COMBINED CODE OF ETHICS
ADOPTED UNDER RULE 17J-1
COVERING THE FOLLOWING COMPANIES:
RYDEX DYNAMIC FUNDS
RYDEX SERIES FUNDS
RYDEX VARIABLE TRUST
RYDEX ETF TRUST
PADCO ADVISORS, INC.
PADCO ADVISORS II, INC.
RYDEX DISTRIBUTORS, INC.
RYDEX FUND SERVICES, INC.
EFFECTIVE JANUARY 1, 1999
AS REVISED AUGUST 6, 2003
Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, Rydex
ETF Trust, PADCO Advisors, Inc., PADCO Advisors II, Inc., Rydex Distributors,
Inc. and Rydex Fund Services, Inc. (the "Companies") are confident that their
officers, trustees, directors and employees act with integrity and good faith.
The Companies recognize, however, that personal interests may conflict with a
Company's interests where officers, directors, trustees or employees:
X Know about present or future portfolio transactions or
X Have the power to influence portfolio transactions; and
X Engage in personal transactions in securities.
In an effort to prevent these conflicts from arising and in accordance
with Rule 17j-1(b)(1) under the Investment Company Act of 1940 (the "1940 Act"),
the Companies have adopted this Code of Ethics (the "Code") to prohibit
transactions that create, may create, or appear to create conflicts of interest,
and to establish reporting requirements and enforcement procedures. Each
officer, director, trustee and employee of the Companies should carefully read
and review this Code.
I. ABOUT THE RYDEX FUNDS.
Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, and
Rydex ETF Trust (the "Trusts") are separately registered open-end management
investment companies. Each Trust may consist of multiple investment portfolios
(the "Rydex Funds"). The Rydex Funds may be grouped primarily into three broad
categories: (1) Benchmark Funds, (2) Sector Funds, and (3) Strategic Funds. In
addition, there is a Money Market Fund.
PADCO Advisors, Inc. and PADCO Advisors II, Inc. (the "Advisors") are
each investment advisers. PADCO Advisors, Inc. is the investment adviser for
Rydex Dynamic Funds and for Rydex Series Funds and PADCO Advisors II, Inc. is
the investment adviser for Rydex Variable Trust and Rydex ETF Trust. Rydex
Distributors, Inc. serves as the distributor of the Rydex Funds. Rydex Financial
Services, Inc. provides general administrative services to the Rydex Funds, and
serves as the transfer agent to the Rydex Series Funds, Rydex Dynamic Funds and
Rydex Variable Trust.
II. ABOUT THIS CODE OF ETHICS.
(1) TRANSACTION-RELATED AND REPORTING PROVISIONS.
This Code sets forth specific prohibitions relating to securities
transactions and also sets out certain reporting requirements. They cover the
persons identified below:
X All Company officers and directors;
X Portfolio Management Persons, Fund Accounting Persons and all
other employees who regularly obtain information concerning
recommendations made to a Fund about the purchase or sale of a
----------------
security (herein called Access Employees);
----------------
X All Trustees of the Trusts, both Interested and Independent; and
---------- -----------
X Natural persons in a control relationship with a Company who
-------
obtain information concerning recommendations made to a Fund
about the purchase or sale of a security AND ARE NOT
SPECIFICALLY COVERED BY ANY OTHER SECTION OF THE CODE.
For the prohibitions and reporting requirements that apply to you,
please refer to Parts A-D, as indicated below. (Definitions of underlined terms
----------
are included in Appendix A.)
X Independent Trustees of the Trusts Part A
X Interested Trustees Part B
X Company officers, directors and Access Employees Part C
----------------
X Natural control persons Part D
-------
X
(2) OTHER PROVISIONS.
The remainder of this Code sets forth general principles (Section III),
required course of conduct (Section IV), reporting obligations (Section V), the
Companies' review, enforcement and recordkeeping responsibilities (Sections VI,
VII and VIII) and miscellaneous information (Section IX).
III. STATEMENT OF GENERAL PRINCIPLES.
In recognition of the trust and confidence placed in the Companies by
shareholders of the Trusts, and because the Companies believe that their
operations should benefit shareholders, the Companies have adopted the following
universally applicable principles.
