate meetings or
presentations. Additionally, someone familiar with compliance and the
federal securities laws, such as the Compliance Director or an attorney
familiar with the laws governing the use of Inside Information, could
attend these meetings to ensure that there are no inadvertent violations of
the securities laws.
C. DUAL FUNCTION EMPLOYEES, OFFICERS, AND DIRECTORS
The roles of individuals who perform dual functions for BSII and its
affiliates should be limited to the extent reasonably practicable to reduce
the likelihood of potential violations of Firewalls. Generally, BSII
Associates who serve as officers or directors of Babson should not be
involved in the investment or proxy voting decision making process or
otherwise be made aware of currently existing, specific securities
positions held by Stewart Ivory and its affiliates (including for BSII
Advisory Clients) that are not publicly available. Likewise, BSII
Associates who serve as officers or directors of Stewart Ivory should not
be involved in the investment or proxy voting decision making process or
otherwise be made aware of currently existing, specific securities
positions held by Babson and its affiliates that are not publicly
available.
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D. DUTY TO DISCLOSE BREACHES OF FIREWALL(S)
Any BSII Associate should inform the Compliance Director whenever they
become aware of a breach in said Firewalls(s) including any instance
whereby a BSII Associate becomes involved in the exercise of another
member's investment or voting decision making process (or otherwise was
made aware of specific securities positions held by such other member that
are not publicly available).
ARTICLE IV: CONFIDENTIALITY OF ADVISORY CLIENTS' TRANSACTIONS
Until disclosed in a public report to shareholders or public filing to the SEC,
all information concerning Securities Being Considered for Purchase or Sale by
or on behalf of BSII and/or any of its Advisory Clients shall be kept
confidential and disclosed by BSII Associates only on a need to know basis in
accordance with practices and policies developed and periodically reviewed for
their continuing appropriateness by the Compliance Director.
ARTICLE V: SUPERVISORY PROCEDURES AND PERSONAL LIABILITY
All supervisory personnel are responsible for the reasonable supervision of
their staff to prevent and detect violations of this Code. Failure to supervise
adequately can result in the supervisor being held personally liable for
violations of the securities laws and this Code. Supervisors shall ensure that
employees and/or consultants joining their departments are reported to the
Compliance Department.
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PART THREE - CODE OF ETHICS RELATING TO
PERSONAL SECURITIES TRANSACTIONS
ARTICLE I: GENERAL POLICIES
A. PERSONAL INVESTMENT ACTIVITIES
In addition to the previously discussed duty to avoid illegal Insider
Trading, the principles that govern personal investment activities for BSII
Associates include:
1. The duty at all times to place the interests of BSII and/or its
Advisory Clients first;
2. The requirement that all personal securities transactions be consistent
with this Code so as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and
responsibility; and
3. The fundamental standard that individuals should not take inappropriate
advantage of their positions.
B. GENERAL PROHIBITIONS
In connection with the purchase, sale or disposition of a Security Held Or
To Be Acquired by BSII and/or its Advisory Clients no person may directly
or indirectly:
1. Use information concerning the investment intentions of or influence
the investment decision making process of BSII and/or its Advisory
Clients for personal gain or in a manner detrimental to the interests
of BSII and/or its Advisory Clients;
2. Employ any device, scheme or artifice to defraud BSII and/or its
Advisory Clients;
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3. Make an untrue statement of a material fact;
4. Omit to state a material fact necessary in order to make any statement
made to BSII and/or its Advisory Clients, in light of the circumstances
under which they are made, not misleading;
5. Engage in any act, practice, or course of business that operates or
would operate as fraud, deceit or breach of trust upon, or by, BSII
and/or its Advisory Clients; or
6. Engage in any manipulative practice with respect to BSII and/or its
Advisory Clients.
ARTICLE II: SPECIFIC POLICIES FOR
ACCESS PERSONS, INVESTMENT PERSONS AND PORTFOLIO MANAGERS
While this Code applies to all BSII Associates, there are specific policies that
govern the personal investment activities of Access Persons, Investment Persons
and Portfolio Managers.
