-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Low6uwEyxnBt1ZH6B3ZBhoh2EEUT8tqmKKK2dYnb3otauOiTAZLuKTrpC8yGbfEx G8wT2yEio5dyuyd2Ux54qg== 0000935069-06-001894.txt : 20060718 0000935069-06-001894.hdr.sgml : 20060718 20060718163437 ACCESSION NUMBER: 0000935069-06-001894 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20060718 DATE AS OF CHANGE: 20060718 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RBB FUND INC CENTRAL INDEX KEY: 0000831114 IRS NUMBER: 510312196 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-20827 FILM NUMBER: 06967421 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PKWY STE 100 CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027911700 MAIL ADDRESS: STREET 1: 400 BELLEVUE PKWY STREET 2: SUITE 152 CITY: WILMINGTON STATE: DE ZIP: 19809 FORMER COMPANY: FORMER CONFORMED NAME: FUND INC /DE/ DATE OF NAME CHANGE: 19600201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RBB FUND INC CENTRAL INDEX KEY: 0000831114 IRS NUMBER: 510312196 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05518 FILM NUMBER: 06967422 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PKWY STE 100 CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027911700 MAIL ADDRESS: STREET 1: 400 BELLEVUE PKWY STREET 2: SUITE 152 CITY: WILMINGTON STATE: DE ZIP: 19809 FORMER COMPANY: FORMER CONFORMED NAME: FUND INC /DE/ DATE OF NAME CHANGE: 19600201 0000831114 S000013665 Bear Stearns CUFS MLP Mortgage Portfolio C000037423 Bear Stearns CUFS MLP Mortgage Portfolio 485APOS 1 g34307rbb_485a.txt RBB 485A 2006 As filed with the Securities and Exchange Commission on July 18, 2006 Securities Act File No. 33-20827 Investment Company Act File No. 811-5518 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X| Pre-Effective Amendment No. __ |_| Post-Effective Amendment No. 103 |X| and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X| Amendment No. 105 |X| -------------------- THE RBB FUND, INC. (Exact Name of Registrant as Specified in Charter) Bellevue Park Corporate Center 400 Bellevue Parkway Wilmington, DE 19809 (Address of Principal Executive Offices) Registrant's Telephone Number: (302) 792-2555 Copies to: JAMES SHAW MICHAEL P. MALLOY, ESQUIRE PFPC Inc. Drinker Biddle & Reath LLP 400 Bellevue Parkway One Logan Square Wilmington, DE 19809 18th & Cherry Streets (Name and Address of Agent for Service) Philadelphia, PA 19103-6996 It is proposed that this filing will become effective (check appropriate box) |_| immediately upon filing pursuant to paragraph (b) |_| on ________________ pursuant to paragraph (b) |_| 60 days after filing pursuant to paragraph (a)(1) |_| on (date) pursuant to paragraph (a)(1) |_| 75 days after filing pursuant to paragraph (a)(2) |X| on October 2, 2006 pursuant to paragraph (a)(2) of Rule 485 If appropriate, check the following box: |_| This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Being Registered..................Shares of Common Stock SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JULY 18, 2006 INFORMATION CONTAINED HEREIN PERTAINING TO THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO OF THE RBB FUND, INC. IS SUBJECT TO COMPLETION OR AMENDMENT. A POST-EFFECTIVE AMENDMENT TO THE RBB FUND, INC. REGISTRATION STATEMENT RELATING TO SHARES OF THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SHARES OF THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO MAY NOT BE SOLD NOR MAY OFFERS TO BUY SHARES OF SUCH FUND BE ACCEPTED PRIOR TO THE TIME THE POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SHARES OF THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO OF THE RBB FUND, INC. PROSPECTUS ______________, 2006 The Securities and Exchange Commission ("SEC") has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Prospectus. Anyone who tells you otherwise is committing a criminal offense. An investment in the Portfolio is not a credit union deposit and is not insured or guaranteed by the National Credit Union Share Insurance Fund, the National Credit Union Administration ("NCUA") or any other government agency. An investment in the Portfolio involves investment risks, including possible loss of principal. TABLE OF CONTENTS - -------------------------------------------------------------------------------- INTRODUCTION...................................................................3 BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO.......................................4 MORE ABOUT THE PORTFOLIO'S INVESTMENTS AND RISKS..............................10 MANAGEMENT OF THE PORTFOLIO Investment Adviser.................................................17 Portfolio Manager..................................................17 Management Fees....................................................17 OTHER SERVICE PROVIDERS.......................................................18 SHAREHOLDER INFORMATION Pricing of Portfolio Shares........................................19 Market Timing......................................................19 Purchase of Portfolio Shares.......................................20 Redemption of Portfolio Shares.....................................22 Dividends and Distributions........................................24 Taxes..............................................................24 FOR MORE INFORMATION..................................................Back Cover 2 INTRODUCTION - -------------------------------------------------------------------------------- The Bear Stearns CUFS MLP Mortgage Portfolio (the "Portfolio") is an open-end, non- diversified investment portfolio of The RBB Fund, Inc. (the "Company"). This Prospectus and the Statement of Additional Information (the "SAI") incorporated herein relate solely to the Portfolio. Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser") provides investment advisory services to the Portfolio. Credit Union Financial Services(R) and CUFS(R) are both registered trademarks of Wade Charles Barnett and represents the group generally responsible for counseling the Adviser on all things related to the credit unions, including and not limited to shareholder services and marketing. MLP stands for "Managed Leverage Program" which, for the purposes of this Prospectus, refers to leverage, if any, used within the Portfolio in accordance with the Investment Company Act of 1940 Act, as amended (the "1940 Act"). The Portfolio is offered solely to eligible state and federally chartered credit unions. See "Shareholder Information - Purchase of Portfolio Shares". Shares of the Portfolio ("Shares") are designed to qualify as eligible investments for federally chartered credit unions pursuant to Part 1757, Sections 107(7), 107(8) and 107(15) of the Federal Credit Union Act and Part 703 of the NCUA Rules and Regulations. The Adviser has obtained a waiver with respect to the Portfolio from the following provisions of the NCUA Rules and Regulations: Section 703.13(a)-Permissible Investment Activities: Regular way settlement and delivery versus payment; Section 703.15-Prohibited Investment Activities: Adjusted trading or short sales; Section 703.16(a)-Prohibited Investments: Derivatives; and Section 703.16(e)-Prohibited Investments: Other Prohibited Investments (including stripped mortgage-backed securities). Shares of the Portfolio may or may not qualify as eligible investments for particular state chartered credit unions. You should consult qualified legal counsel to determine whether an investment in Shares of the Portfolio by a particular credit union qualifies as an eligible investment under applicable law. 3 BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The Portfolio seeks high total return consistent with preservation of capital. The Portfolio's investment objective is not fundamental and may be changed without shareholder approval by the Company's Board of Directors upon prior written notice to shareholders. PRINCIPAL INVESTMENT STRATEGIES INVESTMENTS The Portfolio intends to invest all of its assets in obligations authorized by the Federal Credit Union Act ("FCUA") or otherwise permitted pursuant to a waiver granted by the NCUA with respect to certain FCUA rules and regulations. MORTGAGE-RELATED SECURITIES. Under normal circumstances, the Portfolio will invest at least 80% of its net assets (including any borrowings for investment purposes) in mortgage-related securities, including: o privately-issued mortgage-related securities, rated at the time of purchase in one of the two highest rating categories by a nationally recognized statistical ratings organization ("NRSRO"); and o mortgage-related securities issued or guaranteed by the U.S. government, its agencies, instrumentalities or sponsored enterprises ("U.S. Government securities"). TYPES OF MORTGAGE-RELATED SECURITIES. The Portfolio may hold various types of mortgage-related securities, including: o adjustable rate and fixed rate mortgage pass-through securities; o collateralized mortgage obligations ("CMOs") and other multiclass mortgage-related securities; o other securities that are collateralized by or represent direct or indirect interests in mortgage-related securities or mortgage loans; o mortgage dollar rolls; and o stripped mortgage-backed securities ("SMBS"), including interest only ("IO") SMBS, inverse floating IO SMBS, and principal only ("PO") SMBS, as well as other floating rate and inverse floating rate debt instruments. The Portfolio will notify shareholders in writing at least 60 days prior to any change in its policy to invest at least 80% of its net assets in mortgage-related securities. The Portfolio may also invest in: DERIVATIVE INSTRUMENTS. The Portfolio may use these derivative instruments to hedge risks, or to seek to generate additional returns, which may be considered speculative. The Portfolio may invest in derivative instruments including: o interest rate swaps and total return swaps; o futures (Treasury, Eurodollar and Federal Funds) and options (including put and call options on financial futures contracts, interest rate swaps and total return swaps); o interest rate caps; o interest rate floors; and 4 o interest rate collars. OTHER INVESTMENTS. The Portfolio may invest in other instruments, including o other U.S. Government securities and related custodial receipts; o U.S. dollar-denominated obligations issued or guaranteed by U.S. banks with total assets exceeding $1 billion (but only to the extent permitted under the Federal Credit Union Act and the rules, regulations and interpretations thereunder); and o repurchase agreements (to gain investment return) and reverse repurchase agreements (to effectively borrow money). INVESTMENT STRATEGY The Adviser seeks high total return consistent with preservation of capital. The Adviser intends to utilize a wide spectrum of mortgage-related securities, subject to the limitations outlined herein, in conjunction with hedging instruments and strategies to minimize risk. In particular, the Adviser seeks to minimize the sensitivity of the Portfolio to localized changes in interest rates. DURATION. "Duration" refers to the sensitivity of an instrument or portfolio to parallel movements in interest rates. That is, the higher the duration, the greater the sensitivity an instrument or portfolio has to movements in interest rates. "Effective duration" is a measure of duration that incorporates cash flow variability into the analysis and considers the likelihood that a particular security will be called or prepaid prior to maturity based on prevailing interest rates. The longer the effective duration of a security, the more the security is affected by movements in interest rates. Theoretically, for each 1% parallel increase in interest rates, a security declines in principal value equal to its effective duration with all other factors unchanged. For example, if the effective duration of the Portfolio is two years and interest rates rise 1%, the principal value of the Portfolio could be expected to decrease by approximately 2%. If the effective duration of the portfolio is -2 years and interest rates rise 1%, the principal value of the Portfolio could be expected to increase by approximately 2%. Generally, the Adviser expects that under normal circumstances, the overall "effective" duration of the Portfolio will be between -2 and +2 years as calculated using the Adviser's mortgage risk models. The Adviser generally intends to minimize the Portfolio's sensitivity to movements in interest rates, and corresponding fluctuation in the Portfolio's net asset value. There is no guarantee that the Adviser can successfully protect the Portfolio's principal value. Calculating effective duration requires estimates of possible future interest rates, historical and estimated prepayment rates, call options, and other cash flow variables. Estimates of these factors are used in pricing models to calculate effective duration. In computing effective portfolio duration, the Adviser will estimate the duration of obligations that are subject to repayment or redemption by the issuer, taking into account the influence of interest rates on prepayments of mortgages that make up the Portfolio's holdings. There can be no assurance that estimates will be correct or that models calculating effective duration will be applied or implemented correctly. There also can be no assurance that the Adviser's estimation of duration will be accurate or that the duration of the Portfolio will always remain within its maximum target duration. CONVEXITY. Particularly for securities with embedded options (E.G., most mortgage-related securities), there are limitations in relying solely on effective duration as the measure of interest rate risk. Because effective duration is calculated as an average across numerous potential interest rate scenarios, it does not fully describe how that duration can change under certain conditions. For securities with 5 negative convexity (E.G., many mortgage-related and callable securities), duration tends to underestimate a bond's price fall for a rise in interest rates, and overestimate a bond's price rise for a fall in interest rates. "Effective convexity" is a statistic used to help describe the expected sensitivity of a bond's duration to interest rate changes. For bonds that have greater degrees of negative convexity, model estimates of effective duration tend to be less reliable as a measure of interest rate risk. The Portfolio's convexity will generally be greater than or equal to -5. As with model estimates of effective duration, there can be no assurance that models will provide accurate estimates of effective convexity or that they will be applied or implemented correctly. MATURITY. Maturity measures the time until final payment is due. The Portfolio has no restrictions as to the minimum or maximum maturity of any particular security it holds, but intends to maintain the duration range noted above. VALUE OPPORTUNITIES. While the Adviser expects that the Portfolio's overall interest rate sensitivity will typically be very low, the Portfolio is structured to take advantage of value opportunities throughout the universe of mortgage-related securities. The Adviser may identify value in asset classes that have interest-rate sensitivity greater than would ordinarily be acceptable to the Portfolio. The Portfolio may invest in these instruments in conjunction with hedging instruments or with other mortgage securities designed to offset these additional risks. SHORT SALES. The Portfolio may engage in short-sales of securities. PRINCIPAL RISKS You may lose money by investing in the Portfolio. An investment in the Portfolio is not a deposit of any credit union and is not insured or guaranteed by the National Credit Union Share Insurance Fund, the National Credit Union Administration or any other governmental agency. The net asset value of the Portfolio will fluctuate and may decline for extended periods with no guarantee that the Portfolio's net asset value will return to its prior level. The Portfolio could underperform other possible investments or benchmarks. The Portfolio's principal risks include: o FIXED INCOME SECURITIES RISK - The mortgage-related and fixed income securities held by the Portfolio may experience a drop in price that affects the Portfolio's net asset value. One reason that this may occur is due to changes in interest rates. Other factors may affect the value of fixed income securities and the Portfolio's share price, such as financial conditions of a particular issuer and general economic conditions. The Portfolio is also subject to the risk that investment grade fixed income securities in which it invests may underperform particular segments of the fixed income markets or the fixed income markets generally. MORTGAGE RISK - The risk that