THE ARBITRAGE FUNDS
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS
I. COVERED OFFICERS/PURPOSE OF THE CODE
The code of ethics (this "Code") for The Arbitrage Funds (the "Company")
applies to the Company's Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer(s) (the "Covered Officers" each of whom
are set forth in Exhibit A) for the purpose of promoting:
o honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships;
o full, fair, accurate, timely and understandable disclosure in reports and
documents that a registrant files with, or submits to, the Securities and
Exchange Commission ("SEC") and in other public communications made by the
Company;
o compliance with applicable laws and governmental rules and regulations;
o the prompt internal reporting of violations of the Code to an appropriate
person or persons identified in the Code; and
o accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business ethics
and should be sensitive to situations that may give rise to actual as well as
apparent conflicts of interest.
II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF
INTEREST
OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private
interest interferes with the interests of, or his service to, the Company. For
example, a conflict of interest would arise if a Covered Officer, or a member of
his family, receives improper personal benefits as a result of his position with
the Company.
Certain conflicts of interest arise out of the relationships between
Covered Officers and the Company and already are subject to conflict of interest
provisions in the Investment Company Act of 1940 ("Investment Company Act") and
the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example,
Covered Officers may not individually engage in certain transactions (such as
the purchase or sale of securities or other property) with the Company because
of their status as "affiliated persons" of the Company. The Company's and the
investment adviser's compliance programs and procedures are designed to prevent,
or identify and correct, violations of these provisions.
This Code does not, and is not intended to, repeat or replace these programs and
procedures, and such conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts arise from, or as a result of, the contractual relationship
between the Company and the investment adviser/administrator of which the
Covered Officers are also officers or employees. As a result, this Code
recognizes that the Covered Officers will, in the normal course of their duties
(whether formally for the Company or for the adviser/administrator, or for
both), be involved in establishing policies and implementing decisions that will
have different effects on the adviser/administrator and the Company. The
participation of the Covered Officers in such activities is inherent in the
contractual relationship between the Company and the adviser/administrator and
is consistent with the performance by the Covered Officers of their duties as
officers of the Company. Thus, if performed in conformity with the provisions of
the Investment Company Act and the Investment Advisers Act, such activities will
be deemed to have been handled ethically. In addition, it is recognized by the
Company's Board of Trustees ("Board") that the Covered Officers may also be
officers or employees of one or more investment companies covered by other
codes.
Other conflicts of interest are covered by the Code, even if such
conflicts of interest are not subject to provisions in the Investment Company
Act and the Investment Advisers Act. The following list provides examples of
conflicts of interest under the Code, but Covered Officers should keep in mind
that these examples are not exhaustive. The overarching principle is that the
personal interest of a Covered Officer should not be placed improperly before
the interest of the Company.
Each Covered Officer must:
o not use his personal influence or personal relationships improperly to
influence investment decisions or financial reporting by the Company
whereby the Covered Officer would benefit personally to the detriment of
the Company;
o not cause the Company to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the benefit
of the Company;
o not use material non-public knowledge of portfolio transactions made or
contemplated for the Company to trade personally or cause others to trade
personally in contemplation of the market effect of such transactions;
o report at least annually any affiliations or other relationships related
to conflicts of interest that the Company's Trustees and Officers
Questionnaire covers.
There are some conflict of interest situations that should always be
discussed with Counsel for the Company if material. Examples of these include:
o service as a director on the board of any public company;
o the receipt of any non-nominal gifts;
-2-
o the receipt of any entertainment from any company with which the Company
has current or prospective business dealings unless such entertainment is
business-related, reasonable in cost, appropriate as to time and place,
and not so frequent as to raise any questions of impropriety;
o any ownership interest in, or any consulting or employment relationship
with, any of the Company's service providers, other than its investment
adviser, principal underwriter, administrator or any affiliated person
thereof;
o a direct or indirect financial interest in commissions, transaction
charges or spreads paid by the Company for effecting portfolio
transactions or for selling or redeeming shares other than an interest
arising from the Covered Officer's employment, such as compensation or
equity ownership.
