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Exhibit (p)(13)(ii)
CODE OF ETHICS
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IT IS THE PERSONAL RESPONSIBILITY OF EVERY
XXXXXX EMPLOYEE TO AVOID ANY CONDUCT THAT
COULD CREATE A CONFLICT, OR EVEN THE APPEARANCE
OF A CONFLICT, WITH OUR CLIENTS, OR TO DO ANYTHING
THAT COULD DAMAGE OR ERODE THE TRUST OUR CLIENTS
PLACE IN XXXXXX AND ITS EMPLOYEES.
TABLE OF CONTENTS
Overview ..............................................................ii
Preamble ..............................................................v
Definitions: Code of Ethics ...........................................vi
Section I. Personal Securities Rules for All Employees ................1
A. Restricted List ...............................................1
B. Prohibited Transactions .......................................4
C. Discouraged Transactions ......................................7
D. Exempted Transactions .........................................8
Section II. Additional Special Rules for Personal Securities
Transactions of Access Persons and Certain Investment Professionals ..10
Section III. Prohibited Conduct for All Employees ....................14
Section IV. Special Rules for Officers and Employees of
Xxxxxx Investments Limited ...........................................22
Section V. Reporting Requirements for All Employees ..................24
Section VI. Education Requirements ...................................27
Section VII. Compliance and Appeal Procedures ........................28
Appendix A. Policy Statement Concerning Xxxxxxx Xxxxxxx
Prohibitions .........................................................30
Preamble ........................................................30
Definitions: Xxxxxxx Xxxxxxx ....................................31
Section 1. Rules Concerning Inside Information ..................32
Section 2. Overview of Xxxxxxx Xxxxxxx ..........................34
Appendix B. Policy Statement Regarding
Employee Trades in Shares of Xxxxxx Closed-End Funds .................38
Appendix C. Clearance Form for Portfolio Manager Sales
Out of Personal Account of Securities Also Held by Fund
(For Compliance with "Contra-Trading" Rule) ..........................39
Appendix D. Procedures for Approval of New Financial
Instruments ..........................................................40
Appendix E. AIMR Code of Ethics and Standards of
Professional Conduct. ................................................41
Index ................................................................46
i
OVERVIEW
EVERY XXXXXX EMPLOYEE IS REQUIRED, AS A CONDITION OF CONTINUED EMPLOYMENT, TO
READ, UNDERSTAND, AND COMPLY WITH THE ENTIRE CODE OF ETHICS. THIS OVERVIEW IS
PROVIDED ONLY AS A CONVENIENCE AND IS NOT INTENDED TO SUBSTITUTE FOR A CAREFUL
READING OF THE COMPLETE DOCUMENT.
It is the personal responsibility of every Xxxxxx employee to avoid any conduct
that could create a conflict, or even the appearance of a conflict, with our
clients, or do anything that could damage or erode the trust our clients place
in Xxxxxx and its employees. THIS IS THE SPIRIT OF THE CODE OF ETHICS. IN
ACCEPTING EMPLOYMENT AT XXXXXX, EVERY EMPLOYEE ACCEPTS THE ABSOLUTE OBLIGATION
TO COMPLY WITH THE LETTER AND THE SPIRIT OF THE CODE OF ETHICS. FAILURE TO
COMPLY WITH THE SPIRIT OF THE CODE OF ETHICS IS JUST AS MUCH A VIOLATION OF THE
CODE AS FAILURE TO COMPLY WITH THE WRITTEN RULES OF THE CODE.
The rules of the Code cover activities, including personal securities
transactions, of Xxxxxx employees, certain family members of employees, and
entities (such as corporations, trusts, or partnerships) that employees may be
deemed to control or influence.
SANCTIONS WILL BE IMPOSED FOR VIOLATIONS OF THE CODE OF ETHICS. SANCTIONS MAY
INCLUDE BANS ON PERSONAL TRADING, REDUCTIONS IN SALARY INCREASES OR BONUSES,
DISGORGEMENT OF TRADING PROFITS, SUSPENSION OF EMPLOYMENT, AND TERMINATION OF
EMPLOYMENT.
XXXXXXX XXXXXXX
Xxxxxx employees are forbidden to buy or sell any security while either Xxxxxx
or the employee is in possession of non-public information ("inside
information") concerning the security or the issuer. A violation of Xxxxxx'x
xxxxxxx xxxxxxx policies may result in criminal and civil penalties, including
imprisonment and substantial fines.
CONFLICTS OF INTEREST
The Code of Ethics imposes limits on activities of Xxxxxx employees where the
activity may conflict with the interests of Xxxxxx or its clients. These include
limits on the receipt and solicitation of gifts and on service as a fiduciary
for a person or entity outside of Xxxxxx.
For example, Xxxxxx employees generally may not accept gifts over $100 in total
value in a calendar year from any entity or any supplier of goods or services to
Xxxxxx. In addition, a Xxxxxx employee may not serve as a director of any
corporation without prior approval of the Code of Ethics Officer, AND XXXXXX
EMPLOYEES MAY NOT BE MEMBERS OF INVESTMENT CLUBS.
CONFIDENTIALITY
Information about Xxxxxx clients and Xxxxxx investment activity and research is
proprietary and confidential and may not be disclosed or used by any Xxxxxx
employee outside Xxxxxx without a valid business purpose.
PERSONAL SECURITIES TRADING
XXXXXX EMPLOYEES MAY NOT BUY OR SELL ANY SECURITY FOR THEIR OWN ACCOUNT WITHOUT
CLEARING THE PROPOSED TRANSACTION IN ADVANCE THROUGH THE ONLINE PRE-CLEARANCE
SYSTEM OR WITH THE CODE OF ETHICS ADMINISTRATOR.
Certain securities are excepted from this requirement (e.g., Xxxxx & McLennan
stock and shares of open-end (not closed-end) Xxxxxx funds).
ii
Clearance must be obtained in advance, between 11:30 a.m. and 4:00 p.m. Eastern
Time on the day of the trade. Clearance may be obtained between 9:00 a.m. and
4:00 p.m. on the day of the trade for up to 1,000 shares of stock of an issuer
whose capitalization exceeds $5 billion. A clearance is valid only for the day
it is obtained. The Code also strongly discourages excessive trading by
employees for their own account (i.e., more than 10 trades in any calendar
quarter). Trading in excess of this level will be reviewed with the Code of
Ethics Oversight Committee.
PERSONAL SECURITIES TRANSACTIONS BY ACCESS PERSONS AND CERTAIN
INVESTMENT PROFESSIONALS
The Code imposes several special restrictions on personal securities
transactions by Access Persons and certain investment professionals, which are
summarized as follows:
"60-Day Holding Period." No Access Person shall purchase and then sell at a
profit, or sell and then repurchase at a lower price, any security or
related derivative security within 60 calendar days.
"7-Day" Rule. Before a portfolio manager places an order to buy a security
for any portfolio he manages, he must sell from his personal account any
such security or related derivative security purchased within the preceding
7 calendar days and disgorge any profit from the sale.
"Blackout" Rule. No portfolio manager may sell any security or related
derivative security for her personal account until 7 calendar days have
passed since the most recent purchase of that security or related
derivative security by any portfolio she manages. No portfolio manager may
buy any security or related derivative security for his personal account
until 7 calendar days have passed since the most recent sale of that
security or related derivative security by any portfolio he manages.
"Contra-Trading" Rule. No portfolio manager may sell out of her personal
account any security or related derivative security that is held in any
portfolio she manages unless she has received the WRITTEN APPROVAL OF A CIO
AND THE CODE OF ETHICS OFFICER.
No manager may cause a Xxxxxx client to take action for the manager's own
personal benefit.
SIMILAR RULES LIMIT PERSONAL SECURITIES TRANSACTIONS BY ANALYSTS, CO-MANAGERS,
AND CHIEF INVESTMENT OFFICERS. PLEASE READ THESE RULES CAREFULLY. YOU ARE
RESPONSIBLE FOR UNDERSTANDING THE RESTRICTIONS.
iii
SHORT SELLING
Xxxxxx employees are prohibited from short selling any security, whether or not
it is held in a Xxxxxx client portfolio, except that short selling against broad
market indexes and "against the box" are permitted.
CONFIRMATIONS OF TRADING AND PERIODIC ACCOUNT STATEMENTS
All Xxxxxx employees must have their brokers send confirmations of personal
securities transactions, including transactions of immediate family members and
accounts over which the employee has investment discretion, to the Code of
Ethics Officer. Employees must contact the Code of Ethics Administrator to
obtain an authorization letter from Xxxxxx for setting up a personal brokerage
account.
QUARTERLY AND ANNUAL REPORTING
Certain Xxxxxx employees (so-called "Access Persons" as defined by the SEC and
in the Code of Ethics) must report all their securities transactions in each
calendar quarter to the Code of Ethics Officer within 10 days after the end of
the quarter. All Access Persons must disclose all personal securities holdings
upon commencement of employment and thereafter on an annual basis. You will be
notified if these requirements apply to you. If these requirements apply to you
and you fail to report as required, salary increases and bonuses will be
reduced.
IPOS AND PRIVATE PLACEMENTS
Xxxxxx employees may not buy any securities in an initial public offering or in
a private placement, except in limited circumstances when prior written
authorization is obtained.
PROCEDURES FOR APPROVAL OF NEW FINANCIAL INSTRUMENTS
No new types of securities or instruments may be purchased for any Xxxxxx fund
or other client account without the prior approval of the Risk Management
Committee.
THIS OVERVIEW IS QUALIFIED IN ITS ENTIRETY BY THE PROVISIONS OF THE CODE OF
ETHICS. THE CODE REQUIRES THAT ALL XXXXXX EMPLOYEES READ, UNDERSTAND, AND COMPLY
WITH THE ENTIRE CODE OF ETHICS.
iv
PREAMBLE
IT IS THE PERSONAL RESPONSIBILITY OF EVERY XXXXXX EMPLOYEE TO AVOID ANY CONDUCT
THAT WOULD CREATE A CONFLICT, OR EVEN THE APPEARANCE OF A CONFLICT, WITH OUR
CLIENTS, OR EMBARRASS XXXXXX IN ANY WAY. THIS IS THE SPIRIT OF THE CODE OF
ETHICS. IN ACCEPTING EMPLOYMENT AT XXXXXX, EVERY EMPLOYEE ALSO ACCEPTS THE
ABSOLUTE OBLIGATION TO COMPLY WITH THE LETTER AND THE SPIRIT OF THE CODE OF
ETHICS. FAILURE TO COMPLY WITH THE SPIRIT OF THE CODE OF ETHICS IS JUST AS MUCH
A VIOLATION OF THE CODE AS FAILURE TO COMPLY WITH THE WRITTEN RULES OF THE CODE.
SANCTIONS WILL BE IMPOSED FOR VIOLATIONS OF THE CODE OF ETHICS, INCLUDING THE
CODE'S REPORTING REQUIREMENTS. SANCTIONS MAY INCLUDE BANS ON PERSONAL TRADING,
REDUCTIONS IN SALARY INCREASES OR BONUSES, DISGORGEMENT OF TRADING PROFITS,
SUSPENSION OF EMPLOYMENT, AND TERMINATION OF EMPLOYMENT.
Xxxxxx Investments is required by law to adopt a Code of Ethics. The purpose of
the law is to prevent abuses in the investment advisory business that can arise
when conflicts of interest exist between the employees of an investment adviser
and its clients. Having an effective Code of Ethics is also good business
practice. By adopting and enforcing a Code of Ethics, we strengthen the trust
and confidence reposed in us by demonstrating that, at Xxxxxx, client interests
come before personal interests.
Xxxxxx has had a Code of Ethics for many years. The first Xxxxxx Code was
written more than 30 years ago by Xxxxxx Xxxxxx. It has been revised
periodically, and was re-drafted in its entirety in 1989 to take account of
legal and regulatory developments in the investment advisory business. Since
1989, the Code has been revised regularly to reflect developments in our
business.
The Code that follows represents a balancing of important interests. On the one
hand, as a registered investment adviser, Xxxxxx owes a duty of undivided
loyalty to its clients, and must avoid even the appearance of a conflict that
might be perceived as abusing the trust they have placed in Xxxxxx. On the other
hand, Xxxxxx does not want to prevent conscientious professionals from investing
for their own account where conflicts do not exist or are so attenuated as to be
immaterial to investment decisions affecting Xxxxxx clients.
When conflicting interests cannot be reconciled, the Code makes clear that,
first and foremost, Xxxxxx employees owe a fiduciary duty to Xxxxxx clients. In
most cases, this means that the affected employee will be required to forego
conflicting personal securities transactions. In some cases, personal
investments will be permitted, but only in a manner that, because of the
circumstances and applicable controls, cannot reasonably be perceived as
adversely affecting Xxxxxx client portfolios or taking unfair advantage of the
relationship Xxxxxx employees have to Xxxxxx clients.
The Code contains specific rules prohibiting defined types of conflicts. Because
every potential conflict cannot be anticipated in advance, the Code also
contains certain general provisions prohibiting conflict situations. In view of
these general provisions, it is critical that any individual who is in doubt
about the applicability of the Code in a given situation seek a determination
from the Code of Ethics Officer about the propriety of the conduct in advance.
The procedures for obtaining such a determination are described in Section VII
of the Code.
IT IS CRITICAL THAT THE CODE BE STRICTLY OBSERVED. NOT ONLY WILL ADHERENCE TO
THE CODE ENSURE THAT XXXXXX RENDERS THE BEST POSSIBLE SERVICE TO ITS CLIENTS, IT
WILL ENSURE THAT NO INDIVIDUAL IS LIABLE FOR VIOLATIONS OF LAW.
IT SHOULD BE EMPHASIZED THAT ADHERENCE TO THIS POLICY IS A FUNDAMENTAL CONDITION
OF EMPLOYMENT AT XXXXXX. EVERY EMPLOYEE IS EXPECTED TO ADHERE TO THE
REQUIREMENTS OF THIS CODE OF ETHICS DESPITE ANY INCONVENIENCE THAT MAY BE
INVOLVED. ANY EMPLOYEE FAILING TO DO SO MAY BE SUBJECT TO SUCH DISCIPLINARY
ACTION, INCLUDING FINANCIAL PENALTIES AND TERMINATION OF EMPLOYMENT, AS
DETERMINED BY THE CODE OF ETHICS OVERSIGHT COMMITTEE OR THE CHIEF EXECUTIVE
OFFICER OF XXXXXX INVESTMENTS.
v
DEFINITIONS: CODE OF ETHICS
THE WORDS GIVEN BELOW ARE DEFINED SPECIFICALLY FOR THE PURPOSES OF XXXXXX'X CODE
OF ETHICS.
GENDER REFERENCES IN THE CODE OF ETHICS ALTERNATE.