A. ACCESS PERSONS
Access Persons are any BSII Associates who, in connection with his or her
regular functions or duties, makes, participates in or obtains information
regarding, the Securities being purchased, sold or considered for purchase
or sale by BSII or by Advisory Clients. ACCESS PERSONS INCLUDE INVESTMENT
PERSONS AND PORTFOLIO MANAGERS. Access Persons are subject to the following
restrictions:
1. PURCHASE, SALE OR OTHER DISPOSITION OF SECURITIES
No Access Person shall purchase, sell or otherwise dispose of any
Security if that same Security is being purchased or sold or being
considered for purchase or sale by or on behalf of BSII and/or its
Advisory Clients, provided however, that this prohibition does not
apply if the disposition involves Securities that are donated to a
tax-exempt organization or if given to a member of the Access Person's
Immediate Family.
2. SERVING ON BOARDS OF TRUSTEES OR DIRECTORS
No Access Person may serve on the Board of Directors or Trustees of a
business entity without prior written approval from a Managing Director
of BSII . All Access Persons that wish to serve on a Board of Directors
or Trustees shall submit a written request to the Compliance Director.
3. DUTY TO DISCLOSE POSSIBLE CONFLICTS OF INTEREST
(A) To the extent that any Access Person has a Beneficial Interest in
or Control of Securities of an issuer which is Being Considered
for Purchase or Sale by BSII, he or
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she shall disclose that actual or potential conflict of interest
in writing to his or her manager with a copy to the Compliance
Director;
(B) Such disclosure must be made prior to the execution of the
Securities transactions;
(C) Transactions where Access Persons are known to have investments or
interests deemed to be material by a Portfolio Manager or the
Compliance Director must be brought to a Managing Director of BSII
or his or her designee on a Required Approval basis; and
(D) No Access Person having a Beneficial Interest or Control of
Securities of an issuer shall unilaterally approve such a
transaction involving the Securities of such issuer.
4. INVESTMENT CLUBS
Participation by Access Persons in Investment Clubs is prohibited.
Access Persons who were participating in Investment Clubs prior to
January 1, 2000 are exempted from this restriction ("grandfathered").
However, those qualifying under the "grandfather" provision are
prohibited from joining additional investment clubs. If a
"grandfathered" Access Person makes a recommendation to an investment
club, such Security must be precleared by the Compliance Director prior
to trade execution. Additionally, Access Persons relying on the
"grandfather" provision must disclose their participation and related
holdings annually.
5. SHORT SALES INVOLVING BSII ADVISED OR SUB-ADVISED ENTITIES
No Access Person shall sell short a Security issued by an entity for
which BSII is an investment adviser or sub-adviser.
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6. BUSINESS COURTESIES, GIFTS
BSII Associates shall be subject to the policies adopted by their
respective employers with respect to the giving and receiving of
business courtesies and gifts.
B. INVESTMENT PERSONS
Investment Persons are BSII Associates employed by Stewart Ivory
International who, in connection with his or her regular functions or
duties, makes or participates in making recommendations regarding the
Securities being purchased or sold by BSII or by Advisory Clients.
INVESTMENT PERSONS INCLUDE PORTFOLIO MANAGERS. In addition to the
provisions of PART THREE, Article II(A) Access Persons, Investment Persons
are subject to the following restrictions:
1. BAN ON SHORT-TERM PROFITS
No Investment Person may profit from the purchase and sale, or sale and
purchase, within any 60-day period, of any Security, except for those
Securities types listed in Part THREE, Article III (A)(2)(a). Any
profits realized on such trades will be disgorged pursuant to
instructions from the Compliance Director.
2. PRIVATE PLACEMENTS
No Investment Person may acquire any Security in a private placement
without the express prior written approval of the Compliance Director.
3. INITIAL PUBLIC OFFERINGS
No Investment Person or Portfolio Manager may purchase any Security in
an Initial Public Offering except purchases of shares of a savings
association, insurance company, or similar institution, under an
existing right as a policyholder or depositor, that have been approved
and precleared in advance by the Compliance Director.
