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CODE OF ETHICS
POTOMAC FUNDS
POTOMAC INSURANCE TRUST
and
RAFFERTY ASSET MANAGEMENT, LLC
I. INTRODUCTION
A. Fiduciary Duty. This Code of Ethics has been adopted by the above named
trusts ("Trusts") and Rafferty Asset Management, LLC in compliance with Rule
17j-1 under the Investment Company Act of 1940, as amended. Capitalized terms
used in this Code are defined in Appendix 1 to this Code. All Appendices
referred to herein are attached to and are a part of this Code.
This Code is based on the principle that the trustees, officers, and
employees of Rafferty and the Trusts have a fiduciary duty to place the
interests of the Funds ahead of their own interests. The Code applies to all
Access Persons and focuses principally on preclearance and reporting of personal
transactions in securities. Access Persons must avoid activities, interests and
relationships that might interfere with making decisions in the best interests
of the Funds.
As fiduciaries, Access Persons must at all times:
1. Place the interests of the Funds first. Access Persons must
scrupulously avoid serving their own personal interests ahead of the
interests of the Funds. An Access Person may not induce or cause a Fund to
take action, or not to take action, for personal benefit, rather than for
the benefit of the Fund. For example, an Access Person would violate this
Code by causing a Fund to purchase a Security he or she owned for the
purpose of increasing the price of that Security.
2. Avoid taking inappropriate advantage of their positions. Access
Persons may not, for example, use their knowledge of portfolio transactions
to profit by the market effect of such transactions. Receipt of investment
opportunities, prerequisites, or gifts from persons seeking business with
the Trusts or Rafferty could call into question the exercise of an Access
Person's independent judgment.
3. Conduct all Personal Securities Transactions in full compliance
with this Code including the reporting requirements. Doubtful situations
should be resolved in favor of the Funds. Technical compliance with the
Code's procedures will not automatically insulate from scrutiny any trades
that indicate an abuse of fiduciary duties.
B. Appendices to the Code. The appendices to this Code are attached to and
are a part of the Code. The appendices include the following:
1. Definitions (Appendix 1),
2. Contact Persons (Appendix 2),
3. Certification of Compliance with Code of Ethics (Appendix 3 and
3-I),
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a) Personal Securities Holdings and Accounts Disclosure Form
(Appendix 3-A)
4. Form Letter to Broker, Dealer or Bank (Appendix 4).
5. Report of Securities Transactions (Appendix 5)
6. Initial Public Offering / Private Placement Clearance Form
(Appendix 6)
C. Application of the Code to Independent Fund Trustees. Notwithstanding
the definition of Access Persons, the following provisions do not apply to
Independent Fund Trustees and their Immediate Families.
1. Personal Securities Transactions (Section II)
2. Initial, Quaterly and Annual Holdings Reporting Requirements
(Section III.A.)
3. Receipt and Giving of Gifts (Section IV.B.)
4. Restrictions on Service as a Director of a Publicly-Traded
Company (Section IV.E.)
II. PERSONAL SECURITIES TRANSACTIONS
A. Prohibited Transactions.
1. Prohibited Securities Transactions. The following Securities
Transactions are prohibited and will not be authorized by the Compliance
Officer (or a designee) absent exceptional circumstances. The prohibitions
apply only to the categories of Access Persons specified.
a. Initial Public Offerings (Investment Personnel only). Any
purchase of Securities by Investment Personnel in an initial public
offering (other than a new offering of a registered open-end
investment company). However, if authorized, the Compliance Officer
will maintain a record of the reasons for such authorization (see
Appendix 6).
b. Pending Buy or Sell Orders (Investment Personnel Only). Any
purchase or sale of Securities by Investment Personnel on any day
during which any Fund has a pending "buy" or "sell" order in the same
Security (or Equivalent Security) until that order is executed or
withdrawn.
c. Intention to Buy or Sell for a Fund (all Investment
Personnel). Purchases or sales of Securities by an Investment Person
at a time when that Investment Person intends, or knows of another's
intention, to purchase or sell that Security (or an Equivalent
Security) on behalf of a Fund. This prohibition applies whether the
Securities Transaction is in the same direction (e.g., two purchases)
or the opposite direction (a purchase and sale) as the transaction of
the Fund.