III. DISCLOSURE AND COMPLIANCE
o each Covered Officer should familiarize himself with the disclosure
requirements generally applicable to the Company;
o each Covered Officer should not knowingly misrepresent, or cause others to
misrepresent, facts about the Company to others, whether within or outside
the Company, including to the Company's directors and auditors, and to
governmental regulators and self-regulatory organizations;
o each Covered Officer should, to the extent appropriate within his area of
responsibility, consult with other officers and employees of the Company
and the adviser/administrator with the goal of promoting full, fair,
accurate, timely and understandable disclosure in the reports and
documents the Company files with, or submits to, the SEC and in other
public communications made by the Company; and
o it is the responsibility of each Covered Officer to promote compliance
with the standards and restrictions imposed by applicable laws, rules and
regulations.
IV. REPORTING AND ACCOUNTABILITY
Each Covered Officer must:
o upon adoption of the Code (or thereafter as applicable, upon becoming a
Covered Officer), affirm in writing to the Board that he has received,
read, and understands the Code;
o annually thereafter affirm to the Board that he has complied with the
requirements of the Code;
o not retaliate against any other Covered Officer or any employee of the
Company or their affiliated persons for reports of potential violations
that are made in good faith; and
-3-
o notify Counsel for the Company promptly if he knows of any violation of
this Code. Failure to do so is itself a violation of this Code.
Counsel for the Company is responsible for applying this Code to specific
situations in which questions are presented under it and has the authority to
interpret this Code in any particular situation. However, any approvals or
waivers sought by a Covered Officer will be considered by the Audit Committee
(the "Committee").
The Company will follow these procedures in investigating and enforcing
this Code:
o Counsel for the Company will take all appropriate action to investigate
any potential violations reported to him;
o if, after such investigation, Counsel believes that no violation has
occurred, Counsel is not required to take any further action;
o any matter that Counsel believes is a violation will be reported to the
Committee;
o if the Committee concurs that a violation has occurred, it will inform and
make a recommendation to the Board, which will consider appropriate
action, which may include review of, and appropriate modifications to,
applicable policies and procedures; notification to appropriate personnel
of the investment adviser/administrator or its board; or a recommendation
to dismiss the Covered Officer;
o the Board will be responsible for granting waivers, as appropriate; and
o any changes to or waivers of this Code will, to the extent required, be
disclosed as provided by SEC rules.
V. OTHER POLICIES AND PROCEDURES
This Code shall be the sole code of ethics adopted by the Company for
purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms
applicable to registered investment companies thereunder. Insofar as other
policies or procedures of the Company, the Company's adviser, principal
underwriter, or other service providers govern or purport to govern the behavior
or activities of the Covered Officers who are subject to this Code, they are
superseded by this Code to the extent that they overlap or conflict with the
provisions of this Code. The Company's and its investment adviser's and
principal underwriter's codes of ethics under Rule 17j-1 under the Investment
Company Act are separate requirements applying to the Covered Officers and
others, and are not part of this Code.
-4-
VI. AMENDMENTS
Any amendments to this Code, other than amendments to Exhibit A, must be
approved or ratified by a majority vote of the Board, including a majority of
independent trustees.
VII. CONFIDENTIALITY
All reports and records prepared or maintained pursuant to this Code
will be considered confidential and shall be maintained and protected
accordingly. Except as otherwise required by law or this Code, such matters
shall not be disclosed to anyone other than the Board and Counsel for the
Company.
VIII. INTERNAL USE
The Code is intended solely for the internal use by the Company and does
not constitute an admission, by or on behalf of the Company, as to any fact,
circumstance, or legal conclusion.
Date: July 29, 2003
EXHIBIT A
Persons Covered by this Code of Ethics
John S. Orrico
-6-
CODE OF ETHICS
FOR PRINCIPAL EXECUTIVE
AND
SENIOR FINANCIAL OFFICER
CERTIFICATE OF COMPLIANCE
As a Covered Officer as defined in the Code of Ethics For Principal
Executive and Senior Financial Officers of The Arbitrage Funds (the "Code"), I
hereby certify that I have received and have read and fully understand the Code,
and I recognize that I am subject to the Code. I further certify that since any
prior certification of the Code, I have complied with the policies and
procedures as in effect during that time, and agree going forward to comply with
the requirements of the Code.
-------------------------------------
Signature
-------------------------------------
Name (Please Print)
-------------------------------------
Date
-7-