Rule of construction regarding time periods. Unless the context indicates
otherwise, time periods used in the Code of Ethics shall be measured
inclusively, i.e., including the dates from and to which the measurement is
made.
ACCESS PERSONS. Access Persons are (i) all officers of Xxxxxx Investment
Management, LLC (the investment manager of Xxxxxx'x mutual funds), (ii) all
employees within Xxxxxx'x Investment Division, and (iii) all other employees of
Xxxxxx who, in connection with their regular duties, have access to information
regarding purchases or sales of portfolio securities by a Xxxxxx mutual fund, or
who have access to information regarding recommendations with respect to such
purchases or sales.
CODE OF ETHICS ADMINISTRATOR. The individual designated by the Code of Ethics
Officer to assume responsibility for day-to-day, non-discretionary
administration of this Code. The current Code of Ethics Administrator is Xxxxx
Xxxx, who can be reached at extension 11104.
CODE OF ETHICS OFFICER. The Xxxxxx officer who has been assigned the
responsibility of enforcing and interpreting this Code. The Code of Ethics
Officer shall be the General Counsel or such other person as is designated by
the President of Xxxxxx Investments. If the Code of Ethics Officer is
unavailable, the Deputy Code of Ethics Officer (to be appointed by the Code of
Ethics Officer) shall act in his stead.
CODE OF ETHICS OVERSIGHT COMMITTEE. Has oversight responsibility for
administering the Code of Ethics. Members include the Code of Ethics Officer,
the Head of Investments, and other members of Xxxxxx'x senior management
approved by the Chief Executive Officer of Xxxxxx.
IMMEDIATE FAMILY. Spouse, minor children, or other relatives living in the same
household as the Xxxxxx employee.
POLICY STATEMENTS. The Policy Statement Concerning Xxxxxxx Xxxxxxx
Prohibitions attached to the Code as Appendix A and the Policy Statement
Regarding Employee Trades in Shares of Xxxxxx Closed-End Funds attached
to the Code as Appendix B.
PRIVATE PLACEMENT. Any offering of a security not to the public, but to
sophisticated investors who have access to the kind of information that would be
contained in a prospectus, and that does not require registration with the
relevant securities authorities.
PURCHASE OR SALE OF A SECURITY. Any acquisition or transfer of any interest in
the security for direct or indirect consideration, and includes the writing of
an option.
XXXXXX. Any or all of Xxxxxx Investments, and its subsidiaries, any one
of which shall be a "Xxxxxx company."
XXXXXX CLIENT. Any of the Xxxxxx funds, or any advisory, trust, or other client
of Xxxxxx.
XXXXXX EMPLOYEE (OR "EMPLOYEE"). Any employee of Xxxxxx.
RESTRICTED LIST. The list established in accordance with Rule 1 of
Section I.A.
vi
SECURITY. Any type or class of equity or debt security and any rights relating
to a security, such as put and call options, warrants, and convertible
securities. Unless otherwise noted, the term "security" does not include:
currencies, direct and indirect obligations of the U.S. government and its
agencies, commercial paper, certificates of deposit, repurchase agreements,
bankers' acceptances, any other money market instruments, shares of open-end
mutual funds (including Xxxxxx open-end mutual funds), exchange traded index
funds containing a portfolio or securities of 25 or more issuers (e.g., SPDRs,
WEBs, QQQs), securities of The Xxxxx & McLennan Companies, Inc., commodities,
and any option on a broad-based market index or an exchange-traded futures
contract or option thereon.
TRANSACTION FOR A PERSONAL ACCOUNT (OR "PERSONAL SECURITIES TRANSACTION").
Securities transactions (a) for the personal account of any employee; (b) for
the account of a member of the immediate family of any employee; (c) for the
account of a partnership in which a Xxxxxx employee or immediate family member
is a general partner or a partner with investment discretion; (d) for the
account of a trust in which a Xxxxxx employee or immediate family member is a
trustee with investment discretion; (e) for the account of a closely-held
corporation in which a Xxxxxx employee or immediate family member holds shares
and for which he has investment discretion; and (f) for any account other than a
Xxxxxx client account which receives investment advice of any sort from the
employee or immediate family member, or as to which the employee or immediate
family member has investment discretion.
vii
SECTION I.
PERSONAL SECURITIES RULES FOR ALL EMPLOYEES
A. RESTRICTED LIST
RULE 1
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No Xxxxxx employee shall purchase or sell for his personal account any security
without prior clearance obtained through Xxxxxx'x intranet pre-clearance system
(in the "@Xxxxxx" section of XXX.XXXXXXXXXXXXXX.XXX) or from the Code of Ethics
Administrator. No clearance will be granted for securities appearing on the
Restricted List. Securities shall be placed on the Restricted List in the
following circumstances:
(a) When orders to purchase or sell such security have been entered for any
Xxxxxx client, or the security is being actively considered for purchase or
sale for any Xxxxxx client;
(b) With respect to voting securities of corporations in the banking, savings
and loan, communications, or gaming (i.e., casinos) industries, when
holdings of Xxxxxx clients exceed 7% (for public utilities, the threshold
is 4%);
(c) When, in the judgment of the Code of Ethics Officer, other circumstances
warrant restricting personal transactions of Xxxxxx employees in a
particular security;
(d) The circumstances described in the Policy Statement Concerning Xxxxxxx
Xxxxxxx Prohibitions, attached as Appendix A.
Reminder: Securities for an employee's "personal account" include
securities owned by certain family members of a Xxxxxx employee. Thus, this
Rule prohibits certain trades by family members of Xxxxxx employees. See
Definitions.
COMPLIANCE WITH THIS RULE DOES NOT EXEMPT AN EMPLOYEE FROM COMPLYING WITH
ANY OTHER APPLICABLE RULES OF THE CODE, SUCH AS THOSE DESCRIBED IN SECTION
III. IN PARTICULAR, ACCESS PERSONS AND CERTAIN INVESTMENT PROFESSIONALS
MUST COMPLY WITH THE SPECIAL RULES SET FORTH IN SECTION II.
EXCEPTIONS
A. "Large Cap" Exception. If a security appearing on the Restricted List is an
equity security for which the issuer has a market capitalization (defined
as outstanding shares multiplied by current price per share) of over $5
billion, then a Xxxxxx employee may purchase or sell up to a total of 1,000
shares of the security per day for his personal account. This exception
does not apply if the security appears on the Restricted List in the
circumstances described in subpart (b), (c), or (d) of Rule 1.
B. INVESTMENT-GRADE OR HIGHER FIXED-INCOME EXCEPTION. If a security being
traded or considered for trade for a Xxxxxx client is a non-convertible
fixed-income security0 which bears a rating of BBB (Standard & Poor's) or
Baa (Xxxxx'x) or any comparable rating or higher, then a Xxxxxx employee
may purchase or sell that security for his personal account without regard
to the activity of Xxxxxx clients. This exception does not apply if the
security has been placed on the Restricted List in the circumstances
described in subpart (b), (c), or (d) of Rule 1.
1
C. PRE-CLEARING TRANSACTIONS EFFECTED BY SHARE SUBSCRIPTION. The purchase and
sale of securities made by subscription rather than on an exchange are
limited to issuers having a market capitalization of $5 billion or more and
are subject to a 1,000 share limit. The following are procedures to comply
with Rule 1 when effecting a purchase or sale of shares by subscription:
(a) The Xxxxxx employee must pre-clear the trade on the day he or she
submits a subscription to the issuer, rather than on the actual day of
the trade since the actual day of the trade typically will not be
known to the employee who submits the subscription. At the time of
pre-clearance, the employee will be told whether the purchase is
permitted (in the case of a corporation having a market capitalization
of $5 billion or more), or not permitted (in the case of a smaller
capitalization issuer).
(b) The subscription for any purchase or sale of shares must be reported
on the employee's quarterly personal securities transaction report,
noting the trade was accomplished by subscription.
(c) As no brokers are involved in the transaction, the confirmation
requirement will be waived for these transactions, although the Xxxxxx
employee must provide the Legal and Compliance Department with any
transaction summaries or statements sent by the issuer.
SANCTION GUIDELINES
A. Failure to Pre-Clear a Personal Trade
1. First violation: One-month trading ban with written warning that a
future violation will result in a longer trading ban.
2. Second violation: Three-month trading ban and written notice to
Managing Director of the employee's division.
3. Third violation: Six-month trading ban with possible longer or
permanent trading ban based upon review by Code of Ethics Oversight
Committee.
B. Failure to Pre-Clear Securities on the Restricted List
1. First violation: Disgorgement of any profit from the transaction,
one-month trading ban, and written warning that a future violation
will result in a longer trading ban.
2. Second violation: Disgorgement of any profit from the transaction,
three-month trading ban, and written notice to Managing Director of
the employee's division.
3. Third violation: Disgorgement of any profit from the transaction, and
six-month trading ban with possible longer or permanent trading ban
based upon review by Code of Ethics Oversight Committee.
NOTE: These are the sanction guidelines for successive failures to
pre-clear personal trades within a two-year period. The Code of Ethics
Oversight Committee retains the right to increase or decrease the sanction
for a particular violation in light of the circumstances. The Committee's
belief that an employee intentionally has violated the Code of Ethics will
result in more severe sanctions than outlined in the guidelines above. The
sanctions described in Paragraph B apply to Restricted List securities that
are (i) small-cap stocks (i.e., stocks not entitled to the "Large-Cap"
exception) and (ii) large-cap stocks that exceed the daily 1,000 share
maximum permitted under the "Large-Cap" exception. Failure to pre-clear an
otherwise permitted trade of up to 1,000 shares of a large-cap security is
subject to the sanctions described above in Paragraph A.
2
IMPLEMENTATION
A. MAINTENANCE OF RESTRICTED LIST. The Restricted List shall be maintained by
the Code of Ethics Administrator.
B. CONSULTING RESTRICTED LIST. An employee wishing to trade any security for
his personal account shall first obtain clearance through Xxxxxx'x intranet
pre-clearance system. The system may be accessed from your desktop computer
through the Xxxxxx'x intranet, ibenefitcenter
(xxxxx://xxx.xxxxxxxxxxxxxx.xxx) @Xxxxxx tab, Employee Essentials menu.
Employees may pre-clear all securities between 11:30 a.m. and 4:00 p.m.
Eastern Time, and may pre-clear purchases or sales of up to 1,000 shares of
issuers having a market capitalization of more than $5 billion between 9:00
a.m. and 4:00 p.m. Eastern Time. Requests to make personal securities
transactions may not be made using the system or presented to the Code of
Ethics Administrator after 4:00 p.m.
The pre-clearance system will inform the employee whether the security may
be traded and whether trading in the security is subject to the "Large Cap"
limitation. The response of the pre-clearance system as to whether a
security appears on the Restricted List and, if so, whether it is eligible
for the exceptions set forth after this Rule shall be final, unless the
employee appeals to the Code of Ethics Officer, using the procedure
described in Section VII, regarding the request to trade a particular
security.
A CLEARANCE IS ONLY VALID FOR TRADING ON THE DAY IT IS OBTAINED. TRADES IN
SECURITIES LISTED ON ASIAN OR EUROPEAN STOCK EXCHANGES, HOWEVER, MAY BE
EXECUTED WITHIN ONE BUSINESS DAY AFTER PRE-CLEARANCE IS OBTAINED.
If a security is not on the Restricted List, other classes of securities of
the same issuer (e.g., preferred or convertible preferred stock) may be on
the Restricted List. It is the employee's responsibility to identify with
particularity the class of securities for which permission is being sought
for a personal investment.
If the pre-clearance system does not recognize a security, or if an
employee is unable to use the system or has any questions with respect to
the system or pre-clearance, the employee may consult the Code of Ethics
Administrator. The Code of Ethics Administrator shall not have authority to
answer any questions about a security other than whether trading is
permitted. The response of the Code of Ethics Administrator as to whether a
security appears on the Restricted List and, if so, whether it is eligible
for the exceptions set forth after this Rule shall be final, unless the
employee appeals to the Code of Ethics Officer, using the procedure
described in Section VII, regarding the request to trade a particular
security.
C. REMOVAL OF SECURITIES FROM RESTRICTED LIST. Securities shall be removed
from the Restricted List when: (a) in the case of securities on the
Restricted List pursuant to Rule 1(a), they are no longer being purchased
or sold for a Xxxxxx client or actively considered for purchase or sale for
a Xxxxxx client; (b) in the case of securities on the Restricted List
pursuant to Rule 1(b), the holdings of Xxxxxx clients fall below the
applicable threshold designated in that Rule, or at such earlier time as
the Code of Ethics Officer deems appropriate; or (c) in the case of
securities on the Restricted List pursuant to Rule 1(c) or 1(d), when
circumstances no longer warrant restrictions on personal trading.
COMMENTS
1. PRE-CLEARANCE. Subpart (a) of this Rule is designed to avoid the conflict
of interest that might occur when an employee trades for his personal
account a security that currently is being traded or is likely to be traded
for a Xxxxxx client. Such conflicts arise, for example, when the trades of
an employee might have an impact on the price or availability of a
particular security, or when the trades of the client might have an impact
on price to the benefit of the employee. Thus, exceptions involve
situations where the trade of a Xxxxxx employee is unlikely to have an
impact on the market.
3
2. REGULATORY LIMITS. Owing to a variety of federal statutes and regulations
in the banking, savings and loan, communications, and gaming industries, it
is critical that accounts of Xxxxxx clients not hold more than 10% of the
voting securities of any issuer (5% for public utilities). Because of the
risk that the personal holdings of Xxxxxx employees may be aggregated with
Xxxxxx holdings for these purposes, subpart (b) of this Rule limits
personal trades in these areas. The 7% limit (4% for public utilities) will
allow the regulatory limits to be observed.
3. OPTIONS. For the purposes of this Code, options are treated like the
underlying security. See Definitions. Thus, an employee may not purchase,
sell, or "write" option contracts for a security that is on the Restricted
List. A securities index will not be put on the Restricted List simply
because one or more of its underlying securities have been put on the
Restricted List. The exercise of an options contract (the purchase or
writing of which was previously pre-cleared) does not have to be
pre-cleared. Note, however, that the sale of securities obtained through
the exercise of options must be pre-cleared.
4. INVOLUNTARY TRANSACTIONS. "Involuntary" personal securities transactions
are exempted from the Code. Special attention should be paid to this
exemption. (See Section I.D.)
5. TENDER OFFERS. This Rule does not prohibit an employee from tendering
securities from his personal account in response to an any-and-all tender
offer, even if Xxxxxx clients are also tendering securities. A Xxxxxx
employee is, however, prohibited from tendering securities from his
personal account in response to a partial tender offer, if Xxxxxx clients
are also tendering securities.
B. PROHIBITED TRANSACTIONS
RULE 1
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Xxxxxx employees are prohibited from short selling any security, whether or not
the security is held in a Xxxxxx client portfolio.