prepayment of principal on the mortgages underlying a particular security may be faster or slower than estimated and may be sensitive to changes in mortgage interest rates. When underlying interest rates are rising, prepayment of principal tends to slow and will tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, the Portfolio may exhibit additional volatility. This has the tendency to delay the Portfolio's ability to reinvest principal in higher yielding securities and is known as EXTENSION RISK. When interest rates decline, borrowers may pay-off their mortgages sooner than expected and will tend to shorten the duration of mortgage related securities. This can reduce the returns of the Portfolio because the Portfolio may be unable to recoup all of its initial investment and will also suffer from having to reinvest in lower yielding securities. This is known as PREPAYMENT RISK. 6 INTEREST RATE RISK - The risk that during periods of rising interest rates, the Portfolio's yield (and the market value of its mortgage-related and other fixed-income securities) will tend to be lower than prevailing market rates. In periods of falling interest rates, the Portfolio's yield (and the market value of its mortgage-related and other fixed income securities) will tend to be higher. CREDIT/DEFAULT RISK - The risk that an issuer or guarantor of a security, the counterparty to a derivatives contract or a repurchase agreement may default on its payment obligations. o DERIVATIVES RISK - The risk that loss may result from the Portfolio's investments in swaps, futures and options and other derivative instruments. These instruments may be leveraged so that small changes in value may produce disproportionate losses to the Portfolio. The Portfolio intends to use derivatives as a substitute for taking a position in the underlying asset and/or part of a strategy designed to reduce exposure to other risks, such as interest rate risk, or to generate additional returns. The Portfolio's use of derivative instruments may involve risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The Portfolio's investment in a derivative instrument could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that the Portfolio will engage in these transactions to reduce exposure to other risks when they would be beneficial. Certain derivative mortgage-related securities, such as PO, IO or inverse floating rate securities, are particularly exposed to call and extension risk. Small changes in mortgage prepayments can significantly impact the cash flow and mortgage value of these securities. The value of POs and IOs may change more drastically than debt securities that pay both principal and interest during periods of changing interest rates. An increase in mortgage prepayments of principal may result in significant losses to an IO security. Slower than anticipated prepayments generally adversely affects PO securities. The Portfolio's share price may be adversely impacted because of its investment in these IO and PO securities. o LEVERAGE RISK - The risk that loss may result from the Portfolio's investments in certain leveraged mortgage-related securities and derivative instruments. These instruments may be leveraged so that small changes in value may produce disproportionate losses to the Portfolio. Leverage may also arise from the Portfolio's use of borrowed money for leveraging purposes which may affect adversely the value of its share price. The use of leverage in a declining market may cause a greater decline in the value of the Portfolio's Share price than if the Portfolio were not leveraged. Fluctuations in interest rates on borrowings may reduce the Portfolio's return or dividends it may pay. o REPURCHASE AND REVERSE REPURCHASE AGREEMENTS RISK - The risk that the other party to a repurchase or reverse repurchase agreement will be unable or unwilling to complete the transaction as scheduled, which may result in losses to the Portfolio. Reverse purchase transactions are a form of leverage that may also increase the volatility of the Portfolio's share price. o SHORT SELLING - The risk that the Portfolio's use of short sales will result in losses. A short sale involves the sale of a security that the Portfolio does not own in order to hedge related risks. A short sale creates the risk of a theoretically unlimited loss, in that the price of the underlying security could theoretically increase without limits, thus increasing the cost to the Portfolio of buying those securities to cover the short position. There can be no assurance that the Portfolio will be able to maintain the ability to borrow securities sold short. There also can be no assurance that the securities necessary to cover a short position will be available for purchase at or near prices quoted in the market. Purchasing securities to close out the short position can itself cause the price of the securities to rise further, thereby exacerbating the loss. o LIQUIDITY RISK - Liquidity risk exists when particular investments are difficult to purchase or sell. The Portfolio's investments in illiquid securities may reduce the returns of the Portfolio because it may be unable to sell the illiquid securities at an advantageous time or price. Portfolios with principal 7 investment strategies that include derivatives or securities with substantial market and/or credit risk may have a greater exposure to liquidity risk. o MARKET RISK - The risk that the market price of securities owned by the Portfolio may go up or down, sometimes rapidly or unpredictably depending solely on the market conditions of supply and demand. In such a market, the value of such securities and the Portfolio's share price may change dramatically. The value of a security may decline due to general market conditions that are not specifically related to a particular issuer such as real or perceived adverse economic conditions, changes in the outlook for corporate earnings, changes in interest rates or adverse investor sentiment generally. The value of a security also may decline because of factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. The Portfolio's share price or yield may be adversely impacted by market risk. o MARKET SECTOR RISK - The risk that the Portfolio's risk level will depend on the market sectors in which the Portfolio is invested. The Portfolio may overweight or underweight certain market sectors, which may cause the Portfolio's performance to be more or less sensitive to developments affecting those sectors. o MANAGEMENT RISK - The risk that a strategy used by the Adviser may fail to produce the intended results. o U.S. GOVERNMENT SECURITIES RISK - The risk that the U.S. Government will not provide financial support to U.S. Government instrumentalities or sponsored enterprises if it is not obligated to do so by law. Some U.S. Government securities are backed by the full faith and credit of the U.S. Treasury. Other issuers, however, may be chartered or sponsored by Acts of Congress, although their securities are neither issued nor guaranteed by the United States Treasury and, therefore, are not backed by the full faith and credit of the United States. o NON-DIVERSIFICATION RISK - The Portfolio is non-diversified, meaning that it is permitted to invest more of its assets in fewer issuers than "diversified" mutual funds. Thus, the Portfolio may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments. o MODEL RISK - the risk that the models used by the Adviser will not accurately predict the price movements or the total return for certain securities or for the Portfolio under certain future market conditions even if those market conditions were accurately predicted ahead of time. This risk may arise because they are applied to tasks for which they are inappropriate, because the market conditions that were used for calibration of such models are no longer useful for predicting future market environments, because assumptions used to generate model output are not robust or accurate, or other reasons associated with the inappropriate or incorrect implementation of such models. Even with the proper use of models, it should be understood that models generally provide estimated risk characteristics (such as duration and convexity) over a broad range of market scenarios, and may not be appropriate for particular scenarios that may transpire. There can be no assurance that estimates will be accurate or that the models calculating effective duration or effective convexity will be applied or implemented correctly. Additionally, there can be no assurance that the effective duration of the Portfolio will always remain within its allowable duration range. There can be no assurance that the Portfolio's convexity generally will be within the parameters stated above. PERFORMANCE INFORMATION The Portfolio has not commenced investment operations as of the date of this Prospectus. 8 Therefore, no performance information is available. EXPENSES AND FEES As a shareholder, you pay certain fees and expenses. Total annual Portfolio operating expenses are paid out of Portfolio assets and are reflected in the Portfolio's price. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio. ANNUAL PORTFOLIO OPERATING EXPENSES* (expenses that are deducted from Portfolio assets) Management fees 0.48% Distribution (12b-1) fees None Other Expenses (1) 0.12% ----- Total annual Portfolio operating expenses(2) 0.60% * Shareholders requesting redemptions by wire are charged a transaction fee of $7.50. (1) Other expenses for the Portfolio are based on estimated amounts for the current fiscal year. Other expenses include audit, administration, custody, legal, registration, transfer agency, and miscellaneous other charges. (1) The Adviser is voluntarily waiving a portion of its advisory fee and/or reimbursing certain expenses in order to limit total annual Portfolio operating expenses to 0.60% of the Portfolio's average daily net assets. THESE WAIVERS AND/OR REIMBURSEMENTS MAY BE TERMINATED BY THE ADVISER AT ANY TIME. EXAMPLE This example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your Shares at the end of the period. The example also assumes that your investment has a 5% return each year, that the operating expenses of the Portfolio remain the same, and that you reinvested all dividends and distributions. Although your actual costs may be higher or lower, based on these assumptions your cost would be: 1 YEAR 3 YEARS ------ ------- $61 $192 9 MORE ABOUT THE PORTFOLIO'S INVESTMENTS AND RISKS - -------------------------------------------------------------------------------- The Risk/Return Summary describes the Portfolio's investment objective and its principal investment strategies and risks. This section provides some additional information about the Portfolio's investments and certain portfolio management techniques that the Portfolio may use. More information about the Portfolio's investments and portfolio management techniques, some of which entail risks, is included in the SAI. MORE ABOUT THE PORTFOLIO'S INVESTMENTS MORTGAGE-RELATED SECURITIES. Mortgage-related securities may be issued by private companies or by government sponsored entities or agencies of the U.S. Government, such as the Government National Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal Home Loan Banks. Mortgage-related securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by real property. Ginnie Mae is a wholly-owned corporation of the U.S. Government. Mortgage-related securities may include multiple class securities, including collateralized mortgage obligations ("CMOs") and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or participation certificates. CMOs provide an investor with a specified interest in the cash flow from a pool of underlying mortgages or of other mortgage-related securities. A REMIC is a CMO that qualifies for special tax treatment under the Internal Revenue Code of 1986, as amended, and invests in certain mortgages principally secured by interests in real property and other permitted investments. CMOs may exhibit more or less price volatility and interest rate sensitivity than other types of mortgage-related obligations, and under certain interest rate and payment scenarios, the Portfolio may fail to recoup fully its investment in certain of these securities regardless of their credit quality. Stripped mortgage-backed securities ("SMBS") represent the right to receive payments of interest ("IOs") or payments of principal ("POs") on underlying pools of mortgage securities, but not both. The value of these types of instruments may change more drastically than debt securities that pay both principal and interest during periods of changing interest rates. IOs are particularly subject to prepayment risk. The Portfolio may obtain a below market yield or incur a loss on such instruments. POs are particularly subject to extension risk. Mortgage derivatives, such as SMBS, often employ features that have the effect of leverage. As a result, small changes in interest rates may cause large and sudden price movements, especially compared to an investment in a security that is not leveraged. Mortgage derivatives can also become illiquid and hard to value in declining markets. The Portfolio seeks to invest in floating rate debt instruments ("floaters"). While floaters provide a certain degree of protection against rises in interest rates, their yields fall in a decline in interest rates as well. The Portfolio may also invest in inverse floating rate debt instruments ("inverse floaters"). An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality. The Portfolio may also invest in inverse floating IOs, which are IO securities related to inverse floaters. The Portfolio generally may invest no more than 50% of its total assets at the time of purchase in IO, inverse floating interest only, or PO securities in the aggregate. Within this 50% limit, IO, inverse floating IO and PO securities each will generally be no more than 20% of the Portfolio's total assets at the time of purchase. MORTGAGE DOLLAR ROLLS. The Portfolio may enter into mortgage dollar rolls to finance the purchase of additional investments. Dollar rolls expose the Portfolio to the risk that it will lose money if the additional investments do not produce enough income to cover the Portfolio's dollar roll obligations. 10 In addition, if the Adviser's prepayment assumptions are incorrect, the Portfolio may have performed better had the Portfolio not entered into the mortgage dollar roll. U.S. GOVERNMENT SECURITIES. U.S. Government securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. Government agencies, instrumentalities or sponsored enterprises. U.S. Treasury obligations include, among other things, the separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury that are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS"). U.S. Government Securities have historically involved little risk of loss of principal if held to maturity. However, no assurance can be given that the U.S. Government will provide financial support to U.S. Government agencies, authorities, instrumentalities or sponsored enterprises if it is not obligated to do so by law. CUSTODIAL RECEIPTS. Interests in U.S. Government securities may be purchased in the form of custodial receipts that evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued or guaranteed as to principal and interest by the U.S. Government, its agencies, instrumentalities or authorities. For certain securities law purposes, custodial receipts are not considered obligations of the U.S. Government. LEVERAGE. The Portfolio's investments in mortgage-related securities may involve the use of leverage. The Portfolio may make margin purchases of securities and, in connection with the purchases, borrow money from banks and other financial institutions for investment purposes. The Portfolio may also engage in selling securities short, which is a form of leverage. This practice of leveraging is speculative and involves certain risks. REPURCHASE AGREEMENTS. Repurchase agreements involve the purchase of securities subject to the seller's agreement to repurchase them at a mutually agreed upon date and price. The Portfolio may enter into repurchase agreements with securities dealers and banks that furnish collateral at least equal in value or market price to the amount of their repurchase obligation. If the other party or "seller" defaults, the Portfolio might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Portfolio are less than the repurchase price and the Portfolio's cost associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, the Portfolio could suffer additional losses if a court determines that the Portfolio's interest in the collateral is not enforceable. BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Portfolio can borrow money from banks and other financial institutions, and the Portfolio may enter into reverse repurchase agreements as permitted by law for leverage provided there is asset coverage of at least 300% of the amount borrowed, or for temporary or emergency purposes. Reverse repurchase agreements involve the sale of securities held by the Portfolio subject to the Portfolio's agreement to repurchase them at a mutually agreed upon date and price (including interest). These transactions may be entered into as a temporary measure for emergency purposes or to meet redemption requests. Reverse repurchase agreements may also be entered into when the Adviser expects that the interest income to be earned from the investment of the transaction proceeds will be greater than the related interest expense. Borrowings and reverse repurchase agreements involve leveraging. If the securities held by the Portfolio decline in value while these transactions are outstanding, the net asset value of the Portfolio's outstanding shares will decline in value by proportionately more than the decline in value of the securities. In addition, reverse repurchase agreements involve the risks that the investment return earned by the Portfolio (from the investment of the proceeds) will be less than the interest expense of the transaction, that the market value of the securities sold by the Portfolio will decline below the price the Portfolio is obligated to pay to repurchase the securities, and that the securities may not be returned to the Portfolio. 