2. Always Prohibited Securities Transactions. The following Securities
Transactions are prohibited and will not be authorized under any
circumstances.
a. Inside Information. Any transaction in a Security while in
possession of material nonpublic information regarding the Security or
the issuer of the Security.
b. Market Manipulation. Transactions intended to raise, lower, or
maintain the price of any Security or to create a false appearance of
active trading.
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c. Others. Any other transactions deemed by the Compliance
Officer (or a designee) to involve a conflict of interest, possible
diversions of a corporate opportunity, or an appearance of
impropriety.
3. Private Placements (Investment Personnel only). Acquisition of
Beneficial Interests in Securities in a private placement by Investment
Personnel is strongly discouraged. The Compliance Officer (or a designee)
will give permission only after considering, among other facts, whether the
investment opportunity should be reserved for a Fund and whether the
opportunity is being offered to the person by virtue of the person's
position as an Investment Person. If a private placement transaction is
permitted, the Compliance Officer will maintain a record of the reasons for
such approval (see Appendix 6). Investment Personnel who have acquired
securities in a private placement are required to disclose that investment
to the Compliance Officer when they play a part in any subsequent
consideration of an investment in the issuer by a Fund, and the decision to
purchase securities of the issuer by a Fund must be independently
authorized by a Portfolio Manager with no personal interest in the issuer.
B. Exemptions.
1. The following Securities Transactions are exempt from the
restrictions set forth in Section II.A.
a. Mutual Funds. Securities issued by any registered open-end
investment companies (including the Funds);
b. No Knowledge. Securities Transactions where neither the Access
Person nor an Immediate Family member knows of the transaction before
it is completed (for example, Securities Transactions effected for an
Access Person by a trustee of a blind trust or discretionary trades
involving an investment partnership or investment club in which the
Access Person is neither consulted nor advised of the trade before it
is executed);
c. Certain Corporate Actions. Any acquisition of Securities
through stock dividends, dividend reinvestments, stock splits, reverse
stock splits, mergers, consolidations, spin-offs, or other similar
corporate reorganizations or distributions generally applicable to all
holders of the same class of Securities;
d. Rights. Any acquisition of Securities through the exercise of
rights issued by an issuer pro rata to all holders of a class of its
Securities, to the extent the rights were acquired in the issue; and
e. Miscellaneous. Any transaction in the following: (1) bankers'
acceptances, (2) bank certificates of deposit, (3) commercial paper,
(4) high quality short-term debt, including repurchase agreements, (5)
Securities that are direct obligations of the U.S. Government, and (6)
other Securities as may from time to time be designated in writing by
the Compliance Officer on the grounds that the risk of abuse is
minimal or non-existent.
2. Personal Transactions in Securities that also are being purchased,
sold or held by a Fund are exempt from the prohibitions of Sections
II.A.1.b, and c, if the Access Person does not, in connection with his or
her regular functions or duties, make, participate in, or obtain
information regarding the purchase or sale of Securities by that Fund.
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THE SECURITIES TRANSACTIONS LISTED IN SECTION II IN THIS SUBSECTION
ARE NOT EXEMPT FROM THE REPORTING REQUIREMENTS OF THE CODE.
3. Application to Commodities, Futures, Options on Futures and Options
on Broad-Based Indices. Commodities, futures (including currency futures
and futures on securities comprising part of a broad-based, publicly traded
market based index of stocks) and options on futures are not subject to the
seven-day blackout and prohibited transaction provisions of Section II.A.,
but are subject to transaction reporting.
