PILGRIM GROUP FUNDS
CODE OF ETHICS
STATEMENT OF GENERAL PRINCIPLES
Each of (i) The Pilgrim Group Mutual Funds (as more particularly described
on Exhibit A hereto and collectively referred to as the "Funds"), which are
registered investment companies under the Investment Company Act of 1940
(the "1940 Act"), (ii) Pilgrim Investments, Inc. ("PII"), a registered
investment adviser under the Investment Advisers Act of 1940, as amended,
which serves as the investment adviser for the Funds, and (iii) Pilgrim
Securities, Inc ("PSI"), a registered broker-dealer which serves as the
principal underwriter for the open-end Funds, hereby adopt this Code of
Ethics (hereinafter, the "Code"), pursuant to Rule 17j-1 promulgated by the
Commission under Section 17(j) of the 1940 Act.
In general, Rule 17j-1 imposes an obligation on registered investment
companies and their investment advisers and principal underwriters to adopt
written codes of ethics covering the securities activities of certain of
their directors, trustees, officers, and employees. This Code is designed
to ensure that those individuals who have access to information regarding
the portfolio securities activities of registered investment company
clients do not intentionally use information concerning such clients'
portfolio securities activities for his or her personal benefit and to the
detriment of such clients. For purposes of this Code, a Sub-Adviser of the
Fund shall be treated as an Adviser of the Fund unless the Boards of the
Funds have approved a separate code of ethics for that Sub-Adviser. It is
not the intention of this Code to prohibit personal securities activities
by Access Persons, but rather to prescribe rules designed to prevent actual
and apparent conflicts of interest. While it is not possible to define and
prescribe all-inclusive rules addressing all possible situations in which
conflicts may arise, this Code sets forth the policies of the Funds, PII,
and PSI regarding conduct in those situations in which conflicts are most
likely to develop.
In discharging his or her obligations under the Code, every Access Person
should adhere to the following general fiduciary principles governing
personal investment activities:
A. Every Access Person should at all times scrupulously place the interests of
the Funds' shareholders ahead of his or her own interests with respect to
any decision relating to personal investments.
B. No Access Person should take inappropriate advantage of his or her position
with a Fund, or with PII or PSI, as the case may be, by using knowledge of
any Fund's transactions to his or her personal profit or advantage.
C. Every Access Person should at all times conform to the Policies and
Procedures to Control The Flow And Use Of Material Non-Public Information
In Connection With Securities Activities, copy of which is attached and is
incorporated by reference into this Code of Ethics (that is, the policies
and procedures set forth are legally considered a part of this Code of
Ethics).
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II. DEFINITIONS
This Code defines directors, officers and employees of the Funds, PII, and
PSI into several categories, and imposes varying requirements by category
appropriate to the sensitivity of the positions included in the category.
As used herein and unless otherwise indicated, the following terms shall
have the meanings set forth below:
"PORTFOLIO MANAGER": means any employee of a Fund or of PII who is
entrusted with the direct responsibility and authority to make investment
decisions affecting an investment company, and who, therefore, may be best
informed about such Fund's investment plans and interests.
"INVESTMENT PERSONNEL": includes any employee of the Adviser (or of any
company in a control relationship to the Adviser) who, in connection with
his or her regular functions or duties, makes or participates in making
recommendations regarding the purchase or sale of Securities by the Fund
and includes the following individuals:all Finance Department staff of the
Adviser, Portfolio Managers of the Funds, the Portfolio support staff, and
traders who provide information and advice to a Portfolio Manager of a Fund
or who assist in the execution of such Portfolio Manager's decisions.
"ACCESS PERSONS": includes:
(i) any director, officer, general partner or Advisory Person of the Funds
or the Adviser to the Funds; and
(ii) any director or officer of PSI who, in the ordinary course of
business, makes, participates in or obtains information regarding the
purchase or sale of Securities by the Funds, or whose functions or
duties in the ordinary course of business relate to the making of any
recommendation to the Funds regarding the purchase or sale of
Securities.
This definition includes, but is not limited to, the following individuals:
Portfolio Managers, Investment Personnel, certain employees in Operations,
Marketing employees, Finance department employees, an Information Systems
member, an Accounting/Compliance Department member, and Executive
Management support staff members, as such individuals are defined by the
Company's Human Resource Department. Where the term Access Person is used
without specifying whether such person is an Access Person of a Fund, or of
PII or PSI, such term shall be interpreted to include all Access Persons of
each such entity.
"ADVISORY PERSON" includes each employee of the Adviser (or of any company
in a control relationship to the Adviser) who, in connection with his or
her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Securities by the Funds or
whose functions relate to the making of any recommendations with respect to
the purchases or sales.
"SEGREGATED PERSON" means an Access Person who in the ordinary course of
business does not have access to information regarding the trading
activities and/or current portfolio holdings of the Funds; does not
ordinarily maintain an office on the premises utilized by Investment
Personnel or Portfolio Managers; and who, by resolution, the Boards of the
Funds have determined may be a Segregated Person because he or she will not
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be permitted access to information regarding the trading activities and/or
current portfolio holdings of the Funds.
"EXEMPT PERSON": means a person who is, or could be, an Access Person who
does not ordinarily maintain an office on the premises utilized by
Investment Personnel or Portfolio Managers, and who, by resolution, the
Boards of the Funds have determined may be an Exempt Person not subject to
the Code because his or her responsibilities are ministerial in function
and therefore the risk of violation of the Code is highly remote.
"DISINTERESTED DIRECTOR": means a director/trustee of the Funds who is not
an "interested person" of the Funds within the meaning of Section 2(a)(19)
of the 1940 Act.
"PII INVESTMENT ADVISER REPRESENTATIVES": means any officer or director of
the investment adviser; any employee who makes any recommendation, who
participates in the determination of which recommendation should be made,
or whose functions or duties relate to the determination of which
recommendation shall be made. These individuals are identified on Form ADV,
Schedule F, Item 6.
"BEING CONSIDERED FOR PURCHASE OR SALE": means, with respect to any
security, that a recommendation to purchase or sell such security has been
made and communicated or, with respect to the person making the
recommendation, such person seriously considers making such recommendation.
"BENEFICIAL OWNERSHIP": An Access Person will be deemed to have "beneficial
ownership" of any Securities and commodities interests for any account held
(i) in the name of his or her spouse or their minor children, (ii) in the
name of another person (for example, a relative of the Access Person or his
or her spouse sharing the same home) if, by reason of any contract,
understanding, relationship or agreement or other arrangement, he or she
obtains benefits substantially equivalent to those of ownership of the
Securities, (iii) by a partnership of which he or she is a partner, (iv) by
a corporation of which he or she is a controlling person and which is used
by him or her alone or with a small group as a medium for investing or
trading in Securities, or (v) by a trust over which he or she has any
direct or indirect influence or control and of which he or she, or a member
of his or her immediate family (spouse, children, grandchildren or parents)
is a beneficiary. Exceptions may be made on a case-by-case basis by the
Designated Officer where the Access Person certifies in writing (and
annually re-certifies, as applicable) that he or she has no control over
the account of e.g., a trust or estate, or of a spouse whose transactions
in Securities are subject to a code of ethics of his or her employer. In
making such exceptions, the Compliance Officer may require the Access
Person to comply with various requirements under this Code, e.g., periodic
filing of holdings or transactions reports, as the Designated Officer deems
appropriate in the circumstances.
"CONTROL": shall have the same meaning as that set forth in Section 2(a)(9)
of the 1940 Act.
"DESIGNATED OFFICER": means, with respect to any Fund, or PII or PSI, the
President of such Fund or of PII or PSI, or such other officer as the board
of directors/trustees of such Fund, or of PII or PSI, as the case may be,
shall designate.
"FUNDS" OR "FUND": means The Pilgrim Group of Funds, or any fund within The
Pilgrim Group of Funds, respectively, as more particularly described on
Exhibit A hereto; provided that such terms shall not include any fund as to
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which PII has appointed a sub-adviser if the Board of Directors/Trustees of
that fund has adopted the sub-adviser's code of ethics on behalf of that
fund.
"PSI": means Pilgrim Securities, Inc.
"PII": means Pilgrim Investments, Inc. and Pilgrim Advisors, Inc..