2
(1) Shareholders' interests are paramount. You must place
shareholder interests before your own.
(2) You must accomplish all personal securities transactions in a
----------
manner that avoids even the appearance of a
conflict of your personal interests with those of a Trust and
its shareholders.
(3) You must avoid actions or activities that allow (or appear to
allow) you or your family to profit or benefit from your
position with a Company, or that bring into question your
independence or judgment.
IV. REQUIRED COURSE OF CONDUCT.
(1) PROHIBITION AGAINST FRAUD, DECEIT AND MANIPULATION.
You cannot, in connection with the purchase or sale, directly
or indirectly, of a security held or to be acquired by any
Fund:
(A) employ any device, scheme or artifice to defraud the
Fund;
(B) make to the Fund any untrue statement of a material
fact or omit to state to the Fund a material fact
necessary in order to make the statements made, in
light of the circumstances under which they are made,
not misleading;
(C) engage in any act, practice or course of business
which would operate as a fraud or deceit upon the
Fund; or
(D) engage in any manipulative practice with respect to
the Fund.
Two of the most common risks associated with personal
securities transactions are front-running and trading opposite
a Fund. For example, front-running would include the purchase
of a security any time within seven days ahead of when a Fund
purchases the same security or the sale of a security any time
within seven days ahead of when a Fund sells the same
security. An example of trading opposite a Fund would include
the sale of a security any time within seven days after a Fund
purchases the same security or the purchase of a security any
time within seven days after a Fund sells the same security.
(2) LIMITS ON ACCEPTING OR RECEIVING GIFTS.
Officers of the Advisors and Portfolio Management Personnel
cannot accept or receive any gift of more than DE MINIMIS
value from any person or entity that does business with or on
behalf of a Company. THIS PROVISION DOES NOT INCLUDE:
3
X occasional meals, tickets to a sporting event or the
theater, or normal business entertainment; and
X any payment or reimbursement for professional training or
educational meetings.
V. REPORTING OBLIGATIONS.
See Parts A, B, C or D as appropriate, for your specific reporting
obligations.
VI. REVIEW AND ENFORCEMENT OF THE CODE.
Each Company shall appoint a Compliance Officer. However, with respect
to the Trusts, the Compliance Officer shall be the President of the Trust or his
designee.
(1) COMPLIANCE OFFICER. The Compliance Officer will perform the
following duties:
(A) The Compliance Officer will, on a quarterly basis, compare
all reported personal securities transactions with the Trusts'
----------
completed portfolio transactions and a list of securities
being considered for purchase or sale by the Advisors to
determine whether a Code violation may have occurred. The
Compliance Officer may request additional information or take
any other appropriate measure that the Compliance Officer
decides is necessary to aid in this determination. Before
determining that a person has violated the Code, the
Compliance Officer must give the person an opportunity to
supply explanatory material.
(B) If the Compliance Officer determines that a Code violation
may have occurred, the Compliance Officer must submit the
determination, together with the confidential quarterly report
and any explanatory material provided by the person, to the
President and fund counsel. The President of the Trusts and
counsel to the Rydex Funds (the "Fund Counsel") will
independently determine whether the person violated the Code.
(C) No person is required to participate in a determination of
whether he or she has committed a Code violation or of the
imposition of any sanction against himself or herself. If a
securities transaction of the President is under
consideration, a Vice President will act for the President for
purposes of this Section VI.
(2) SANCTIONS.
If the President and Fund Counsel find that the person
violated the Code, the President will impose upon the person
sanctions that the President deems appropriate and will report
the violation and the sanction imposed to the Board of
Trustees of the Rydex Funds at the next regularly scheduled
board meeting unless, in the sole discretion of the Trusts'
President, circumstances warrant an earlier report.
4
(3) EXCEPTIONS.
The Compliance Officer, in his or her discretion, may exempt
any person from any specific provision of the Code, if the
Compliance Officer determines that (a) the services of the
person are valuable to the Rydex Funds; (b) the failure to
grant this exemption will result in an undue burden on the
person or prevent the person from being able to render
services to the Rydex Funds; and (c) granting the exemption
does not detrimentally affect the shareholders of the Rydex
Funds. The Compliance Officer will prepare a report
documenting the nature of any exemption granted, the persons
involved and the reasons for granting such exemption.