C. PORTFOLIO MANAGERS
Portfolio Managers are Investment Persons who have DIRECT RESPONSIBILITY
AND AUTHORITY TO MAKE INVESTMENT DECISIONS AFFECTING A PARTICULAR BSII
INVESTMENT PORTFOLIO OR AN ADVISORY CLIENT ACCOUNT. In addition to the
provisions of PART THREE, Article II(A) & (B), Portfolio Managers are
subject to the following restrictions:
1. SEVEN-DAY "BLACKOUT" PERIOD
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No Portfolio Manager may purchase, sell or dispose of any Security
within seven (7) calendar days before or after the purchase or sale of
that Security by BSII or an Advisory Client for which he or she is a
Portfolio Manager. Any profits realized with respect to such purchase
or sale shall be disgorged pursuant to instructions from the Compliance
Director. Exempt from this provision are those Securities and
transactions enumerated in PART THREE, Article III (A)(2)(a)-(e),
(Please note items (f) and (g) from PART THREE, Article III (A)(2) are
NOT exempt from this provision.)
2. CONTRA TRADING RULE
No Portfolio Manager shall, without preclearance, sell out of his or
her personal account or the account of any member of his or her
Immediate Family any Security or related Security held by BSII and/or
on behalf of its Advisory Client, for which he or she is a Portfolio
Manager. Any profits realized with respect to such purchase or sale
shall be disgorged pursuant to instructions from the Compliance
Director
Exempt from this provision are those Securities and transactions
enumerated in PART THREE, Article III (A)(2)(a)-(e), (Please note items
(f) and (g) from PART THREE, Article III(A)(2) are not exempt from
these provisions.)
ARTICLE III: PRECLEARANCE, DUPLICATE CONFIRMATIONS
AND REPORTING PROCEDURES APPLICABLE TO BSII ASSOCIATES
There are preclearance and a number of reporting requirements that apply to
Access Persons, Investment Persons, and Portfolio Managers. The Compliance
Director will make every effort to inform any individual that he or she
qualifies as an Access Person, Investment Person and/or Portfolio Manager.
A. ACCESS PERSONS (INCLUDES INVESTMENT PERSONS AND PORTFOLIO MANAGERS)
1. PRECLEARANCE
No Access Person may purchase, sell or otherwise acquire or dispose of
any Security in which he or she has, or as a result of such transaction
will establish, a Beneficial Interest or Control without the prior
written approval of the Compliance Director. Preclearance is not
required if Securities are donated to a tax-exempt organization or
given as a gift between members of the Access Person's Immediate
Family. PRECLEARANCE IS VALID ONLY FOR THE DAY IT IS OBTAINED.
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Preclearance communications may be recorded for the protection of BSII
and its Associates.
2. PRECLEARANCE EXEMPTIONS
Certain transactions do not need to be precleared.
(A) EXEMPT SECURITIES AND FUNDS
Purchases, sales or dispositions of the following types of
Securities: direct obligations of the government of the United
States, bankers' acceptances, bank certificates of deposit,
commercial paper, shares of registered Open-End Investment
Companies (closed-end mutual funds are not exempt from
preclearance), and high quality short-term debt instruments,
including repurchase agreements. High quality short-term debt
instrument means any instrument that has a maturity at issuance of
less than 366 days and that is rated in one of the two highest
rating categories by a nationally recognized rating organization.
(B) NO DIRECT OR INDIRECT CONTROL OVER ACCOUNT
Purchases, sales or dispositions of securities for an account over
which an Access Person has no direct or indirect control,
typically known as a "blind trust".
(C) INVOLUNTARY PURCHASES OR SALES
Involuntary purchases or sales made by a Access Person, such as
spin-offs of shares of an issuer to existing shareholders or a
call of a debt Security by the issuer.
(D) DIVIDEND REINVESTMENT PLAN (DRIPS)
Purchases which are part of an automatic dividend reinvestment
plan or, regular monthly purchases through a U.K. investment trust
savings scheme.
(E) PRO RATA DISTRIBUTIONS
Purchases resulting from the exercise of rights acquired from an
issuer as part of a pro rata distribution to all holders of a
class of Securities of such issuer (and the sale of such rights).
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(F) OTHER SECURITIES
Purchases or sales of the following types of Securities: municipal
general obligations, Securities held by a Trust established to
fund the employee's retirement benefit plans such as a 401(k)
plan, interests in Securities that are related to broad-based
equity indices, and interest rate or commodity futures. Approval
from the Compliance Director is required for these exemptions to
be granted.