"PERSONAL SECURITIES HOLDINGS" OR "PERSONAL SECURITIES TRANSACTIONS":
means, with respect to any person, any Security Beneficially Owned, or any
Security purchased or otherwise acquired, or sold or otherwise disposed of
by such person, including any Security in which such person has, or by
reason of such transaction acquires or disposes of, any direct or indirect
Beneficial Ownership in such Security and any account over which such
person has discretion; provided, however, that such terms shall not include
any holding or transaction in a Security held in or effectuated for an
account over which such person does not have any direct or indirect
influence and has certified such fact to the appropriate Designated
Officer. Personal Securities Transactions shall include all Securities or
commodity interests regardless of the dollar amount of the transaction or
whether the sale is in response to a tender offer.
"SECURITY": includes 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, or any put, call,
straddle, option or privilege entered into on a national securities
exchange relating to foreign currency. Securities also includes shares of
closed-end investment companies, various derivative instruments such as
ELKs, LEAPs and PERCs, limited partnership interests and private placement
common or preferred stocks or debt instruments. Commodity interests, which
includes futures contracts, and options on futures, relating to any stock
or bond, stock or bond index, interest rate or currency shall also be
included in this Code's definition of Security. Commodity interests in
agricultural or industrial commodities, such as agricultural products or
precious metals, are not covered under this Code.
Security does not include shares of registered open-end investment
companies, securities issued by the government of the United States and any
options or futures thereon, bankers' acceptances, bank certificates of
deposit and time deposits, commercial paper, repurchase agreements, and
such other money market instruments as designated by the board of
directors/trustees of such Fund, and shares of ReliaStar Financial
Corporation.
"SECURITY HELD OR TO BE ACQUIRED" by a Fund means: any Security which,
within the most recent fifteen (15) days, (i) is or has been held by such
Fund, or (ii) is being or has been considered by such Fund for purchase for
such Fund.
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"AUTOMATIC DISGORGEMENT." Where a violation results from a transaction
which can be reversed prior to settlement, such transaction should be
reversed, with the cost of the reversal being borne by the covered person;
or if reversal is impractical or impossible, then any profit realized on
such short-term investment, net of brokerage commissions but before tax
effect, shall be disgorged to the appropriate Fund, or if no fund is
involved then to a charity designated by PII.
III. GOVERNING LAWS, REGULATIONS AND PROCEDURES
All employees shall have and maintain knowledge of and shall comply
strictly with all applicable Federal and State laws and all rules and
regulations of any governmental agency or self-regulatory organization
governing his or her activities.
Each employee will be given a copy of the Code of Ethics at the time of his
or her employment and each Access Person is required to submit a statement
at least annually that he or she has reviewed the Codeof Ethics.
Each employee shall comply with all laws and regulations relating to the
use of material non-public information. Trading on "inside information" of
any sort, whether obtained in the course of research activities, through a
client relationship or otherwise, is strictly prohibited. All employees
shall comply strictly with procedures established by the Funds to ensure
compliance with applicable Federal and State laws and regulations of
governmental agencies and self-regulatory organizations. The employees
shall not knowingly participate in, assist, or condone any acts in
violation of any statute or regulation governing securities matters, nor
any act which would violate any provision of this Code of Ethics, or any
rules adopted thereunder.
Each employee having supervisory responsibility shall exercise reasonable
supervision over employeessubject to his or her control with a view to
preventing any violation by such of the provisions of the Code of Ethics.
Any employee encountering evidence that acts in violation of applicable
statutes or regulations or provisions of the Code of Ethics have occurred
shall report such evidence to the Designated Officer or the Board of
Directors/Trustees of each fund.
IV. CONFIDENTIALITY OF TRANSACTIONS
Information relating to each Fund's portfolio and research and studies
activity is confidential untilpublicly available. Whenever statistical
information or research is supplied to or requested by the Fund, such
information must not be disclosed to any persons other than persons
designated by the Designated Officer or the Board of Directors/Trustees of
the Fund. If the Fund is considering a particular purchase or sale of a
security, this must not be disclosed except to such duly authorized
persons.
Any employee authorized to place orders for the purchase or sale of
Securities on behalf of a Fund shall take all steps reasonably necessary to
provide that all brokerage orders for the purchase and sale of Securities
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for the account of the Fund will be so executed as to ensure that the
nature of the transactions shall be kept confidential until the information
is reported to the Securities and Exchange Commission or each Fund's
shareholders in the normal course of business.
If any employee of the Fund or Access Person should obtain information
concerning the Fund's portfolio (including, the consideration by the Fund
of acquiring, or recommending any security for the Fund's portfolio),
whether in the course of such person's duties or otherwise, such person
shall respect the confidential nature of this information and shall not
divulge it to anyone unless it is properly part of such person's services
to the Fund to do so or such person is specifically authorized to do so by
the Designated Officier of the Fund.
V. ETHICAL STANDARDS
A. INVESTMENT ACTIVITIES RELATED TO THE FUNDS. All Access Persons, in
making any investment recommendations or in taking any investment
action, shall exercise diligence and thoroughness, and shall have a
reasonable and adequate basis for any such recommendations or actions.
B. CONFLICTS. All Access Persons shall conduct themselves in a manner
consistent with the highest ethical standards. They shall avoid any
action, whether for personal profit or otherwise, that results in an
actual or potential conflict of interest, with a Fund or which may
otherwise be detrimental to the interest of a Fund. Therefore, no
Access Person shall undertake independent practice for compensation in
competition with the Fund.
Every employee or Access Person of the Funds who owns beneficially,
directly or indirectly, 1/2% or more of the stock of any corporation
is required to report such holdings to the President of the Funds.
C. OBLIGATION TO COMPLY WITH LAWS AND REGULATIONS. Every Access Person
shall acquire and maintain knowledge of, and shall comply strictly
with, all applicable federal and state laws and all rules and
regulations of any governmental agency or self-regulatory organization
governing such Access Person's activities. In addition, every Access
Person shall comply strictly with all procedures established by the
Funds, or by PII or PSI, to ensure compliance with such laws and
regulations. Access Persons shall not knowingly participate in, assist
or condone any acts in violation of any law or regulation governing
Securities transactions, nor any act which would violate any provision
of this Code.
D. SELECTION OF BROKER-DEALERS. Any employee having discretion as to the
election of broker- dealers to execute transactions in Securities for
the Funds shall select broker-dealers solely on the basis of the
services provided directly or indirectly by such broker-dealers as
provided in the registration statements for the Funds. An employee
shall not directly or indirectly, receive a fee or commission from any
source in connection with the sale or purchase of any security for a
Fund.
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In addition, the Funds shall take all actions reasonably calculated to
ensure that they engage broker-dealers to transact business with each
Fund whose partners, officers and employees, and their respective
affiliates, will conduct themselves in a manner consistent with the
provisions of this Section V.
E. SUPERVISORY RESPONSIBILITY. Every Access Person having supervisory
responsibility shall exercise reasonable supervision over employees
subject to his or her control in order to prevent any violation by
such persons of applicable laws and regulations, procedures
established by the Funds, or PII or PSI, as the case may be, or the
provisions of this Code.
ETHICAL STANDARDS CONTINUED
F. ACCOUNTABILITY. Any Access Person encountering evidence of any action
in violation of applicable laws or regulations, or of Fund procedures
or the provisions of this Code shall report such evidence to the
appropriate Designated Officer or the Board of Directors of each Fund.
G. INABILITY TO COMPLY WITH CODE. If, as a result of fiduciary
obligations to other persons or entities, an Access Person believes
that he or she, is unable to comply with certain provisions of this
Code, such Access Person shall so advise the Designated Officer of any
Fund for which such person is an Access Person in writing and shall
set forth with reasonably specificity the nature of his or her
fiduciary obligations and the reasons why such Access Person believes
that he or she cannot comply with the provisions of the Code.
VI. EXEMPTED TRANSACTIONS
The provisions of Article VII of this Code shall not apply to:
A. Purchases or sales effected in any account over which such Access
Person has no direct or indirect influence or control;
B. Purchases or sales of Securities which are not eligible for purchase
or sale by any Fund e.g. municipal securities.
C. Purchases or sales which are non-volitional on the part of either the
Access Person or a Fund; Purchases which are part of an automatic
dividend reinvestment plan or employee stock purchase plan;
D. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired; and
E. Purchases or sales of Securities which receive the prior approval of
the appropriate Designated Officer because they (i) are only remotely
potentially harmful to each Fund, (ii) would be very unlikely to
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affect a highly institutional market, or (iii) clearly are not related
economically to the Securities to be purchased, sold or held by each
Fund.