11 OTHER INVESTMENT COMPANIES. The Portfolio may invest in securities of other investment companies subject to the limitations prescribed by 1940 Act. The Portfolio will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Such other investment companies will have investment objectives, policies and/or restrictions that fall within the criteria set forth in the FCUA and subject to the waiver granted by the NCUA with respect to its rules and regulations. INVERSE FLOATING RATE SECURITIES. The Portfolio may invest in inverse floating rate debt securities ("inverse floaters"). The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value. Inverse floaters may present a greater degree of market risk than many types of securities, and may be more volatile, less liquid and more difficult to price accurately than less complex securities. BANK OBLIGATIONS. The Portfolio may invest in U.S. dollar-denominated obligations issued or guaranteed by U.S. banks with total assets exceeding $1 billion (including obligations issued by foreign branches of such banks) but only to the extent permitted under the Federal Credit Union Act and the rules and regulations thereunder. Bank obligations may include certificates of deposit, bankers' acceptances, bank notes, deposit notes, and other obligations. Bank obligations may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulation. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and sell Federal Funds, Treasury and Eurodollar futures contracts and may purchase and write put and call options on such futures contracts. Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A futures contract may be based on particular securities, securities indices and other financial instruments and indices. The Portfolio may engage in futures transactions on U.S. exchanges. The Portfolio may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, in order to seek to increase total return or to hedge against changes in interest rates, securities prices, or to otherwise manage its term structure, sector selections and duration in accordance with its investment objective and policies. The Portfolio may also enter into closing purchase and sale transactions with respect to such contracts and options. OPTIONS ON SECURITIES. A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller) of the option the obligation to sell, the underlying instrument during the option period. The Portfolio may write (sell) call and put options and purchase put and call options on any securities in which the Portfolio may invest. The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the Adviser to manage future price fluctuations and the degree of correlation between the options and securities markets. If the Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in the Portfolio, the Portfolio may incur losses that it would not otherwise 12 incur. The use of options can also increase the Portfolio's transaction costs. Options written or purchased by the Portfolio may be traded on U.S. exchanges or over-the-counter. Over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risk. The Portfolio may be required to treat as illiquid over-the-counter options purchased and securities being used to cover certain written over-the counter options. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The Portfolio may purchase when-issued securities and make contracts to purchase or sell securities for a fixed price at a future date beyond customary settlement time. When-issued securities are purchased after the announcement of the offering but before the issue date of the securities in order to secure what is considered to be an advantageous price and yield to the Portfolio at the time of entering into the transaction. A forward commitment involves the entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period. The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the securities to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although the Portfolio may purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, the Portfolio may dispose of when-issued securities or forward commitments prior to settlement if the Adviser deems it appropriate. INTEREST RATE SWAPS, TOTAL RETURN SWAPS, OPTIONS ON SWAPS AND INTEREST RATE CAPS, FLOORS AND COLLARS. o INTEREST RATE SWAPS involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. o TOTAL RETURN SWAPS are contracts that obligate a party to pay or receive interest in exchange for payment by the other party of the total return generated by a security, a basket of securities, an index, or an index component. o OPTIONS ON SWAPS ("SWAPTIONS") The Portfolio may also purchase and write (sell) options on swaps, commonly referred to as swaptions. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. o LIMITS ON SWAPS. The total notional amount of swaps will not exceed 300% of the Portfolio's net assets . o INTEREST RATE CAPS entitle the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. o INTEREST RATE FLOORS entitle the purchaser to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. o INTEREST RATE COLLARS combine a cap and a floor that are designed to preserve a certain return within a predetermined range of interest rates. The Portfolio may enter into the transactions described above for hedging purposes or to seek to increase total return. The use of swaps, swaptions, and interest rate caps, floors and collars is a highly specialized activity which involves investment techniques and risks different form those associated with ordinary portfolio securities transactions. If the Adviser is incorrect in its forecasts of market values and 13 interest rates, the investment performance of the Portfolio would be less favorable than it would have been if these investment techniques were not used. SHORT SALES. The Portfolio may engage in short-sales of securities. This is a sale by the Portfolio of a security which has been borrowed from a third party on the expectation that the market price will decline. If the price of the security drops, the Portfolio will make a profit by purchasing the security in the market at a lower price than the price at which it sold the security. If the price of the security rises, the Portfolio may have to cover its short position at a higher price than the short sale price, resulting in a loss to the Portfolio. TEMPORARY INVESTMENTS. The Portfolio may depart from its principal investment strategy in response to adverse market, economic or political conditions by taking temporary defensive positions in all types of money market and short-term debt securities. If the Portfolio were to take a temporary defensive position, it may be unable for a time to achieve its investment objective. INVESTMENT RISKS The following provides additional information about the principal risks of investing in the Portfolio. RISKS OF FIXED INCOME SECURITIES. These risks include interest rate risk and credit risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase (although many mortgage-related securities will have less potential than other debt securities for capital appreciation during periods of declining rates). Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that the issuer could default on its obligations, and the Portfolio will not recover its investment. RISKS OF MORTGAGE AND RELATED INVESTMENTS. Mortgage-related securities are particularly exposed to prepayment and extension risks. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can either shorten (prepayment risk) or lengthen (extension risk). In general, if interest rates on new mortgage loans fall sufficiently below the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to increase. Conversely, if mortgage loan interest rates rise above the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to decrease. Small changes in mortgage prepayments can significantly impact the cash flow and the market value of mortgage-related securities. A change in the prepayment rate can result in losses to investors. In addition, particular securities may be leveraged such that their exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is magnified. CALL RISK. The risk that an issuer or borrower will exercise its right to pay principal on an obligation held by the Portfolio earlier than expected. This may happen when there is a decline in interest rates. The Portfolio may receive unscheduled prepayments of principal before the security's maturity date due to voluntary prepayments, refinancing or foreclosure on the underlying mortgage loans. To the Portfolio this means a loss of anticipated interest, and a portion of its principal investment represented by any premium that the Portfolio may have paid. Under these circumstances, the Portfolio may be unable to recoup all of its initial investment and will also suffer from having to reinvest in lower yielding securities. For mortgage-related securities, the early prepayment of principal by all or a portion of the borrowers underlying a mortgage security is functionally equivalent to a full or partial call of the security. RISKS OF DERIVATIVE INVESTMENTS. The Portfolio's transactions, if any, in options, futures, options on futures, options on swaps, swaps and interest rate caps, floors and collars, involve risk of loss. Loss can result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative instruments, or 14 the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Adviser is incorrect in its expectation of fluctuations in securities prices or interest rates. Markets for derivatives are highly volatile and the use of derivatives may increase the volatility of the Portfolio's net asset value and may result in substantial losses to the Portfolio. Certain derivative investments may be illiquid. The Portfolio may also invest in derivative investments for non-hedging purposes (that is, to seek to increase total return). Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss. The yields on structured mortgage-backed securities that receive all or most of the interest from mortgage loans are generally higher than prevailing market yields on other mortgage-related securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped. The market value of structured mortgage-backed securities consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. Total return may fluctuate in rising interest rate environments and create greater price volatility. The yield to maturity on an interest only security is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the Portfolio's yield to maturity from these securities. The Portfolio may invest in floating rate debt instruments ("floaters"). While floaters provide a certain degree of protection against rises in interest rates, the Portfolio will participate in any declines in interest rates as well. The Portfolio may also invest in inverse floating rate debt instruments ("inverse floaters"). An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality. CREDIT/DEFAULT RISKS. The Portfolio expects to purchase securities rated in one of the two highest rating categories by an NRSRO (e.g., Aaa or Aa as rated by Moody's Investors Service, Inc. or AAA or AA as rated by Standard & Poor's Rating Group). A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one NRSRO even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is determined by the Adviser to be of comparable credit quality. A security satisfies the Portfolio's minimum rating requirement regardless of its relative rating (for example, plus or minus) within a designated major rating category. If a security satisfies the Portfolio's minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Portfolio will not be required to dispose of the security. If a downgrade occurs, the Adviser will consider which action, including the sale of the security, is in the best interest of the Portfolio and its shareholders. Debt securities purchased by the Portfolio may include securities issued by the U.S. Government (and its agencies, instrumentalities and sponsored enterprises), banks and other issuers. LEVERAGING RISKS. The use of leverage by the Adviser may increase the volatility of the Portfolio. Mortgage-related securities in which the Portfolio invests may be leveraged. These leveraged instruments may result in losses to the Portfolio or may adversely affect the Portfolio's net asset value or total return. The Portfolio may also use borrowed funds to create leverage. Although leverage will increase investment return if the Portfolio earns a greater return on the investments purchased with borrowed funds than it pays for use of those funds, the use of leverage will decrease the Portfolio's return if it fails to earn as much on investments purchased with borrowed funds as it pays for the use of those funds. In the event that the Portfolio's instruments decline in value, the Portfolio could be subject to a "margin call" under which the Portfolio must either deposit additional collateral with the lender or suffer mandatory liquidation of the pledged securities. In the event of a sudden, precipitous drop in value of the Portfolio's assets, the Portfolio may not be able to liquidate assets quickly enough to pay off its borrowing. Short sales of securities also involve the use of leverage. Use of this investment technique may adversely affect the Portfolio's net asset value or total return. 15 RISKS OF ILLIQUID SECURITIES. The Portfolio generally may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include: o Securities that are not readily marketable o Repurchase agreements with a notice or demand period of more than seven days o Certain over-the-counter options o Certain structured securities and certain swap transactions o Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933 ("144A Securities"). Investing in 144A Securities may decrease the liquidity of the Portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists. DISCLOSURE OF PORTFOLIO HOLDINGS A description of the Company's policies and procedures with respect to the disclosure of the Portfolio's securities is available in the SAI. 16 MANAGEMENT OF THE PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ADVISER BSAM, located at 383 Madison Avenue, New York, New York 10179, serves as the Portfolio's investment adviser. BSAM, a wholly owned subsidiary of The Bear Stearns Companies Inc., was established in 1985. The Bear Stearns Companies Inc. is a holding company that, through its subsidiaries (including its principal subsidiary, Bear, Stearns & Co. Inc.), is a leading United States investment banking, securities trading and brokerage firm serving U.S. and foreign corporations, governments and institutional and individual investors. BSAM is a registered investment adviser and provides investment advisory and sub-advisory services to open-end investment portfolios, U.S. equity and fixed income separate accounts, alternative investment vehicles such as hedge funds, private equity funds and fund of funds. As of March 31, 2006, BSAM has approximately $ 36 billion in assets under management. Subject to the general supervision of the Company's Board of Directors, the Adviser manages the Portfolio's investment portfolio and is responsible for the selection and management of all investments of the Portfolio in accordance with the Portfolio's investment objective and policies. PORTFOLIO MANAGER The Portfolio is managed by a team that is led by Andrew Headley. Mr. Headley, Managing Director at BSAM, is primarily responsible for the day-to-day management of the Portfolio's investments. Mr. Headley joined BSAM in 2005 as a Portfolio Manager. In this capacity, Mr. Headley oversees all strategy and security selection for the mortgage and asset-backed sectors. Mr. Headley came to BSAM from Fischer Francis Trees & Watts ("FFTW"), where he worked since 1994. As a portfolio manager for FFTW's mortgage and broad-market portfolios, Mr. Headley's responsibilities included asset allocation, portfolio construction and risk management. Mr. Headley was also responsible for security selection within the commercial and residential mortgage-backed securities markets. Mr. Headley graduated summa cum laude from the Wharton School of the University of Pennsylvania with a B.S. in Economics and is a CFA Charterholder. The SAI provides additional information about the portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Portfolio. MANAGEMENT FEES Pursuant to an investment advisory agreement with the Company, the Adviser is entitled to an advisory fee at the annual rate of 0.48% of the Portfolio's average daily net assets, computed daily and payable monthly. A discussion regarding the Board of Directors' basis for approving the investment advisory agreement with respect to the Portfolio will be available in the Portfolio's semi-annual report for the period ended February 28, 2007 when prepared. The Adviser is voluntarily waiving a portion of its advisory fee and/or reimbursing expenses to the extent necessary to limit total annual Portfolio operating expenses to 0.60% of the Portfolio's average daily net assets. These waivers and/or reimbursements can be terminated at any time. 17 OTHER SERVICE PROVIDERS - --------------------------------------------------------------------------------