Any person granted an exemption with respect to a particular
transaction must furnish the Compliance Officer with a written
report concerning that transaction within three (3) days of
the transaction.
VII. ANNUAL WRITTEN REPORT TO THE BOARD.
At least once a year, the Compliance Officer, on behalf of each
Company, will provide the Board of Trustees of each Trust a WRITTEN report that
includes:
(1) ISSUES ARISING UNDER THE CODE.
The Report will describe any issue(s) that arose during the
previous year under the Code, including any material Code
violations, and any resulting sanctions.
(2) CERTIFICATION.
The Report will certify to the Board of Trustees that each
Company has adopted measures reasonably necessary to prevent
its personnel from violating the Code currently and in the
future.
VIII. RECORDKEEPING.
The Companies will maintain records as set forth below. These records
will be maintained in accordance with Rule 31a-2 under the 1940 Act and will be
available for examination by representatives of the Securities and Exchange
Commission.
(1) A copy of this Code and any other code which is, or at any
time within the past five years has been, in effect will be
preserved in an easily accessible place;
(2) A list of all persons who are, or within the past five years
have been, required to submit reports under this Code will be
maintained in an easily accessible place;
5
(3) A copy of each report made by a person under this Code will be
preserved for a period of not less than five years from the
end of the fiscal year in which it is made, the first two
years in an easily accessible place;
(4) A record of any Code violation and of any sanctions taken will
be preserved in an easily accessible place for a period of
not less than five years following the end of the fiscal year
in which the violation occurred;
(5) A copy of each annual report to the Board of Trustees will be
maintained for at least five years from the end of the fiscal
year in which it is made, the first two years in an easily
accessible place; and
(6) The Companies will maintain a record of any decision, and the
reasons supporting the decision, to approve the acquisition of
securities in an initial public offering ("IPO") or a private
---------- ----------------------- ----- -------
placement, for at least five years after the end of the fiscal
---------
year in which the approval is granted.
IX. MISCELLANEOUS.
(1) CONFIDENTIALITY. All personal securities transactions reports
----------
and any other information filed with a Company under this Code
will be treated as confidential, provided that such reports
and related information may be produced to the Securities and
Exchange Commission and other regulatory agencies.
(2) INTERPRETATION OF PROVISIONS. The Board of Trustees of the
Trusts may from time to time adopt such interpretations of
this Code as it deems appropriate.
(3) PERIODIC REVIEW AND REPORTING. The Compliance Officer or
President of the Trust (or his or her designee) will report to
the Board of Trustees at least annually as to the operation of
this Code and will address in any such report the need (if
any) for further changes or modifications to this Code.
(4) ANNUAL ACKNOWLEDGMENT. Each interested Trustee, officer,
employee and affiliated agent of the Companies is required to
certify annually that he/she (i) has read and understands the
Code, (ii) is aware that he/she is subject to the provisions
of this Code, (iii) has complied with the Code at all times
during the previous calendar year, and (iv) has, during the
previous calendar year, reported all holdings and transactions
that he/she is required to report pursuant to the Code. This
certification may be made electronically via the
http://rydex.starcompliance.com website.
Adopted December 11, 1998
Revised February 11, 2002
Revised January 30, 2003
Revised August 25, 2003
6
PART A
PROCEDURES FOR INDEPENDENT TRUSTEES
GENERAL OBLIGATIONS.
(1) REQUIRED TRANSACTION REPORTS.
(A) On a quarterly basis you must report any securities
----------
transactions, as well as any securities accounts
----------
established. You must submit your report to the
Compliance Officer no later than 10 calendar days
after the end of the calendar quarter in which the
transaction to which the report relates was effected.
Quarterly Personal Securities Transactions Reports
will be made electronically, via the
RYDEX.STARCOMPLIANCE.COM website. You will receive
notification via email when the Quarterly Transaction
Report is due, including instructions on how to
access the information and complete the report.