F. Future elections into an employer sponsored 401(k) plan, in an amount
not exceeding $1,000 in any calendar month and any other transfers to
an open end fund. However, an exchange of a current account balance
into or from one of the closed end funds in an amount greater than
$1,000 would still need pre-clearance and be reportable at the end of
the quarter on the quarterly transaction reports.
G. The provisions of Article VII A, B and D of this Code shall not apply
to any Segregated Person EXCEPT with respect to transactions in
Securities where such Segregated Person knew, or in the ordinary
course of fulfilling his or her duties, should have known that such
Security was being purchased or sold by the Funds or that a purchase
or sale of such Security was being considered by or with respect to
the Funds. Pre-clearance approval WILL be required for purchases of
Securities in private transactions conducted pursuant to Section 4(2)
of the Securities Act of 1933 and Securities (debt or equity) acquired
in an initial public offering.
H. The provisions of this Code shall not apply to any Exempt Person
EXCEPT with respect to transactions in Securities where such Exempt
Person knew, or in the ordinary course of fulfilling his or her
duties, should have known that such Security was being purchased or
sold by the Funds or that a purchase or sale of such Security was
being considered by or with respect to the Funds.
VII. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
A. GENERAL. No Access Person shall purchase or sell, directly or
indirectly or for any account over which an Access Person has
discretion, any Security (including both publicly traded and private
placement Securities), in which he or she has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership and
which he or she knows or should have known at the time of such
purchase or sale
1. is being considered for purchase or sale by a Fund; or
2. is being purchased or sold by a Fund.
B. PRE-CLEARANCE.
1. Every Access Person must pre-clear all Personal Securities
Transactions with the compliance department. In order to receive
pre-clearance for Personal Securities Transactions, an Access Person
must call the Compliance Officer or complete a Personal Trading
Approval form. A member of the compliance department is available each
business day to respond to pre-clearance requests. Access Persons are
directed to identify (i) the subject of the transaction and the number
of shares and principal amount of each security involved, (ii) the
date on which the Access Person desires to engage in the subject
transaction; (iii) the nature of the transaction (i.e., purchase,
sale, private placement, or any other type of acquisition or
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disposition); (iv) the approximate price at which the transaction will
be effected; and (v) the name of the broker, dealer, or bank with or
through whom the transaction will be effected. When granted, clearance
authorizations will be identified by authorization number and will be
effective for Day Orders for 24-hours from the time of authorization
(or in the case of a private placementpurchase, the closing of the
private placement transaction). In cases of Good Till cancelled Orders
(GTC) or Open Orders, authorizations will be effective until theend of
that calendar day, except for transactions in Pilgrim Capital
Corporation (PACC), formerly Express Holdings Corporation (EXAM),
stock for which authorizations will be effective for 30 days. If on
any particular day the Compliance Officer is not present in the
office, pre-clearance may be obtained by providing a completed
Personal Trading Approval form to a Senior Vice President or Vice
President of PII for authorization. The current list of designated
officers of PII authorized to provide pre-clearance trade approval is
attached as Exhibit B. Questions regarding pre-clearance procedures
should be directed to the compliance department.
2. In determining whether to grant approval of Personal Securities
Transactions of Investment Personnel who desire to purchase or
otherwise acquire Securities in private placement transactions
conducted pursuant to Section 4(2) of the Securities Act of 1933, the
appropriate Designated Officer will consider, among other factors,
whether the investment opportunity presented by such private placement
offering should be reserved for investment company and its
shareholders, and whether the opportunity is being offered to an
individual by virtue of his position with the Fund. In the event that
Investment Personnel who have been authorized to acquire Securities in
a private placement transaction later have any role in a Fund's
subsequent consideration of an investment in the issuer of the
Securities acquired in such prior private placement transaction, such
Investment Personnel must provide written notification of such prior
authorization and investment to the compliance department, immediately
upon learning of such Fund's subsequent consideration. In such
circumstances, the Fund's decision to purchase Securities of such
issuer will be subject to an independent review by Investment
Personnel with no personal interest in the issuer.
3. A disinterested Director of a Fund need only pre-clear a
transaction in a security if at the time such director/trustee
proposes to engage in such transaction, he or she knows , in the
ordinary course of fulfilling his or her official duties as a
director/trustee of such Fund, should know that, during the fifteen
(15) day period immediately preceding the date such director/trustee
proposed to engage in the transaction, such security was purchased or
sold by such Fund or was being considered by the Fund or its
investment adviser for purchase by the Fund.
COMPLIANCE OF TRANSACTIONS WITH THIS CODE BY ACCESS PERSONS MAY DEPEND ON THE
SUBSEQUENT INVESTMENT ACTIVITIES OF THE FUNDS, THEREFORE, PRE-CLEARANCE APPROVAL
OF A TRANSACTION BY THE DESIGNATED OFFICER DOES NOT NECESSARILY MEAN THE
TRANSACTION COMPLIES WITH THE CODE.
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C. INITIAL PUBLIC OFFERINGS. INITIAL PUBLIC OFFERINGS (IPOS AND HOT
IPOS). No Access Person (or account over which they have beneficial
ownership) may purchase any securities in an IPO or Hot IPO; provided,
however, an Access Person (or their beneficially owned accounts) may,
upon the prior written approval of a Designated Officer, participate
in the following IPOs:
(i) an IPO in connection with the de-mutualization of a savings
bank or the de mutualization of a mutual insurance company in
which the holder of the account owns a life insurance policy;
(ii) an IPO of a spin-off company where the Access Person
beneficially owns stock in the company that spins off the
issuer;
(iii) an IPO of a company in which the Acess Person beneficially
owns stock in the company and the stock was acquired through
participation in a private placement previously approved by
thier Designated Officer; and
(iv) an IPO of the employer of the holder of the Access Persons
account.
An IPO generally means an offering of securities registered with the
Securities and Exchange Commission (SEC), the issuer of which,
immediately before the registration, was not required to file reports
with the SEC. See, rule 17j-1(a)(6). Hot IPOs are securities of a
public offering that trade at a premium in the secondary market
whenever such secondary market begins.
D. BLACKOUT PERIODS.
1. No Access Person may execute any Personal Securities Transaction on
a day during which any Fund has a pending "buy" or "sell" order in
that same security until such order is executed or withdrawn.
2. Any purchase or sale of any Security by a Portfolio Manager which
occurs within seven (7) calendar days (exclusive of the day of the
relevant trade) from the day a Fund he or she manages trades in such
security will be subject to Automatic Disgorgement. This seven day
blackout period also applies to any portfolio support staff member who
recommends the purchase or sale of the particular security to a Fund's
Portfolio Manager.
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RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES (CONTINUED)
BAN ON SHORT-TERM TRADING PROFITS. Investment Personnel may not profit from
the purchase and sale, or sale and purchase, of the same (or equivalent)
Securities within sixty (60) calendar days, unless (i) such Securities were
not eligible to be purchased by any of the Funds under their respective
investment policies, or (ii) such Investment Personnel have requested and
obtained an exemption from this provision from the compliance department
with respect to a particular transaction. Violations of this policy will be
subject to Automatic Disgorgement.
GIFTS. Investment Personnel may not receive any fee, commission, gift or
other thing, or services, having a value of more than $100.00 each year
from any person or entity that does business with or on behalf of the
Funds.
SERVICES AS A DIRECTOR. Investment Personnel may not serve on the boards of
directors of publicly traded companies, unless (i) the individual serving
as a director has received prior authorization from the appropriate
Designated Officer based upon a determination that the board service would
be consistent with the interests of the Funds and their shareholders and
(ii) policies and procedures have been developed and maintained by the
board of directors/trustees of the Funds that are designed to isolate the
individual from those making investment decisions (a "Chinese Wall").
NAKED OPTIONS. Investment Personnel are prohibited from engaging in naked
options transactions. Transactions under any incentive plan sponsored by
PII or PSI are exempt from this restriction.
SHORT SALES. Short sales of Securities by Investment Personnel are
prohibited.
VIII. COMPLIANCE PROCEDURES
DISCLOSURE OF PERSONAL HOLDINGS. All Investment Personnel must disclose all
Personal Securities Holdings upon commencement of employment and thereafter
on an annual basis. Such annual disclosure shall be made by January 31st of
each year. Any person filing such report may state the report shall not be
deemed an admission that such person is the beneficial owner of any
Securities covered by the report.
DUPLICATE TRADE CONFIRMATION STATEMENTS AND ACCOUNT STATEMENTS. Every
Access Person must cause duplicate trading confirmations for all Personal
Securities Transactions and copies of periodic statements for all
Securities accounts to be sent to the compliance department, except that a
Segregated Person may satisfy this requirement by providing a statement to
the compliance department of an affiliate of the Adviser
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QUARTERLY TRANSACTIONS REPORTS.