EXCEPTIONS
Short selling against broad market indexes (such as the Dow Xxxxx
Industrial Average, the NASDAQ index, and the S&P 100 and 500 indexes) and
short selling "against the box" are permitted.
RULE 2
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No Xxxxxx employee shall purchase any security for her personal account in an
initial public offering.
EXCEPTION
PRE-EXISTING STATUS EXCEPTION. A Xxxxxx employee shall not be barred by
this Rule or by Rule 1(a) of Section I.A. from purchasing securities for
her personal account in connection with an initial public offering of
securities by a bank or insurance company when the employee's status as a
policyholder or depositor entitles her to purchase securities on terms more
favorable than those available to the general public, in connection with
the bank's conversion from mutual or cooperative form to stock form, or the
insurance company's conversion from mutual to stock form, provided that the
employee has had the status entitling her to purchase on favorable terms
for at least two years. This exception is only available with respect to
the value of bank deposits or insurance policies that an employee owns
before the announcement of the initial public offering. This exception does
not apply, however, if the security appears on the Restricted List in the
circumstances set forth in subparts (b), (c), or (d) of Section I.A.,
Rule 1.
4
IMPLEMENTATION
A. GENERAL IMPLEMENTATION. An employee shall inquire, before any purchase of a
security for her personal account, whether the security to be purchased is
being offered pursuant to an initial public offering. If the security is
offered through an initial public offering, the employee shall refrain from
purchasing that security for her personal account unless the exception
applies.
B. ADMINISTRATION OF EXCEPTION. If the employee believes the exception
applies, she shall consult the Code of Ethics Administrator concerning
whether the security appears on the Restricted List and, if so, whether it
is eligible for this exception.
COMMENTS
1. The purpose of this rule is twofold. First, it is designed to prevent a
conflict of interest between Xxxxxx employees and Xxxxxx clients who might
be in competition for the same securities in a limited public offering.
Second, the rule is designed to prevent Xxxxxx employees from being subject
to undue influence as a result of receiving "favors" in the form of special
allocations of securities in a public offering from broker-dealers who seek
to do business with Xxxxxx.
2. Purchases of securities in the immediate after-market of an initial public
offering are not prohibited, provided they do not constitute violations of
other portions of the Code of Ethics. For example, participation in the
immediate after-market as a result of a special allocation from an
underwriting group would be prohibited by Section III, Rule 3 concerning
gifts and other "favors."
3. Public offerings subsequent to initial public offerings are not deemed to
create the same potential for competition between Xxxxxx employees and
Xxxxxx clients because of the pre-existence of a market for the securities.
RULE 3
--------------------------------------------------------------------------------
No Xxxxxx employee shall purchase any security for his personal account in a
limited private offering or private placement.
COMMENTS
1. The purpose of this Rule is to prevent a Xxxxxx employee from investing in
securities for his own account pursuant to a limited private offering that
could compete with or disadvantage Xxxxxx clients, and to prevent Xxxxxx
employees from being subject to efforts to xxxxx favor by those who seek to
do business with Xxxxxx.
2. Exemptions to the prohibition will generally not be granted where the
proposed investment relates directly or indirectly to investments by a
Xxxxxx client, or where individuals involved in the offering (including the
issuers, broker, underwriter, placement agent, promoter, fellow investors,
and affiliates of the foregoing) have any prior or existing business
relationship with Xxxxxx or a Xxxxxx employee, or where the Xxxxxx employee
believes that such individuals may expect to have a future business
relationship with Xxxxxx or a Xxxxxx employee.
3. An exemption may be granted, subject to reviewing all the facts and
circumstances, for investments in:
(a) Pooled investment funds, including hedge funds, subject to the
condition that an employee investing in a pooled investment fund would
have no involvement in the activities or decision-making process of
the fund except for financial reports made in the ordinary course of
the fund's business.
(b) Private placements where the investment cannot relate, or be expected
to relate, directly or indirectly to Xxxxxx or investments by a Xxxxxx
client.
5
4. Employees who apply for an exemption will be expected to disclose to the
Code of Ethics Officer in writing all facts and relationships relating to
the proposed investment.
5. Limited partnership interests are frequently sold in private placements. An
employee should assume that investment in a limited partnership is barred
by these rules, unless the employee has obtained, in advance of purchase, a
written exemption under the ad hoc exemption set forth in Section I.D.,
Rule 2. The procedure for obtaining an ad hoc exemption is described in
Section VII, Part 4.
6. Applications to invest in private placements will be reviewed by the Code
of Ethics Oversight Committee. This review will take into account, among
other factors, the considerations described in the preceding comments.
RULE 4
--------------------------------------------------------------------------------
No Xxxxxx employee shall purchase or sell any security for her personal account
OR FOR ANY XXXXXX CLIENT ACCOUNT while in possession of material, nonpublic
information concerning the security or the issuer.
EXCEPTIONS
NONE. Please read Appendix A. Policy Statement Concerning Xxxxxxx Xxxxxxx
Prohibitions.
RULE 5
--------------------------------------------------------------------------------
No Xxxxxx employee shall purchase from or sell to a Xxxxxx client any securities
or other property for his personal account, nor engage in any personal
transaction to which a Xxxxxx client is known to be a party, or which
transaction may have a significant relationship to any action taken by a Xxxxxx
client.
EXCEPTIONS
None.
IMPLEMENTATION
It shall be the responsibility of every Xxxxxx employee to make inquiry
prior to any personal transaction sufficient to satisfy himself that the
requirements of this Rule have been met.
COMMENT
This rule is required by federal law. It does not prohibit a Xxxxxx
employee from purchasing any shares of an open-end Xxxxxx fund. The policy
with respect to employee trading in closed-end Xxxxxx funds is attached as
Appendix B.
RULE 6
--------------------------------------------------------------------------------
No Xxxxxx employee shall engage in market timing strategies within Xxxxxx mutual
funds, including within Xxxxxx'x Profit Sharing Retirement Plan accounts and
deferred compensation accounts.
EXCEPTIONS
None.
6
COMMENTS
"Market timing" is when a person frequently purchases and sells shares of
mutual funds based upon the activity of equity markets on the days that the
purchases and sales are effected. Xxxxxx has determined that market timing
may have a detrimental effect on the performance of the mutual funds
managed by Xxxxxx, and Xxxxxx has taken steps to reduce instances of market
timing by brokers and shareholders in the mutual funds. Xxxxxx therefore
expects that Xxxxxx employees will avoid making frequent trades into and
out of the Xxxxxx mutual funds, including transactions made within Xxxxxx'x
Profit Sharing Retirement Plan and other deferred compensation vehicles.
C. DISCOURAGED TRANSACTIONS
RULE 1
--------------------------------------------------------------------------------
Xxxxxx employees are strongly discouraged from engaging in naked option
transactions for their personal accounts.
EXCEPTIONS
None.
COMMENT
Naked option transactions are particularly dangerous, because a Xxxxxx
employee may be prevented by the restrictions in this Code of Ethics from
"covering" the naked option at the appropriate time. All employees should
keep in mind the limitations on their personal securities trading imposed
by this Code when contemplating such an investment strategy. Engaging in
naked options transactions on the basis of material, nonpublic information
is prohibited. See Appendix A. Policy Statement Concerning Xxxxxxx Xxxxxxx
Prohibitions.
RULE 2
--------------------------------------------------------------------------------
Xxxxxx employees are strongly discouraged from engaging in excessive trading for
their personal accounts.
EXCEPTIONS
None.
COMMENTS
1. Although a Xxxxxx employee's excessive trading may not itself constitute a
conflict of interest with Xxxxxx clients, Xxxxxx believes that its clients'
confidence in Xxxxxx will be enhanced and the likelihood of Xxxxxx
achieving better investment results for its clients over the long term will
be increased if Xxxxxx employees rely on their investment -- as opposed to
trading -- skills in transactions for their own account. Moreover,
excessive trading by a Xxxxxx employee for his or her own account diverts
an employee's attention from the responsibility of servicing Xxxxxx
clients, and increases the possibilities for transactions that are in
actual or apparent conflict with Xxxxxx client transactions.
2. Although this Rule does not define excessive trading, employees should be
aware that if their trades exceed 10 trades per quarter, the trading
activity will be reviewed by the Code of Ethics Oversight Committee.
7
D. EXEMPTED TRANSACTIONS
RULE 1
--------------------------------------------------------------------------------
Transactions which are involuntary on the part of a Xxxxxx employee are exempt
from the prohibitions set forth in Sections I.A., I.B., and I.C.
EXCEPTIONS
None.
COMMENTS
1. This exemption is based on categories of conduct that the Securities and
Exchange Commission does not consider "abusive."
2. Examples of involuntary personal securities transactions include:
(a) Sales out of the brokerage account of a Xxxxxx employee as a result of
bona fide margin call, provided that withdrawal of collateral by the
Xxxxxx employee within the ten days previous to the margin call was
not a contributing factor to the margin call;
(b) Purchases arising out of an automatic dividend reinvestment program of
an issuer of a publicly traded security.
3. Transactions by a trust in which the Xxxxxx employee (or a member of his
immediate family) holds a beneficial interest, but for which the employee
has no direct or indirect influence or control with respect to the
selection of investments, are involuntary transactions. In addition, these
transactions do not fall within the definition of "personal securities
transactions." See Definitions.
4. A good-faith belief on the part of the employee that a transaction was
involuntary will not be a defense to a violation of the Code of Ethics. In
the event of confusion as to whether a particular transaction is
involuntary, the burden is on the employee to seek a prior written
determination of the applicability of this exemption. The procedures for
obtaining such a determination appear in Section VII, Part 3.
RULE 2
--------------------------------------------------------------------------------
Transactions which have been determined in writing by the Code of Ethics Officer
before the transaction occurs to be no more than remotely potentially harmful to
Xxxxxx clients because the transaction would be very unlikely to affect a highly
institutional market, or because the transaction is clearly not related
economically to the securities to be purchased, sold, or held by a Xxxxxx
client, are exempt from the prohibitions set forth in Sections I.A., I.B., and
I.C.
EXCEPTIONS
N.A.
IMPLEMENTATION
An employee may seek an ad hoc exemption under this Rule by following the
procedures in Section VII, Part 4.
8
COMMENTS
1. This exemption is also based upon categories of conduct that the Securities
and Exchange Commission does not consider "abusive."
2. The burden is on the employee to seek a prior written determination that
the proposed transaction meets the standards for an ad hoc exemption set
forth in this Rule.
9
SECTION II. ADDITIONAL SPECIAL RULES FOR PERSONAL
SECURITIES TRANSACTIONS OF ACCESS PERSONS AND
CERTAIN INVESTMENT PROFESSIONALS
ACCESS PERSONS (INCLUDING ALL INVESTMENT PROFESSIONALS AND OTHER EMPLOYEES
AS DEFINED ON PAGE VI)
RULE 1 ("60-DAY" RULE)
--------------------------------------------------------------------------------
No Access Person shall purchase and then sell at a profit, or sell and then
repurchase at a lower price, any security or related derivative security within
60 calendar days.
EXCEPTIONS
None, unless prior written approval from the Code of Ethics Officer is
obtained. Exceptions may be granted on a case-by-case basis when no abuse
is involved and the equities of the situation support an exemption. For
example, although an Access Person may buy a stock as a long-term
investment, that stock may have to be sold involuntarily due to unforeseen
activity such as a merger.
IMPLEMENTATION
1. The 60-Day Rule applies to all Access Persons, as defined in the
Definitions section of the Code.
2. Calculation of whether there has been a profit is based upon the market
prices of the securities. The calculation is not net of commissions or
other sales charges.
3. As an example, an Access Person would not be permitted to sell a security
at $12 that he purchased within the prior 60 days for $10. Similarly, an
Access Person would not be permitted to purchase a security at $10 that she
had sold within the prior 60 days for $12. If the proposed transaction
would be made at a loss, it would be permitted if the pre-clearance
requirements are met. See Section I, Rule 1.
COMMENTS
1. The prohibition against short-term trading profits by Access Persons is
designed to minimize the possibility that they will capitalize
inappropriately on the market impact of trades involving a client portfolio
about which they might possibly have information.
2. Although Chief Investment Officers, Portfolio Managers, and Analysts may
sell securities at a profit within 60 days of purchase in order to comply
with the requirements of the 7-Day Rule applicable to them (described
below), the profit will have to be disgorged to charity under the terms of
the 7-Day Rule.
3. Access Persons occasionally make a series of transactions in securities
over extended periods of time. For example, an Access Person bought 100
shares of Stock X on Day 1 at $100 per share and then bought 50 additional
shares on Day 45 at $95 per share. On Day 75, the Access Person sold 20
shares at $105 per share. The question arises whether the Access Person
violated the 60-Day Rule. The characterization of the employee's
10
tax basis in the shares sold determines the analysis. If, for personal
income tax purposes, the Access Person characterizes the shares sold as
having a basis of $100 per share (i.e., shares purchased on Day 1), the
transaction would be consistent with the 60-Day Rule. However, if the tax
basis in the shares is $95 per share (i.e., shares purchased on Day 45),
the transaction would violate the 60-Day Rule.
CERTAIN INVESTMENT PROFESSIONALS
RULE 2 ("7-DAY" RULE)
--------------------------------------------------------------------------------
(a) PORTFOLIO MANAGERS: Before a portfolio manager (including a Chief
Investment Officer with respect to an account he manages) places an order
to buy a security for any Xxxxxx client portfolio that he manages, he shall
sell any such security or related derivative security purchased in a
transaction for his personal account within the preceding seven calendar
days.
(b) CO-MANAGERS: Before a portfolio manager places an order to buy a security
for any Xxxxxx client he manages, his co-manager shall sell any such
security or related derivative security purchased in transaction for his
personal account within the preceding seven calendar days.
(c) ANALYSTS: Before an analyst makes a buy recommendation for a security
(including designation of a security for inclusion in the portfolio of the
Xxxxxx Research Fund), he shall sell any such security or related
derivative security purchased in a transaction for his personal account
within the preceding seven calendar days.
EXCEPTIONS
None.
COMMENTS
1. This Rule applies to portfolio managers (including Chief Investment
Officers with respect to accounts they manage) in connection with any
purchase (no matter how small) in any client account managed by that
portfolio manager or CIO (even so-called "clone accounts"). In particular,
it should be noted that the requirements of this rule also apply with
respect to purchases in client accounts, including "clone accounts,"
resulting from "cash flows." To comply with the requirements of this rule,
it is the responsibility of each portfolio manager or CIO to be aware of
the placement of all orders for purchases of a security by client accounts
that he or she manages for 7 days following the purchase of that security
for his or her personal account.
2. An investment professional who must sell securities to be in compliance
with the 7-Day Rule must absorb any loss and disgorge to charity any profit
resulting from the sale.