III. REPORTING REQUIREMENTS
A. Reporting Requirements for all Access Persons Except Independent Fund
Trustees
1. Initial Holdings and Accounts Report. Any person who becomes an
Access Person of Rafferty or the Funds must submit within 10 days of
becoming an Access Person an Initial Holdings and Accounts Report (see
Appendix 3-A) to the Compliance Officer listing all Securities accounts and
securities that he or she holds in such accounts in which that Access
Person (or Immediate Family member) has Beneficial Interest..
2. Quarterly Reporting Requirements. Every Access Person and members
of his or her Immediate Family must arrange for the Compliance Officer to
receive directly from any broker, dealer, or bank that effects any
Securities Transaction, duplicate copies of each confirmation for each such
transaction and periodic statements for each brokerage account in which
such Access Person has a Beneficial Interest. Attached hereto as Appendix 4
is a form of letter that may be used to request such documents from such
entities. All copies must be received no later than 10 days after the end
of the calendar quarter. Each confirmation or statement must disclose the
following information:
a) the date of the transaction;
b) the title (and interest rate and maturity date, if
applicable)
c) the number of shares and principal amount
d) the nature of the transaction (e.g., purchase, sale);
e) the price of the Security; and
f) the name of the broker, dealer or bank through which the
trade was effected.
If an Access Person is not able to arrange for duplicate
confirmations and periodic statements to be sent that contain the
information required above, the Access Person must submit a Quarterly
Transaction Report (see Appendix 5) within 10 days after the completion of
each calendar quarter to the Compliance Officer.
3. Every Access Person who establishes a Securities account during the
quarter in which that Access Person (or Immediate Family member) has
Beneficial Interest must submit an Account Report (see Appendix 5) to the
Compliance Officer. This report must be submitted to the Compliance Officer
within 10 days after the completion of each calendar quarter.
4. Annual Holdings and Accounts Report. Every Access Person must
submit an Annual Holdings and Accounts Report (see Appendix 3-A) listing
all Securities accounts and securities in which that Access Person (or
Immediate Family member) has Beneficial Interest. The information in the
Annual Holdings Report must be current as of a date no more than 30 days
before the report is submitted. The completed report should be submitted to
the Compliance Officer by December 31 following the end of the calendar
year.
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B. Reporting Requirements for Independent Fund Trustees
Each Independent Fund Trustee (and their Immediate Families) must
report to the Compliance Officer any trade in a Security by any account in
which the Independent Fund Trustee has any Beneficial Interest if the
Independent Fund Trustee knew or, in the ordinary course of fulfilling his
or her duty as a Trustee of the Trusts, should have known that during the
15-day period immediately preceding or after the date of the transaction in
a Security by the Trustee such Security (or an Equivalent Security) was or
would be purchased or sold by the Fund or such purchase or sale by the Fund
was or would be considered by the Fund or by Rafferty for the Fund.
Independent Fund Trustees who need to report such transactions should refer
to the procedures outlined in Section III.A.2.
C. Reporting Requirements for Investment Personnel
Each investment person must notify the Chief Compliance officer in
writing of each securities transaction, except those exempt transaction
listed in Section II B, on the trade date of the transaction. Notification
must consist of securities name and number of shares or bonds traded.
D. Exemptions, Disclaimers and Availability of Reports
1. A Securities Transaction involving the following circumstances or
Securities are exempt from the Reporting Requirements discussed above: (1)
neither the Access Person nor an Immediate Family Member had any direct or
indirect influence or control over the transaction; (2) Securities directly
issued by the U.S. Government; (3) bankers' acceptances; (4) bank
certificates of deposit; (5) commercial paper; (6) high quality short-term
debt instruments, including repurchase agreements; (7) shares issued by
open-end mutual funds; and (7) other Securities as may from time to time be
designated in writing by the Compliance Officer on the grounds that the
risk of abuse is minimal or non-existent.