1. PII Investment Adviser Representatives.
Quarterly reporting of transactions in Securities is required of all PII
Investment Adviser Representatives pursuant to the requirements of Rules
204-2(a)(12) or 204-2(a)(13) under the Investment Advisers Act of 1940. PII
must have a record of every Personal Securities Transaction including every
transaction in Securities in which PII or any of its "advisory
representatives" (as such term is defined in the rule) has (or by reason of
such transaction acquires) any direct or indirect beneficial interest and
any account over which an Access Person has discretion, except (i) any
Personal Securities Transaction effected in any account over which neither
PII, nor such advisory representative, has any direct or indirect influence
or control, (ii) any Personal Securities Transaction which is a direct
obligation of the United States and (iii) any Personal Securities
Transactions in shares of unaffiliated open-end funds Such record must
state (i) the title and amount of the Securities involved in the
transaction, (ii) the trade date and nature of the transaction (i.e.,
purchase, sale, private placement, or other acquisition or disposition),
(iii) the price at which the transaction was effected, and (iv) the name of
the broker, dealer or bank with or through whom the transaction was
effected, This report must be made no later than ten days following the end
of the calendar quarter in which such Personal Securities Transaction was
effected. A Segregated Person may satisfy this reporting requirement by
providing a statement to the compliance department of an affiliate of the
Adviser.
2. All Other Access Persons
All other Access Persons must prepare a quarterly report of all
transactions in Securities within 10 days following the end of each quarter
in which such Personal Securities Transaction was effected. The
transactional and reporting rules under the Code for these individuals do
not include shares of registered open-end investment companies, securities
issued by the government of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper, and such other money market
instruments as designated by the board of directors/trustees of such Fund.
Such record must state (i) the title and amount of the Securities involved
in the transaction, (ii) the trade date and nature of the transaction
(i.e., purchase, sale, private placement, or other acquisition or
disposition, (iii) the price at which the transaction was effected, and
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected. This report must be made no later than ten days
following the end of the calendar quarter. A Segregated Person may satisfy
this reporting requirement by providing a statement to the compliance
department of an affiliate of the Adviser.
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COMPLIANCE PROCEDURES CONTINUED
D. CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS. All Access Persons will
be provided with a copy of this Code upon beginning his or her employment
with a Fund, or with PII or PSI, as the case may be, and must certify
annually that they have read and understand this Code, and that they
recognize that they are subject to the terms and provisions hereof.
Further, all Access Persons must certify by January 31st of each year that
they have complied with the requirements of this Code and that they have
disclosed all personal brokerage accounts and disclosed or reported all
Personal Securities Transactions required to be disclosed or reported
pursuant to the requirements herein.
IX. SANCTIONS
A.GENERALLY. The Designated Officer shall investigate all apparent
violations of this Code. If a Designated Officer for any Fund, or for PII
or PSI, discovers that an Access Person has violated any provision of this
Code, he or she may impose such sanctions as he or she deems appropriate,
including, without limitation, one or more of the following: warnings,
periods of "probation" during which all personal investment activities
(except for specifically approved liquidations of current positions), a
letter of censure, suspension with or without pay, termination of
employment, or Automatic Disgorgement of any profits realized on
transactions in violation of this Code. Any profits realized on
transactions in violation of Sections D and E of Article VII of this Code
shall be subject to Automatic Disgorgement.
B.PROCEDURES. Upon discovering that an Access Person of a Fund, or of PII
or PSI, has violated any provision of this Code, the appropriate Designated
Officer shall report the violation, the corrective action taken, and any
sanctions imposed to the relevant entity's board of irectors/trustees,
which may, at the request of the individual involved, review the matter. If
a transaction in Securities of a Designated Officer is under consideration,
another senior officer of the relevant Fund, or of PII or PSI, as the case
may be, shall act in all respects in the manner prescribed herein for a
Designated Officer.
X. MISCELLANEOUS PROVISIONS
A. RECORDS. The Funds shall maintain records in the manner and to the
extent set forth below, which records may be maintained on microfilm under
the conditions described in Rule 31a-2(f)(1) under the 1940 Act and shall
be available for examination by representatives of the Commission:
a copy of this Code and any other code of ethics which is, or at any
time within the past five (5) years has been, in effect shall be
preserved in an easily accessible place;
a record of any violation of this Code and of any action taken as a
result of such violation shall be preserved in an easily-accessible
place for a period of not less than five (5) years following the end
of the fiscal year in which the violation occurs;
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a copy of each duplicate confirmation statement concerning Personal
Securities Transactions of Access Persons, made pursuant to this Code,
shall be preserved for a period of not less than five (5) years from
the end of the fiscal year in which the statement is provided, the
first two (2) years in an easily-accessible place; and
a copy of each report disclosing Personal Securities Holdings of
Investment Personnel, made pursuant to this Code, shall be preserved
for a period of not less than five (5) years from the end of the
fiscal year in which the report is made, the first two (2) years in an
easily-accessible place; and
a list of all persons who are, or within the past five (5) years have
been, required to pre-clear Personal Securities Transactions or make
reports disclosing Personal Securities Holdings pursuant to this Code
shall be maintained in an easily-accessible place.
CONFIDENTIALITY.
All pre-clearance requests pertaining to Personal Securities
Transactions, reports disclosing Personal Securities Holdings, and any
other information filed pursuant to this Code shall be treated as
confidential, but are subject to review as provided herein and by
representatives of the Commission.
All information relating to any Fund portfolio or pertaining to any
research activities is confidential until publicly available. Whenever
statistical information or research is supplied to or requested by a
Fund, such information must not be disclosed to any persons other than
persons designated by the appropriate Designated Officer or the board
of directors/trustees of such Fund. If the Fund is considering a
particular purchase or sale of a security, this fact must not be
disclosed except to such duly authorized persons.
Any employee authorized to place orders for the purchase or sale of
Securities on behalf of a Fund shall take all steps reasonably
necessary to provide that all brokerage orders for the purchase and
sale of Securities for the account of the Fund will be so executed as
to ensure that the nature of the transactions shall be kept
confidential until the information is reported to the Commission or
each Fund's shareholders in the normal course of business.
4. If any employee of a Fund or Access Person should obtain information
concerning such Fund's portfolio (including, the consideration by the
Fund of acquiring, or recommending any security for the Fund's
portfolio), whether in the course of such person's duties or
otherwise, such person shall respect the confidential nature of this
information and shall not divulge it to anyone unless it is properly
part of such person's services to such Fund to do so or such person is
specifically authorized to do so by the Designated Officer of the
Fund.5.No officer, director or employee shall disclose any non-public
information relating to a client's portfolio or transactions or to the
investment recommendations of PII, nor shall any officer,
director/trustee or employee disclose any non-public information
relating to the business or operations of PII, PSI or the Funds unless
properly authorized to do so.
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C. INTERPRETATION OF PROVISIONS. Each Fund's board of directors/trustees
may from time to time adopt such interpretation of this Code as such
board deems appropriate.
D. EFFECT OF VIOLATION OF THIS CODE. In adopting Rule 17j-1, the
Commission specifically noted, in Investment Company Act Release No.
IC-11421, that a violation of any provision of a particular code of
ethics, such as this Code, would not be considered a per se unlawful
act prohibited by the general anti-fraud provisions of this Rule. In
adopting this Code, it is not intended that a violation of this Code
necessarily is or should be considered to be a violation of Rule
17j-1.
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<PAGE>
INITIAL CERTIFICATION OF CODE OF ETHICS
PILGRIM GROUP MUTUAL FUNDS
I AM FULLY FAMILIAR WITH THE EFFECTIVE CODE OF ETHICS
AS ADOPTED BY EACH OF THE PILGRIM GROUP MUTUAL FUNDS,
PILGRIM INVESTMENTS, INC. AND PILGRIM SECURITIES, INC.,
AND WILL COMPLY WITH SUCH CODE AT ALL TIMES DURING
THE FORTHCOMING CALENDAR YEAR.
Name (print):
Signature:
Date:
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EXHIBIT A
TO CODE OF ETHICS
Pilgrim Bank and Thrift Fund, Inc.
Pilgrim Advisory Funds, Inc.
Pilgrim LargeCap Leaders Fund
Pilgrim MidCap Value Fund
Pilgrim Asia-Pacific Equity Fund
Pilgrim Investment Funds, Inc.