3. This Rule is designed to avoid even the appearance of a conflict of
interest between an investment professional and a Xxxxxx client. A more
stringent rule is warranted because, with their greater knowledge and
control, these investment professionals are in a better position than other
employees to create an appearance of manipulation of Xxxxxx client accounts
for personal benefit.
4. "Portfolio manager" is used in this Section as a functional label, and is
intended to cover any employee with authority to authorize a trade on
behalf of a Xxxxxx client, whether or not such employee bears the title
"portfolio manager." "Analyst" is also used in this Section as a functional
label, and is intended to cover any employee who is not a portfolio manager
but who may make recommendations regarding investments for Xxxxxx clients.
11
RULE 3 ("BLACKOUT" RULE)
--------------------------------------------------------------------------------
(a) PORTFOLIO MANAGERS: No portfolio manager (including a Chief Investment
Officer with respect to an account she manages) shall (i) sell any security
or related derivative security for her personal account until seven
calendar days have elapsed since the most recent purchase of that security
or related derivative security by any Xxxxxx client portfolio she manages
or co-manages; or (ii) purchase any security or related derivative security
for her personal account until seven calendar days have elapsed since the
most recent sale of that security or related derivative security from any
Xxxxxx client portfolio that she manages or co-manages.
(b) ANALYSTS: No analyst shall (i) sell any security or related derivative
security for his personal account until seven calendar days have elapsed
since his most recent buy recommendation for that security or related
derivative security (including designation of a security for inclusion in
the portfolio of the Xxxxxx Research Fund); or (ii) purchase any security
or related derivative security for his personal account until seven
calendar days have elapsed since his most recent sell recommendation for
that security or related derivative security (including the removal of a
security from the portfolio of the Xxxxxx Research Fund).
EXCEPTIONS
None.
COMMENTS
1. This Rule applies to portfolio managers (including Chief Investment
Officers with respect to accounts they manage) in connection with any
transaction (no matter how small) in any client account managed by that
portfolio manager or CIO (even so-called "clone accounts"). In particular,
it should be noted that the requirements of this rule also apply with
respect to transactions in client accounts, including "clone accounts,"
resulting from "cash flows." In order to comply with the requirements of
this rule, it is the responsibility of each portfolio manager and CIO to be
aware of all transactions in a security by client accounts that he or she
manages that took place within the seven days preceding a transaction in
that security for his or her personal account.
2. This Rule is designed to prevent a Xxxxxx portfolio manager or analyst from
engaging in personal investment conduct that appears to be counter to the
investment strategy she is pursuing or recommending on behalf of a Xxxxxx
client.
3. Trades by a Xxxxxx portfolio manager for her personal account in the "same
direction" as the Xxxxxx client portfolio she manages, and trades by an
analyst for his personal account in the "same direction" as his
recommendation, do not present the same danger, so long as any "same
direction" trades do not violate other provisions of the Code or the Policy
Statements.
RULE 4 ("CONTRA TRADING" RULE)
-------------------------------------------------------------------------------
(a) PORTFOLIO MANAGERS: No portfolio manager shall, without prior clearance,
sell out of his personal account securities or related derivative
securities held in any Xxxxxx client portfolio that he manages or
co-manages.
(b) CHIEF INVESTMENT OFFICERS: No Chief Investment Officer shall, without prior
clearance, sell out of his personal account securities or related
derivative securities held in any Xxxxxx client portfolio managed in his
investment group.
12
EXCEPTIONS
None, unless prior clearance is given.
IMPLEMENTATION
A. INDIVIDUALS AUTHORIZED TO GIVE APPROVAL. Prior to engaging in any such
sale, a portfolio manager shall seek approval, in writing, of the proposed
sale. In the case of a portfolio manager or director, prior written
approval of the proposed sale shall be obtained from a Chief Investment
Officer to whom he reports or, in his absence, another Chief Investment
Officer. In the case of a Chief Investment Officer, prior written approval
of the proposed sale shall be obtained from another Chief Investment
Officer. In addition to the foregoing, prior written approval must also be
obtained from the Code of Ethics Officer.
B. CONTENTS OF WRITTEN APPROVAL. In every instance, the written approval FORM
ATTACHED AS APPENDIX C (or such other form as the Code of Ethics Officer
shall designate) shall be used. The written approval should be signed by
the Chief Investment Officer giving approval and dated the date such
approval was given, and shall state, briefly, the reasons why the trade was
allowed and why the investment conduct pursued by the portfolio manager,
director, or chief investment officer was deemed inappropriate for the
Xxxxxx client account controlled by the individual seeking to engage in the
transaction for his personal account. Such written approval shall be sent
by the Chief Investment Officer approving the transaction to the Code of
Ethics Officer within twenty-four hours or as promptly as circumstances
permit. Approvals obtained after a transaction has been completed or while
it is in process will not satisfy the requirements of this Rule.
COMMENT
This Rule, like Rule 3 of this Section, is designed to prevent a Xxxxxx
portfolio manager from engaging in personal investment conduct that appears
to be counter to the investment strategy that he is pursuing on behalf of a
Xxxxxx client.
RULE 5
--------------------------------------------------------------------------------
No portfolio manager shall cause, and no analyst shall recommend, a Xxxxxx
client to take action for the portfolio manager's or analyst's own personal
benefit.
EXCEPTIONS
None.
COMMENTS
1. A portfolio manager who trades in, or an analyst who recommends, particular
securities for a Xxxxxx client account in order to support the price of
securities in his personal account, or who "front runs" a Xxxxxx client
order is in violation of this Rule. Portfolio managers and analysts should
be aware that this Rule is not limited to personal transactions in
securities (as that word is defined in "Definitions"). Thus, a portfolio
manager or analyst who "front runs" a Xxxxxx client purchase or sale of
obligations of the U.S. government is in violation of this Rule, although
U.S. government obligations are excluded from the definition of "security."
2. This Rule is not limited to instances when a portfolio manager or analyst
has malicious intent. It also prohibits conduct that creates an appearance
of impropriety. Portfolio managers and analysts who have questions about
whether proposed conduct creates an appearance of impropriety should seek a
prior written determination from the Code of Ethics Officer, using the
procedures described in Section VII, Part 3.
13
SECTION III. PROHIBITED CONDUCT FOR ALL EMPLOYEES
RULE 1
--------------------------------------------------------------------------------
All employees must comply with applicable laws and regulations as well as
company policies. This includes tax, antitrust, political contribution, and
international boycott laws. In addition, no employee at Xxxxxx may engage in
fraudulent conduct of any kind.
EXCEPTIONS
None.
COMMENTS
1. Xxxxxx may report to the appropriate legal authorities conduct by Xxxxxx
employees that violates this rule.
2. It should also be noted that the U.S. Foreign Corrupt Practices Act makes
it a criminal offense to make a payment or offer of payment to any non-U.S.
governmental official, political party, or candidate to induce that person
to affect any governmental act or decision, or to assist Xxxxxx'x obtaining
or retaining business.
RULE 2
--------------------------------------------------------------------------------
No Xxxxxx employee shall conduct herself in a manner which is contrary to the
interests of, or in competition with, Xxxxxx or a Xxxxxx client, or which
creates an actual or apparent conflict of interest with a Xxxxxx client.
EXCEPTIONS
None.
COMMENTS
1. This Rule is designed to recognize the fundamental principle that Xxxxxx
employees owe their chief duty and loyalty to Xxxxxx and Xxxxxx clients.
2. It is expected that a Xxxxxx employee who becomes aware of an investment
opportunity that she believes is suitable for a Xxxxxx client who she
services will present it to the appropriate portfolio manager, prior to
taking advantage of the opportunity herself.
RULE 3
--------------------------------------------------------------------------------
No Xxxxxx employee shall seek or accept gifts, favors, preferential treatment,
or special arrangements of material value from any broker-dealer, investment
adviser, financial institution, corporation, or other entity, or from any
existing or prospective supplier of goods or services to Xxxxxx or Xxxxxx funds.
Specifically, any gift over $100 in value, or any accumulation of gifts which in
aggregate exceeds $100 in value from one source in one calendar year, is
prohibited. Any Xxxxxx employee who is offered or receives an item prohibited by
this Rule must report the details in writing to the Code of Ethics Officer.
EXCEPTIONS
None.
14
COMMENTS
1. This rule is intended to permit only proper types of customary business
amenities. Listed below are examples of items that would be permitted under
proper circumstances and of items that are prohibited under this rule.
These examples are illustrative and not all-inclusive. Notwithstanding
these examples, a Xxxxxx employee may not, under any circumstances, accept
anything that could create the appearance of any kind of conflict of
interest. For example, acceptance of any consideration is prohibited if it
would create the appearance of a "reward" or inducement for conducting
Xxxxxx business either with the person providing the gift or his employer.
2. This rule also applies to gifts or "favors" of material value that an
investment professional may receive from a company or other entity being
researched or considered as a possible investment for a Xxxxxx client
account.
3. Among items not considered of "material value" which, under proper
circumstances, would be considered permissible are:
(a) Occasional lunches or dinners conducted for business purposes;
(b) Occasional cocktail parties or similar social gatherings conducted for
business purposes;
(c) Occasional attendance at theater, sporting, or other entertainment
events conducted for business purposes; and
(d) Small gifts, usually in the nature of reminder advertising, such as
pens, calendars, etc., with a value of no more than $100.
4. Among items which are considered of "material value" and which are
prohibited are:
(a) Entertainment of a recurring nature such as sporting events, theater,
golf games, etc.;
(b) The cost of transportation to a locality outside the Boston
metropolitan area, and lodging while in another locality, unless such
attendance and reimbursement arrangements have received advance
written approval of the Code of Ethics Officer;
(c) Personal loans to a Xxxxxx employee on terms more favorable than those
generally available for comparable credit standing and collateral;and
(d) Preferential brokerage or underwriting commissions or spreads or
allocations of shares or interests in an investment for the personal
account of a Xxxxxx employee.
5. As with any of the provisions of the Code of Ethics, a sincere belief by
the employee that he was acting in accordance with the requirements of this
Rule will not satisfy his obligations under the Rule. Therefore, an
employee who is in doubt concerning the propriety of any gift or "favor"
should seek a prior written determination from the Code of Ethics Officer,
as provided in Part 3 of Section VII.
15
RULE 4
--------------------------------------------------------------------------------
No Xxxxxx employee may pay, offer, or commit to pay any amount of consideration
which might be or appear to be a bribe or kickback in connection with Xxxxxx'x
business.
EXCEPTIONS
None.
COMMENT
Although the rule does not specifically address political contributions,
Xxxxxx employees should be aware that it is against corporate policy to use
company assets to fund political contributions of any sort, even where such
contributions may be legal. No Xxxxxx employee should offer or agree to
make any political contributions (including political dinners and similar
fund-raisers) on behalf of Xxxxxx, and no employee will be reimbursed by
Xxxxxx for such contributions made by the employee personally.
RULE 5
--------------------------------------------------------------------------------
No contributions may be made with corporate funds to any political party or
campaign, whether directly or by reimbursement to an employee for the expense of
such a contribution. No Xxxxxx employee shall solicit any charitable, political,
or other contributions using Xxxxxx letterhead or making reference to Xxxxxx in
the solicitation. No Xxxxxx employee shall personally solicit any such
contribution while on Xxxxxx business.
EXCEPTIONS
None.
COMMENTS
1. Xxxxxx has established a political action committee (PAC) that contributes
to worthy candidates for political office. Any request received by a Xxxxxx
employee for a political contribution must be directed to Xxxxxx'x Legal
and Compliance Department.
2. This rule does not prohibit solicitation on personal letterhead by Xxxxxx
employees. Nonetheless, Xxxxxx employees should use discretion in
soliciting contributions from individuals or entities who provide services
to Xxxxxx. There should never be a suggestion that any service provider
must contribute to keep Xxxxxx'x business.
RULE 6
--------------------------------------------------------------------------------
No unauthorized disclosure may be made by any employee or former employee of any
trade secrets or proprietary information of Xxxxxx or of any confidential
information. No information regarding any Xxxxxx client portfolio, actual or
proposed securities trading activities of any Xxxxxx client, or Xxxxxx research
shall be disclosed outside the Xxxxxx organization without a valid business
purpose.
EXCEPTIONS
None.
16
COMMENT
All information about Xxxxxx and Xxxxxx clients is strictly confidential.
Xxxxxx research information should not be disclosed unnecessarily and never
for personal gain.
RULE 7
--------------------------------------------------------------------------------
No Xxxxxx employee shall serve as officer, employee, director, trustee, or
general partner of a corporation or entity other than Xxxxxx, without prior
approval of the Code of Ethics Officer.
EXCEPTION
CHARITABLE OR NON-PROFIT EXCEPTION. This Rule shall not prevent any Xxxxxx
employee from serving as officer, director, or trustee of a charitable or
not-for-profit institution, provided that the employee abides by the spirit
of the Code of Ethics and the Policy Statements with respect to any
investment activity for which she has any discretion or input as officer,
director, or trustee. The pre-clearance and reporting requirements of the
Code of Ethics do not apply to the trading activities of such charitable or
not-for-profit institutions for which an employee serves as an officer,
director, or trustee.
COMMENTS
1. This Rule is designed to ensure that Xxxxxx cannot be deemed an affiliate
of any issuer of securities by virtue of service by one of its officers or
employees as director or trustee.
2. Certain charitable or not-for-profit institutions have assets (such as
endowment funds or employee benefit plans) which require prudent
investment. To the extent that a Xxxxxx employee (because of her position
as officer, director, or trustee of an outside entity) is charged with
responsibility to invest such assets prudently, she may not be able to
discharge that duty while simultaneously abiding by the spirit of the Code
of Ethics and the Policy Statements. Employees are cautioned that they
should not accept service as an officer, director, or trustee of an outside
charitable or not-for-profit entity where such investment responsibility is
involved, without seriously considering their ability to discharge their
fiduciary duties with respect to such investments.
RULE 8
--------------------------------------------------------------------------------
No Xxxxxx employee shall serve as a trustee, executor, custodian, any other
fiduciary, or as an investment adviser or counselor for any account outside
Xxxxxx.
EXCEPTIONS
CHARITABLE OR RELIGIOUS EXCEPTION. This Rule shall not prevent any Xxxxxx
employee from serving as fiduciary with respect to a religious or
charitable trust or foundation, so long as the employee abides by the
spirit of the Code of Ethics and the Policy Statements with respect to any
investment activity over which he has any discretion or input. The
pre-clearance and reporting requirements of the Code of Ethics do not apply
to the trading activities of such a religious or charitable trust or
foundation.
FAMILY TRUST OR ESTATE EXCEPTION. This Rule shall not prevent any Xxxxxx
employee from serving as fiduciary with respect to a family trust or
estate, so long as the employee abides by all of the Rules of the Code of
Ethics with respect to any investment activity over which he has any
discretion.