In addition, no Access Person of Rafferty shall be required to make a
Quarterly Transaction Report where such report would duplicate information
recorded by Heritage pursuant to Rule 204-2(a) of the Investment Advisers
Act of 1940.
2. Disclaimers. Any report of a Securities Transaction for the benefit
of a person other than the individual in whose account the transaction is
placed may contain a statement that the report should not be construed as
an admission by the person making the report that he or she has any direct
or indirect beneficial ownership in the Security to which the report
relates.
3. Availability of Reports. All information supplied pursuant to this
Code may be made available for inspection to the Board of Trustees of the
Trusts, the Board of Directors of Rafferty, the Compliance Officer, any
party to which any investigation is referred by any of the foregoing, the
SEC, any self-regulatory organization of which Rafferty is a member, any
state securities commission, and any attorney or agent of the foregoing or
of the Trusts.
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IV. FIDUCIARY DUTIES
A. Confidentiality. Access Persons are prohibited from revealing
information relating to the investment intentions, activities or portfolios of
the Funds except to persons whose responsibilities require knowledge of the
information.
B. Gifts. The following provisions on gifts apply to all Investment
Personnel.
1. Accepting Gifts. On occasion, because of their position with the
Trusts, Investment Personnel may be offered, or may receive without notice,
gifts from clients, brokers, vendors, or other persons not affiliated with
such entities. Acceptance of extraordinary or extravagant gifts is not
permissible. Any such gifts must be declined or returned in order to
protect the reputation and integrity of the Trusts and Rafferty. Gifts of a
nominal value (i.e., gifts whose reasonable value is no more than $100 a
year), and customary business meals, entertainment (e.g., sporting events),
and promotional items (e.g., pens, mugs, T-shirts) may be accepted.
If an Investment Person receives any gift that might be
prohibited under this Code, the Investment Person must inform the
Compliance Officer.
2. Solicitation of Gifts. Investment Personnel may not solicit gifts
or gratuities.
3. Giving Gifts. Investment Personnel may not personally give any gift
with a value in excess of $100 per year to persons associated with
securities or financial organizations, including exchanges, other member
organizations, commodity firms, news media, or clients of Rafferty.
C. Corporate Opportunities. Access Persons may not take personal advantage
of any opportunity properly belonging to the Trusts or Rafferty. This includes,
but is not limited to, acquiring Securities for one's own account that would
otherwise be acquired for a Fund.
D. Undue Influence. Access Persons may not cause or attempt to cause any
Fund to purchase, sell or hold any Security in a manner calculated to create any
personal benefit to the Access Person. If an Access Person or Immediate Family
member stands to benefit materially from an investment decision for a Fund which
the Access Person is recommending or participating in, the Access Person must
disclose to those persons with authority to make investment decisions for the
Fund (or, if the Access Person in question is a person with authority to make
investment decisions for the Fund, to the Compliance Officer) any Beneficial
Interest that the Access Person (or Immediate Family member) has in that
Security or an Equivalent Security, or in the issuer thereof, where the decision
could create a material benefit to the Access Person (or Immediate Family
member) or the appearance of impropriety. The person to whom the Access Person
reports the interest, in consultation with the Compliance Officer, must
determine whether or not the Access Person will be restricted in making
investment decisions.
E. Service as a Director. No Investment Person may serve on the board of
directors of a publicly-held company (other than the Trusts) absent prior
written authorization by the Compliance Officer. This authorization will rarely,
if ever, be granted and, if granted, normally will require that the affected
Investment Person be isolated, through a "Chinese Wall" or other procedures,
from those making investment decisions related to the issuer on whose board the
person sits.