(B) If you had no reportable transactions or did not open
any securities accounts during the quarter, you are
----------
not required to submit a report.
(C) Reports of individual securities transactions are
----------
required only if you KNEW at the time of the
transaction or, in the ordinary course of fulfilling
your official duties as a Trustee, SHOULD HAVE KNOWN,
that during the 15-calendar day period immediately
preceding or following the date of your transaction,
the same security was purchased or sold, or was being
-------- ----------------- -----
considered for purchase or sale, by a Fund.
-------------------------------
Note: The "SHOULD HAVE KNOWN" standard does not:
----
X imply a duty of inquiry;
X presume you should have deduced or
extrapolated from discussions or memoranda
dealing with the Fund's investment
strategies; or
X impute knowledge from your prior knowledge
of the Fund's portfolio holdings, market
considerations, or investment policies,
objectives and restrictions.
(2) WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING
OBLIGATION?
If the transaction is reportable because it came within
paragraph (1), above, you must report all transactions in
securities that: (i) you directly or indirectly beneficially
---------- ------------
own or (ii) because of the transaction, you acquire direct or
---
indirect beneficial ownership. The report must also contain
---------- ---------
any account you established in which any securities were held
----------
during the quarter.
7
(3) WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR
REPORT?
You are not required to detail or list the following
securities or transactions on your quarterly report:
(A) Purchases or sales effected for any account over
------------------
which you have no direct or indirect influence or
control.
-------
(B) Purchases you made solely with the dividend proceeds
received in a dividend reinvestment plan or that are
part of an automatic payroll deduction plan or other
similar type of plan, where you purchase securities
----------
issued by your employer.
(C) Purchases arising from the exercise of rights issued
by an issuer PRO RATA to all holders of a class of
its securities, as long as you acquired these rights
----------
from the issuer, and sales of such rights so
acquired.
(D) Purchases of securities issued by the U.S. Government
----------
or its agencies, bankers' acceptances, bank
certificates of deposit, commercial paper, high
quality short-term debt instruments, including
repurchase agreements, and registered open-end mutual
funds.
(E) Purchases or sales which are non-volitional on your
------------------
part, including purchases or sales upon exercise of
------------------
puts or calls written by you and sales from a margin
account to a BONA FIDE margin call.
You may include a statement in your report that the report
shall not be construed as your admission that you have any
direct or indirect beneficial ownership in the security
-------------------- --------
included in the report.
8
PART B
INTERESTED TRUSTEES
GENERAL OBLIGATIONS.
(1) PROVIDING A LIST OF SECURITIES.
You must provide the Compliance Officer with a complete
listing of all securities you beneficially own as of December
------------ ---
31 of the previous year. Each following year, you must submit
a revised list to the Compliance Officer showing the
securities you beneficially own as of December 31. You must
------------ ---
submit the initial listing within 10 calendar days of the date
you first become a Trustee, and each update no later than 30
calendar days after the start of the year. The Initial
Holdings Report and Annual Holdings Report, as applicable,
will be delivered electronically, via the
RYDEX.STARCOMPLIANCE.COM website. You will receive
notification via email when the applicable report is due,
including instructions on how to access the information and
complete the report.
You are NOT required to provide this list of securities if:
o you are not currently affiliated with or employed by
a Trust's investment adviser(s) or distributor.
(2) REQUIRED TRANSACTION REPORTS.
On a quarterly basis you must report any securities
----------
transactions, as well as any securities accounts established.
----------
You must submit your report to the Compliance Officer no later
than 10 calendar days after the end of the calendar quarter in
which the transaction to which the report relates was
effected. Quarterly Personal Securities Transactions Reports
will be made electronically, via the RYDEX.STARCOMPLIANCE.COM
website. You will receive notification via email when the
Quarterly Transaction Report is due, including instructions on
how to access the information and complete the report.
If you had no reportable transactions or did not open any
securities accounts during the quarter, you are still required
----------
to submit a report. Please sign in the space provided and
submit the report with no transactions listed.
(3) WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING
OBLIGATION?