(G) DE MINIMIS S&P 500 OR FT-SE 100 PRECLEARANCE EXEMPTION
Except as provided in the following paragraph, preclearance is not
required for any acquisitions or dispositions of shares of stock
and bonds issued by a company included in the Standard & Poor's
500 Index (the "S&P 500") or, for BSII Associates that are
employees of Stewart Ivory, the FT-SE 100, if the total of such
purchases, sales and dispositions does not exceed 1,000 shares of
stock or $10,000 par value of bonds of a single issuer in any
given calendar quarter.
The De Minimis S&P 500 and FT-SE 100 preclearance exemption may
NOT be used in connection with transactions in warrants, options
and futures.
A listing of the S&P 500 is available in the Babson Compliance
Department and a listing of the FT-SE 100 is available from the
Stewart Ivory Compliance Department.
3. DUPLICATE CONFIRMATIONS
All Access Persons shall arrange for copies of confirmations of ALL
personal Securities transactions involving a Securities account in
which the Access Person has a Beneficial Interest or Control to be sent
promptly by the Access Person's broker(s) directly to the Compliance
Director. Accounts which may only hold Open-End Investment Companies
are exempt from this reporting requirement.
4. INITIAL HOLDINGS REPORT
New Access Persons must file a report disclosing the title, number of
shares, and principal amount of all Securities in which they have any
direct or indirect beneficial ownership when the Access Person became
an Access Person and 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 when the person became an Access Person, and the date that the
report is submitted by the Access Person. This Initial Holding Report
is due within ten days after the person became an Access Person.
5.QUARTERLY REPORTS
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(A) THE SEC REQUIRES that all Access Persons, within ten (10) calendar
days after the end of each calendar quarter, make a written report
(the "Quarterly Report") certifying to the Compliance Director
that the Quarterly Report lists all Security transactions in which
the Access Person has a Beneficial Interest or over which the
Access Person exercises Control. Copies of broker prepared
periodic securities account statements ("Account Statement") may
be attached to the Quarterly Report in lieu of listing each of the
transactions detailed in the Account Statement on the Quarterly
Report so long as all information required in the Quarterly Report
is contained in the Account Statement. The Quarterly Report form
will be sent out to Associates at the end of the quarter. Late
filers are in technical violation of the law and will be subject
to disciplinary action.
(B) Each Quarterly Report must contain: (i) with respect to each
reportable transaction for the quarter, the date of the
transaction, the title, the interest rate and maturity date (if
applicable), the number of shares, and the principal amount of
each Security involved, the nature of the transaction (e.g.
purchase or sale), the price at which the transaction was
effected; and the name of the broker, dealer, or bank with or
through which the transaction was affected; (ii) with respect to
any account established by the Access Person in which any
Securities were held during the quarter for the direct or indirect
benefit of the Access Person: the name of the broker, dealer or
bank with whom the Access Person established the account and the
date the account was established; and (iii) the date that the
report is submitted by the Access Person.
(C) All Security transactions are reportable, even those exempt from
the preclearance requirements except those exempt Securities
described in;
o PART THREE, Article III (A)(2)(a) and (b)
Notwithstanding the above, any transaction involving shares of an
Open-End Investment Company that is advised by BSII MUST be
reported in the Quarterly Report.
6. ANNUAL CERTIFICATION OF UNDERSTANDING AND COMPLIANCE
All Access Persons shall within 10 days of employment and at least
annually thereafter, certify to the Compliance Director that they have
read and understand this Code, recognize that they are subject to it,
have complied with its requirements and have disclosed or reported all
required personal Securities transactions and holdings.
B. ACCESS PERSONS - ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS
All Access Persons shall, at least annually, disclose all Securities,
except as indicated in PART THREE, Article III(A)(2)(a) and (b), to the
Compliance Director in an Annual Disclosure of Personal Securities Holdings
Report, (i) all Securities (title, number of shares and principal amount)
in which he or she has a Beneficial Interest or Control, and (ii) 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 (iii)
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the date the report is submitted by the Access Person. Only Securities
described in PART THREE, Article III(A)(2)(a) and Securities in accounts
described in (b) are exempt from the Annual Disclosure Requirement. The
information contained in the report must be current as of a date no more
than 30 days before the report is submitted. Any Open-End Investment
Company managed by DLB must be disclosed.