Pilgrim MagnaCap Fund
Pilgrim High Yield Fund
Pilgrim Mutual Funds
Pilgrim Internationl Core Growth Fund
Pilgrim Worldwide Growth Fund
Pilgrim International SmallCap Growth Fund
Pilgrim Emerging Countries Fund
Pilgrim LargeCap Growth Fund
Pilgrim MidCap Growth Fund
Pilgrim SmallCap Growth Fund
Pilgrim Convertible Fund
Pilgrim Balanced Fund
Pilgrim High Yield Fund II
Pilgrim Strategic Income Fund
Pilgrim Money Market Fund
Pilgrim Government Securities Income Fund, Inc.
Pilgrim Prime Rate Trust
Pilgrim Equity Trust
Pilgrim MidCap Opportunities Fund
Northstar Galaxy Trust
Northstar Galaxy Emerging Growth Portfolio
Northstar Galaxy Growth + Value Portfolio
Northstar Galaxy High Yield Bond Portfolio
Northstar Galaxy International Value Portfolio
Northstar Galaxy Research Enhanced Index Portfolio
Pilgrim SmallCap Opportunities Funds
Pilgrim Growth Opportunities Fund
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Pilgrim Mayflower Trust
Pilgrim Emerging Markets Value Fund
Pilgrim High Growth + Value Fund
Pilgrim High Total Return Fund
Pilgrim High Total Return Fund II
Pilgrim International Value Fund
Pilgrim Research Enhanced Index Fund
USLICO Series Fund
The Stock Portfolio
The Money Market Portfolio
The Bond Portfolio
The Asset Allocation Portfolio
Pilgrim Corporate Leaders Trust
Pilgrim Global Corporate Leaders Fund, Inc.
Pilgrim Global Income Fund
Pilgrim Growth and Income Fund, Inc.
Pilgrim GNMA Income Fund, Inc.
Pilgrim Gold Fund, Inc.
Pilgrim International Fund, Inc.
Pilgrim Silver Fund, Inc.
Pilgrim SmallCap Asia Growth Fund, Inc.
Pilgrim Troika Dialog Russia Fund, Inc.
Pilgrim Worldwide Emerging Markets Fund, Inc.
Lexington Money Market Trust
Lexington Emerging Markets Fund, Inc.
Lexington Natural Resources Trust
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EXHIBIT B
TO CODE OF ETHICS
Designated Officer of PII able to provide pre-clearance:
Lauren Bensinger
Senior Vice Presidents of PII able to provide pre-clearance:
James M. Hennessy
Rob Naka
Michael Roland
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POLICIES AND PROCEDURES TO CONTROL THE FLOW AND USE OF MATERIAL NON-PUBLIC
INFORMATION IN CONNECTION WITH SECURITIES ACTIVITIES
The reputation for integrity and high ethical standards in the conduct of its
affairs of the Pilgrim Group, Inc., Pilgrim Investments, Inc. and Pilgrim
Securities, Inc. (Pilgrim) is of paramount importance to all of us. To preserve
this reputation, it is essential that all transactions in securities be effected
in conformity with securities laws and in a manner which avoids the appearance
of impropriety. In particular, it has been Pilgrim 's long-standing policy that
there be no trading in securities of public companies on the basis of material
non-public or "inside" information or disclosure of such information to persons
who are in the position to trade on the basis of the information or transmit it
to others.
Material non-public information is information not known to the public that: (1)
might reasonably be expected to affect the market value of securities and (2)
influence investor decisions to buy, sell or hold securities. It is not possible
to define with precision what constitutes "material" information. However,
advance information about the following:
* a merger, acquisition or joint venture;
* a stock split or stock dividend;
* earnings or dividends of an unusual nature;
* the acquisition or loss of a significant contract;
* a significant new product or discovery;
* a change in control or a significant change in management;
* a call of securities for redemption;
* the public or private sale of a significant amount of additional
securities;
* the purchase or sale of a significant asset;
* a significant labor dispute;
* establishment of a program to make purchases of the issuer's own
shares;
* a tender offer for another issuer's securities; and
* an event requiring the filing of a current report under the Act.
Pilgrim Prime Rate Trust, an affiliated regulated investment company
("PPR"), and Pilgrim Investments, Inc as part of its structured finance
activities are both frequently in possession of material non-public
information about public companies as a result of its investments in
participation interests in senior collateralized corporate loans.
The following policies and procedures are designed to help insure that Pilgrim
abides by the prohibition on trading on the basis of material non-public
information by limiting the use and restricting the disclosure of material
non-public information to persons within or outside the Pilgrim organization who
are in the position to trade on the basis of such information or transmit it to
others.
All employees must familiarize themselves with these policies and procedures and
abide by them. Compliance with the law and with the policies and procedures
described in this memorandum is the individual responsibility of each director,
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officer and employee of Pilgrim. It is each person's duty to see that the
policies and procedures set forth herein are followed in both spirit and letter.
In addition, all employees of Pilgrim should understand that supervisory
personnel have special responsibilities for taking appropriate action to prevent
insider trading violations. FAILURE TO COMPLY WITH THESE POLICIES WILL BE DEALT
WITH HARSHLY AND COULD LEAD TO TERMINATION OF EMPLOYMENT, PERSONAL LIABILITY OR
CRIMINAL PROSECUTION.
PERSONAL SECURITIES TRADING
It is a long-standing policy of Pilgrim that if an employee of Pilgrim or any of
its subsidiaries or affiliated investment companies possesses material
non-public information about a public company, the employee may not trade in or
recommend trading in the securities of that company nor disclose such
information to another person, whether within or outside the Pilgrim
organization, except in fulfillment of a legitimate business objective of
Pilgrim. Violations of this policy may result in severe civil and criminal
penalties under the Federal securities laws, as well as disciplinary action by
Pilgrim. Employees should refer to Pilgrim 's Policies and Procedures Governing
Securities Transactions for a complete statement of these policies.
"CHINESE WALL" POLICIES AND PROCEDURES APPLICABLE TO SECURITIES TRADING BY
PILGRIM
Employees of Pilgrim performing investment management related activities for
PPR/Structured Finance Vehicles ("PPR/Structured Finance Investment Activities
(and persons with supervisory or higher management responsibilities for such
employees) are likely to receive in the normal course of their activities
material non-public information about issuers of publicly-traded securities. The
following policies and procedures are designed to prevent the flow of material
non-public information about a public company or its securities from employees
engaged in PPR/Structured Finance Investment Activities to those performing
other "investment management activities." By following these policies and
procedures, Pilgrim can continue, in most instances, to engage in "investment
management activities," even though material non-public information about public
companies may be known to others within the Pilgrim organization who are
involved in performing PPR/Structured Finance Investment Activities.
"INVESTMENT MANAGEMENT ACTIVITIES," FOR PURPOSES OF THESE POLICIES AND
PROCEDURES, ARE ACTIVITIES OF EMPLOYEES OF PILGRIM WHOSE REGULAR FUNCTIONS OR
DUTIES PRINCIPALLY CONSIST OF MAKING, PARTICIPATION IN, OR OBTAINING INFORMATION
REGARDING, THE PURCHASE OR SALE OF PUBLICLY-TRADED SECURITIES OR MAKING, OR
OBTAINING INFORMATION ABOUT, RESEARCH AND RECOMMENDATIONS WITH RESPECT TO
PURCHASES OR SALES OF SUCH SECURITIES.
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<PAGE>
GENERAL "CHINESE WALL" POLICY
IN ADDITION TO PILGRIM 'S GENERAL POLICY PROHIBITING TRADING ON THE BASIS OF
MATERIAL NON-PUBLIC INFORMATION OR DISCLOSURE OF SUCH INFORMATION TO OTHERS, IT
IS PILGRIM'S POLICY THAT ANY MATERIAL NON-PUBLIC INFORMATION ABOUT A PUBLIC
COMPANY OR ITS SECURITIES OBTAINED BY A DIRECTOR, OFFICER OR EMPLOYEE OF PILGRIM
OR ANY OF ITS AFFILIATED INVESTMENT COMPANIES, EITHER IN CONNECTION WITH HIS OR
HER PPR/STRUCTURED FINANCE INVESTMENT ACTIVITIES OR OTHERWISE, SHALL NOT BE
DISCLOSED TO ANY DIRECTOR, OFFICER OR EMPLOYEE OF PILGRIM OR ANY OF ITS
AFFILIATED INVESTMENT COMPANIES PERFORMING INVESTMENT MANAGEMENT ACTIVITIES, OR
ANY OTHER PERSON, EXCEPT AS SPECIFICALLY PERMITTED BY THESE POLICIES AND
PROCEDURES. THIS PROHIBITION APPLIES TO ORAL AS WELL AS WRITTEN DISCLOSURE AND
TO INFORMAL AS WELL AS FORMAL DISCLOSURE.