You must report all transactions in securities that: (i) you
----------
directly or indirectly beneficially own or (ii) because of the
------------ ---
transaction, you acquire direct or indirect beneficial
----------
ownership. The report must also contain any account you
---------
established in which any securities were held during the
----------
quarter.
(4) PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS.
You must obtain approval from the Compliance Officer before
acquiring beneficial ownership of any securities offered in
---------- --------- ----------
connection with an IPO or a private placement.
--- -----------------
(5) WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR
REPORT?
You are not required to detail or list the following
securities or transactions on your report:
----------
(A) Purchases or sales effected for any account over
------------------
which you have no direct or indirect influence or
control.
-------
(B) Purchases you made solely with the dividend proceeds
received in a dividend reinvestment plan or that are
part of an automatic payroll deduction plan or other
similar type of plan, where you purchase securities
----------
issued by your employer.
(C) Purchases arising from the exercise of rights issued
by an issuer PRO RATA to all holders of a class of
its securities, as long as you acquired these rights
----------
from the issuer, and sales of such rights so
acquired.
(D) Purchases of securities issued by the U.S. Government
----------
or its agencies, bankers' acceptances, bank
certificates of deposit, commercial paper, high
quality short-term debt instruments, including
repurchase agreements, and registered open-end mutual
funds.
(E) Purchases or sales which are non-volitional on your
------------------
part, including purchases or sales upon exercise of
------------------
puts or calls written by you and sales from a margin
account to a BONA FIDE margin call.
You may include a statement in your report that the report
shall not be construed as your admission that you have any
direct or indirect beneficial ownership in the security
-------------------- --------
included in the report.
10
PART C
COMPANY OFFICERS, DIRECTORS AND ACCESS EMPLOYEES
I. GENERAL OBLIGATIONS.
(1) THIRTY-DAY PROHIBITION ON SELLING SECURITIES.
You cannot sell a security within 30 calendar days of
--------
acquiring that security.
(2) PROVIDING A LIST OF SECURITIES.
You must provide the Compliance Officer with a complete
listing of all securities you beneficially own as of December
------------ ---
31 of the previous year. Each following year, you must submit
a revised list to the Compliance Officer showing the
securities you beneficially own as of December 31. You must
----------
submit the initial listing within 10 calendar days of the date
you first become an officer or Access Employee, and each
---------------
update no later than 30 calendar days after the start of the
year. The Initial Holdings Report and Annual Holdings Report,
as applicable, will be delivered electronically, via the
RYDEX.STARCOMPLIANCE.COM website. You will receive
notification via email when the applicable report is due,
including instructions on how to access the information and
complete the report.
You are NOT required to provide this list of securities if:
o you are not currently affiliated with or employed by
a Trust's investment adviser(s) or distributor.
(3) REQUIRED TRANSACTION REPORTS.
On a quarterly basis you must report transactions in
securities, as well as any securities accounts established.
You must submit your report to the Compliance Officer no later
than 10 calendar days after the end of the calendar quarter in
which the transaction to which the report relates was
effected. Quarterly Personal Securities Transactions Reports
will be made electronically, via the RYDEX.STARCOMPLIANCE.COM
website. You will receive notification via email when the
Quarterly Transaction Report is due, including instructions on
how to access the information and complete the report.
If you had no reportable transactions or did not open any
securities accounts during the quarter, you are still required
----------
to submit a report. Please sign in the space provided and
submit the report with no transactions listed.
(4) WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY REPORTING
OBLIGATION?
You must report all transactions in securities that: (i) you
----------
directly or indirectly beneficially own or (ii) because of the
----------------
transaction, you acquire direct or indirect
11
beneficial ownership. The report must contain any account you
--------------------
established in which any securities were held during the
----------
quarter.
(5) PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS.
You must obtain approval from the Compliance Officer before
acquiring beneficial ownership of any securities offered in
connection with an IPO or a private placement.
(6) WHAT SECURITIES AND TRANSACTIONS MAY BE EXCLUDED FROM YOUR
REPORT?
You are not required to detail or list the following
securities or transactions on your report.
----------
(A) Purchases or sales effected for any account over
------------------
which you have no direct or indirect influence or
control.