=========================================== SHAREHOLDERS =========================================== ============================================ | =========================================== Distribution PRINCIPAL DISTRIBUTOR | TRANSFER AGENT AND DIVIDEND DISBURSING and | AGENT Shareholder PFPC DISTRIBUTORS, INC. | Services 760 MOORE ROAD | PFPC INC. KING OF PRUSSIA, PA 19406 | 301 BELLEVUE PARKWAY | WILMINGTON, DE 19809* | Distributes Shares and provides ------ | ----- Handles shareholder services, including administrative services to the Portfolio's | recordkeeping and statements, beneficial shareholders. | distribution of dividends and processing | of buy, sell and exchange requests. | | *Do not use this address for purchases | and redemptions. Please see "Purchase of | Portfolio Shares" and "Redemption of | Portfolio Shares" sections for further | instructions. ============================================ | =========================================== | ============================================ | =========================================== Asset INVESTMENT ADVISER | CUSTODIAN Management | BEAR STEARNS ASSET | PFPC MANAGEMENT INC. | TRUST COMPANY 383 MADISON AVENUE ------ |----- 8800 TINICUM BOULEVARD NEW YORK, NY 10179 | SUITE 200 | PHILADELPHIA, PA 19153 Manages the Portfolio's investment | activities. | Holds the Portfolio's assets, settles all | portfolio trades and collects most of the | valuation data required for calculating | the Portfolio's net asset value. ========================================== | ============================================ | ========================================== | Portfolio ADMINISTRATOR AND PORTFOLIO | Operations ACCOUNTING AGENT | | PFPC INC. | 301 BELLEVUE PARKWAY | WILMINGTON, DE 19809 | | Provides facilities, equipment and | personnel to carry out administrative | services for the Portfolio and | calculates the Portfolio's net asset | value, dividends and distributions. | ========================================== | =========================================== BOARD OF DIRECTORS Supervises the Portfolio's activities. ===========================================
18 SHAREHOLDER INFORMATION - ------------------------------------------------------------------------------- PRICING OF PORTFOLIO SHARES Shares of the Portfolio are priced at their net asset value ("NAV"). The Portfolio's NAV per Share is calculated as follows: Value of Assets Attributable to the Portfolio NAV = - Value of Liabilities Attributable to the Portfolio -------------------------------------------------- Number of Outstanding Shares of the Portfolio The Portfolio's NAV is calculated once daily at the close of regular trading hours on the New York Stock Exchange (the "NYSE") (generally 4:00 p.m. Eastern time) on each day the NYSE is open (a "Business Day"). The NYSE is generally open Monday through Friday, except national holidays. The Portfolio will effect purchases or redemptions of shares at the next NAV calculated after receipt of your order in proper form. Certain securities are valued using the closing price or the last sale price on the national securities exchange or the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. If there were no sales on that day or the securities are traded on the over-the-counter markets, the mean of the last bid and ask price prior to the market close is used. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Short-term debt securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Certain fixed income securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement value. Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Prices may be obtained from independent pricing services which use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characterics. If market quotations are unavailable or deemed unreliable, securities will be valued using fair valuation by the Portfolio's Valuation Committee following procedures adopted by the Company's Board of Directors. The use of fair valuation involves the risk that the values used by the Portfolio to price its investments may be higher or lower than the values used by other investment companies and investors to price the same investments. MARKET TIMING Market timing is defined as effecting frequent trades into or out of a Portfolio in an effort to anticipate or time market movements. Due to the frequent and disruptive nature of this activity, it can adversely impact the ability of the Adviser to invest assets in an orderly, long-term manner, which, in turn, may adversely impact the performance of the Portfolio. In addition, such activity also may result in dilution in the value of Portfolio shares held by long-term shareholders, adverse tax consequences to shareholders and increased brokerage and administrative costs. There is no assurance that the Portfolio will be able to identify market timers, particularly if they are investing through intermediaries. The Board of Directors of the Company has adopted policies and procedures with respect to frequent trading of Portfolio shares by shareholders. The Company reserves the right, in its sole discretion, to reject purchase orders when, in the judgment of management, such rejection is in the best interest of the Portfolio and its shareholders. 19 PURCHASE OF PORTFOLIO SHARES Shares representing interests in the Portfolio are offered continuously for sale at NAV by PFPC Distributors, Inc. (the "Distributor"). The minimum initial investment in the Portfolio is $20 million and the minimum subsequent investment is $1 million. The minimum initial and subsequent investment requirement may be reduced or waived from time to time. You can only purchase Shares of the Portfolio on days the NYSE is open. For purchase information, contact Wade Barnett at CUFS(R) or call 1-800-519-CUFS (2837). SERVICE ORGANIZATIONS. Shares of the Portfolio may be available through certain brokerage firms, financial institutions and other industry professionals (collectively, "Service Organizations"). Certain features of the Shares, such as the initial and subsequent investment minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if Shares are purchased directly from the Company. Therefore, you should contact the Service Organization acting on your behalf concerning the fees (if any) charged in connection with a purchase or redemption of Shares and should read this Prospectus in light of the terms governing your accounts with the Service Organization. Service Organizations will be responsible for promptly transmitting client or customer purchase and redemption orders to the Company in accordance with their agreements with the Company and with clients or customers. Service Organizations or, if applicable, their designees that have entered into agreements with the Company or its agent may enter confirmed purchase orders on behalf of clients and customers, with payment to follow no later than the Company's pricing on the following Business Day. If payment is not received by such time, the Service Organization could be held liable for resulting fees or losses. The Company will be deemed to have received a purchase or redemption order when a Service Organization, or, if applicable, its authorized designee, accepts a purchase or redemption order in good order if the order is actually received by the Company in good order not later than the next business morning. If a purchase order is not received in good order, PFPC will contact the financial intermediary to determine the status of the purchase order. Orders received by the Company in good order will be priced at the Portfolio's NAV next computed after they are deemed to have been received by the Service Organization or its authorized designee. For purchase information, call 1-800-519-CUFS (2837). The Company relies upon the integrity of Service Organizations to ensure that orders are timely and properly submitted. The Portfolio cannot assure you that Service Organizations properly submitted to it all purchase and redemption orders received from the Service Organization's customers before the time for determination of the Portfolio's NAV in order to obtain that day's price. GENERAL. You may also purchase Shares of the Portfolio at the NAV per share next calculated after your order is received by PFPC Inc. (the "Transfer Agent") in proper form as described below. After an initial purchase is made, the Transfer Agent will set up an account for you on the Company records. INITIAL INVESTMENT BY MAIL. An account may be opened by completing and signing the application included with this Prospectus and mailing it to the Transfer Agent at the address noted below, together with a check payable to __________. Third party checks will not be accepted. 20 Regular Mail: Overnight Mail: -------------------------- ----------------------- c/o PFPC Inc. c/o PFPC Inc. P.O. Box 9806 101 Sabin Street Providence, RI 02940 Pawtucket, RI 02860-1427 Payment for the purchase of Shares received by mail will be credited to a shareholder's account at the NAV per Share of the Portfolio next determined after receipt of payment in good order. INITIAL INVESTMENT BY WIRE. Shares of the Portfolio may be purchased by wiring federal funds to _____________. (see instructions below). A completed application must be forwarded to the Transfer Agent at the address noted above under "Initial Investment by Mail" in advance of the wire. Notification must be given to the Transfer Agent at (800) ____-____ prior to 4:00 p.m., Eastern time, on the wire date. (Prior notification must also be received from investors with existing accounts.) Request account information and routing instructions by calling the Transfer Agent at (800) ____-____. Funds should be wired to: --------------------------- --------------------------- Ref. (Account Number) Shareholder or Account Name Federal funds purchases will be accepted only on a day on which the NYSE and _______________________ are open for business. SUBSEQUENT INVESTMENTS. Subsequent investments may be made at any time by purchasing Shares of the Portfolio at its NAV per Share by mailing a check to the Transfer Agent at the address noted under "Initial Investment by Mail" (payable to _______________________ or by wiring monies to _______________________ as outlined under "Initial Investment by Wire." Notification must be given to the Transfer Agent at (800) ____-____ prior to 4:00 p.m., Eastern time, on the wire date. Initial and subsequent purchases made by check cannot be redeemed until payment of the purchase has been collected. This may take up to 15 calendar days. OTHER PURCHASE INFORMATION. The Company reserves the right, in its sole discretion, to suspend the offering of Shares or to reject purchase orders when, in the judgment of management, such suspension or rejection is in the best interests of the Portfolio. Subject to Board approval, the Adviser will monitor the Portfolio's total assets and may decide to close the Portfolio at any time to new investments or to new accounts due to concerns that a significant increase in the size of the Portfolio may adversely affect the implementation of the Portfolio's strategy. Subject to Board approval, the Adviser may also choose to reopen a closed Portfolio to new investments at any time, and may subsequently close the Portfolio again should concerns regarding the Portfolio's size recur. If the Portfolio closes to new investments, generally the closed Portfolio would be offered only to certain existing shareholders of the Portfolio and certain other persons, who are generally subject to cumulative, maximum purchase amounts, as follows: a. persons who already hold Shares of the Portfolio directly or through accounts maintained by brokers by arrangement with the Company, and b. existing and future clients of financial advisers and planners whose clients already hold shares of the Portfolio. 21 Other persons who are shareholders of other funds of the Company are not permitted to acquire shares of the Portfolio by exchange. Distributions to all shareholders of the Portfolio will continue to be reinvested unless a shareholder elects otherwise. The Adviser reserves the right to implement other purchase limitations at the time of closing, including limitations on current shareholders. Purchases of the Portfolio's Shares will be made in full and fractional shares of the Portfolio calculated to three decimal places. CUSTOMER IDENTIFICATION PROGRAM. Federal law requires the Company to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), social security or taxpayer identification number or other identifying information for each investor who opens or reopens an account with the Company. For business entities, partnerships, trusts, or other organizations, the Company may request additional documentation including, but not limited to, certified copies of the corporate resolution, partnership agreement, or trust document, which established the entity's identity. Applications without the required information, or without any indication that a social security or taxpayer identification number has been applied for, may not be accepted. After acceptance, to the extent permitted by applicable law or its customer identification program, the Company reserves the right (a) to place limits on transactions in any account until the identity of the investor is verified; or (b) to refuse an investment in a Company portfolio or to involuntarily redeem an investor's shares and close an account in the event that an investor's identity is not verified. The Company and its agents will not be responsible for any loss in an investor's account resulting from the investor's delay in providing all required identifying information or from closing an account and redeeming an investor's shares when an investor's identity cannot be verified. GOOD ORDER. You must include complete and accurate required information on your purchase request. Purchase requests not in good order may be rejected. REDEMPTION OF PORTFOLIO SHARES You may redeem Shares of the Portfolio at the next NAV calculated after a redemption request is received by the Transfer Agent in proper form. You can only redeem Shares on days the NYSE is open and through the means described below. See "Purchase of Portfolio Shares - Services Organizations" for additional information about redemptions effected through Service Organizations. For redemption information, call 1-800-519-CUFS (2837). You may redeem Shares of the Portfolio by mail, or, if you are authorized, by telephone. The value of Shares redeemed may be more or less than the purchase price, depending on the market value of the investment securities held by the Portfolio. There is generally no charge for a redemption. REDEMPTION BY MAIL. Your redemption requests should be addressed to ___________________, c/o PFPC Inc., P.O. Box 9806, Providence, RI 02940; for overnight delivery, requests should be addressed to ____________________, c/o PFPC Inc., 101 Sabin Street, Pawtucket, RI 02860-1427 and must include: a. Name of the Portfolio; b. Account Number; c. Your share certificates, if any, properly endorsed or with proper powers of attorney; 22 d. a letter of instruction specifying the number of Shares or dollar amount to be redeemed, signed by all registered owners of the Shares in the exact names in which they are registered; e. medallion signature guarantees are required when (i) the redemption proceeds are to be sent to someone other than the registered shareholder(s) or (ii) the redemption request is for $10,000 or more. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a Medallion Program recognized by the Securities Transfer Association. The three recognized Medallion Programs are Securities Transfer Agent Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees which are not a part of these programs will not be accepted. Please note that a notary public stamp or seal is not acceptable; and f. other supporting legal documents, if required, in the case of estates, trusts, guardianships, custodianships, corporations, pension and profit sharing plans and other organizations. REDEMPTION BY TELEPHONE. In order to request a telephone redemption, you must have returned your account application containing a telephone election. To add a telephone redemption option to an existing account, contact the Transfer Agent by calling (800) ____-______. For organizations, the Portfolio requests that a list of authorized telephone traders be provided with the application during the initial account set-up. If a list of authorized signors is not presented at account set-up or if there is a change to the list of signors, organizations may supply a copy of the corporate resolution, or other applicable documentation, which must be certified within the last 6 months. There is no minimum or maximum amount that may be redeemed by phone. Once you are authorized to utilize the telephone redemption option, a redemption of Shares may be requested by calling the Transfer Agent at (800) ____-____ and requesting that the redemption proceeds be mailed to the primary registration address or wired per the authorized instructions. If the telephone redemption option is authorized, the Company and the Transfer Agent may act on telephone instructions from any person representing himself or herself to be a shareholder and believed by the Company and the Transfer Agent to be genuine. The Transfer Agent's records of such instructions are binding and shareholders, not the Company or the Transfer Agent, bear the risk of loss in the event of unauthorized instructions reasonably believed by the Company or the Transfer Agent to be genuine. The Company and the Transfer Agent will employ reasonable procedures to confirm that instructions communicated are genuine and, if it does not, it may be liable for any losses due to unauthorized or fraudulent instructions. The procedures employed by the Company and the Transfer Agent in connection with transactions initiated by telephone include tape recording of telephone instructions and requiring some form of personal identification prior to acting upon instructions received by telephone. OTHER REDEMPTION INFORMATION. Redemption proceeds for Portfolio Shares recently purchased by check may not be distributed until payment for the purchase has been collected, which may take up to fifteen days from the purchase date. Shareholders can avoid this delay by utilizing the wire purchase option. Other than as described above, payment of the redemption proceeds will be made within seven days after receipt of an order for a redemption. The Company may suspend the right of redemption or postpone the date at times when the NYSE is closed or under any emergency circumstances as determined by the SEC. 23 If the Board of Directors determines that it would be detrimental to the best interests of the remaining shareholders of the Portfolio to make payment wholly or partly in cash, redemption proceeds may be paid in whole or in part by an in-kind distribution of readily marketable securities held by the Portfolio instead of cash in conformity with applicable rules of the SEC. Investors generally will incur brokerage charges on the sale of portfolio securities so received in payment of redemptions. The Company has elected, however, to be governed by Rule 18f-1 under the Act, so that the Portfolio is obligated to redeem its Shares solely in cash up to the lesser of $250,000 or 1% of its NAV during any 90-day period for any one shareholder of the Portfolio. PROPER FORM. You must include complete and accurate required information on your redemption request. Redemption requests not in proper form may be delayed. DIVIDENDS AND DISTRIBUTIONS The Portfolio will distribute substantially all of its net investment income and net realized capital gains, if any, to its shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Portfolio unless a shareholder elects otherwise. The Portfolio will declare dividends from net investment income daily and pay such dividends monthly. Net realized capital gains (including net short-term capital gains), if any, will be distributed by the Portfolio at least annually. The Portfolio may pay additional distributions and dividends at other times if necessary to avoid U.S. federal tax. The Portfolio's distributions and dividends, whether received in cash or reinvested in additional Portfolio shares, are subject to U.S. federal income tax. TAXES Shares of the Portfolio are available only to state and federally chartered credit unions, which, it is contemplated, are generally exempt from federal and state income taxes. Accordingly, it is not anticipated that shareholders of the Portfolio will be taxed on Portfolio distributions or on gain on disposition of Shares. Information regarding tax rules affecting the Portfolio is available in the SAI. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE PORTFOLIO'S SAI INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. 24 This page intentionally left blank. 25 BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO OF THE RBB FUND, INC. FOR MORE INFORMATION: This Prospectus contains important information you should know before you invest. Read it carefully and keep it for future reference. More information about the Bear Stearns CUFS MLP Mortgage Portfolio is available free of charge, upon request, including: ANNUAL/SEMI-ANNUAL REPORTS These reports contain additional information about the Portfolio's investments, describe the Portfolio's performance, list portfolio holdings, and discuss recent market conditions and economic trends. The Annual Report includes the Portfolio's strategies that significantly affected the Portfolio's performance during the last fiscal year. STATEMENT OF ADDITIONAL INFORMATION ("SAI") An SAI has been filed with the SEC. The SAI, which includes additional information about the Bear Stearns CUFS MLP Mortgage Portfolio, may be obtained free of charge, along with the annual and semi-annual reports, by calling (800) _________. The SAI, as supplemented from time to time, is incorporated by reference into this Prospectus (and is legally part of the Prospectus). SHAREHOLDER INQUIRIES Representatives are available to discuss account balance information, mutual Portfolio prospectuses, literature programs and services available. Hours: ___ a.m. to ___ p.m. (Eastern time) Monday-Friday. Call (800) ________. The Portfolio makes copies of its SAI and Annual/Semi-Annual Reports to shareholders available on the Adviser's website at www.bearstearns.com. The SAI and annual and semi-annual reports are available by email request at WWW.BEARSTEARNS.COM. PURCHASES AND REDEMPTIONS Call (800) ______________. WRITTEN CORRESPONDENCE Street Address: Bear Stearns CUFS MLP Mortgage Portfolio, c/o PFPC Inc., 760 Moore Road, King of Prussia, PA 19406. P.O. Box Address: Bear Stearns CUFS MLP Mortgage Portfolio, c/o PFPC Inc., P.O. Box 9806, Providence, RI 02940. SECURITIES AND EXCHANGE COMMISSION You may also view and copy information about the Company and the Portfolios, including the SAI, by visiting the SEC's Public Reference Room in Washington, DC or the EDGAR Database on the SEC's Internet site at www.sec.gov. You may also obtain copies of Portfolio documents by paying a duplicating fee and sending an electronic request to the following e-mail address: publicinfo@sec.gov, or by sending your written request and a duplicating fee to the SEC's Public Reference Section, Washington, DC 20549-0102. You may obtain information on the operation of the public reference room by calling the SEC at 1-202-942-8090. Investment Company Act File number 811-05518 26 SUBJECT TO COMPLETION PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED JULY 18, 2006 INFORMATION CONTAINED HEREIN PERTAINING TO THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO OF THE RBB FUND, INC. IS SUBJECT TO COMPLETION OR AMENDMENT. A POST-EFFECTIVE AMENDMENT TO THE RBB FUND, INC. REGISTRATION STATEMENT RELATING TO SHARES OF THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SHARES OF THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO MAY NOT BE SOLD NOR MAY OFFERS TO BUY SHARES OF SUCH FUND BE ACCEPTED PRIOR TO THE TIME THE POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SHARES OF THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO OF THE RBB FUND, INC. STATEMENT OF ADDITIONAL INFORMATION _____________, 2006 This Statement of Additional Information (the "SAI") is not a prospectus, but should be read in conjunction with the current prospectus dated ________________, 2006 (the "Prospectus") pursuant to which shares ("Shares") of the Bear Stearns CUFS MLP Mortgage Portfolio (the "Portfolio"), a series of The RBB Fund, Inc. (the "Company") are offered. This SAI is incorporated by reference in its entirety into the Prospectus. Please retain this SAI for future reference. For a free copy of the Prospectus, please call toll-free 1-800-___-____. -i- TABLE OF CONTENTS GENERAL INFORMATION............................................................1 INVESTMENT INSTRUMENTS AND POLICIES............................................1 INVESTMENT LIMITATIONS........................................................26 DISCLOSURE OF PORTFOLIO HOLDINGS..............................................28 MANAGEMENT OF THE COMPANY.....................................................29 CODE OF ETHICS................................................................34 PROXY VOTING..................................................................35 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................35 INVESTMENT ADVISORY AND OTHER SERVICES........................................35 INVESTMENT ADVISER.........................................................35 PORTFOLIO MANAGER..........................................................36 CUSTODIAN AGREEMENT........................................................38 TRANSFER AGENCY AGREEMENT..................................................38 ADMINISTRATION AND ACCOUNTING AGREEMENT....................................39 DISTRIBUTION ARRANGEMENTS.....................................................39 DISTRIBUTION AGREEMENT.....................................................39 ADMINISTRATIVE SERVICES AGENT..............................................40 PORTFOLIO TRANSACTIONS........................................................40 PURCHASE AND REDEMPTION INFORMATION...........................................40 TELEPHONE TRANSACTION PROCEDURES..............................................41 VALUATION OF SHARES...........................................................42 TAXES.........................................................................43 MISCELLANEOUS.................................................................47 COUNSEL....................................................................47 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..............................47 APPENDIX A...................................................................A-1 APPENDIX B...................................................................B-1 -ii- GENERAL INFORMATION The Company is an open-end management investment company currently operating or proposing to operate twenty-one separate portfolios, two of which have not yet commenced operations as of the date of this SAI. The Company is registered under the Investment Company Act of 1940 (the "1940 Act") and was organized as a Maryland corporation on February 29, 1988. This SAI pertains to one class of shares representing interests in one non-diversified portfolio of the Company, which is offered by the Prospectus. Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser") serves as the investment adviser to the Portfolio. INVESTMENT INSTRUMENTS AND POLICIES The following supplements the information contained in the Prospectus concerning the investment objective and policies of the Portfolio. The Portfolio seeks high total return consistent with preservation of capital. Under normal circumstances, the Portfolio will invest at least 80% of its net assets (including any borrowings for investment purposes) in mortgage-related securities, including privately-issued mortgage-related securities, rated at the time of purchase in one of the two highest rating categories by a nationally recognized statistical ratings organization ("NRSRO"), and mortgage-related securities issued or guaranteed by the U.S. Government, its agencies, instrumentalities or sponsored enterprises ("U.S. Government securities"). The Portfolio will notify shareholders in writing at least 60 days prior to changing its policy to invest at least 80% of its net assets in mortgage-related securities. The Adviser might not invest in all of the instruments or use all of the investment techniques permitted by the Portfolio's Prospectus and this SAI or invest in such instruments or engage in such techniques to the full extent permitted by the Portfolio's investment policies and limitations. MORTGAGE-RELATED SECURITIES GENERALLY. The Portfolio may invest in mortgage pass-through securities and multiple-class pass-through securities, such as collateralized mortgage obligations ("CMOs") and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or participation certificates as well as other securities collateralized by or representing a direct or indirect interest in mortgage-related securities or mortgage loans. The Portfolio may also invest in certain stripped mortgage-backed securities. A description of the types of mortgage-related securities in which the Portfolio may invest, and certain risks associated with these securities, is provided below. The descriptions are general in nature, and do not detail every possible variation in the types of securities that the Portfolio may acquire. MORTGAGE PASS-THROUGH SECURITIES. The Portfolio may invest in both government guaranteed and privately issued mortgage pass-through securities that are fixed or adjustable rate. These securities "pass through" the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, not including any -1- fees or other amounts paid to any guarantor, administrator and/or servicer of the underlying mortgage loans. The seller or servicer of the underlying mortgage obligations will generally make representations and warranties to certificate holders about certain characteristics of the mortgage loans and the accuracy of certain information furnished to the trustee in respect of each such mortgage loan. If there is a breach of any representation or warranty that materially and adversely affects the interests of the related certificate holders in a mortgage loan, the seller or servicer generally may be obligated either to cure the breach in all material respects, to repurchase the mortgage loan or, if the related agreement so provides, to substitute in its place a mortgage loan pursuant to the conditions set forth therein. Such a repurchase or substitution obligation may constitute the sole remedy available to the related certificate holders or the trustee for the material breach of any such representation or warranty by the seller or servicer. U.S. Government guaranteed mortgage pass-through securities represent participation interests in pools of residential mortgage loans and are issued by U.S. governmental or private lenders and guaranteed by the U.S. Government or one of its agencies or instrumentalities, including but not limited to the Government National Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal Home Loan Banks. Ginnie Mae certificates are guaranteed by the full faith and credit of the U.S. Government for timely payment of principal and interest on the certificates. Fannie Mae, Freddie Mac and Federal Home Loan Bank certificates are not backed by the full faith and credit of the U.S. Government. Fannie Mae and Freddie Mac certificates are guaranteed by Fannie Mae and Freddie Mac, respectively, each a stockholder-owned corporation chartered by Congress, for full and timely payment of principal and interest on the certificates. Both Fannie Mae and Freddie Mac have a limited ability to borrow from the U.S. Treasury to meet its obligations. Periodically, proposals are introduced in Congress to restrict or eliminate federal sponsorship for Fannie Mae and Freddie Mac with respect to guaranteed mortgage-related securities. The Company cannot predict whether legislation may be proposed or enacted in the future. If such a proposal is enacted, it would likely materially and adversely affect the availability of U.S. Government guaranteed mortgage-related securities and the Portfolio's liquidity and value. There is always a risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. The Portfolio may purchase U.S. Government securities that are not backed by the full faith and credit of the United States, such as those issued by Fannie Mae, Freddie Mac and Federal Home Loan Banks. The maximum potential liability of the issuers of some U.S. Government securities held by the Portfolio may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is therefore possible that these issuers will not have the funds to meet their payment obligations in the future. CMOs and REMIC pass-through or participation certificates may be issued by, among others, U.S. Government agencies and instrumentalities as well as private lenders. CMOs and REMIC certificates are issued in multiple classes and the principal of and interest on the mortgage assets may be allocated among the several classes of CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC certificates, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the mortgage loans or the mortgage assets -2- underlying the CMOs or REMIC certificates may cause some or all of the classes of CMOs or REMIC certificates to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs or REMIC certificates on a monthly basis. Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac certificates but also may be collateralized by other mortgage assets such as whole loans or private mortgage pass-through securities. Debt service on CMOs is provided from payments of principal and interest on collateral of mortgaged assets and any reinvestment income thereon. A REMIC is a CMO that qualifies for special tax treatment under the Internal Revenue Code of 1986 (the "Code"), and which invests in certain mortgages primarily secured by interests in real property and other permitted investments. Investors may purchase "regular" and "residual" interest shares of beneficial interest in REMIC trusts although the Portfolio does not intend to invest in residual interests. The principal of and interest on the mortgage assets may be allocated among the several classes of CMOs or REMIC certificate in various ways. In certain structures (known as "sequential pay" CMOs or REMIC certificates), payments of principal, including any principal prepayments, on the mortgage assets generally are applied to the classes of CMOs or REMIC certificates in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs or REMIC certificates until all other classes having an earlier final distribution date have been paid in full. Additional structures of CMOs and REMIC certificates include, among others, "parallel pay" CMOs and REMIC certificates. Parallel pay CMOs or REMIC certificates are those which are structured to apply principal payments and prepayments of the mortgage assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class. A wide variety of REMIC certificates may be issued in parallel pay or sequential pay structures. These securities include accrual certificates (also known as "Z-Bonds"), which only accrue interest at a specified rate until all other certificates having an earlier final distribution date have been retired and are converted thereafter to an interest-paying security, and planned amortization class ("PAC") certificates, which are parallel pay REMIC certificates that generally require that specified amounts of principal be applied on each payment date to one or more classes or REMIC certificates (the "PAC Certificates"), even though all other principal payments and prepayments of the mortgage assets are then required to be applied to one or more other classes of the PAC Certificates. The scheduled principal payments for the PAC Certificates generally have the highest priority on each payment date after interest due has been paid to all classes entitled to receive interest currently. Shortfalls, if any, are added to the amount payable on the next payment date. The PAC Certificate payment schedule is taken into account in calculating the final distribution date of each class of PAC. In order to create PAC tranches, one or more tranches generally must be created that absorb most of the volatility in the underlying mortgage assets. These tranches (often referred to as "companion" or "support" tranches) tend to have market prices and yields that are much more volatile than other PAC classes. -3- PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES. The Portfolio may invest in mortgage-related securities issued by trusts or other entities formed or sponsored by private originators of and institutional investors in mortgage loans and other non-governmental entities (or representing custodial arrangements administered by such institutions). These private originators and institutions include savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing. Privately issued mortgage-related securities are generally backed by pools of conventional (i.e., non-government guaranteed or insured) mortgage loans secured by mortgages or deeds of trust creating a first lien on certain residential properties. The seller or servicer of the underlying mortgage obligations will generally make representations and warranties to certificate- holders as to certain characteristics of the mortgage loans and as to the accuracy of certain information furnished to the trustee in respect of each such mortgage loan. Upon a breach of any representation or warranty that materially and adversely affects the interests of the related certificate holders in a mortgage loan, the seller or servicer generally may be obligated either to cure the breach in all material respects, to repurchase the mortgage loan or, if the related agreement so provides, to substitute in its place a mortgage loan pursuant to the conditions set forth therein. Such a repurchase or substitution obligation may constitute the sole remedy available to the related certificate holders or the trustee for the material breach of any such representation or warranty by the seller or servicer. Because such mortgage-related securities normally are not guaranteed by an entity having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high quality rating from an NRSRO (e.g., S&P's or Moody's), such securities often are structured with one or more types of "credit enhancement." Such credit enhancement falls into two categories: (1) liquidity protection and (2) protection against losses resulting after default by a borrower and liquidation of the collateral. Liquidity protection refers to the payment of cash advances to holders of mortgage-related securities when a borrower on an underlying mortgage fails to make its monthly payment on time. Protection against losses resulting after default and liquidation is designed to cover losses resulting when, for example, the proceeds of a foreclosure sale are insufficient to cover the outstanding amount on the mortgage. Such protection may be provided through guarantees, insurance policies or letters of credit, through various means of structuring the securities or through a combination of such approaches. Examples of credit enhancement that arise out of a transaction's structure include "senior subordinated securities" (multiple class securities with one or more classes entitled to receive payment before other classes, with the result that defaults on the underlying mortgages are borne first by the holders of the subordinated class), creation of "spread accounts" or "reserve funds" (where cash or investments are held in reserve against future losses) and "over-collateralization" (where the scheduled payments on the underlying mortgages in a pool exceed the amount required to be paid on the mortgage-related securities). The degree of credit enhancement for a particular issue of mortgage-related securities is based on the level of credit risk associated with the particular mortgages in the related pool. Losses on a pool in excess of anticipated levels could nevertheless result in losses to security holders because credit enhancement rarely covers every dollar owed on a pool. -4- NRSROs are an additional way of measuring some of the risk of investing in privately issued mortgage-related securities. The ratings assigned by an NRSRO to mortgage-related securities address the likelihood of the receipt of all distributions on the underlying mortgage loans by the related certificate holders under the agreements pursuant to which such certificates are issued. An NRSRO's ratings normally take into consideration the credit quality of the related mortgage pool, including any credit support providers, structural and legal aspects associated with such certificates, and the extent to which the payment stream on such mortgage pool is adequate to make payments required by such certificates. An NRSRO's ratings on such certificates do not, however, constitute a statement regarding frequency of prepayments on the related mortgage loans. In addition, the rating assigned by an NRSRO to a certificate may not address the remote possibility that, in the event of the insolvency of the issuer of certificates where a subordinated interest was retained, the issuance and sale of the senior certificates may be recharacterized as a financing and, as a result of such recharacterization, payments on such certificates may be affected. In order to achieve ratings on one or more classes of mortgage-related securities, one or more classes of certificates may be subordinate certificates which provide that the rights of the subordinate certificate holders to receive any or a specified portion of distributions with respect to the underlying mortgage loans may be subordinated to the rights of the senior certificate- holders. If so structured, the subordination feature may be enhanced by distributing to the senior certificate-holders on certain distribution dates, as payment of principal, a specified percentage (which generally declines over time) of all principal payments received during the preceding prepayment period ("shifting interest credit enhancement"). This will have the effect of accelerating the amortization of the senior certificates while increasing the interest in the trust fund evidenced by the subordinate certificates. Increasing the interest of the subordinate certificates relative to that of the senior certificates is intended to preserve the availability of the subordination provided by the subordinate certificates. In addition, because the senior certificate-holders in a shifting interest credit enhancement structure are entitled to receive a percentage of principal prepayments which is greater than their proportionate interest in the trust fund, the rate of principal prepayments on the mortgage loans may have an even greater effect on the rate of principal payments and the amount of interest payments on, and the yield to maturity of, the senior certificates. A reserve fund related to the senior certificates is another way to minimize the risk of those privately issued mortgage-related securities. The reserve fund may be created with an initial cash deposit by the originator or servicer and augmented by the retention of distributions otherwise available to the subordinate certificate- holders or by excess servicing fees until the reserve fund reaches a specified amount. The subordination feature, and a reserve fund, are intended to enhance the likelihood that senior certificate holders will receive the full amount of scheduled monthly payments of principal and interest due to them on a timely basis, and will protect the senior certificate- holders against certain losses. In certain circumstances, however, the reserve fund could be depleted and temporary shortfalls could result. If the reserve fund is depleted before the subordinated amount is reduced to zero, senior certificate- holders will nevertheless have a -5- preferential right to receive current distributions from the mortgage pool to the extent of the then outstanding subordinated amount. Unless otherwise specified, until the subordinated amount is reduced to zero, on any distribution date any amount otherwise distributable to the subordinate certificates or, to the extent specified, in the reserve fund will generally be used to offset the amount of any losses realized with respect to the mortgage loans ("Realized Losses"). Realized Losses remaining after application of such amounts will generally be applied to reduce the ownership interest of the subordinate certificates in the mortgage pool. If the subordinated amount has been reduced to zero, Realized Losses generally will be allocated PRO RATA among all certificate holders in proportion to their respective outstanding interests in the mortgage pool. As an alternative, or in addition to the credit enhancement afforded by subordination, credit enhancement for mortgage-related securities may be provided by mortgage insurance, hazard insurance, by the deposit of cash, certificates of deposit, letters of credit, a limited guaranty or by such other methods as are acceptable to a rating agency. In certain circumstances, such as where credit enhancement is provided by guarantees or a letter of credit, the security is subject to credit risk because of its exposure to an external credit enhancement provider. Generally, in the event of delinquencies in payments on the mortgage loans underlying the mortgage-related securities, the servicer may agree to make advances of cash for the benefit of certificate- holders, but generally will do so only to the extent that it determines such voluntary advances will be recoverable from future payments and collections on the mortgage loans or otherwise. Generally, the servicer may, at its option with respect to any certificates, repurchase all of the underlying mortgage loans remaining outstanding at such time if the aggregate outstanding principal balance of such mortgage loans is less than a specified percentage (generally 5-10%) of the aggregate outstanding principal balance of the mortgage loans as of the cut-off date specified with respect to such series. STRIPPED MORTGAGE-BACKED SECURITIES. The Portfolio may invest in stripped mortgage-backed securities ("SMBS"), which are derivative multiclass mortgage securities, issued or guaranteed by the U.S. Government, its agencies or instrumentalities or non-governmental originators. SMBS are structured with two different classes: one that receives substantially all of the interest payments and the other that receives substantially all of the principal payments from a pool of mortgage loans. One class of SMBS receiving all of the interest from the mortgage assets is the interest-only, or "IO" class, while the other class receives all of the principal and is known as the principal-only, or "PO" class. The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the Portfolio's yield to maturity from these securities. The market value of SMBS consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. Certain SMBS may not be readily marketable and will be considered illiquid for purposes of the Portfolio's limitation on investments in illiquid securities. The Adviser may determine that SMBS which are U.S. Government securities are liquid for purposes of the Portfolio's -6- limitation on investments in illiquid securities. The yields on a class of SMBS that receives all or most of the interest from mortgage assets are generally higher than prevailing market yields on other mortgage-related securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped. FLOATING RATE AND INVERSE