REPORTING MATERIAL NON-PUBLIC INFORMATION TO CHIEF COMPLIANCE OFFICER.
From time to time, a director, officer or employee of Pilgrim may come into
possession of material non-public information (of the type described on page 18
of these policies and procedures) about a company. If such information is
obtained in connection with the performance of such person's responsibilities as
a director, officer or employee of Pilgrim, then he or she shall immediately
report the information as follows:
a. A director, officer or employee of Pilgrim, other than a PPR/Structured
Finance staff member, shall report such information immediately to the
Compliance Department, which is responsible for taking appropriate action,
which may include restricting trading in the affected securities. Depending
on the nature of such information, such director, officer or employee may
have an ongoing duty to inform the Compliance Department of material
changes in the information or the status of the transaction which it
relates in order to permit the Compliance Department to take appropriate
action, including restricting or terminating restrictions on trading in the
affected securities.
b. PPR/Structured Finance staff members who in their normal course of
business deal with material non-public information are to follow the
SPECIFIC "CHINESE WALL" PROCEDURES as set forth below.
c. Such information need not be reported if, after reasonable inquiry, the
director, officer or employee is satisfied that the Compliance Department
has already received such information.
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<PAGE>
SPECIFIC "CHINESE WALL" PROCEDURES
COMPLIANCE WITH SECTIONS 13(F) AND 13(G) OF THE SECURITIES EXCHANGE ACT OF 1934
("EXCHANGE ACT")
All directors, executive officers (or persons performing similar functions)
or Investment Personnel of ReliaStar Financial Corp. ("ReliaStar") shall not
have access to current information (less than 7 days old) that relates to the
voting and investment power of the securities held by the Pilgrim Funds'
portfolios. Such persons shall not have access to investment reports, Investment
Personnel, the premises of Investment Personnel or attend meetings of Investment
Personnel of PII, wherever located, except that such persons may attend meetings
of the Board of Directors/Trustees of the Pilgrim Funds based on the premise
that information concerning portfolio holdings is more than 7 days old.
Communications concerning the holdings, voting or investment power of the
Pilgrim Funds' portfolios between Investment Personnel of PII and directors,
executive officers (or persons performing similar functions) or Investment
Personnel of ReliaStar are prohibited. Exceptions may be permitted by the Chief
Compliance Officer where the Chief Compliance Officer believes such persons will
not act in concert with Investment Personnel of PII for purposes of transactions
in securities that would require reporting under Sections 13(f) and 13(g) of the
Exchange Act.
PILGRIM PRIME RATE TRUST
In order to contain material non-public information concerning a public
company or its securities within the immediate group of persons engaged in
performing PPR/Structured Finance Investment Activities who have a need to know
such information, and in order to ensure that such information does not flow to
those engaged in other investment management activities, the following policies
and procedures should be followed:
1. ORAL AND WRITTEN COMMUNICATIONS. Except as specifically permitted by these
policies and procedures, employees engaged in performing PPR/Structured Finance
Investment Activities should not discuss or exchange any written or oral
non-public information, whether or not material, about a company or its
securities with employees performing other investment management activities.
Any communication, whether written or oral, containing material non-public
information (of the type described on the attached copy of Pilgrim 's Policies
and Procedures to Control the Flow and Use of Material Non-Public Information in
Connection with Securities Activities) about an issuer or its securities shall
be restricted, on a need-to-know basis, to employees engaged in performing
PPR/Structured Finance Investment Activities and to the following persons:
a. directors and senior executives of Pilgrim who are not actually involved
in investment management decisions;
b. Compliance personnel; and
c. certain identified accountants, attorneys or other outside professional
advisers.
In addition, the Company involved shall be placed on PPR/Structured Finance's
Watch List/Inside Information List. Written communications containing material
non-public information shall be marked "confidential." Documents prepared for
presentation to PPR's Board of Directors shall be presumed to contain material
non-public information and shall be handled accordingly.
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2. ATTENDANCE AT MEETINGS. Attendance at meetings, whether held inside or
outside the Pilgrim organization, at which personnel performing PPR/Structured
Finance Investment Activities may be present, is limited as follows:
a. Attendance at meetings at which material non-public information
regarding a company or its securities are to be, or are likely to be,
discussed is restricted to employees, on a need-to-know basis, performing
PPR/Structured Finance Investment Activities and to the following persons:
i) directors and senior executives of Pilgrim who are not actually involved
in investment management decisions
ii) compliance personnel; and
iii) certain identified accountants, attorneys, or other outside
professional advisers.
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SPECIFIC "CHINESE WALL" PROCEDURES CONTINUED
Persons engaged in other investment management activities ARE PROHIBITED
from attending meetings at which material non-public information about a
public company or its securities is to be, or is likely to be, discussed,
without the specific authorization of the Compliance Department, after
appropriate legal consultation.
b. The preceding paragraph shall not prohibit investment management
personnel from preparing and participating in written or oral presentations
and attending meetings with persons performing PPR/Structured Finance
Investment Activities in order to develop products or marketing plans, to
report on the financial services of Pilgrim to existing or prospective
clients or to discuss matters not related to PPR/Structured Finance
Investment Activities, provi ded, that such persons shall leave such
meetings if non-public matters are raised.
3. LIBRARY AND FILES. A separate credit file room has been established. The door
is closed and locked at all times except when an Authorized Person is working in
the room. NO OTHER PERSONS ARE ALLOWED IN THE PPR/STRUCTURED FINANCE FILE ROOM
EVEN IN THE COMPANY OF AN AUTHORIZED PERSON (AS DEFINED ABOVE) OTHER THAN REPAIR
OR MAINTENANCE PERSONNEL AND THEN ONLY IN THE PRESENCE OF AN AUTHORIZED PERSON.
The Library's access is to be monitored by an Authorized Person.
All information awaiting filing in the Library is to be under the supervision of
an Authorized Person at all times or locked in a PPR/Structured Finance staff
member's office or other lockable file cabinet.
Materials, which have been archived, are stored with a storage company whose
procedures restrict access to archived materials and where only a Pilgrim
Authorized Person may request retrieval of files from the archives.
4. PPR/STRUCTURED FINANCE OFFICES ARE TO BE LOCKED when not occupied or
supervised. Authorized Persons requiring keys must sign in/out for keys on a log
maintained by the Administrative Assistant.
5. COMPUTERS WITH ACCESS TO PPR/STRUCTURED FINANCE FILES ARE TO HAVE SEPARATE
ACCESS PASSWORDS. Pilgrim 's company-wide computer security has also been
reviewed to insure that all reasonable and practical measures have been taken to
limit the possibility that unauthorized access could be made to PPR/Structured
Finance (and all Pilgrim) computer files. Pilgrim 's MIS personnel are required
to notify in writing a PPR Senior Vice President of any file/systems maintenance
work, in advance of beginning any such work.
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6. THE (602) 417-8327 FAX MACHINE IS FOR THE EXCLUSIVE USE OF THE PPR/STRUCTURED
FINANCE CREDIT DEPARTMENT. It is to remain situated in direct proximity to the
PPR/Structured Finance Department Administrative Assistant for monitoring of
incoming/outgoing information. Any Authorized Person noting any unattended
information on the machine is required to take possession of that information
until it can be properly delivered to the appropriate PPR/Structured Finance
staff member.
If any Pilgrim employee should inadvertently receive PPR/Structured Finance
faxes, he/she is to immediately deliver it to a PPR/Structured Finance staff
member and should immediately report the occurrence to a Senior Vice President
of PPR. The Senior Vice President will decide if there has been any exposure of
non-public information and, if so, will immediately inform the Chief Compliance
Officer and place the issuer on the Restricted List.
7. ALL PPR/STRUCTURED FINANCE NON-PUBLIC DUPLICATE MATERIALS OR OTHER SUCH
REFUSE OF A CONFIDENTIAL NATURE MUST BE DISPOSED OF PROPERLY. A document
shredder is available for the use of each Authorized Person.