-------
(B) Purchases you made solely with the dividend proceeds
received in a dividend reinvestment plan or that are
part of an automatic payroll deduction plan or other
similar type of plan, where you purchase securities
----------
issued by your employer.
(C) Purchases arising from the exercise of rights issued
by an issuer PRO RATA to all holders of a class of
its securities, as long as you acquired these rights
----------
from the issuer, and sales of such rights so
acquired.
(D) Purchases of securities issued by the U.S. Government
----------
or its agencies, bankers' acceptances, bank
certificates of deposit, commercial paper, high
quality short-term debt instruments, including
repurchase agreements, and registered open-end mutual
funds.
(E) Purchases or sales which are non-volitional on your
------------------
part, including purchases or sales upon exercise of
------------------
puts or calls written by you and sales from a margin
-----
account to a BONA FIDE margin call.
You may include a statement in your report that the report
shall not be construed as your admission that you have any
direct or indirect beneficial ownership in the security
--------------------
included in the report.
(7) SEVEN-DAY BLACKOUT PERIOD ON PERSONAL SECURITIES TRANSACTIONS.
You cannot purchase or sell, directly or indirectly, any
----------------
security in which you had (or by reason of such transaction
--------
acquire) any beneficial ownership at any time within seven
--------------------
calendar days before or after the time that the same (or a
related) security is being
-----------------
purchased or sold by any Fund. This provision will only apply
-----------------
if you obtain specific information regarding the purchase or
-----------
sale of a security by a Fund.
---- --------
(A) EXCEPTION TO BLACKOUT PERIOD. The seven-day blackout
period does not apply to the purchase or sale of any
----------------
security (i) of a company with a market
--------
capitalization in excess of $500 million, (ii)
included in either the S&P 500 Composite Index or the
NASDAQ 100 Index, and (iii) made in dollar amounts
less than $25,000.
13
PART D
NATURAL CONTROL PERSONS
GENERAL OBLIGATIONS.
(1) PROVIDING A LIST OF SECURITIES.
You must provide the Compliance Officer with a complete
listing of all securities you beneficially own as of December
---------- ------------ ---
31 of the previous year. Each following year, you must submit
a revised list to the Compliance Officer showing the
securities you beneficially own as of December 31. You must
------------ ---
submit the initial listing within 10 calendar days of the date
you first become a natural control person, and each update no
-------
later than 30 calendar days after the start of the year. The
Initial Holdings Report and Annual Holdings Report, as
applicable, will be delivered electronically, via the
RYDEX.STARCOMPLIANCE.COM website. You will receive
notification via email when the applicable report is due,
including instructions on how to access the information and
complete the report.
You are NOT required to provide this list of securities if:
o you are not currently affiliated with or employed by
the Trusts' investment adviser(s) or distributor.
(2) REQUIRED TRANSACTION REPORTS.
On a quarterly basis you must report any securities
transactions, as well as any securities accounts established.
You must submit your report to the Compliance Officer no later
than 10 calendar days after the end of the calendar quarter in
which the transaction to which the report relates was
effected. Quarterly Personal Securities Transactions Reports
will be made electronically, via the RYDEX.STARCOMPLIANCE.COM
website. You will receive notification via email when the
Quarterly Transaction Report is due, including instructions on
how to access the information and complete the report.
If you had no reportable transactions or did not open any
securities accounts during the quarter, you are still required
to submit a report. Please sign in the space provided and
submit the report with no transactions listed.
(3) WHAT SECURITIES ARE COVERED UNDER YOUR QUARTERLY OBLIGATION?
You must report all transactions in securities that: (i) you
directly or indirectly beneficially own or (ii) because of the
transaction, you acquire direct or indirect beneficial
ownership. The report must also include any account you
established in which securities were held during the quarter.
(4) PRE-APPROVAL OF IPOS AND PRIVATE PLACEMENTS.
14
You must obtain approval from the Compliance Officer before
acquiring beneficial ownership of any securities offered in
---------- --------- ----------
connection with an IPO or a private placement.
--- -----------------
(5) WHAT SECURITIES AND TRANSACTIONS ARE EXCLUDED FROM YOUR
REPORTING OBLIGATION?