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PART FOUR - COMPLIANCE DIRECTOR
ARTICLE I: COMPLIANCE DIRECTOR
The role of the Compliance Director is critical to the implementation and
maintenance of this Code.
A. APPOINTMENT
The President of each general partner of BSII shall designate a compliance
director (the "Compliance Director") who shall have the authority and
responsibility to administer this Code as it applies to the operations of
that BSII general partner and/or its Advisory Clients.
B. PREVENTION OF VIOLATIONS
The Compliance Director shall be, or shall become, familiar with investment
compliance practices and policies and shall report any material inadequacy
to the Managing Directors of BSII and the chief legal officer of Babson and
Stewart Ivory, if any.
The Compliance Director shall:
1. Furnish all Access Persons with a copy of this Code and periodically
inform them of their duties and obligations thereunder;
2. Obtain signed certifications from each Access Person stating that: (a)
such Access Person has received a copy of the Code; (b) has read it;
(c) understands it; and (d) is either in compliance with all of its
provisions or has disclosed in writing to the Compliance Director any
instance of actual or possible violation of the Code;
3. Conduct periodic educational programs to explain the terms of this Code
and applicable securities laws, regulations and cases;
4. Answer questions regarding this Code, and keep abreast of changes in
applicable laws and regulations;
5. Interpret this Code consistent with the objectives of applicable laws,
regulations and industry practices;
6. Consistent with this Code and applicable SEC rules, promptly review,
and in writing either approve or disapprove, each request of BSII
Associates for clearance to trade in specified Securities for or on
behalf of BSII, one or more Advisory Clients, or for their personal
account;
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7. Conduct audits, inspections and investigations as necessary or
appropriate to prevent or detect possible violations of this Code.
Report, with his or her recommendations, any apparent and material
violations of this Code to the Managing Directors of BSII and the Chief
Legal Officer of each general partner of BSII. Report, where
appropriate, to the Managing Directors of BSII, or any Committee
appointed by them to deal with such information;
8. Develop and maintain one or more Restricted Lists.
9. Determine whether particular Securities transactions qualify for the De
Minimis S&P 500 or FT-SE 100 Exception from preclearance as set forth
in PART THREE, Article III(A)(2)(g) De Minimis S&P 500 and FT-SE 100
Exception.
10. Grant exceptions or exemptions on a transaction, an individual or a
class basis, to any of the provisions of PART III, Article III:
Preclearance, Duplicate Confirmations and Reporting Procedures
applicable to BSII Associates, provided that such exceptions or
exemptions are consistent with the spirit of the principles on which
this Code is premised.
11. Periodic reviews of all personal Securities transactions effected by
Access Persons, the scope and frequency of such review to be determined
by the Compliance Director.
12. Oversee the manner of disposition of any profits required to be
disgorged in conformance with company guidelines.
13. Designate one or more persons to have the authority and responsibility
to act on behalf of the Compliance Director when necessary or
appropriate;
14. Maintain confidential information regarding personal Securities
transactions and holdings and only disclose such information to persons
with a clear need to know, including state and federal regulators when
required or deemed necessary or appropriate by the Compliance Director
in conformance with the provisions of the Code;
15. Develop policies and procedures designed to implement, maintain and
enforce this Code;
16. Resolve issues of whether information received by a BSII Associate
constitutes Inside Information;
17. Confirm that there are department supervisors implementing this Code;
18. Develop, implement, review, and revise specific firewall procedures
consistent with SEC rules and this Code; and
19. Review this Code on a regular basis and recommend to the Managing
Directors amendments, as are necessary or appropriate.
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C. DETECTION OF VIOLATIONS
To prevent and detect Insider Trading, the Compliance Director shall:
1. Review the trading activity and Holdings reports filed by each Access
Person;
2. Review duplicate brokerage confirmations required of each Access
Person.
3. Review the trading activity of BSII and its Advisory Clients; and
4. Coordinate the review of such reports with other appropriate officers,
directors or employees of BSII and its affiliates.