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V. COMPLIANCE WITH THIS CODE OF ETHICS
A. Compliance Officer Review
1. Investigating Violations of the Code. The Compliance Officer is
responsible for investigating any suspected violation of the Code and shall
report the results of each investigation to the President of Rafferty. The
President of Rafferty together with the Compliance Officer are responsible
for reviewing the results of any investigation of any reported or suspected
violation of the Code. Any violation of the Code by an Access Person will
be reported to the Boards of Trustees of the Trusts no less frequently than
each regular quarterly meeting.
2. Annual Reports. The Compliance Officer will review the Code at
least once a year, in light of legal and business developments and
experience in implementing the Code, and will report to the Boards of
Trustees of the Trusts:
a. Summarizing existing procedures concerning personal investing
and any changes in the procedures made during the past year;
b. Identifying any violation requiring significant remedial
action during the past year; and
c. Identifying any recommended changes in existing restrictions
or procedures based on its experience under the Code, evolving
industry practices, or developments in applicable laws or regulations.
B. Remedies
1. Sanctions. If the Compliance Officer and the President of Rafferty
determine that an Access Person has committed a violation of the Code
following a report of the Compliance Officer, the Compliance Officer and
the President of Rafferty may impose sanctions and take other actions as
they deem appropriate, including a letter of caution or warning, suspension
of personal trading rights, suspension of employment (with or without
compensation), fine, civil referral to the SEC, criminal referral, and
termination of the employment of the violator for cause. The Compliance
Officer and the President of Rafferty also may require the Access Person to
reverse the trade(s) in question and forfeit any profit or absorb any loss
derived therefrom. The amount of profit shall be calculated by the
Compliance Officer and the President of Rafferty and shall be forwarded to
a charitable organization selected by the Compliance Officer and the
President of Rafferty. The Compliance Officer and the President of Rafferty
may not review his or her own transaction.
2. Sole Authority. The Compliance Officer and the President of
Rafferty have sole authority, subject to the review set forth in Section
V.B.3 below, to determine the remedy for any violation of the Code,
including appropriate disposition of any monies forfeited pursuant to this
provision. Failure to promptly abide by a directive to reverse a trade or
forfeit profits may result in the imposition of additional sanctions.
3. Review. Whenever the Compliance Officer and the President of
Rafferty determine that an Access Person has committed a violation of this
Code that merits remedial action, they will report no less frequently than
quarterly to the Boards of Trustees of the Trusts, information relating to
the investigation of the violation, including any sanctions imposed. The
Boards of Trustees of the Trusts may modify such sanctions as it deems
appropriate. The Boards of Trustees of the Trusts and the Compliance
Officer and the President of Rafferty shall have access to all information
considered
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by the Compliance Officer in relation to the case. The Compliance Officer
may determine whether or not to delay the imposition of any sanctions
pending review by the applicable Board.
C. Exceptions to the Code. Although exceptions to the Code will rarely, if
ever, be granted, the Compliance Officer may grant exceptions to the
requirements of the Code on a case by case basis if the Compliance Officer finds
that the proposed conduct involves negligible opportunity for abuse. All such
exceptions must be in writing and must be reported as soon as practicable to the
Boards of Trustees of the Trusts at its next regularly scheduled meeting after
the exception is granted.
D. Compliance Certification. Each current Access Person and each
newly-hired Access Person shall certify that he or she has received, read and
understands the Code by executing the Certification of Compliance with the Code
of Ethics form (see Appendix 3). In addition, by December 31 following the end
of the prior calendar year, all Access Persons will be required to re-certify on
such form (see Appendix 3) that they have read and understand the Code, that
they have complied with the requirements of the Code, and that they have
reported all Securities Transactions required to be disclosed or reported
pursuant to the requirements of this Code. Independent Fund Trustees should
complete Appendix 3-I only.
E. Inquiries Regarding the Code. The Compliance Officer will answer any
questions about the Code or any other compliance-related matters.
August 26, 1997, as amended February 24, 2000 and November 9, 2004
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APPENDIX 1
DEFINITIONS
"Access Person" means any trustee, director, officer or Advisory Person of
Rafferty or the Trusts.