17
COMMENT
The roles permissible under this Rule may carry with them the obligation to
invest assets prudently. Once again, Xxxxxx employees are cautioned that
they may not be able to fulfill their duties in that respect while abiding
by the Code of Ethics and the Policy Statements.
RULE 9
--------------------------------------------------------------------------------
No Xxxxxx employee may be a member of any investment club.
EXCEPTIONS
None.
COMMENT
This Rule guards against the danger that a Xxxxxx employee may be in
violation of the Code of Ethics and the Policy Statements by virtue of his
personal securities transactions in or through an entity that is not bound
by the restrictions imposed by this Code of Ethics and the Policy
Statements. Please note that this restriction also applies to the spouse of
a Xxxxxx employee and any relatives of a Xxxxxx employee living in the same
household as the employee, as their transactions are covered by the Code of
Ethics (see page 31).
RULE 10
--------------------------------------------------------------------------------
No Xxxxxx employee may become involved in a personal capacity in consultations
or negotiations for corporate financing, acquisitions, or other transactions for
outside companies (whether or not held by any Xxxxxx client), nor negotiate nor
accept a fee in connection with these activities without obtaining the prior
written permission of the president of Xxxxxx Investments.
EXCEPTIONS
None.
RULE 11
--------------------------------------------------------------------------------
No new types of securities or instruments may be purchased for a Xxxxxx fund or
other client account without following the procedures set forth in Appendix D.
EXCEPTIONS
None.
COMMENT
See Appendix D.
18
RULE 12
--------------------------------------------------------------------------------
No employee may create or participate in the creation of any record that is
intended to mislead anyone or to conceal anything that is improper.
EXCEPTIONS
None.
COMMENT
In many cases, this is not only a matter of company policy and ethical
behavior but also required by law. Our books and records must accurately
reflect the transactions represented and their true nature. For example,
records must be accurate as to the recipient of all payments; expense
items, including personal expense reports, must accurately reflect the true
nature of the expense. No unrecorded fund or asset shall be established or
maintained for any reason.
RULE 13
--------------------------------------------------------------------------------
No employee should have any direct or indirect (including by a family member or
close relative) personal financial interest (other than normal investments not
material to the employee in the entity's publicly traded securities) in any
business, with which Xxxxxx has dealings unless such interest is disclosed and
approved by the Code of Ethics Officer.
RULE 14
--------------------------------------------------------------------------------
No employee shall, with respect to any affiliate of Xxxxxx that provides
investment advisory services and is listed below in Comment 4 to this Rule, as
revised from time to time (each a non-Xxxxxx affiliate "NPA"):
(a) Directly or indirectly seek to influence the purchase, retention, or
disposition of, or exercise of voting, consent, approval or similar
rights with respect to, any portfolio security in any account or fund
advised the NPA and not by Xxxxxx,
(b) Transmit any information regarding the purchase, retention or
disposition of, or exercise of voting, consent, approval or similar
rights with respect to, any portfolio security held in a Xxxxxx or NPA
client account to any personnel of the NPA,
(c) Transmit any trade secrets, proprietary information, or confidential
information of Xxxxxx to the NPA without a valid business purpose,
(d) Use confidential information or trade secrets of the NPA for the
benefit of the employee, Xxxxxx, or any other NPA, or
(d) Breach any duty of loyalty to the NPA by virtue of service as a
director or officer of the NPA.
COMMENTS
1. Sections (a) and (b) of the Rule are designed to help ensure that the
portfolio holdings of Xxxxxx clients and clients of the NPA need not be
aggregated for purposes of determining beneficial ownership under Section
13(d) of the Securities Exchange Act or applicable regulatory or
contractual investment restrictions that incorporate such definition of
beneficial ownership. Persons who serve as directors or officers of both
Xxxxxx and an NPA would take care to avoid even inadvertent violations of
Section (b). Section (a) does not prohibit a Xxxxxx employee who serves as
a director or officer of the NPA from seeking to influence the modification
or
19
termination of a particular investment product or strategy in a manner that
is not directed at any specific securities. Sections (a) and (b) do not
apply when a Xxxxxx affiliate serves as an adviser or subadviser to the NPA
or one of its products, in which case normal Xxxxxx aggregation rules
apply.
2. As a separate entity, any NPA may have trade secrets or confidential
information that it would not choose to share with Xxxxxx. This choice must
be respected.
3. When Xxxxxx employees serve as directors or officers of an NPA, they are
subject to common law duties of loyalty to the NPA, despite their Xxxxxx
employment. In general, this means that when performing their duties as NPA
directors or officers, they must act in the best interest of the NPA and
its shareholders. Xxxxxx'x Legal and Compliance Department will assist any
Xxxxxx employee who is a director or officer of an NPA and has questions
about the scope of his or her responsibilities to the NPA.
4. Entities that are currently non-Xxxxxx affiliates within the scope of this
Rule are: Cisalpina Gestioni, S.p.A., PanAgora Asset Management Inc.,
PanAgora Asset Management Ltd., Nissay Asset Management Co., Ltd., Xxxxxx
X. Xxx Partners, L.P., and Sceptre Investment Counsel, Ltd.
RULE 15
--------------------------------------------------------------------------------
No employee shall use computer hardware, software, data, Internet, electronic
mail, voice mail, electronic messaging ("e-mail" or "cc: Mail"), or telephone
communications systems in a manner that is inconsistent with their use as set
forth in policy statements governing their use that are adopted from time to
time by Xxxxxx. No employee shall introduce a computer "virus" or computer code
that may result in damage to Xxxxxx'x information or computer systems.
EXCEPTIONS
None.
COMMENT
Xxxxxx'x policy statements relating to these matters are contained in the
"Computer System and Network Responsibilities" section of the "Employment
Issues" category within the Employee Handbook. The online Employee Handbook
is located in Xxxxxx'x intranet, ibenefitcenter
(xxxxx://xxx.xxxxxxxxxxxxxx.xxx) under the "Policies and Procedures"
section of the "@Xxxxxx" tab.
RULE 16
--------------------------------------------------------------------------------
All employees must follow and abide by the spirit of the Code of Ethics and the
Standards of Professional Conduct of the Association of Investment Management
and Research (AIMR). The texts of the AIMR Code of Ethics and Standards of
Professional Conduct are set forth in Exhibit E.
RULE 17
--------------------------------------------------------------------------------
Except as provided below, no employee may disclose to any outside organization
or person any non-public personal information about any individual who is a
current or former shareholder of any Xxxxxx retail or institutional fund, or
current or former client of a Xxxxxx company. All employees shall follow the
security procedures as established from time to time by a Xxxxxx company to
protect the confidentiality of all shareholder and client account information.
Except as Xxxxxx'x Legal and Compliance Department may expressly authorize, no
employee shall collect any non-public personal information about a prospective
or current shareholder of a Xxxxxx Fund or prospective or current client of a
Xxxxxx company, other than through an account application (or corresponding
information provided by the
20
shareholder's financial representative) or in connection with executing
shareholder or client transactions, nor shall any information be collected other
than the following: name, address, telephone number, Social Security number, and
investment, broker, and transaction information.
EXCEPTIONS
XXXXXX EMPLOYEES. Non-public personal information may be disclosed to
Xxxxxx employees in connection with processing transactions or maintaining
accounts for shareholders of a Xxxxxx fund and clients of a Xxxxxx company,
to the extent that access to such information is necessary to the
performance of that employee's job functions.
SHAREHOLDER CONSENT EXCEPTION. Non-public personal information about a
shareholder's or client's account may be provided to a non-Xxxxxx
organization at the specific request of the shareholder or client or with
the shareholder's or client's prior written consent.
BROKER OR ADVISER EXCEPTION. Non-public personal information about a
shareholder's or client's account may be provided to the shareholder's or
client's broker of record.
THIRD-PARTY SERVICE PROVIDER EXCEPTION. Non-public personal information may
be disclosed to a service provider that is not affiliated with a Xxxxxx
fund or Xxxxxx company only when such disclosure is necessary for the
service provider to perform the specific services contracted for, and only
(a) if the service provider executes Xxxxxx'x standard confidentiality
agreement, or (b) pursuant to an agreement containing a confidentiality
provision that has been approved by the Legal and Compliance Department.
Examples of such service providers include proxy solicitors and proxy vote
tabulators, mail services and providers of other administrative services,
and Information Services Division consultants who have access to non-public
personal information.
COMMENTS
1. Non-public personal information is any information that personally
identifies a shareholder of a Xxxxxx fund or client of a Xxxxxx company and
is not derived from publicly available sources. This privacy policy applies
to shareholders or clients that are individuals, not institutions. However,
as a general matter, all information that we receive about a shareholder of
a Xxxxxx fund or client of a Xxxxxx company shall be treated as
confidential. No employee may sell or otherwise provide shareholder or
client lists or any other information relating to a shareholder or client
to any marketing organization.
2. All Xxxxxx employees with access to shareholder or client account
information must be trained in and follow Xxxxxx'x security procedures
designed to safeguard that information from unauthorized use. For example,
a telephone representative must be trained in and follow Xxxxxx'x security
procedures to verify the identity of a caller requesting account
information.
3. Any questions regarding this privacy policy should be directed to Xxxxxx'x
Legal and Compliance Department. A violation of this policy will be subject
to the sanctions imposed for violations of Xxxxxx'x Code of Ethics.
21
SECTION IV. SPECIAL RULES FOR OFFICERS AND
EMPLOYEES OF XXXXXX INVESTMENTS LIMITED
RULE 1
--------------------------------------------------------------------------------
In situations subject to Section I.A., Rule 1 (Restricted List Personal
Securities Transactions), the Xxxxxx Investments Limited ("PIL") employee must
obtain clearance not only as provided in that rule, but also from PIL's
Compliance Officer or her designee, who must approve the transaction before any
trade is placed and record the approval.
EXCEPTIONS
None.
IMPLEMENTATION
Xxxxxx'x Code of Ethics Administrator in Boston (the "Boston
Administrator") has also been designated the Assistant Compliance Officer
of PIL and has been delegated the right to approve or disapprove personal
securities transactions in accordance with the foregoing requirement.
Therefore, approval from the Code of Ethics Administrator for PIL employees
to make personal securities investments constitutes approval under the Code
of Ethics and also for purposes of compliance with Financial Services
Authority (FSA), the U.K. self-regulatory organization that regulates PIL.
The position of London Code of Ethics Administrator (the "London
Administrator") has also been created (Xxxx Xxxxxx is the current London
Administrator). All requests for clearances must be made by e-mail to the
Boston Administrator copying the London Administrator. The e-mail must
include the number of shares to be bought or sold and the name of the
broker(s) involved. Where time is of the essence clearances can be made by
telephone to the Boston Administrator but they must be followed up by
e-mail.
Both the Boston and London Administrators will maintain copies of all
clearances for inspection by senior management and regulators.
RULE 2
--------------------------------------------------------------------------------
No PIL employee may trade with any broker or dealer unless that broker or dealer
has sent a letter to the London Administrator agreeing to deliver copies of
trade confirmations to PIL. No PIL employee may enter into any margin or any
other special dealing arrangement with any broker-dealer without the prior
written consent of the PIL Compliance Officer.
EXCEPTIONS
None.
22
IMPLEMENTATION
PIL employees will be notified separately of this requirement once a year
by the PIL Compliance Officer, and are required to provide an annual
certification of compliance with the Rule.
All PIL employees must inform the London Administrator of the names of all
brokers and dealers with whom they trade prior to trading. The London
Administrator will send a letter to the broker(s) in question requesting
them to agree to deliver copies of confirms to PIL. The London
Administrator will forward copies of the confirms to the Boston
Administrator. PIL employees may trade with a broker only when the London
Administrator has received the signed agreement from that broker.
RULE 3
--------------------------------------------------------------------------------
For purposes of the Code of Ethics, including Xxxxxx'x Policy Statement on
Xxxxxxx Xxxxxxx Prohibitions, PIL employees must also comply with Part V of the
Criminal Justice Xxx 0000 on insider dealing.
EXCEPTIONS
None.
IMPLEMENTATION
To ensure compliance with U.K. insider dealing legislation, PIL employees
must observe the relevant procedures set forth in PIL's Compliance Manual,
a copy of which is sent to each PIL employee, and sign an annual
certification as to compliance.
23
SECTION V. REPORTING REQUIREMENTS
FOR ALL EMPLOYEES
REPORTING OF PERSONAL SECURITIES TRANSACTIONS
RULE 1
--------------------------------------------------------------------------------
Each Xxxxxx employee shall ensure that broker-dealers send all confirmations of
securities transactions for his personal accounts to the Code of Ethics Officer.
(For the purpose of this Rule, "securities" shall include securities of The
Xxxxx & XxXxxxxx Companies, Inc., and any option on a security or securities
index, including broad-based market indexes.)
EXCEPTIONS
None.
IMPLEMENTATION
Xxxxxx employees must instruct their broker-dealers to send confirmations
to Xxxxxx and must follow up with the broker-dealer on a reasonable basis
to ensure that the instructions are being followed. Xxxxxx employees should
contact the Code of Ethics Administrator to obtain a letter from Xxxxxx
authorizing the setting up of a personal brokerage account. Confirmations
should be submitted to the Code of Ethics Administrator. (Specific
procedures apply to employees of Xxxxxx Investments Limited ("PIL").
Employees of PIL should contact the London Code of Ethics Administrator.)
FAILURE OF A BROKER-DEALER TO COMPLY WITH THE INSTRUCTIONS OF A XXXXXX
EMPLOYEE TO SEND CONFIRMATIONS SHALL BE A VIOLATION BY THE XXXXXX EMPLOYEE
OF THIS RULE.
COMMENTS
1. "Transactions for personal accounts" is defined broadly to include more
than transaction in accounts under an employee's own name. See Definitions.
2. A confirmation is required for all personal securities transactions,
whether or not exempted or excepted by this Code.
3. To the extent that a Xxxxxx employee has investment authority over
securities transactions of a family trust or estate, confirmations of those
transactions must also be made, unless the employee has received a prior
written exception from the Code of Ethics Officer.
24
RULE 2
--------------------------------------------------------------------------------
Every Access Person shall file a quarterly report, within ten calendar days of
the end of each quarter, recording all purchases and sales of any securities for
personal accounts as defined in the Definitions. (For the purpose of this Rule,
"securities" shall include any option on a security or securities index,
including broad-based market indexes.)
EXCEPTIONS
None.
IMPLEMENTATION
All employees required to file such a report will receive by e-mail a blank
form at the end of the quarter from the Code of Ethics Administrator. The
form will specify the information to be reported. The form shall also
contain a representation that employees have complied fully with all
provisions of the Code of Ethics.
COMMENTs
1. The date for each transaction required to be disclosed in the quarterly
report is the trade date for the transaction, not the settlement date.