D. REPORTS AND RECORDS
1. REPORTS
The Compliance Director shall:
(A) Prepare a quarterly report containing a description of any
material violation requiring significant remedial action during
the past quarter and any other significant information concerning
the application of this Code. The Compliance Director shall submit
the report to BSII's Managing Directors and the Chief Legal
Officer of each general partner of BSII and the Board of Trustees
of each mutual fund potentially affected.
(B) Prepare written reports at least annually summarizing any
exceptions or exemptions concerning personal investing made during
the past year; listing any violations requiring significant
remedial action; identifying any recommended changes to the Code
or the procedures thereunder. The report should include any
violations that are material, any sanctions imposed to such
material violations and report any significant conflicts of
interest that arose involving the personal investment policies of
the organization, even if the conflicts have not resulted in a
violation of the Code. The Compliance Director shall submit the
Report to BSII's Managing Directors, the Chief Legal Officer of
each BSII general partner, and the Board of Trustees of each
mutual fund. The report to the Board of Trustees shall certify
that BSII and the DLB Fund Group have adopted procedures
reasonably necessary to prevent Access Persons from violating the
Code.
More frequent reports may be appropriate in certain circumstances,
such as when there have been significant violations of a code or
procedures, or significant conflicts of interest arising under the
code or procedures.
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2. RECORDS
The Compliance Director shall maintain or cause to be maintained, the
following records:
(A) A copy of this Code or any other Code of Ethics which has been in
effect during the most recent 5-year period;
(B) A record of any violation of any such Code and of any action taken
as a result of such violation in the 5-year period following the
end of the fiscal year in which the violation took place;
(C) A copy of each report made by the Compliance Director for a period
of 5 years from the end of the fiscal year of BSII and of the DLB
Fund Group, as applicable, in which such report is made or issued;
(D) A list of all persons currently or within the most recent 5-year
period who are or were required to make reports pursuant to this,
or a predecessor Code, or who are or were responsible for
reviewing these reports; along with a copy of all Initial Holdings
Reports, Quarterly Reports, Annual Reports, Preclearance Forms and
Duplicate Confirmations filed during that same period;
(E) An up-to-date list of all Access Persons, Investment Persons and
Portfolio Managers with an appropriate description of their title
or employment; and
(F) A record of the approval of, and rationale supporting, the
acquisition of Securities in IPO's and private placements for at
least five years after the end of the fiscal year in which the
approval is granted.
The aforementioned records shall be maintained in an easily accessible
place for the time period required by applicable SEC rules.
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PART FIVE - GENERAL INFORMATION
ARTICLE I: NO BSII LIABILITY FOR LOSSES
BSII, its affiliates and/or its Advisory Clients shall not be liable for any
losses incurred or profits avoided by any BSII Associate resulting from the
implementation or enforcement of this Code. BSII Associates should understand
that their ability to buy and sell Securities is limited by this Code and that
trading activity by BSII and/or its Advisory Clients may affect the timing of
when an Access Person can buy or sell a particular Security.
ARTICLE II: REPORTING VIOLATIONS
Any BSII Associate who knows or has reason to believe that this Code has been or
may be violated shall bring such actual or potential violation to the immediate
attention of the Compliance Director.
ARTICLE III: PENALTIES FOR VIOLATIONS
Individuals who trade on or inappropriately communicate Inside Information are
not only violating this Code but are also involved in unlawful conduct.
Penalties for trading on or communicating Inside Information can be severe, both
for the individuals involved in such unlawful conduct and their employers. A
person can be subject to penalties even if they do not personally benefit from
the violation. Penalties may include civil injunctions, payment of profits made
or losses avoided ("disgorgement"), jail sentences, fines for the person
committing the violation of up to three times the profit gained or loss avoided,
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 Code shall be subject to the imposition of
such sanctions by BSII as may be deemed appropriate under the circumstances to
achieve the purposes of applicable SEC rules and this Code. Such sanctions could
include, without limitation, bans on personal trading, reductions in salary
increases, the forfeiture of incentive compensation benefits, disgorgement of
trading profits, transfer to another position at BSII or its affiliates,
suspension of employment and termination of employment.