FLOATING RATE SECURITIES. The Portfolio may invest in floaters, which are fixed income securities with a floating or variable interest rate that changes when the specified market rate or index, such as the prime rate, changes, or at specified intervals of time. The Portfolio may also invest in inverse floaters, which are fixed income securities that have a coupon rate that varies inversely at a multiple of a designated floating rate. If the designated floating rate rises (typically because interest rates rise), the coupon rate of the inverse floater goes down. Conversely, if the designated floating rate goes down, the coupon rate of the inverse floater increases. Inverse floaters may reflect greater price volatility than fixed rate obligations having similar credit quality and redemption and maturity provisions. Some inverse floater CMOs are extremely sensitive to changes in prepayment rates on the underlying mortgage assets. An inverse floater may be considered "leveraged" if its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value. Certain inverse floaters may be deemed to be illiquid securities. Furthermore, certain floaters and inverse floaters have additional risk characteristics that may add to their complexity. Some floaters and inverse floaters may have reference rates or indices that lag current interest rates, giving them unique risks. Particularly when other interest rate indices are rising, the coupons on securities that reference lagging rates or indices may pay below market interest rates for some period of time until such a lagging rates catch up with market rates. Additionally, some floating rate securities have caps that prevent the coupon rate from moving in unison with a reference index. As interest rates rise, securities that have lower interest rate caps will tend to depreciate in value relative to similar floating rate securities that have higher caps or no caps. The Portfolio generally may invest no more than 50% of its total assets at the time of purchase in IO, inverse floating IO or PO securities in the aggregate. Within this 50% limit, IO, inverse floating IO and PO securities each will generally be no more than 20% of the Portfolio's total assets at the time of purchase. A number of indices, used alone or in combination, provide the basis for rate adjustments on floating rate securities. Commonly utilized indices include the One-Year, Three-Year and Five-Year Constant Maturity Treasury rates, the 11th District Federal Home Loan Bank Cost of Funds, the One-Month, Three-Month, Six-Month or One-Year LIBOR, the Three-Month, Six Month or One-Year Treasury Bill rate, the National Median Cost of Funds, the prime rate of a specific bank, or commercial paper rates. Some indices, such as the one-year Constant Maturity Treasury rate, closely mirror changes in market interest rate levels. Others, such as the 11th District Federal Home Loan Bank Cost of Funds Index ("COFI"), tend to lag behind changes in market rate levels. The degree of volatility in the market value of the Portfolio will be influenced by the length of the interest rate reset periods and the degree of volatility in the applicable indices, and whether the instrument moves with or inversely to the applicable index. -7- CERTAIN RISKS ASSOCIATED WITH INVESTING IN MORTGAGE-RELATED SECURITIES. The risks of investing in mortgage-related securities (such as those described above) include the failure of a counter party to meet its commitments, volatility, adverse interest rate changes and the effects of prepayments on mortgage cash flows. There is also a difference in the yield characteristics of mortgage-related securities from those of traditional fixed income securities. The major differences typically include more frequent interest and principal payments (usually monthly), the adjustability of interest rates, and the possibility that prepayments of principal may be made substantially earlier than their final distribution dates. This can result in significantly greater price and yield volatility than is the case with traditional fixed-income securities. VOLATILITY AND PREPAYMENT. As a result of the potentially greater volatility, if the Portfolio purchases mortgage-related securities at a premium, a faster than expected prepayment rate will reduce both the market value and the yield to maturity from those which were anticipated. A prepayment rate that is slower than expected will have the opposite effect of increasing yield to maturity and market value. Conversely, if the Portfolio purchases mortgage-related securities at a discount, faster than expected prepayments will increase, while slower than expected prepayments will reduce, yield to maturity and market values. The Adviser may seek to manage these potential risks by investing in a variety of mortgage-related securities and by using certain hedging techniques. The timing and level of prepayments on a pool of mortgage loans cannot always be accurately predicted. Prepayments are influenced by changes in current interest rates and a variety of economic, geographic, social and other factors (such as changes in mortgagors' housing needs, job transfers, unemployment, mortgagors' equity in the mortgaged properties and servicing decisions). A predominant factor affecting the prepayment rate is the difference between the interest rates on outstanding mortgage loans and prevailing mortgage loan interest rates (factoring in the cost of refinancing). Generally, prepayments on mortgage loans increase during a period of falling mortgage interest rates and decrease during a period of rising mortgage interest rates. Accordingly, the amounts of prepayments available for reinvestment by the Portfolio are likely to be greater during a period of declining mortgage interest rates for both adjustable rate mortgage loans and fixed rate mortgage loans. If general interest rates decline, such prepayments are likely to be reinvested at lower interest rates than the Portfolio was earning on the mortgage-backed securities that were prepaid or lower than the rate on existing adjustable rate mortgage pass-through securities. Under certain interest rate and prepayment rate scenarios, the Portfolio may fail to recoup fully its investment in mortgage-related securities notwithstanding any direct or indirect governmental or agency guarantee. Due to these factors, there is a risk that mortgage-backed securities can be less effective than U.S. Treasury and other types of debt securities of similar maturity at maintaining yields during periods of declining interest rates. INTEREST RATES AND PREPAYMENT. Under certain interest rate and prepayment rate scenarios, the Portfolio may fail to recoup fully its investment in mortgage-related securities -8- notwithstanding any direct or indirect governmental or agency guarantee. When the Portfolio reinvests amounts representing payments and unscheduled prepayments of principal, it may receive a rate of interest that is lower than the rate on existing adjustable rate mortgage pass-through securities. Thus, mortgage-related securities, and adjustable rate mortgage pass-through securities in particular, may be less effective than other types of U.S. Government securities as a means of "locking in" interest rates. Conversely, in a rising interest rate environment, a declining prepayment rate will extend the average life of many mortgage-related securities. This possibility is often referred to as extension risk. Extending the average life of a mortgage-related security increases the risk of depreciation due to future increases in market interest rates. The market for certain types of mortgage-related securities (i.e., certain CMOs) may not be liquid under all interest rate scenarios, which may prevent the Portfolio from selling such securities it holds at times or prices that it desires. As the Portfolio's investments are interest-rate sensitive, the Portfolio's performance will depend in part upon the Adviser's ability to anticipate and respond to fluctuations in market interest rates and to utilize appropriate strategies to maximize returns to the Portfolio, while attempting to minimize the associated risks to the Portfolio's investment capital. Prepayments may have a disproportionate effect on certain mortgage-backed securities and other multiple class pass-through securities, which are discussed below. The rate of interest on mortgage-related securities is normally lower than the interest rates paid on the mortgages included in the underlying pool. There are causes for this. There are annual fees paid to the servicer of the mortgage pool for passing through monthly payments to certificate holders and to any guarantor. Another cause is the yield retained by the issuer. Actual yield to the holder may vary from the coupon rate, even if adjustable, if the mortgage-related securities are purchased or traded in the secondary market at a premium or discount. In addition, there is normally some delay between the time the issuer receives mortgage payments from the servicer and the time the issuer makes the payments on the mortgage-related securities and this delay reduces the effective yield to the holder of such securities. DERIVATIVE DEBT SECURITIES. Different types of derivative debt securities are subject to different combinations of prepayment, extension and/or interest rate risk. Conventional mortgage pass-through securities and sequential pay CMOs are subject to all of these risks, but are typically not leveraged. Thus, the magnitude of exposure may be less than for more leveraged mortgage-related securities. PAC AND TARGETED AMORTIZATION CLASS ("TAC") CMO BONDS. PAC and TAC CMO bonds involve less exposure to prepayment, extension and interest rate risk than other mortgage-related securities, provided that prepayment rates remain within expected prepayment ranges or "collars." To the extent that prepayment rates remain within these prepayment ranges, the residual or support tranches of PAC and TAC CMOs assume the extra prepayment extension and interest rate risk associated with the underlying mortgage assets. -9- THE NATURE OF ADJUSTABLE AND FIXED RATE MORTGAGE LOANS The following is a general description of the adjustable and fixed rate mortgage loans which may be expected to underlie the mortgage-related securities in which the Portfolio may invest. The actual mortgage loans underlying any particular issue of mortgage-related securities may differ materially from those described below. ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"). The Portfolio may invest in ARMs. ARMs included in a mortgage pool will generally provide for a fixed initial mortgage interest rate for a specified period of time. Thereafter, the interest rates (the "Mortgage Interest Rates") may be subject to periodic adjustment based on changes in the applicable index rate (the "Index Rate"). The adjusted rate would be equal to the Index Rate plus a gross margin, which is a fixed percentage spread over the Index Rate established for each ARM at the time of its origination. Adjustable interest rates can cause payment increases that some mortgagors may find difficult to make. However, certain ARMs provide that the Mortgage Interest Rate may not be adjusted to a rate above an applicable lifetime maximum rate or below an applicable lifetime minimum rate for such ARM. Certain ARMs may also be subject to limitations on the maximum amount by which the Mortgage Interest Rate may adjust for any single adjustment period (the "Maximum Adjustment"). Other ARMs ("Negatively Amortizing ARMs") may provide instead or as well for limitations on changes in the monthly payment on such ARMs. Limitations on monthly payments can result in monthly payments that are more or less than the amount necessary to amortize a Negatively Amortizing ARM by its maturity at the Mortgage Interest Rate in effect in any particular month. If a monthly payment is insufficient to pay the interest accruing on a Negatively Amortizing ARM, any such excess interest is added to the principal balance of the loan, causing negative amortization, and will be repaid through future monthly payments. It may take borrowers under Negatively Amortizing ARMs longer periods of time to accumulate equity and may increase the likelihood of default by such borrowers. If a monthly payment exceeds the sum of the interest accrued at the applicable Mortgage Interest Rate and the principal payment which would have been necessary to amortize the outstanding principal balance over the remaining term of the loan, the excess (or "accelerated amortization") further reduces the principal balance of the ARM. Negatively Amortizing ARMs do not provide for the extension of their original maturity to accommodate changes in their Mortgage Interest Rate. As a result, unless there is a periodic recalculation of the payment amount (which there generally is), the final payment may be substantially larger than the other payments. These limitations on periodic increases in interest rates and on changes in monthly payments protect borrowers from unlimited interest rate and payment increase, but may result in increased credit exposure and prepayment risks for lenders. ARMs also have prepayment risk associated with them. The rate of principal prepayments with respect to ARMs has fluctuated in the past. The value of mortgage-related securities that are structured as pass-through mortgage securities that are collateralized by ARMs are less likely to rise during periods of declining interest rates to the same extent as fixed-rate securities. Accordingly, ARMs may be subject to a greater rate of principal repayments in a declining interest rate environment resulting in lower yields to the Portfolio. For example, if prevailing interest rates fall significantly, ARMs could be subject to higher prepayment rates -10- (than if prevailing interest rates remain constant or increase) because the availability of low fixed-rate mortgages may encourage mortgagors to refinance their ARMs to "lock-in" a fixed-rate mortgage. On the other hand, during periods of rising interest rates, the value of ARMs will lag behind changes in the market rate. ARMs are also typically subject to maximum increases and decreases in the interest rate adjustment which can be made on any one adjustment date, in any one year, or during the life of the security. In the event of dramatic increases or decreases in prevailing market interest rates, the value of the Portfolio's investment in ARMs may fluctuate more substantially because these limits may prevent the security from fully adjusting its interest rate to the prevailing market rates. As with fixed-rate mortgages, ARM prepayment rates vary in both stable and changing interest rate environments. There are a number of indices that provide the basis for rate adjustments on ARMs. Commonly utilized indices include the one-year, three-year and five-year constant maturity Treasury rates, the Three-Month Treasury Bill rate, the 180-Day Treasury Bill rate, rates of longer-term Treasury securities, the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost of Funds, the One-Month, Three-Month, Six-Month or One-Year London Interbank Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper rates. Some indices, such as the one-year constant maturity Treasury rate, closely mirror changes in market interest rate levels. Others, such as the 11th District Federal Home Loan Bank Cost of Funds Index, tend to lag behind changes in market rate levels and tend to be somewhat less volatile. The degree of volatility in the market value of the Portfolio will be influenced by the length of the interest rate reset periods and the degree of volatility in the applicable indices. FIXED RATE MORTGAGE LOANS. The Portfolio may invest in fixed rate mortgage loans. Generally, fixed rate mortgage loans eligible for inclusion in a mortgage pool (the "Fixed Rate Mortgage Loans") will bear simple interest at fixed annual rates and typically have terms of 15 or 30 years, but may be shorter or longer as new products may appear from time to time and be included for investment. Fixed Rate Mortgage Loans generally provide for monthly payments of principal and interest in substantially equal installments for the contractual term of the mortgage note in sufficient amounts to amortize fully principal by maturity, although certain Fixed Rate Mortgage Loans provide for a large final "balloon" payment upon maturity. MORTGAGE DOLLAR ROLL TRANSACTIONS. The Portfolio may enter into mortgage dollar roll transactions in which the Portfolio sells securities for delivery on a specified date and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity), but not identical securities on a specified future date. During