You are not required to detail or list the following
securities or transactions on your report:
(A) Purchases or sales effected for any account over
------------------
which you have no direct or indirect influence or
control.
-------
(B) Purchases you made solely with the dividend proceeds
received in a dividend reinvestment plan or that are
part of an automatic payroll deduction plan, where
you purchase securities issued by your employer.
----------
(C) Purchases arising from the exercise of rights issued
by an issuer PRO RATA to all holders of a class of
its securities, as long as you acquired these rights
----------
from the issuer, and sales of such rights so
acquired.
(D) Purchases of securities issued by the U.S. Government
----------
or its agencies, bankers' acceptances, bank
certificates of deposit, commercial paper, high
quality short-term debt instruments, including
repurchase agreements, and registered open-end mutual
funds.
(E) Purchases or sales which are non-volitional on your
------------------
part, including purchases or sales upon exercise of
------------------
puts or calls written by you and sales from a margin
account to a BONA FIDE margin call.
You may include a statement in your report that the report
shall not be construed as your admission that you have any
direct or indirect beneficial ownership in the security
---------- --------- --------
included in the report.
15
APPENDIX A
DEFINITIONS
Access employee includes any director or officer of a Trust or of a Trust's
- ---------------
investment adviser, or an employee of a Trust's investment adviser who, in
connection with his or her regular functions or duties, participates in the
selection of a Trust's portfolio securities or who has access to information
----------
regarding a Trust's future purchases or sales of portfolio securities.
----------
Beneficial ownership means the same as under Section 16 of the Securities
- --------------------
Exchange Act of 1934 and Rule 16a-1(a)(2) thereunder. You should generally
consider yourself the beneficial owner of any securities in which you have a
direct or indirect pecuniary interest. In addition, you should consider yourself
the beneficial owner of securities held by your spouse, your minor children, a
----------
relative who shares your home, or other persons by reason of any contract,
arrangement, understanding or relationship that provides you with sole or shared
voting or investment power.
Control means the same as that under Section 2(a)(9) of the 1940 Act. Section
- -------
2(a)(9) provides that "control" means the power to exercise a controlling
influence over the management or policies of a company, unless such power is
solely the result of an official position with such company. Ownership of 25% or
more of a company's outstanding voting securities is presumed to give the holder
of such securities control over the company. This presumption may be countered
----------
by the facts and circumstances of a given situation.
Independent trustee means a trustee of a Trust who is not an "interested person"
- -------------------
of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. As of
February 25, 2000, the Trusts' independent trustees are:
Corey A. Colehour
J. Kenneth Dalton
Roger Somers
John O. Demaret
Patrick T. McCarville
Initial public offering ("IPO") means an offering of securities registered under
- -------------------------------
the Securities Act of 1933, the issuer of which, immediately before
registration, was not subject to the reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934.
Interested trustee means a trustee of a Trust who is an "interested person" of
- ------------------
the Trust within the meaning of Section 2(a)(19) of the 1940 Act. As of February
25, 2000, the Trusts' only interested trustee is:
Albert P. Viragh, Jr.
Private placement means an offering that is exempt from registration under the
- -----------------
Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) in the
Securities Act of 1933.
Purchase or sale of a security includes, among other things, the writing of an
- ------------------------------
option to purchase or sell a security.
--------
Security means the same as that set forth in Section 2(a)(36) of the 1940 Act,
- --------
except that it does not include securities issued by the U.S. Government or its
agencies, bankers' acceptances, bank certificates of deposit, commercial paper,
shares of registered open-end mutual funds and high quality short-term debt
instruments, including repurchase agreements. A security does not include index
futures or other commodities.
A security held or to be acquired by the Trust (or any Fund) means any security
------------------------------- --------
which, within the most recent 15 days, (i) is or has been held by the Trust (or
any Fund) or (ii) is being or has been considered by the Trust's adviser or
sub-adviser for purchase by the Trust (or any Fund), and any option to purchase
or sell, and any security convertible into or exchangeable for any security.
--------
A security is being purchased or sold by the Trust from the time a purchase or
-------- -----------------------
sale program has been communicated to the person who places buy and sell orders
for the Trust until the program has been fully completed or terminated.