"Advisory Person" means (1) any employee of Rafferty and the Trusts (or of
any company in a control relationship with such companies) who, in connection
with his or her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by the Funds, or whose
functions relate to the making of any recommendation with respect to such
purchases or sales, and (2) any natural person in a control relationship to such
companies who obtains information concerning the recommendations made to the
Funds with respect to the purchase and sale of securities by the Funds.
"Beneficial Interest" means the opportunity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, to
profit, or share in any profit derived from, a transaction in the subject
Securities. An Access Person is deemed to have a Beneficial Interest in
Securities owned by members of his or her Immediate Family. Common examples of
Beneficial Interest include joint accounts, spousal accounts, UTMA accounts,
partnerships, trusts and controlling interests in corporations. Any uncertainty
as to whether an Access Person has a Beneficial Interest in a Security should be
brought to the attention of the Compliance Officer. Such questions will be
resolved in accordance with, and this definition shall be subject to, the
definition of "beneficial owner" found in Rules 16a-1(a)(2) and (5) promulgated
under the Securities Exchange Act of 1934.
"Code" means this Code of Ethics, as it may be amended from time to time.
"Compliance Officer" means the Compliance Officer of Rafferty and the
persons designated in Appendix 2, as such Appendix shall be amended from time to
time.
"Equivalent Security" means any Security issued by the same entity as the
issuer of a subject Security, including options, rights, stock appreciation
rights, warrants, preferred stock, restricted stock, phantom stock, bonds, and
other obligations of that company or security otherwise convertible into that
security. Options on securities are included even if, technically, they are
issued by the Options Clearing Corporation or a similar entity.
"Fund" and "Funds" mean one or more of the portfolios of the Potomac Funds,
an investment company registered under the 1940 Act for which Rafferty serves as
investment adviser.
"Immediate Family" of an Access Person means any of the following persons
who reside in the same household as the Access Person:
child
stepchild
grandchild
parent
stepparent
grandparent
spouse
sibling
mother-in-law
father-in-law
son-in-law
daughter-in-law
brother-in-law
sister-in-law
Immediate Family includes adoptive relationships and any other relationship
(whether or not recognized by law) which the Compliance Officer determines could
lead to the possible conflicts of interest, diversions of corporate opportunity,
or appearances of impropriety which this Code is intended to prevent.
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"Independent Fund Trustee" means a trustee of a Trust who is not an
"interested person" as that term is defined in Section 2(a)(19) of the 1940 Act.
"Initial Public Offering" is an offering of securities registered under the
Securities Act of 1933 by an issuer who immediately before the registration of
such securities was not subject to the reporting requirements of sections 13 or
15(d) of the Securities Exchange Act of 1934.
"Investment Personnel" and "Investment Person" mean (1) employees of
Rafferty or the Trusts (or of any company in a control relationship to such
companies) who, in connection with his or her regular functions or duties, makes
or participates in making recommendations regarding the purchase or sale of a
security, or (2) any natural person who controls Rafferty or the Trusts and who
obtains information concerning recommendations made to the Funds regarding the
purchase and sale of securities by the Funds. References to Investment Personnel
include Portfolio Managers.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Private Placement" means a limited offering exempt from registration
pursuant to Rules 504, 505 or 506 or under Section 4(2) or 4(6) of the
Securities Act of 1933.
"Portfolio Manager" means a person who has or shares principal day-to-day
responsibility for managing the portfolio of a Fund.
"Rafferty" means Rafferty Asset Management, LLC.
"SEC" means the Securities and Exchange Commission.
"Security" includes stock, notes, bonds, debentures, and other evidences of
indebtedness (including loan participations and assignments), limited
partnership interests, investment contracts, and all derivative instruments of
the foregoing, such as options and warrants. "Security" does not include futures
and options on futures, but the purchase and sale of such instruments are
nevertheless subject to the reporting requirements of the Code.