8. ALL PPR/STRUCTURED FINANCE MAIL IS TO BE DELIVERED UNOPENED TO THE PPR
DEPARTMENT ADMINISTRATIVE ASSISTANT (OR NEAREST AVAILABLE PPR/STRUCTURED FINANCE
STAFF MEMBER). If any Pilgrim employee should inadvertently receive
PPR/Structured Finance mail, he/she is to immediately hand deliver it to a
PPR/Structured Finance staff member. If the mail was opened before receipt by a
PPR/Structured Finance staff member, the occurrence should be immediately
reported to a Senior Vice President of PPR. The Senior Vice President will
decide if there has been any exposure of non-public information and, if so, will
immediately inform the Chief Compliance Officer and place the issuer on the
Restricted List.
9. PPR/STRUCTURED FINANCE'S MAIL DISTRIBUTION IS TO BE HANDLED AS FOLLOWS: Mail
is received and opened. Each item is reviewed to determine content. If the item
is found to contain material, non-public information, the company will be placed
on the Watch List/Inside Information List provided it is not currently in the
portfolio and, therefore, already on the Watch List/Inside Information List. All
items are distributed to the appropriate recipient.
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RESTRICTIONS ON TRADING
From time to time it may be appropriate to restrict or halt trading in a
security if Pilgrim is in possession of material non-public information about
the issuer of such security, particularly if such information is derived from a
significant transaction or proposed transaction involving PPR/Structured Finance
and the issuer. Whenever a trading restriction is in effect, Pilgrim 's
Compliance Department shall implement appropriate procedures to halt trading in
that security for any account for which Pilgrim Investments, Inc. acts as
discretionary investment manager or adviser.
Where PPR/Structured Finance is involved in a transaction, or is otherwise in
possession of material non-public information, the securities of the affected
company shall be placed on the Watch List/Inside Information List and trading in
such securities shall be monitored. Depending on individual circumstance, such
securities may also be considered for placement on Pilgrim 's Restricted List.
HANDLING OF OTHER SENSITIVE INFORMATION
Although the preceding policies deal in particular with the subject of MATERIAL
non-public information, employees of Pilgrim have an obligation to treat ALL
sensitive non-public information in strictest confidence. To safeguard this
information, the following procedures should be followed:
1. Papers relating to non-public matters concerning issuers of securities should
not be left lying in conference rooms or offices and should be locked in file
cabinets or desks overnight or during absence from the office. In addition,
sensitive information stored in computer systems and other electronic files
should be kept secure.
2. Appropriate controls for the reception and oversight of visitors to sensitive
areas should be implemented and maintained. For example, guests should be
escorted around Pilgrim 's offices and should not be left unattended.
3 .Document control procedures, such as numbering counterparts and recording
their distribution, and shredding papers containing material non-public
information should be used where appropriate.
4. If an employee is out of the office on business, secretaries and
receptionists should use caution in disclosing the employee's location.
5 Business conversations should be avoided in public places, such as elevators,
hallways, restrooms and public transportation or in any other situation where
such conversations may be overheard.
QUESTIONS
Questions concerning the interpretation or application of these procedures
should be referred to the Compliance Department, who will consult with counsel
about matters requiring legal interpretations.
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POLICIES AND PROCEDURES GOVERNING SECURITIES TRANSACTIONS
RESTRICTIONS ON TRADING IN SECURITIES.
Pilgrim maintains a list of securities that are subject to trading restrictions
or monitoring in accordance with its Code of Ethics, Chinese Wall Procedures and
various provisions of the federal securities laws. These lists, referred to as
the Restricted List, the Watch List/Inside Information List and the Trading
Lists, are maintained and continuously updated under the supervision of the
Compliance Department. Securities included on the Restricted List may not be
purchased or sold in portfolio accounts, except for Pilgrim Prime Rate Trust
("PPR") and structured finance vehicles. Securities Watch List/Inside
Information List securities are securities of issuers with respect to which
there is a significant likelihood that PPR/Structured Finance is in possession
of material inside information. Trading List securities are those with respect
to which a portfolio manager has indicated an intent to trade or Structured
Finance/PPR public companies to which PPR/Structured Finance is a lender or
PPR/Structured Finance is, or within the preceding ninety (90) days has been, in
possession of material non-public information concerning such company. The
Restricted List, the Watch List/Inside Information List and the Trading Lists
will be prepared and maintained for all Pilgrim Funds; provided that exceptions
from the requirement for such lists may be granted on a case by case basis when
the Compliance Department determines that a portfolios manager's alternative
methodology is sufficient to achieve the purposes of such lists.
Each portfolio manager will maintain a separate Trading List, unless an
exception has been granted by the Compliance Department, as provided above. Each
portfolio manager will have access to his/her Trading List and the Restricted
List.
A. CHINESE WALL PROCEDURES.
Employees of Pilgrim performing investment management related activities for
PPR/Structured Finance ("PPR/Structured Finance Investment Activities") (and
persons with supervisory or management responsibilities for such employees) are
likely, in the normal course of their activities, to receive material non-public
information about issuers of publicly traded securities. If any employee of
Pilgrim possesses material non-public information about a public company,
regardless of its source, such employee may not trade in the securities of that
company or recommend trading in such securities to any person nor can they
disclose such information to another person, whether inside or outside the
Pilgrim organization, except in fulfillment of a legitimate business objective
of Pilgrim. Violations of this policy may result in severe civil or criminal
penalties under the federal securities laws, as well as in disciplinary action
by Pilgrim (including termination of employment). Pilgrim has adopted a series
of stringent procedures designed to prevent the flow of material non-public
information about a public company or its securities from employees engaged in
"PPR/Structured Finance Investment Activities" to employees performing other
"investment management activities." As a general matter, it is Pilgrim's policy
that any material non-public information about a public company or its
securities that is obtained by a director, officer or employee of Pilgrim,
either in connection with their PPR/Structured Finance Investment Activities or
otherwise, shall not be disclosed beyond the immediate group of persons involved
in a particular transaction, except as specifically permitted by the firm's
Chinese Wall Procedures. Employees should refer to Pilgrim 's Chinese Wall
Procedures.
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ALL DIRECTORS, OFFICERS AND EMPLOYEES OF PILGRIM MUST FAMILIARIZE THEMSELVES
WITH THESE POLICIES AND PROCEDURES AND ABIDE BY THEM. COMPLIANCE WITH THE LAW
AND THE POLICIES AND PROCEDURES DESCRIBED IN PILGRIM'S CHINESE WALL PROCEDURES
IS THE INDIVIDUAL RESPONSIBILITY OF EACH DIRECTOR, OFFICER OR EMPLOYEE OF
PILGRIM. IT IS EACH SUCH PERSON'S DUTY TO SEE THAT THE POLICIES AND PROCEDURES
SET FORTH IN PILGRIM 'S CHINESE WALL PROCEDURES ARE FOLLOWED IN BOTH SPIRIT AND
LETTER. FAILURE TO COMPLY WITH THE CHINESE WALL PROCEDURES WILL BE DEALT WITH
HARSHLY AND COULD LEAD TO TERMINATION OF EMPLOYMENT, PERSONAL LIABILITY OR
CRIMINAL PROSECUTION.
B. THE RESTRICTED LIST.
Securities are placed on the Restricted List: (i) in the unlikely event that
there is a failure of the Chinese Wall Procedures and material non-public
information is disseminated beyond persons performing PPR/Structured Finance
Investment Activities; (ii) upon a determination by the Compliance Department or
the Firm's General Counsel that the sensitivity of a transaction being
considered by PPR/Structured Finance, the nature of the information in the
possession of PPR/Structured Finance or other circumstances justify a halt in
trading activity in securities of an issuer; and (iii) in other circumstances as
determined by the Compliance Department or the Firm's General Counsel.
Portfolios managed by Pilgrim, other than PPR, may not trade in securities that
have been placed on the Restricted List. Pre-clearance requests for personal
securities transactions in securities of an issuer on the Restricted List will
not be approved. It is anticipated that few, if any, securities will be included
on the Restricted List.
C. WATCH LIST/INSIDE INFORMATION LIST.
Each company will be placed on the Watch List/Inside Information List if
PPR/Structured Finance is, or within the preceding ninety (90) days has been, in
possession of material non-public information concerning such company.
D. PREPARATION OF THE WATCH LIST/INSIDE INFORMATION LIST.
Persons performing PPR/Structured Finance Investment Activities must immediately
log the names of companies on the Watch List/Inside Information List upon the
receipt of material non-public information concerning such company.