2. If the requirement to file a quarterly report applies to you and you fail
to report within the required 10-day period, salary increases and bonuses
will be reduced in accordance with guidelines stated in the form.
REPORTING OF PERSONAL SECURITIES HOLDINGS
RULE 3
--------------------------------------------------------------------------------
Access Persons must disclose all personal securities holdings to the Code of
Ethics Officer upon commencement of employment and thereafter on an annual
basis.
EXCEPTIONS
None.
COMMENT
These requirements are mandated by SEC regulations and are designed to
facilitate the monitoring of personal securities transactions. Xxxxxx'x
Code of Ethics Administrator will provide Access Persons with the form for
making these reports and the specific information that must be disclosed at
the time that the disclosure is required.
25
OTHER REPORTING POLICIES
The following rules are designed to ensure that Xxxxxx'x internal Control
and Reporting professionals are aware of all items that might need to be
addressed by Xxxxxx or reported to appropriate entities.
RULE 4
--------------------------------------------------------------------------------
If a Xxxxxx employee suspects that fraudulent or other irregular activity might
be occurring at Xxxxxx, the activity must be reported immediately to the
Managing Director in charge of that employee's business unit. Managing Directors
who are notified of any such activity must immediately report it in writing to
Xxxxxx'x Chief Financial Officer or Xxxxxx'x General Counsel.
RULE 5
--------------------------------------------------------------------------------
Xxxxxx employees must report all communications from regulatory or government
agencies (federal, state, or local) to the Managing Director in charge of their
business unit. Managing Directors who are notified of any such communication
must immediately report it in writing to Xxxxxx'x Chief Financial Officer or
Xxxxxx'x General Counsel.
RULE 6
--------------------------------------------------------------------------------
All claims, circumstances, or situations that come to the attention of a Xxxxxx
employee must be reported through the employee's management structure up to the
Managing Director in charge of the employee's business unit. Managing Directors
who are notified of any such claim, circumstance, or situation that might give
rise to a claim against Xxxxxx for more than $100,000 must immediately report it
in writing to Xxxxxx'x Chief Financial Officer or Xxxxxx'x General Counsel.
RULE 7
--------------------------------------------------------------------------------
All possible violations of law or regulations at Xxxxxx that come to the
attention of a Xxxxxx employee must be reported immediately to the Managing
Director in charge of the employee's business unit. Managing Directors who are
notified of any such activity must immediately report it in writing to Xxxxxx'x
Chief Financial Officer or Xxxxxx'x General Counsel.
RULE 8
--------------------------------------------------------------------------------
Xxxxxx employees must report all requests by anyone for Xxxxxx to participate in
or cooperate with an international boycott to the Managing Director in charge of
their business unit. Managing Directors who are notified of any such request
must immediately report it in writing to Xxxxxx'x Chief Financial Officer or
Xxxxxx'x General Counsel.
26
SECTION VI. EDUCATION REQUIREMENTS
Every Xxxxxx employee has an obligation to fully understand the
requirements of the Code of Ethics. The Rules set forth below are designed
to enhance this understanding.
RULE 1
--------------------------------------------------------------------------------
A copy of the Code of Ethics will be distributed to every Xxxxxx employee
periodically. All Access Persons will be required to certify periodically that
they have read, understood, and will comply with the provisions of the Code of
Ethics, including the Code's Policy Statement Concerning Xxxxxxx Xxxxxxx
Prohibitions.
RULE 2
--------------------------------------------------------------------------------
Every investment professional will attend a meeting periodically at which the
Code of Ethics will be reviewed.
27
SECTION VII. COMPLIANCE AND APPEAL PROCEDURES
1. ASSEMBLY OF RESTRICTED LIST. The Code of Ethics Administrator will
coordinate the assembly and maintenance of the Restricted List. The list
will be assembled each day by 11:30 a.m. Eastern Time. No employee may
engage in a personal securities transaction without prior clearance on any
day, even if the employee believes that the trade will be subject to an
exception. Note that pre-clearance may be obtained after 9:00 a.m. for
purchases or sales of up to 1,000 shares of issuers having a market
capitalization in excess of $5 billion.
2. CONSULTATION OF RESTRICTED LIST. It is the responsibility of each employee
to pre-clear through the pre-clearance system or consult with the Code of
Ethics Administrator prior to engaging in a personal securities
transaction, to determine if the security he proposes to trade is on the
Restricted List and, if so, whether it is subject to the "Large Cap"
limitation. The pre-clearance system and the Code of Ethics Administrator
will be able to tell an employee whether a security is on the Restricted
List. No other information about the Restricted List is available through
the pre-clearance system. The Code of Ethics Administrator shall not be
authorized to answer any questions about the Restricted List, or to render
an opinion about the propriety of a particular personal securities
transaction. Any such questions shall be directed to the Code of Ethics
Officer.
3. REQUEST FOR DETERMINATION. An employee who has a question concerning the
applicability of the Code of Ethics to a particular situation shall request
a determination from the Code of Ethics Officer before engaging in the
conduct or personal securities transaction about which he has a question.
If the question pertains to a personal securities transaction, the request
shall state for whose account the transaction is proposed, the relationship
of that account to the employee, the security proposed to be traded, the
proposed price and quantity, the entity with whom the transaction will take
place (if known), and any other information or circumstances of the trade
that could have a bearing on the Code of Ethics Officer's determination. If
the question pertains to other conduct, the request for determination shall
give sufficient information about the proposed conduct to assist the Code
of Ethics Officer in ascertaining the applicability of the Code. In every
instance, the Code of Ethics Officer may request additional information,
and may decline to render a determination if the information provided is
insufficient.
The Code of Ethics Officer shall make every effort to render a
determination promptly.
No perceived ambiguity in the Code of Ethics shall excuse any violation.
Any person who believes the Code to be ambiguous in a particular situation
shall request a determination from the Code of Ethics Officer.
4. REQUEST FOR AD HOC EXEMPTION. Any employee who wishes to obtain an ad hoc
exemption under Section I.D., Rule 2, shall request from the Code of Ethics
Officer an exemption in writing in advance of the conduct or transaction
sought to be exempted. In the case of a personal securities transaction,
the request for an ad hoc exemption shall give the same information about
the transaction required in a request for determination under Part 3 of
this Section, and shall state why the proposed personal securities
transaction would be unlikely to affect a highly institutional market, or
is unrelated economically to securities to be purchased, sold, or held by
any Xxxxxx client. In the case of other conduct, the request shall give
information sufficient for the Code of Ethics Officer to ascertain whether
the conduct raises questions of propriety or conflict of interest (real or
apparent).
The Code of Ethics Officer shall make every effort to promptly render a
written determination concerning the request for an ad hoc exemption.
28
5. APPEAL TO CODE OF ETHICS OFFICER WITH RESPECT TO RESTRICTED LIST. If an
employee ascertains that a security that he wishes to trade for his
personal account appears on the Restricted List, and thus the transaction
is prohibited, he may appeal the prohibition to the Code of Ethics Officer
by submitting a written memorandum containing the same information as would
be required in a request for a determination. The Code of Ethics Officer
shall make every effort to respond to the appeal promptly.
6. INFORMATION CONCERNING IDENTITY OF COMPLIANCE PERSONNEL. The names of Code
of Ethics personnel are available by contacting the Legal and Compliance
Department.
29
APPENDIX A. POLICY STATEMENT CONCERNING XXXXXXX XXXXXXX PROHIBITIONS
PREAMBLE
Xxxxxx has always forbidden trading on material nonpublic information ("inside
information") by its employees. Tougher federal laws make it important for
Xxxxxx to restate that prohibition in the strongest possible terms, and to
establish, maintain, and enforce written policies and procedures to prevent the
misuse of material nonpublic information.
Unlawful trading while in possession of inside information can be a crime.
Today, federal law provides that an individual convicted of trading on inside
information go to jail for some period of time. There is also significant
monetary liability for an inside trader; the Securities and Exchange Commission
can seek a court order requiring a violator to pay back profits and penalties of
up to three times those profits. In addition, private plaintiffs can seek
recovery for harm suffered by them. The inside trader is not the only one
subject to liability. In certain cases, "controlling persons" of inside traders
(including supervisors of inside traders or Xxxxxx itself) can be liable for
large penalties.
Section 1 of this Policy Statement contains rules concerning inside information.
Section 2 contains a discussion of what constitutes unlawful xxxxxxx xxxxxxx.
Neither material nonpublic information nor unlawful xxxxxxx xxxxxxx is easy to
define. Section 2 of this Policy Statement gives a general overview of the law
in this area. However, the legal issues are complex and MUST BE RESOLVED BY THE
CODE OF ETHICS OFFICER. If an employee has any doubt as to whether she has
received material nonpublic information, she must consult with the Code of
Ethics Officer prior to using that information in connection with the purchase
or sale of a security for his own account or the account of any Xxxxxx client,
or communicating the information to others. A SIMPLE RULE OF THUMB IS IF YOU
THINK THE INFORMATION IS NOT AVAILABLE TO THE PUBLIC AT LARGE, DON'T DISCLOSE IT
TO OTHERS AND DON'T TRADE SECURITIES TO WHICH THE INSIDE INFORMATION RELATES. If
an employee has failed to consult the Code of Ethics Officer, Xxxxxx will not
excuse employee misuse of inside information on the ground that the employee
claims to have been confused about this Policy Statement or the nature of the
information in his possession.
If Xxxxxx determines, in its sole discretion, that an employee has failed to
abide by this Policy Statement, or has engaged in conduct that raises a
significant question concerning xxxxxxx xxxxxxx, he will be subject to
disciplinary action, including termination of employment.
THERE ARE NO EXCEPTIONS TO THIS POLICY STATEMENT AND NO ONE IS EXEMPT.
30
DEFINITIONS: XXXXXXX XXXXXXX
Gender references in Appendix A alternate.
CODE OF ETHICS ADMINISTRATOR. The individual designated by the Code of Ethics
Officer to assume responsibility for day-to-day, non-discretionary
administration of this Policy Statement.
CODE OF ETHICS OFFICER. The Xxxxxx officer who has been assigned the
responsibility of enforcing and interpreting this Policy Statement. The Code of
Ethics Officer shall be the General Counsel or such other person as is
designated by the President of Xxxxxx Investments. If he is unavailable, the
Deputy Code of Ethics Officer (to be appointed by the Code of Ethics Officer)
shall act in his stead.
IMMEDIATE FAMILY. Spouse, minor children, or other relatives living in the same
household as the Xxxxxx employee.
PURCHASE OR SALE OF A SECURITY. Any acquisition or transfer of any interest in
the security for direct or indirect consideration, including the writing of an
option.
XXXXXX. Any or all of Xxxxxx Investments, and its subsidiaries, any one
of which shall be a "Xxxxxx company."
XXXXXX CLIENT. Any of the Xxxxxx Funds, or any advisory or trust client of
Xxxxxx.
XXXXXX EMPLOYEE (OR "EMPLOYEE"). Any employee of Xxxxxx.
SECURITY. Anything defined as a security under federal law. The term includes
any type of equity or debt security, any interest in a business trust or
partnership, and any rights relating to a security, such as put and call
options, warrants, convertible securities, and securities indices. (Note: The
definition of "security" in this Policy Statement varies significantly from that
in the Code of Ethics. For example, the definition in this Policy Statement
specifically includes securities of The Xxxxx & XxXxxxxx Companies, Inc.)
TRANSACTION FOR A PERSONAL ACCOUNT (OR "PERSONAL SECURITIES TRANSACTION").
Securities transactions (a) for the personal account of any employee; (b) for
the account of a member of the immediate family of any employee; (c) for the
account of a partnership in which a Xxxxxx employee or immediate family member
is a partner with investment discretion; (d) for the account of a trust in which
a Xxxxxx employee or immediate family member is a trustee with investment
discretion; (e) for the account of a closely-held corporation in which a Xxxxxx
employee or immediate family member holds shares and for which he has investment
discretion; and (f) for any account other than a Xxxxxx client account which
receives investment advice of any sort from the employee or immediate family
member, or as to which the employee or immediate family member has investment
discretion.
Officers and employees of Xxxxxx Investments Limited ("PIL") must also consult
the relevant procedures on compliance with U.K. insider dealing legislation set
forth in PIL's Compliance Manual (see Rule 3 of Section IV of the Code of
Ethics).
31
SECTION 1. RULES CONCERNING INSIDE INFORMATION
RULE 1
--------------------------------------------------------------------------------
No Xxxxxx employee shall purchase or sell any security listed on the Inside
Information List (the "Red List") either for his personal account or for a
Xxxxxx client.
IMPLEMENTATION
When an employee contacts the Code of Ethics Administrator seeking
clearance for a personal securities transaction, the Code of Ethics
Administrator's response as to whether a security appears on the Restricted
List will include securities on the Red List.
COMMENT
This Rule is designed to prohibit any employee from trading a security
while Xxxxxx may have inside information concerning that security or the
issuer. EVERY TRADE, WHETHER FOR A PERSONAL ACCOUNT OR FOR A XXXXXX CLIENT,
IS SUBJECT TO THIS RULE.
RULE 2
--------------------------------------------------------------------------------
No Xxxxxx employee shall purchase or sell any security, either for a personal
account or for the account of a Xxxxxx client, while in possession of material,
nonpublic information concerning that security or the issuer, without the prior
written approval of the Code of Ethics Officer.
IMPLEMENTATION
In order to obtain prior written approval of the Code of Ethics Officer, a
Xxxxxx employee should follow the reporting steps prescribed in Rule 3.
COMMENTS
1. Rule 1 concerns the conduct of an employee when Xxxxxx possesses material
nonpublic information. Rule 2 concerns the conduct of an employee who
herself possesses material, nonpublic information about a security that is
not yet on the Red List.
2. If an employee has any question as to whether information she possesses is
material and/or nonpublic information, she must contact the Code of Ethics
Officer in accordance with Rule 3 prior to purchasing or selling any
security related to the information or communicating the information to
others. The Code of Ethics Officer shall have the sole authority to
determine what constitutes material, nonpublic information for the purposes
of this Policy Statement. An employee's mistaken belief that the
information was not material nonpublic information will not excuse a
violation of this Policy Statement.
32
RULE 3
--------------------------------------------------------------------------------
Any Xxxxxx employee who believes he may have received material, nonpublic
information concerning a security or the issuer shall immediately report the
information to the Code of Ethics Officer and to no one else. After reporting
the information, the Xxxxxx employee shall comply strictly with Rule 2 by not
trading in the security without the prior written approval of the Code of Ethics
Officer and shall (a) take precautions to ensure the continued confidentiality
of the information; and (b) refrain from communicating the information in
question to any person.
EXCEPTION
This rule shall not apply to material, nonpublic information obtained by
Xxxxxx employees who are directors or trustees of publicly traded
companies, to the extent that such information is received in their
capacities as directors or trustees, and then only to the extent such
information is not communicated to anyone else within the Xxxxxx
organization.