ARTICLE IV: AMENDMENTS
This Code may not be amended as to any entity that adopts it except in a
written form approved by a vote of each general partner of BSII and, with
respect to a material change to the Code, by the Board of Trustees of The DLB
Fund Group or Babson-Stewart Ivory International Fund no later than six months
after the adoption of the material change.
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ARTICLE V: DEFINITIONS
ACCESS As defined in Part Three, Article II: Specific Policies for
PERSONS Access Persons, Investment Persons and Portfolio Mangers.
ADVISORY means any person who has an investment advisory services
CLIENT agreement with BSII.
ASSOCIATES As defined in Part One - Introduction
BEING A Security is deemed as "Being Considered for Purchase or
CONSIDERED FOR Sale" when a recommendation to purchase or sell such Security
PURCHASE OR SALE has been made and communicated to a portfolio manager, and,
with respect to the person making the recommendation, when
such person seriously considers making such a recommendation.
BENEFICIAL means any interest by which: (a) an Access Person exercises
INTEREST OR direct or indirect control over the purchase, sale or other
CONTROL disposition of a Security; or (b) an Access Person or any
member of his or her Immediate Family can directly or
indirectly derive a monetary/financial interest from the
purchase, sale, disposition or ownership of a Security.
Examples of indirect monetary/financial interests include:
(a) interests in partnerships and trusts that hold Securities
but does not include Securities held by a blind trust or by a
Trust established to fund employee retirement benefit plans
such as 401(k) plans; (b) a performance-related fee received
by the Access Person for providing investment advisory
services; and (c) a person's rights to acquire Securities
through the exercise or conversion of any derivative
instrument.
CLOSED-END means a mutual fund with a set number of shares issued and
INVESTMENT distributed to investors in a public offering, identical to
COMPANY the way corporate Securities reach public hands. A Closed-End
Investment Company's capitalization is basically fixed
(unless an additional public offering is made). After the
public offering stock is distributed, anyone who wants to buy
or sell shares does so in the secondary market (either on an
exchange or over the counter). Also, see definition of
Open-End Investment Company.
COMPLIANCE means the person designated by the President of each BSII
DIRECTOR general partner to be principally responsible for the
prevention and detection of violations of this Code and
related laws and regulations as it applies to BSII Associates
who are employed by that general partner or one of its
affiliates.
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IMMEDIATE means related by blood or marriage AND living in the same
FAMILY household includes: any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, "significant other",
sibling, mother-, father-, son-, daughter-, brother or
sister-in-law, and any adoptive relationships. The Compliance
Director, after reviewing all the pertinent facts and
circumstances, may determine that an indirect Beneficial
Interest in Securities held by members of the Access Person's
Immediate Family does not exist.
INSIDER means, in most cases, employees, officers and directors of a
company. In addition, a person may become a "temporary
insider" if he or she enters into a special confidential
relationship in the conduct of another company's affairs and
as a result is given access to information solely for BSII
and/or its Advisory Client's purposes. A temporary insider
could include a company's attorneys, accountants, bank
lending officers and printers. A BSII Associate, such as a
securities analyst, may become a temporary insider of another
company if the other company expects such person to keep the
disclosed non-public information confidential and the
relationship at least implies such a duty.
INSIDE means Material Information that is Non-Public Information.
INFORMATION
INSIDER TRADING means trading in Securities (whether or not one is an
"Insider") while having Inside Information, or to
communicating Inside Information to others. While the law
concerning insider trading is not static, it is generally
understood to prohibit:
1. trading by an Insider, while in possession of Inside
Information; or
2. trading by a non-insider, while in possession of Inside
Information, where the information either was disclosed to
the non-insider in violation of an Insider's duty to keep it
confidential or was misappropriated; or
3. communicating Inside Information to others by either an
Insider or a non-insider prohibited from trading by Part II
of this Code.
INVESTMENT CLUB means a group of people who pool their assets in order to
make joint decisions (typically a vote) on which Securities
to buy, hold or sell.
INVESTMENT means any Access Person who provides information and/or
PERSON advice to Portfolio Managers or who helps execute a Portfolio
Manager's decisions (e.g., traders, and analysts).