"Securities Transaction" means a purchase or sale of Securities in which an
Access Person or a member of his or her Immediate Family has or acquires a
Beneficial Interest.
"Trusts" means the Potomac Funds and the Potomac Insurance Trust, each an
investment company registered under the 1940 Act.
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APPENDIX 2
CONTACT PERSONS
COMPLIANCE OFFICER
1. Daniel O'Neill
2. Tim Hagan
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APPENDIX 3
CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS
I acknowledge that I have received the Code of Ethics dated August 26,
1997, as amended on February 24, 2000, and certify that:
1. I have read the Code of Ethics and I understand that it applies to
me and to all accounts in which I or a member of my Immediate Family has
any Beneficial Interest.
2. In accordance with Section III.A. of the Code of Ethics, I will
report or have reported all Securities Transactions in which I have, or a
member of my Immediate Family has, a Beneficial Interest, except for
transactions exempt from reporting under Section III.C.
3. I have listed on Appendix 3-A of this form all accounts and
securities in which I have, or any member of my Immediate Family has, any
Beneficial Interest.
4. I will comply or have complied with the Code of Ethics in all other
respects.
5. I agree to disgorge and forfeit any profits on prohibited
transactions in accordance with the requirements of the Code of Ethics.
----------------------------------------
Access Person's Signature
-------------------------------------
Print Name
Date:
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SEE NEXT PAGE
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APPENDIX 3-A
PERSONAL SECURITIES HOLDINGS AND ACCOUNTS DISCLOSURE FORM
(for use as an Initial or Annual Holdings and Accounts Report)
PURSUANT TO SECTION III.A.1 OR III.A.3 OF THE CODE OF ETHICS, PLEASE LIST
ALL SECURITIES ACCOUNTS AND SECURITIES HOLDINGS FOR EACH SECURITIES ACCOUNT IN
WHICH YOU OR YOUR IMMEDIATE FAMILY MEMBER HAS BENEFICIAL INTEREST. YOU DO NOT
NEED TO LIST THOSE SECURITIES THAT ARE EXEMPT PURSUANT TO SECTION III.C.
Is this an Initial or Annual Report? ____________________________
Name of Access Person: ____________________________
Name of Account Holder: ____________________________
Relationship to Access Person: ____________________________
SECURITIES HOLDINGS:
Attach to this Report your most recent account statement and/or list Securities
held below:
Name of Security Quantity Principal Amount Name of Broker/Dealer/Bank
- ---------------- -------- ---------------- --------------------------
1.
2.
3.
4.
5.
(Attach separate sheets as necessary)
SECURITIES ACCOUNTS:
Account Name Account Number Date Account Opened Name of Broker/Dealer/Bank
- ------------ -------------- ------------------- --------------------------
1.
2.
3.
4.
(Attach separate sheets as necessary)
I certify that this Report and the attached statements (if any) constitute
all the Securities accounts and Securities that must be reported pursuant to
this Code.
- ------------------------------------
Access Person Signature
- ------------------------------------ --------------------------
Print Name Date
2
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APPENDIX 3-I
CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS
(INDEPENDENT FUND TRUSTEES)
I acknowledge that I have received the Code of Ethics dated August 26,
1997, as amended on February 24, 2000, and certify that:
1. I have read the Code of Ethics and I understand that it applies to
me and to all accounts in which I or a member of my Immediate Family has
any Beneficial Interest.
2. I will report or have reported all Securities Transactions required
to be reported under Section III.B. of the Code in which I have, or a
member of my Immediate Family has, a Beneficial Interest.
3. I will comply or have complied with applicable provisions of the
Code of Ethics in all other respects.