IMPLEMENTATION
1. In order to make any use of potential material, nonpublic information,
including purchasing or selling a security or communicating the information
to others, an employee must communicate that information to the Code of
Ethics Officer in a way designed to prevent the spread of such information.
Once the employee has reported potential material, nonpublic information to
the Code of Ethics Officer, the Code of Ethics Officer will evaluate
whether information constitutes material, nonpublic information, and
whether a duty exists that makes use of such information improper. If the
Code of Ethics Officer determines either (a) that the information is not
material or is public, or (b) that use of the information is proper, he
will issue a written approval to the employee specifically authorizing
trading while in possession of the information, if the employee so
requests. If the Code of Ethics Officer determines (a) that the information
may be nonpublic and material, and (b) that use of such information may be
improper, he will place the security that is the subject of such
information on the Red List.
2. An employee who reports potential inside information to the Code of Ethics
Officer should expect that the Code of Ethics Officer will need significant
information to make the evaluation described in the foregoing paragraph,
including information about (a) the manner in which the employee acquired
the information, and (b) the identity of individuals to whom the employee
has revealed the information, or who have otherwise learned the
information. The Code of Ethics Officer may place the affected security or
securities on the Red List pending the completion of his evaluation.
3. If an employee possesses documents, disks, or other materials containing
the potential inside information, an employee must take precautions to
ensure the confidentiality of the information in question. Those
precautions include (a) putting documents containing such information out
of the view of a casual observer, and (b) securing files containing such
documents or ensuring that computer files reflecting such information are
secure from viewing by others.
33
SECTION 2. OVERVIEW OF XXXXXXX XXXXXXX
A. INTRODUCTION
This section of the Policy Statement provides guidelines for employees as
to what may constitute inside information. It is possible that in the
course of her employment, an employee may receive inside information. No
employee should misuse that information, either by trading for her own
account or by communicating the information to others.
B. WHAT CONSTITUTES UNLAWFUL XXXXXXX XXXXXXX?
The basic definition of unlawful xxxxxxx xxxxxxx is trading on material,
nonpublic information (also called "inside information") by an individual
who has a duty not to "take advantage" of the information. What does this
definition mean? The following sections help explain the definition.
1. WHAT IS MATERIAL INFORMATION?
Trading on inside information is not a basis for liability unless the
information is material. Information is "material" if a reasonable person
would attach importance to the information in determining his course of
action with respect to a security. Information which is reasonably likely
to affect the price of a company's securities is "material," but effect on
price is not the sole criterion for determining materiality. Information
that employees should consider material includes but is not limited to:
dividend changes, earnings estimates, changes in previously released
earnings estimates, reorganization, recapitalization, asset sales, plans to
commence a tender offer, merger or acquisition proposals or agreements,
major litigation, liquidity problems, significant contracts, and
extraordinary management developments.
Material information does not have to relate to a company's business. For
example, a court considered as material certain information about the
contents of a forthcoming newspaper column that was expected to affect the
market price of a security. In that case, a reporter for The Wall Street
Journal was found criminally liable for disclosing to others the dates that
reports on various companies would appear in the Journal's "Heard on the
Street" column and whether those reports would be favorable or not.
2. WHAT IS NONPUBLIC INFORMATION?
Information is nonpublic until it has been effectively communicated to, and
sufficient opportunity has existed for it to be absorbed by, the
marketplace. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the Securities and Exchange Commission, or appearing in Dow
Xxxxx, Reuters Economic Services, The Wall Street Journal, or other
publications of general circulation would be considered public.
3. WHO HAS A DUTY NOT TO "TAKE ADVANTAGE" OF INSIDE INFORMATION?
Unlawful xxxxxxx xxxxxxx occurs only if there is a duty not to "take
advantage" of material nonpublic information. When there is no such duty,
it is permissible to trade while in possession of such information.
Questions as to whether a duty exists are complex, fact-specific, and must
be answered by a lawyer.
INSIDERS AND TEMPORARY INSIDERS. Corporate "insiders" have a duty not to
take advantage of inside information. The concept of "insider" is broad. It
includes officers, directors, and employees of a corporation. In addition,
a person can be a "temporary insider" if she enters into a special
confidential relationship with a corporation and
34
as a result is given access to information concerning the corporation's
affairs. A temporary insider can include, among others, accounting firms,
consulting firms, law firms, banks, and the employees of such
organizations. Xxxxxx would generally be a temporary insider of a
corporation it advises or for which it performs other services, because
typically Xxxxxx clients expect Xxxxxx to keep any information disclosed to
it confidential.
EXAMPLE
An investment adviser to the pension fund of a large publicly-traded
corporation, Acme, Inc., learns from an Acme employee that Acme will not be
making the minimum required annual contribution to the pension fund because
of a serious downturn in Acme's financial situation. The information
conveyed is material and nonpublic.
COMMENT
Neither the investment adviser, its employees, nor clients can trade on the
basis of that information, because the investment adviser and its employees
could be considered "temporary insiders" of Acme.
MISAPPROPRIATORS. Certain people who are not insiders (or temporary
insiders) also have a duty not to deceptively take advantage of inside
information. Included in this category is an individual who
"misappropriates" (or takes for his own use) material, nonpublic
information in violation of a duty owed either to the corporation that is
the subject of inside information or some other entity. Such a
misappropriator can be held liable if he trades while in possession of that
material, nonpublic information.
EXAMPLE
The chief financial officer of Acme, Inc., is aware of Acme's plans to
engage in a hostile takeover of Profit, Inc. The proposed hostile takeover
is material and nonpublic.
COMMENT
The chief financial officer of Acme cannot trade in Profit, Inc.'s stock
for his own account. Even though he owes no duty to Profit, Inc., or its
shareholders, he owes a duty to Acme not to "take advantage" of the
information about the proposed hostile takeover by using it for his
personal benefit.
TIPPERS AND TIPPEES. A person (the "tippee") who receives material,
nonpublic information from an insider or misappropriator (the "tipper") has
a duty not to trade while in possession of that information if he knew or
should have known that the information was provided by the tipper for an
improper purpose and in breach of a duty owed by the tipper. In this
context, it is an improper purpose for a person to provide such information
for personal benefit, such as money, affection, or friendship.
EXAMPLE
The chief executive officer of Acme, Inc., tells his daughter that
negotiations concerning a previously-announced acquisition of Acme have
been terminated. This news is material and, at the time the father tells
his daughter, nonpublic. The daughter sells her shares of Acme.
COMMENT
The father is a tipper because he has a duty to Acme and its shareholders
not to "take advantage" of the information concerning the breakdown of
negotiations, and he has conveyed the information for an "improper" purpose
(here, out of love and affection for his daughter). The daughter is a
"tippee" and is liable for trading on
35
inside information because she knew or should have known that her father
was conveying the information to her for his personal benefit, and that her
father had a duty not to "take advantage" of Acme information.
A person can be a tippee even if he did not learn the information directly
from the tipper, but learned it from a previous tippee.
EXAMPLE
An employee of a law firm which works on mergers and acquisitions learns at
work about impending acquisitions. She tells her friend and her friend's
stockbroker about the upcoming acquisitions on a regular basis. The
stockbroker tells the brother of a client on a regular basis, who in turn
tells two friends, A and B. A and B buy shares of the companies being
acquired before public announcement of the acquisition, and regularly
profit from such purchases. A and B do not know the employee of the law
firm. They do not, however, ask about the source of the information.
COMMENT
A and B, although they have never heard of the tipper, are tippees because
they did not ask about the source of the information, even though they were
experienced investors, and were aware that the "tips" they received from
this particular source were always right.
WHO CAN BE LIABLE FOR XXXXXXX XXXXXXX?
The categories of individuals discussed above (insiders, temporary
insiders, misappropriators, or tippees) can be liable if they trade while
in possession of material nonpublic information.
In addition, individuals other than those who actually trade on inside
information can be liable for trades of others. A tipper can be liable if
(a) he provided the information in exchange for a personal benefit in
breach of a duty and (b) the recipient of the information (the "tippee")
traded while in possession of the information.
Most importantly, a controlling person can be liable if the controlling
person "knew or recklessly disregarded" the fact that the controlled person
was likely to engage in misuse of inside information and failed to take
appropriate steps to prevent it. Xxxxxx is a "controlling person" of its
employees. In addition, certain supervisors may be "controlling persons" of
those employees they supervise.
EXAMPLE
A supervisor of an analyst learns that the analyst has, over a long period
of time, secretly received material inside information from Acme, Inc.'s
chief financial officer. The supervisor learns that the analyst has engaged
in a number of trades for his personal account on the basis of the inside
information. The supervisor takes no action.
COMMENT
Even if he is not liable to a private plaintiff, the supervisor can be
liable to the Securities and Exchange Commission for a civil penalty of up
to three times the amount of the analyst's profit. (Penalties are discussed
in the following section.)
36
D. PENALTIES FOR XXXXXXX XXXXXXX
Penalties for misuse of inside information are severe, both for individuals
involved in such unlawful conduct and their employers. A person who
violates the xxxxxxx xxxxxxx laws can be subject to some or all of the
penalties below, even if he does not personally benefit from the violation.
Penalties include:
* Jail sentences (of which at least one to three years must be served)
* Criminal penalties for individuals of up to $1,000,000, and for
corporations of up to $2,500,000
* Injunctions permanently preventing an individual from working in the
securities industry
* Injunctions ordering an individual to pay over profits obtained from
unlawful xxxxxxx xxxxxxx
* Civil penalties of up to three times the profit gained or loss avoided
by the trader, even if the individual paying the penalty did not trade
or did not benefit personally
* Civil penalties for the employer or other controlling person of up to
the greater of $1,000,000 or three times the amount of profit gained
or loss avoided
* Damages in the amount of actual losses suffered by other participants
in the market for the security at issue
Regardless of whether penalties or money damages are sought by others,
Xxxxxx will take whatever action it deems appropriate (including dismissal)
if Xxxxxx determines, in its sole discretion, that an employee appears to
have committed any violation of this Policy Statement, or to have engaged
in any conduct which raises significant questions about whether an xxxxxxx
xxxxxxx violation has occurred.
37
APPENDIX B. POLICY STATEMENT REGARDING EMPLOYEE TRADES IN SHARES OF XXXXXX
CLOSED-END FUNDS
1. PRE-CLEARANCE FOR ALL EMPLOYEES
Any purchase or sale of Xxxxxx closed-end fund shares by a Xxxxxx employee
must be pre-cleared by the Code of Ethics Officer or, in his absence, the
Deputy Code of Ethics Officer. A list of the closed-end funds can be
obtained from the Code of Ethics Administrator. Trading in shares of
closed-end funds is subject to all the rules of the Code of Ethics.
2. SPECIAL RULES APPLICABLE TO MANAGING DIRECTORS OF XXXXXX INVESTMENT
MANAGEMENT, LLC AND OFFICERS OF THE XXXXXX FUNDS
Please be aware that any employee who is a Managing Director of Xxxxxx
Investment Management, LLC (the investment manager of the Xxxxxx mutual
funds) and officers of the Xxxxxx funds will not receive clearance to
engage in any combination of purchase and sale or sale and purchase of the
shares of a given closed-end fund within six months of each other.
Therefore, purchases should be made only if you intend to hold the shares
more than six months; no sales of fund shares should be made if you intend
to purchase additional shares of that same fund within six months.
You are also required to file certain forms with the Securities and
Exchange Commission in connection with purchases and sales of Xxxxxx
closed-end funds. Please contact the Code of Ethics Officer or Deputy Code
of Ethics Officer for further information.
3. REPORTING BY ALL EMPLOYEES
As with any purchase or sale of a security, duplicate confirmations of all
such purchases and sales must be forwarded to the Code of Ethics Officer by
the broker-dealer utilized by an employee. If you are required to file a
quarterly report of all personal securities transactions, this report
should include all purchases and sales of closed-end fund shares.
Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer
if there are any questions regarding these matters.
38
APPENDIX C. CLEARANCE FORM FOR
PORTFOLIO MANAGER SALES OUT OF PERSONAL
ACCOUNT OF SECURITIES ALSO HELD BY FUND
(FOR COMPLIANCE WITH "CONTRA-TRADING" RULE)
TO: Code of Ethics Officer
FROM:
--------------------------------------------------------------------------
DATE:
--------------------------------------------------------------------------
RE: Personal Securities Transaction of:
--------------------------------------------------------------------------
This serves as prior written approval of the personal securities transaction
described below:
NAME OF PORTFOLIO MANAGER CONTEMPLATING PERSONAL TRADE:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SECURITY TO BE TRADED:
--------------------------------------------------------------------------
AMOUNT TO BE TRADED:
--------------------------------------------------------------------------
FUND HOLDING SECURITIES:
--------------------------------------------------------------------------
AMOUNT HELD BY FUND:
--------------------------------------------------------------------------
REASON FOR PERSONAL TRADE:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SPECIFIC REASON SALE OF SECURITIES IS INAPPROPRIATE FOR FUND:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(Please attach additional sheets if necessary.)
CIO APPROVAL: DATE:
--------------------------------------------------------------------------
LEGAL/COMPLIANCE APPROVAL: DATE:
--------------------------------------------------------------------------
39
APPENDIX D. PROCEDURES FOR APPROVAL
OF NEW FINANCIAL INSTRUMENTS
1. SUMMARY
x. Xxxxxx has adopted procedures for the introduction of new instruments
and securities, focusing on, but not limited to, derivatives.
b. No new types of securities or instruments may be purchased for any
Xxxxxx fund or other client account without the approval of Xxxxxx'x
New Securities Review Committee ("NSRC").
x. Xxxxxx publishes from time to time a list of approved derivatives. The
purchase of any derivative not listed is prohibited without specific
authorization from the NSRC.
2. PROCEDURES
a. INTRODUCTION. The purchase and sale of financial instruments that have
not been used previously at Xxxxxx raise significant investment,
business, operational, and compliance issues. In order to address
these issues in a comprehensive manner, Xxxxxx has adopted the
following procedures for obtaining approval of the use of new
instruments or investments. In addition, to provide guidance regarding
the purchase of derivatives, Xxxxxx publishes from time to time a list
of approved derivatives. Only derivatives listed may be used for
Xxxxxx funds or accounts unless specifically authorized by the NSRC.
b. PROCESS OF APPROVAL. An investment professional wishing to purchase a
new type of investment should discuss it with the Chief Operating
Officer of the Investment Division (currently Xxxxx Xxxxxxxxx). After
a review, the NSRC will then approve or disapprove the proposed new
investment. INVESTMENT PROFESSIONALS MUST BUILD IN ADEQUATE TIME FOR
THIS REVIEW BEFORE PLANNED USE OF A NEW INSTRUMENT. Further, the
approval of the NSRC is only a general one. Individual fund and
account guidelines must be reviewed in accordance with standard
compliance procedures to determine whether purchase is permitted. In
addition, if the instrument involves legal documentation, that
documentation must be reviewed and be completed before trading. The
NSRC may prepare a compliance and operational manual for the new
derivative.