PPR's/Structured Finance portfolio managers must advise the Compliance
Department of any changes in the status of such information which might permit
the removal of such securities from the Watch List/Inside Information List or
require placing them on the Restricted List. In addition, the Firm's General
Counsel may advise the Compliance Department to place the securities of a
particular company on the Watch List/Inside Information List. While portfolio
trading in securities on the Watch List/Inside Information List is NOT
prohibited, such trading is monitored frequently to detect any unusual trading
activity involving Watch List/Inside Information List securities. The Watch
List/Inside Information List is prepared by a PPR/Structured Finance Portfolio
Manager.
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E. TRADING LISTS. - OPEN-END FUNDS
A separate Trading List is maintained for each portfolio. A security of an
issuer is placed on a Trading List each Friday or commencing upon the date that
a portfolio manager determines to engage in a transaction involving such
security imminently (generally within seven (7) business days, subject to market
conditions) and for a period of five (5) business days following such
transaction. A portfolio manager's decision to place a security on a Trading
List should be made by reference to a number of factors, including, the
relationship between the target buy/sell price and the market price, the
volatility of the issue and consideration of other factors that may lead a
portfolio manager to trade in a particular security. Obviously, unforeseen
circumstances may lead to a rapid trading decision, in which case a security may
be placed on the Trading List at the same time as a trading order is placed.
Pre-clearance requests for personal securities transactions in securities of an
issuer on the Trading List will not be approved.F. TRADING LIST - PPR AND
STRUCTURED FINANCE VEHICLES
Public companies will be put on PPR/Structured Finance's Trading list if either
entity (I) owns a loan participation with respect to such company or (ii) is, or
within the preceding ninety (90) days has been, in possession of material
non-public information concerning such company. Pre-clearance requests for
personal securities transactions in securities of an issuer on the
PPR/Structured Finance Trading List will not be approved.
G. PERSONAL SECURITIES TRANSACTIONS.
Under Pilgrim 's Code of Ethics, all employees, officers and directors of
Pilgrim, all directors/trustees of registered investment companies managed by
Pilgrim, as well as certain consultants and independent contractors who have
access to confidential information, other than Segregated Persons (collectively,
"Access Persons") must (i) obtain pre-clearance for personal securities
transactions involving beneficial ownership (as defined in Pilgrim 's Code of
Ethics) and (ii) cause duplicate trading confirmations for such personal
securities transactions to be sent to the Compliance Department A Segregated
Person, as that term is defined in Pilgrim's Code of Ethics, need only pre-clear
a transaction in a Security (as that term is defined in Pilgrim's Code of
Ethics) if at the time such Segregated Person proposed to engage in such
transaction, he or she knew, or in the ordinary course of fulfilling his or her
duties, should have known that such Security was being purchased or sold by the
Funds or that a purchase or sale of such Security was being considered by or
with respect to the Funds EXCEPT that pre-clearance approval WILL be required
for purchases of securities in private transactions conducted pursuant to
Section 4(2) of the Securities Act of 1933 and Securities (debt or equity)
acquired in an initial public offering.
All Pilgrim Registered Representatives not deemed to be Access Persons must also
pre-clear all Personal Securities Transactions with the Compliance Department.
In order to receive pre-clearance for Personal Securities Transactions, a
Registered Representative must call the Compliance Officer or complete a
Personal Trading Approval form. A member of the Compliance Department is
available each business day from 9:00 a.m. to 5:00 p.m. to respond to
pre-clearance requests. Registered Representatives are directed to identify (i)
the securities that will be the subject of the transaction and the number of
shares and principal amount of each security involved, (ii) the date on which
they desire to engage in the subject transaction; (iii) the nature of the
transaction (i.e., purchase, sale, private placement, or any other type of
acquisition or disposition); (iv) the approximate price at which the transaction
will be effected; and (vi) the name of the broker, dealer, or bank with or
through whom the transaction will be effected. Transactions in securities of an
issuer on the Restricted List or the Trading Lists will not be approved. In
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order to maintain the confidentiality of the Restricted List, the Watch
List/Inside Information List and the Trading Lists, callers will not be apprised
of the reason for the denial of the authorization to trade. If on any particular
day the Compliance Officer is not present in the office, pre-clearance may be
obtained by providing a completed Personal Trading Approval form to the
Compliance Analyst for authorization who will obtain the signature of an
appropriate designated officer. Questions regarding pre-clearance procedures
should be directed to the Compliance Department.
Exceptions - Certain Transactions No pre-clearance of a securities transaction
is required for the following transactions:
1. Shares of registered open-end investment companies,
2 Securities issued by the government of the United States, bankers'
acceptances, bank certificates of deposit and time deposits, commercial
paper, repurchase agreements and such other money market instruments as
designated by the board of directors/trustees of such Fund and shares of
ReliaStar Financial Corporation.
3. Purchases or sales effected in any account over which such Registered
Representative has no direct or indirect influence or control;
4. Purchases or sales of securities which are not eligible for purchase or
sale by any Fund e.g. municipal securities.
5. Purchases or sales which are non-volitional on the part of either the
Registered Representative or a Fund;
6. Purchases which are part of an automatic dividend reinvestment plan or
employee stock purchase plan;
7. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired.
8. Purchases or sales of securities which receive the prior approval of the
appropriate Designated Officer because they (i) are only remotely
potentially harmful to each Fund, (ii) would be very unlikely to affect a
highly institutional market, or (iii) clearly are not related economically
to the securities to be purchased, sold or held by each Fund.
9. Future elections into an employer sponsored 401(k) plan, in an amount
not exceeding $1,000 in any calendar month and any other transfers to an
open end fund. However, an exchange of a current account balance into or
from one of the closed end funds in an amount greater than $1,000 would
still need pre-clearance and be reportable at the end of the quarter on the
quarterly transaction reports.
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H. PERSONAL BROKERAGE ACCOUNTS
Access Persons and registered representatives pursuant to Article III, Section
28 of the NASD Rules of Fair Practice, are required to notify the securities
brokers with whom he or she opens personal brokerage accounts that he or she is
an affiliated person of PII or PSI as appropriate. This notification should take
place at the time the brokerage account is opened and applies to your personal
accounts and to any account in which you have a beneficial interest as defined
in Pilgrim 's Code of Ethics. If the securities account is with a non-member
institution (e.g., investment adviser, bank or other financial institution) you
are required to notify the Chief Compliance Officer prior to the execution of
any initial transactions, of your intention to open such account or place an
order.
For brokerage and/or non-member institution accounts established prior to your
association with PSI or PII, you are required to notify the Chief Compliance
Officer promptly after your hire date.
I. TRADE CONFIRMATIONS.
Access Persons (other than Segregated Persons) and registered representatives
shall cause broker-dealers maintaining accounts to deliver to Pilgrim duplicate
trade confirmations and statements with respect to all transactions in such
accounts. Pilgrim has prepared a form letter to be used such Access Persons to
direct brokerage firms maintaining such accounts to send duplicate trade
confirmations to the Compliance Department. A copy of this form letter is
attached as Exhibit C.
J. NEW ISSUES.
"Hot issues" are securities which, immediately after their initial public
distribution, sell at a premium in the secondary market. No Access Person nor
Registered Representative ("RR") may purchase hot issue securities during the
primary offering for his or her personal account, for any account in which the
individual has a direct or indirect financial interest, or for the account of
any member of the individual's immediate family. For this purpose, the term
"immediate family" includes parents, spouse, brothers, sisters, in-laws,
children or any other person who is directly or indirectly materially supported
by you.
Because of the difficulty in recognizing a potential "hot issue" until after
distribution, you and your immediate family may not purchase, for any account in
which you have a beneficial interest, any new issue of a security unless such
purchase has been approved in advance by the Chief Compliance Officer.
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SAMPLE LETTER TO BROKERAGE FIRM
TO ESTABLISH DUPLICATE CONFIRMS AND PERIODIC STATEMENTS
(PAGE C12, H. TRADE CONFIRMATIONS)
January 2, 1996
Merrill Lynch, Pierce, Fenner & Smith, Inc.
111 W. Ocean Blvd., 24th Floor
Long Beach, CA 90802
RE: The Brokerage Account of Account Registration
Account No. Your Account Number
--------------------
AE Name of Your Registered Representative
--------------------------------------
Dear Ladies/Gentlemen:
In accordance with the policies of Pilgrim Group, Inc., a financial services
firm with which I have become associated, effective immediately, please forward
duplicate trade confirmations and periodic statements on the above-captioned
accounts as follows:
Pilgrim Group, Inc.
ATTN: LAUREN D. BENSINGER
VP & CHIEF COMPLIANCE OFFICER
TWO RENAISSANCE SQUARE
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004
Sincerely,
Your Name