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Trustee's Signature
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Print Name
Date:
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APPENDIX 4
FORM OF LETTER TO BROKER, DEALER OR BANK
<Date>
<Broker Name and Address>
Subject: Account # _________________
Dear ________________:
Rafferty Asset Management, LLC ("Rafferty"), my employer, is a registered
investment adviser. In connection with the Code of Ethics adopted by Rafferty, I
am required to request that you send duplicate confirmations of individual
transactions as well as duplicate periodic statements for the referenced ac ount
to my employer. Please note that the confirmations and/or periodic statements
must disclose the following information:
1) date of the transaction;
2) the title of the security (including interest rate and maturity
date) and price;
3) the number of shares and principal amount;
4) the nature of the transaction (e.g., purchase or sale); and
5) the name of the firm effecting the trade.
If you are unable to provide this information, please let me know immediately.
Otherwise, please address the confirmations and statements directly to:
Mr. Tim Hagan
Rafferty Asset Management, LLC
3719 N. Randolph St.
Arlington, VA 22207
Your cooperation is most appreciated. If you have any questions regarding
these requests, please contact me at <phone number> .
Sincerely,
<Name of Access Person>
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APPENDIX 5
REPORT OF SECURITY TRANSACTIONS
FOR QUARTER ENDED _____________
Access Persons other than Independent Fund Trustees: You do not need to report
transactions in 1) direct obligations of the U.S. Government, 2) bankers'
acceptances, bank CDs, commercial paper, high quality short-term debt
instruments, 3) shares of an open-end investment company, and 4) transactions
which you had no direct or indirect influence or control.
Independent Fund Trustees: If you are an Independent Fund Trustee, then you only
need to report a transaction if you, at the time of that transaction, knew or,
in the ordinary course of fulfilling your official duties as a Trustee to the
Potomac Funds, should have known that, during the 15-day period immediately
before or after your transaction in a security,
1) the Funds purchased or sold such security or
2) the Funds or their investment adviser considered purchasing or
selling such security.
Disclose all securities transactions for the period covered by this Report:
Price at
Name/Description of Number Date of Which Bought Name of
Security* Shares Transaction Effected Principal Amount or Sold Broker/Dealer/Bank
- ------------------- ------ ----------- -------- ---------------- ------- ------------------
* Please disclose the interest rate or maturity date, if applicable.
Did you establish any securities accounts during the period covered by this
Report? ___ Yes ___ No
If Yes, please complete the following:
EX.99.CODE.ETH
Date of
Name of Broker Account Opening Account Number
- -------------- --------------- --------------
____ The above is a record of every transaction in a security or account opened
which I had, or in which I acquired, any direct or indirect beneficial
ownership during the period indicated above.
____ I certify that the Compliance Officer has received confirmations or account
statements pertaining to all transactions executed and that disclose the
information required above, and notice of any accounts opened, during the
period covered by this Report.
____ I have nothing to report for the period covered by this Report.
Date: Signature:
-------------------- -----------------------------
EX.99.CODE ETH
APPENDIX 6
INITIAL PUBLIC OFFERING / PRIVATE PLACEMENT
CLEARANCE FORM
(for the use of the Compliance Officer only)
The Code of Ethics for Rafferty and the Potomac Funds prohibits any
acquisition of securities in an initial public offering (other than shares of
open-end investment companies) and private placement by any Investment Person.
In cases of exceptional circumstances, however, investments in such securities
may be permitted. In these instances, a record of the rationale supporting the
approval of such transactions must be completed and retained for a period of 5
years after the end of the fiscal year in which approval is granted. This form
should be used for such record keeping purposes.
Name of Investment Person: _________________________________
Date of Request: _________________________________
Name of IPO / Private Placement: _________________________________
Date of Offering: _________________________________
Number of Shares/Interests _________________________________
Price: _________________________________
Name of Broker/Dealer/Bank _________________________________
___ I have cleared the IPO / Private Placement transaction described above.
Reasons supporting the decision to approve the above transaction:
----------------------------------------
Name of Compliance Officer
----------------------------------------
Signature of Compliance Officer
----------------------------------------
Date