3. VIOLATIONS
x. Xxxxxx'x Operating Committee has determined that adherence to rigorous
internal controls and procedures for novel securities and instruments
is necessary to protect Xxxxxx'x business standing and reputation.
VIOLATION OF THESE PROCEDURES WILL BE TREATED AS VIOLATION OF BOTH
COMPLIANCE GUIDELINES AND XXXXXX'X CODE OF ETHICS. Xxxxxx encourages
questions and expects that these guidelines will be interpreted
conservatively.
40
APPENDIX E. AIMR CODE OF ETHICS
AND STANDARDS OF PROFESSIONAL CONDUCT
THE CODE OF ETHICS (FULL TEXT)
Members of the Association for Investment Management and Research shall:
1. Act with integrity, competence, dignity, and in an ethical manner when
dealing with the public, clients, prospects, employers, employees, and
fellow members.
2. Practice and encourage others to practice in a professional and ethical
manner that will reflect credit on members and their profession.
3. Strive to maintain and improve their competence and the competence of
others in the profession.
4. Use reasonable care and exercise independent professional judgment.
THE STANDARDS OF PROFESSIONAL CONDUCT
All members of the Association for Investment Management and Research and
the holders of and candidates for the Chartered Financial Analyst
designation are obligated to conduct their activities in accordance with
the following Code of Ethics. Disciplinary sanctions may be imposed for
violations of the Code and Standards.
I. Fundamental Responsibilities
II. Relationships with and Responsibilities to the Profession
III. Relationships with and Responsibilities to the Employer
IV. Relationships with and Responsibilities to Clients and Prospects
V. Relationships with and Responsibilities to the Public
41
STANDARD I: FUNDAMENTAL RESPONSIBILITIES
Members shall:
A. Maintain knowledge of and comply with all applicable laws, rules, and
regulations (including AIMR's Code of Ethics and Standards of Professional
Conduct) of any government, governmental agency, regulatory organization,
licensing agency, or professional association governing the members'
professional activities.
B. Not knowingly participate in or assist any violation of such laws, rules,
or regulations.
STANDARD II: RELATIONSHIPS WITH AND RESPONSIBILITIES TO THE PROFESSION
A. Use of Professional Designation
1. AIMR members may reference their membership only in a dignified and
judicious manner. The use of the reference may be accompanied by an
accurate explanation of the requirements that have been met to obtain
membership in these organizations.
2. Those who have earned the right to use the Chartered Financial Analyst
designation may use the marks "Chartered Financial Analyst" or "CFA"
and are encouraged to do so, but only in a proper, dignified, and
judicious manner. The use of the designation may be accompanied by an
accurate explanation of the requirements that have been met to obtain
the right to use the designation.
3. Candidates in the CFA Program, as defined in the AIMR Bylaws, may
reference their participation in the CFA Program, but the reference
must clearly state that an individual is a candidate in the CFA
Program and cannot imply that the candidate has achieved any type of
partial designation.
B. Professional Misconduct
1. Members shall not engage in any professional conduct involving
dishonesty, fraud, deceit, or misrepresentation or commit any act that
reflects adversely on their honesty, trustworthiness, or professional
competence.
2. Members and candidates shall not engage in any conduct or commit any
act that compromises the integrity of the CFA designation or the
integrity or validity of the examinations leading to the award of the
right to use the CFA designation.
C. Prohibition against Plagiarism
Members shall not copy or use, in substantially the same form as the
original, material prepared by another without acknowledging and
identifying the name of the author, publisher, or source of such material.
Members may use, without acknowledgment, factual information published by
recognized financial and statistical reporting services or similar sources.
42
STANDARD III: RELATIONSHIPS WITH AND RESPONSIBILITIES TO THE EMPLOYER
A. Obligation to Inform Employer of Code and Standards. Members shall:
1. Inform their employer in writing, through their direct supervisor,
that they are obligated to comply with the Code and Standards and are
subject to disciplinary sanctions for violations thereof.
2. Deliver a copy of the Code and Standards to their employer if the
employer does not have a copy.
B. Duty to Employer. Members shall not undertake any independent practice that
could result in compensation or other benefit in competition with their
employer unless they obtain written consent from both their employer and
the persons or entities for whom they undertake independent practice.
C. Disclosure of Conflicts to Employer. Members shall:
1. Disclose to their employer all matters, including beneficial ownership
of securities or other investments, that reasonably could be expected
to interfere with their duty to their employer or ability to make
unbiased and objective recommendations.
2. Comply with any prohibitions on activities imposed by their employer
if a conflict of interest exists.
D. Disclosure of Additional Compensation Arrangements. Members shall disclose
to their employer in writing all monetary compensation or other benefits
that they receive for their services that are in addition to compensation
or benefits conferred by a member's employer.
E. Responsibilities of Supervisors. Members with supervisory responsibility,
authority, or the ability to influence the conduct of others shall exercise
reasonable supervision over those subject to their supervision or authority
to prevent any violation of applicable statutes, regulations, or provisions
of the Code and Standards. In so doing, members are entitled to rely on
reasonable procedures to detect and prevent such violations.
STANDARD IV: RELATIONSHIPS WITH AND RESPONSIBILITIES TO CLIENTS AND
PROSPECTS
A. Investment Process
A.1. Reasonable Basis and Representations. Members shall:
a. Exercise diligence and thoroughness in making investment
recommendations or in taking investment actions.
b. Have a reasonable and adequate basis, supported by appropriate
research and investigation, for such recommendations or actions.
c. Make reasonable and diligent efforts to avoid any material
misrepresentation in any research report or investment
recommendation.
d. Members shall maintain appropriate records to support the
reasonableness of such recommendations or actions.
A.2. Research Reports. Members shall:
a. Use reasonable judgment regarding the inclusion or exclusion of
relevant factors in research reports.
43
b. Distinguish between facts and opinions in research reports.
c. Indicate the basic characteristics of the investment involved
when preparing for public distribution a research report that is
not directly related to a specific portfolio or client.
A.3. Independence and Objectivity. Members shall use reasonable care and
judgment to achieve and maintain independence and objectivity in
making investment recommendations or taking investment action.
B. Interactions with Clients and Prospects
B.1. Fiduciary Duties. In relationships with clients, members shall use
particular care in determining applicable fiduciary duty and shall
comply with such duty as to those persons and interests to whom the
duty is owed. Members must act for the benefit of their clients and
place their clients' interests before their own.
B.2. Portfolio Investment Recommendations and Actions. Members shall:
a. Make a reasonable inquiry into a client's financial situation,
investment experience, and investment objectives prior to making
any investment recommendations and shall update this information
as necessary, but no less frequently than annually, to allow the
members to adjust their investment recommendations to reflect
changed circumstances.
b. Consider the appropriateness and suitability of investment
recommendations or actions for each portfolio or client. In
determining appropriateness and suitability, members shall
consider applicable relevant factors, including the needs and
circumstances of the portfolio or client, the basic
characteristics of the investment involved, and the basic
characteristics of the total portfolio. Members shall not make a
recommendation unless they reasonably determine that the
recommendation is suitable to the client's financial situation,
investment experience, and investment objectives.
c. Distinguish between facts and opinions in the presentation of
investment recommendations.
d. Disclose to clients and prospects the basic format and general
principles of the investment processes by which securities are
selected and portfolios are constructed and shall promptly
disclose to clients and prospects any changes that might
significantly affect those processes.
B.3. Fair Dealing. Members shall deal fairly and objectively with all
clients and prospects when disseminating investment recommendations,
disseminating material changes in prior investment recommendations,
and taking investment action.
B.4. Priority of Transactions. Transactions for clients and employers shall
have priority over transactions in securities or other investments of
which a member is the beneficial owner so that such personal
transactions do not operate adversely to their clients' or employer's
interests. If members make a recommendation regarding the purchase or
sale of a security or other investment, they shall give their clients
and employer adequate opportunity to act on their recommendations
before acting on their own behalf. For purposes of the Code and
Standards, a member is a "beneficial owner" if the member has
a. a direct or indirect pecuniary interest in the securities;
b. the power to vote or direct the voting of the shares of the
securities or investments;
c. the power to dispose or direct the disposition of the security or
investment.
44
B.5. Preservation of Confidentiality. Members shall preserve the
confidentiality of information communicated by clients, prospects, or
employers concerning matters within the scope of the client-member,
prospect-member, or employer-member relationship unless a member
receives information concerning illegal activities on the part of the
client, prospect, or employer.
B.6. Prohibition against Misrepresentation. Members shall not make any
statements, orally or in writing, that misrepresent
a. the services that they or their firms are capable of performing;
b. their qualifications or the qualifications of their firm;
c. the member's academic or professional credentials.
Members shall not make or imply, orally or in writing, any assurances
or guarantees regarding any investment except to communicate accurate
information regarding the terms of the investment instrument and the
issuer's obligations under the instrument.
B.7. Disclosure of Conflicts to Clients and Prospects. Members shall
disclose to their clients and prospects all matters, including
beneficial ownership of securities or other investments, that
reasonably could be expected to impair the members' ability to make
unbiased and objective recommendations.
B.8. Disclosure of Referral Fees. Members shall disclose to clients and
prospects any consideration or benefit received by the member or
delivered to others for the recommendation of any services to the
client or prospect.
STANDARD V: RELATIONSHIPS WITH AND RESPONSIBILITIES TO THE PUBLIC
A. Prohibition against Use of Material Nonpublic Information. Members who
possess material nonpublic information related to the value of a
security shall not trade or cause others to trade in that security if
such trading would breach a duty or if the information was
misappropriated or relates to a tender offer. If members receive
material nonpublic information in confidence, they shall not breach
that confidence by trading or causing others to trade in securities to
which such information relates. Members shall make reasonable efforts
to achieve public dissemination of material nonpublic information
disclosed in breach of a duty.
B. Performance Presentation
1. Members shall not make any statements, orally or in writing, that
misrepresent the investment performance that they or their firms
have accomplished or can reasonably be expected to achieve.
2. If members communicate individual or firm performance information
directly or indirectly to clients or prospective clients, or in a
manner intended to be received by clients or prospective clients,
members shall make every reasonable effort to assure that such
performance information is a fair, accurate, and complete
presentation of such performance.
45
INDEX Commodities
(other than securities indexes)
excluded from securities, vii
"7-Day" Rule
for transactions by managers, analysts and CIOs, 11 Computer use
compliance with corporate policies required, 20
"60-Day" Rule, 10
Confidentiality
required of all employees, 16, 20
A
------------------------------------------------------ Confirmations
of personal transactions required, 24
Access Persons definition, vi
special rules on trading, 10, 29 Conflicts of interest
with Xxxxxx and Xxxxxx clients prohibited, 14
AIMR Code of Ethics and Standards
of Professional Conduct, 41 Contra-trading rule
transactions by managers and CIOs, 12
Analysts special rules on trading by, 10
Convertible securities, vii
Appeals procedures, 28
D
B ------------------------------------------------------
------------------------------------------------------
defined as securities, vii
Bankers' acceptances excluded from securities, vii
Currencies
"Blackout" rule excluded as securities, vii
on trading by portfolio managers,
analysts, and CIOs, 12 Director
serving as for another entity prohibited, 17
Boycotts
reporting of requests to participate, 26
E
Bribes, 16 ------------------------------------------------------
Employee
C serving as for another entity prohibited, 17
------------------------------------------------------
Excessive trading (over 10 trades)
CDs by employees strongly discouraged, 7
excluded from securities, vii
Exchange traded index funds,
Claims against Xxxxxx excluded from securities, vii
reporting of, 36
Exemptions
Clearance basis for, 8
how long pre-clearance is valid, iii
required for personal securities transactions, ii
Closed-end funds
rules on trading, 38
Commercial paper
excluded from securities, vii
46
F M
------------------------------------------------------ ------------------------------------------------------
Family members Market timing
covered in personal securities transactions, vii, 31 prohibition against, 6
Fiduciary Xxxxx & XxXxxxxx Companies stock
serving as for another entity prohibited, 17 excluded from securities, vii
Fraudulent or irregular activities Money market instruments
reporting of, 26 excluded from securities, vii
G Mutual fund shares (open end)
------------------------------------------------------ excluded from securities, vii
Gifts
restrictions on receipt of by employees, 14 N
------------------------------------------------------
Government or regulatory agencies
reporting of communications from, 26 Naked options
by employees discouraged, 7
H New financial instruments
------------------------------------------------------ procedures for approval, 40
Holdings Non-Xxxxxx affiliates (NPAs)
disclosure of by Access Persons, 25 transactions and relationships with, 19
I O
------------------------------------------------------ ------------------------------------------------------
Initial public offerings/IPOs Officer
purchases in prohibited, 4 serving as for another entity prohibited, 17
Xxxxxxx xxxxxxx Options
policy statement and explanations, 30 defined as securities, vii
prohibited, 6 relationship to securities on Restricted or Red Lists, 4
Investment clubs
prohibited, 18 P
------------------------------------------------------
Investment-grade exception
for clearance of fixed-income securities Partner
on Restricted List, 1 serving as general partner of another entity prohibited, 17
Involuntary personal securities Partnerships
transactions exempted, 8 covered in personal securities transactions, vii, 31
exemption defined, 4
Personal securities transaction
defined, vii, 24
L
------------------------------------------------------ Pink sheet reports
quarterly reporting requirements, 25
"Large Cap" Exception
for clearance of securities on Restricted List, 1
47
Political contributions, 16
Portfolio managers U
special rules on trading by, 10 ------------------------------------------------------
Privacy policy, 21 U.S. government obligations
excluded from securities, vii
Private offerings or placements
purchases of prohibited, 5 V
------------------------------------------------------
Xxxxxx Investments Limited
special rules for officers and employees of, 22 Violations of law
reporting of, 26
Q W
------------------------------------------------------
------------------------------------------------------
Quarterly report of securities transactions, 25
Warrants
defined as securities, vii
R
------------------------------------------------------
Repurchase agreements
excluded from securities, vii
S
------------------------------------------------------
Sale
defined, vi, 31
Sanctions, v
for failure to pre-clear properly, 2
Shares by subscription
procedures to pre-clear the purchase
and sale of Shares by Subscription, 2
Short sales
by employees prohibited conduct, 4
T
------------------------------------------------------
Tender offers
partial exemption from clearance rules, 4
Trustee
serving as for another entity prohibited, 17
Trusts
covered in personal securities transactions, vii, 31
48
[XXXXXX INVESTMENTS LOGO]
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxx Retail Management
xxx.xxxxxxxxxxxxxxxxx.xxx 81062 4/02