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MATERIAL means information for which there is a substantial likelihood
INFORMATION that a reasonable investor would consider it important in
making an investment decision, or information that is
reasonably certain to have a significant effect on the price
of a company's Securities. Information that officers,
directors and employees should consider material includes,
but is not limited to: dividend changes, earnings estimates,
changes in previously released earnings estimates, merger,
acquisition or divestiture proposals or agreements,
information relating to a tender offer, major litigation,
liquidity problems, significant management developments,
expansion or curtailment of operations, significant increases
or decreases in purchase orders, new products or discoveries,
adverse test results of new products, extraordinary
borrowing, purchase or sale of substantial assets, and
capital restructuring (including issue of rights, warrants or
convertible securities).
Material Information does not have to relate to a company's
business. For example, information about the contents of a
forthcoming newspaper column that may be expected to affect
the market price of a Security can be considered material
information.
NO SIMPLE TEST EXISTS TO DETERMINE WHEN INFORMATION IS
MATERIAL. FOR THIS REASON, YOU SHOULD DIRECT ANY QUESTIONS
WHATEVER ABOUT WHETHER INFORMATION IS MATERIAL TO THE
COMPLIANCE DIRECTOR.
NON-PUBLIC means information that has not been effectively communicated
INFORMATION to the market place. In order for information to be
considered "public", one must be able to point to some fact
to show that the information is generally available to the
public and the securities markets have had a reasonable time
to respond. For example, the following information would be
considered public information: (a) information found in a
public filing with the SEC or a stock exchange; (b)
information disseminated by the issuer or securities analysts
to the investment community through written reports or public
meetings; or (c) information appearing in Bloomberg, Dow
Jones News Service, Reuters Economic Services, The Wall
Street Journal or other publications of general circulation.
Information has not been effectively communicated to the
public if there has been: (a) selective disclosure to BSII or
other institutional investors or to select groups of analysts
or brokers; (b) partial disclosure as long as a material
component of the Inside Information remains undisclosed; or
(c) insufficient time for a relevant securities market(s) to
trade on the information.
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OPEN-END means a mutual fund that issues its shares in open-ended
INVESTMENT offerings. New shares are continuously created as investors
COMPANY buy them. Investors who want to sell shares sell them back to
the company (which redeems them) rather than to another
investor. The capitalization of such a mutual fund is
open-ended; as more investors buy mutual fund shares, the
fund's capital expands. By the same token when investors
liquidate their holdings, the fund's capital shrinks. Also,
see definition of Closed-End Investment Company.
PORTFOLIO means an Investment Person who has the direct responsibility
MANAGER and authority to make investment decisions affecting a
particular BSII and/or Advisory Client's account or
portfolio.
RESTRICTED LIST means a list(s) maintained by each BSII general partner or
its affiliates that includes the names of the Securities of
which are being actively traded, Being Considered for
Purchase or Sale by BSII and/or its Advisory Clients, and the
names of any issuer about whom BSII has Inside Information or
on whose board of directors BSII Associates serve. An issuer,
or Security, as applicable, will be removed from the
Restricted List when what had been Inside Information becomes
available to the public, when the interlocking directorate no
longer exists or when what had been a Security Being
Considered for Purchase or Sale is no longer under such
consideration. Each analyst and trader is responsible for
ensuring that all issuers with whom they have worked are
properly reflected in the Restricted List in accordance with
provisions of this Code.
The content of the Restricted List is confidential and will
be distributed only to those that have a need to know the
identity of the issuers in the context of performing their
job responsibilities;
SECURITY means any stock or transferable share; note, bond, debenture
or other evidence of indebtedness, investment contract, any
warrant or option to acquire or sell a Security, any
financial futures contract, put, call, straddle, option, or
any interest in any group or index of Securities, or in
general, any interest or instrument commonly known as a
"Security."
SECURITY HELD means any Security which, within the most recent 15 days, (i)
OR TO BE is or has been held by BSII and/or an Advisory Client or (ii)
ACQUIRED is being or has been considered by BSII for itself and/or its
Advisory Clients. This includes any option on a Security that
is convertible into or exchangeable for, any Security that is
held or to be acquired. The Compliance Director may amend
this definition to the extent necessary to comply with Rule
17j-1 of the Investment Company Act of 1940.
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