the roll period, the Portfolio loses the right to receive principal and interest paid on the securities sold. However, the Portfolio receives the benefit of the "drop" which is the difference between the price received for the securities sold and the lower forward price for the future purchase or fee income plus the interest on the cash proceeds of the securities sold until the settlement date of the forward purchase. So long as the benefits exceed the income, capital appreciation and gain or loss due to mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, then the Portfolio's performance will be improved by using mortgage dollar rolls. Until the settlement date, the Portfolio will maintain in a segregated account, either with the Portfolio's custodian or on the books of the Adviser, cash or -11- liquid, high-grade debt securities in an amount equal to the forward purchase price. The Portfolio does not treat mortgage dollar rolls as borrowings. Successful use of mortgage dollar rolls depends on the Adviser's ability to predict correctly interest rates and mortgage prepayments. If the Adviser is incorrect, the Portfolio may lose money by using mortgage dollar rolls. There is no assurance that mortgage dollar rolls can be successfully employed. U.S. GOVERNMENT OBLIGATIONS. The Portfolio may purchase U.S. Government securities. Some U.S. Government securities (such as U.S. Treasury bills, notes and bonds) are supported by the full faith and credit of the United States. Others, such as obligations issued or guaranteed by U.S. Government agencies, instrumentalities or sponsored enterprises, are supported by (a) the ability of the issuer to borrow, provided approval is granted, from the U.S. Treasury; (b) the discretionary authority of the U.S. Government to purchase certain obligations of the issuer; or (c) only the credit of the agency or instrumentality issuing the obligation. Such guarantees of U.S. Government securities held by the Portfolio do not, however, guarantee the market value of the shares of the Portfolio. There is no guarantee that the U.S. Government will continue to provide support to its agencies or instrumentalities in the future. U.S. Government securities that are not backed by the full faith and credit of the U.S. Government are subject to greater risks than those that are backed by the full faith and credit of the U.S. government. All U.S. Government securities are subject to interest rate risk. U.S. Treasury securities include the separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury that are traded independently under the separate trading of registered interest and principal of securities program ("STRIPS"). CUSTODIAL RECEIPTS. The Portfolio may invest in custodial receipts in respect of securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies, instrumentalities, sponsored enterprises, political subdivisions or authorities. Such custodial receipts evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued or guaranteed as to principal and interest by the U.S. Government, its agencies, instrumentalities, sponsored enterprises, political subdivisions or authorities. These custodial receipts are known by various names, including "Treasury Receipts," "Treasury Investors Growth Receipts" ("TIGRs") and "Certificates of Accrual on Treasury Securities" ("CATs"). For certain securities law purposes, custodial receipts are not considered U.S. Government securities. REPURCHASE AGREEMENTS. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 397 days, provided the repurchase agreement itself matures in less than 13 months. The repurchase price under the repurchase agreements described above generally equals the price paid by the Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with whom the Portfolio may enter into repurchase agreements will be banks which the Adviser considers creditworthy pursuant to criteria approved by the Board of -12- Directors and non-bank dealers of U.S. Government securities that are listed on the Federal Reserve Bank of New York's list of reporting dealers. The Adviser will consider the creditworthiness of a seller in determining whether to have the Portfolio enter into a repurchase agreement. The seller under a repurchase agreement will be required to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. The Adviser will mark to market daily the value of the securities, and will, if necessary, require the seller to maintain additional securities, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations. REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money by entering into transactions called reverse repurchase agreements. Under these arrangements, the Portfolio will sell portfolio securities to dealers in U.S. Government securities or members of the Federal Reserve System, with an agreement to repurchase the security on an agreed date, price and interest payment. Reverse repurchase agreements involve the possible risk that the value of portfolio securities the Portfolio relinquishes may decline below the price the Portfolio must pay when the transaction closes. Borrowings may magnify the potential for gain or loss on amounts invested resulting in an increase in the speculative character of the Portfolio's outstanding shares. When the Portfolio enters into a reverse repurchase agreement, it places in a separate custodial account either liquid assets or other high grade debt securities that have a value equal to or greater than the repurchase price. The account is monitored to make sure that an appropriate value is maintained. Reverse repurchase agreements are considered to be borrowings under the 1940 Act. INVESTMENT COMPANY SECURITIES. The Portfolio may invest in securities issued by other investment companies to the extent permitted by the 1940 Act. Under the 1940 Act, the Portfolio's investments in such securities currently are limited to, subject to certain exceptions, (i) 3% of the total voting stock of any one investment company, (ii) 5% of the Portfolio's total assets with respect to any one investment company and (iii) 10% of the Portfolio's total assets with respect to investment companies in the aggregate. Investments in the securities of other investment companies will involve duplication of advisory fees and certain other expenses. Such other investment companies will have investment objectives, policies or restrictions that limit their investments to those authorized for federally chartered credit unions under the Federal Credit Union Act. BANK OBLIGATIONS. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances, bank notes, or deposit notes issued by U.S. banks or savings institutions having total assets at the time of purchase in excess of $1 billion (including obligations issued by foreign branches of such banks) to the extent permitted by the Federal Credit Union Act and the Rules and Regulations thereunder. -13- Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry. WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. To the extent consistent with its investment objective, the Portfolio may purchase securities on a when-issued basis or purchase or sell securities on a forward commitment basis. When the Portfolio agrees to purchase securities on a when-issued basis or to purchase or sell securities on a forward commitment basis, the custodian will set aside cash, U.S. Government securities or other liquid assets equal to the amount of the purchase or the commitment in a separate account. The market value of the separate account will be monitored and if such market value declines, the Portfolio will subsequently be required to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitments. The value of the securities underlying a when-issued purchase or a forward commitment to purchase securities, and any subsequent fluctuations in their value, is taken into account when determining the Portfolio's net asset value ("NAV") starting on the day that the Portfolio agrees to purchase the securities. The Portfolio does not earn interest on the securities committed to purchase until the securities are paid for and delivered on the settlement date. When the Portfolio makes a forward commitment to sell securities, the proceeds to be received upon settlement are included in the Portfolio's assets, and fluctuations in the value of the underlying securities are not reflected in the Portfolio's NAV as long as the commitment remains in effect. BORROWING. The Adviser intends to borrow for leverage or for temporary or emergency purposes, including to meet portfolio redemption requests so as to permit the orderly disposition of portfolio securities, or to facilitate settlement transactions on portfolio securities. The Portfolio must maintain asset coverage of at least 300% of the amounts borrowed. Although the principal of such borrowings will be fixed, the Portfolio's assets may change in value during the time the borrowing is outstanding. The Portfolio expects that some of its borrowings may be made on a secured basis. In such situations, either the custodian will segregate the pledged assets for the benefit of the lender or arrangements will be made with a suitable subcustodian, which may include the lender. If the securities held by the Portfolio should decline in value while borrowings are outstanding, the NAV of the Portfolio's outstanding shares will decline in value by proportionately more than the decline in value suffered by the Portfolio's securities. As a result, the Portfolio's share price may be subject to greater fluctuation until the borrowing is paid off. The Portfolio's short sales against the box and related borrowing are not subject to the restrictions outlined above. RESTRICTED AND ILLIQUID SECURITIES. The Portfolio does not intend to invest more than 15% of its net assets in illiquid securities, which are securities that cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include: securities that are not readily marketable; repurchase agreements and other agreements with a notice or -14- demand period of more than seven days; securities for which there is no secondary market; certain SMBS; structured securities; swap transactions; interest rate caps, floors and collars; certain restricted securities, such as privately placed securities, unless the Adviser determines, based upon a review of the trading markets for a specific restricted security, that the restricted security is liquid; and certain over-the-counter options. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. The Portfolio may purchase securities which are not registered under the Securities Act of 1933, as amended (the "1933 Act") but which may be sold to "qualified institutional buyers" in accordance with Rule 144A under the 1933 Act ("Rule 144A Securities"). These Rule 144A Securities will not be considered illiquid if the Adviser determines that an adequate trading market exists for the securities. As a result, the Portfolio could hold more illiquid securities during any period in which qualified institutional buyers become uninterested in purchasing Rule 144A Securities. Normally, Rule 144A Securities are purchase and valued at a discount from the price at which such securities trade when they are not restricted, because the restriction makes them less liquid. The amount of the discount from the prevailing market price is expected to vary depending upon the type of security, the character of the issuer, the party who will bear the expenses of registering the Rule 144A Securities and prevailing supply and demand conditions. Mutual funds do not typically hold a significant amount of restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may adversely affect the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty in satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities. The Board of Directors has delegated to the Adviser the daily function of determining and monitoring the liquidity of the Portfolio's securities in accordance with procedures adopted by the Board. The Board exercises its oversight responsibility for liquidity and remains responsible for liquidity determinations. SECURITIES LENDING. The Portfolio may lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. Such loans would involve risks of delay in receiving additional collateral in the event the value of the collateral decreased below the value of the securities loaned or of delay in recovering the securities loaned or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans will be made only to borrowers deemed by the Adviser to be of good standing and only when, in the Adviser's judgment, the income to be earned from the loans justifies the attendant risks. Any loans of the Portfolio's securities will be fully collateralized and marked to market daily. -15- MARKET FLUCTUATION. The market value of the Portfolio's investments, and thus its net asset value, will change in response to market conditions affecting the value of its portfolio securities. For most fixed income securities, when interest rates decline, the value of fixed rate obligations normally can be expected to rise. Conversely, when interest rates rise, the value of fixed rate obligations normally can be expected to decline. Other securities in which the Portfolio may invest do not change inverse to interest rates. Certain securities, for structural reasons, behave in the opposite manner and are expected to move in parallel with interest rates. By contrast, as interest rates on adjustable rate loans are reset periodically, yields on investments in such loans will gradually align themselves to reflect changes in market interest rates, causing the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations. Because the investment alternatives available to the Portfolio may be limited by its objective, investors should be aware that an investment in the Portfolio may be subject to greater market fluctuation than an investment in a portfolio of securities representing a broader range of investment alternatives. In view of the specialized nature of the investment activities of the Portfolio, an investment in the Portfolio should not be considered a complete investment program. MONEY MARKET INSTRUMENTS. The Portfolio may invest a portion of its assets in short-term, high-quality instruments for temporary defensive purposes which may include, among other things, U.S. Government securities and bank obligations. See "U.S. Government Obligations" and "Bank Obligations" above. The value of money market instruments tends to fall when current interest rates rise. Money market instruments are generally less sensitive to interest rate changes than longer-term securities. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments for an agreed price during a designated month (or to deliver the final cash settlement price, in the case of a contract not calling for physical delivery at the end of trading in the contract). When interest rates are rising or securities prices are falling, the Portfolio can seek to offset a decline in the value of its current portfolio securities through the sale of futures contracts. When interest rates are falling or securities prices are rising, the Portfolio, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. The Portfolio may purchase and sell Federal Funds, Eurodollar and Treasury futures contracts, and purchase and write call and put options on any of such futures contracts to seek to increase total return or to hedge against changes in interest rates, securities prices or to otherwise manage its term structure, sector selections and duration. The Portfolio may also enter into closing purchase and sale transactions with respect to any of such contracts and options. Federal Funds futures contracts are futures contracts based on the simple average of the daily effective federal funds rate during the month of the contract. The effective federal funds rate is a weighted average of all federal funds transactions for a group of federal funds brokers who report to the Federal Reserve Bank of New York each day. Eurodollar futures contracts are U.S. dollar-denominated futures contracts that are based on the implied forward LIBOR of a three-month deposit. Treasury futures are futures contracts to buy or sell the underlying Treasury securities of various maturities. The Portfolio will engage in futures and related options transactions for -16- bona fide hedging purposes as described below or for purposes of seeking to increase total return, in each case, only to the extent permitted by regulations of the Commodity Futures Trading Commission ("CFTC"). All futures contracts entered into by the Portfolio are traded on U.S. exchanges. Positions taken in the futures markets are not normally held to maturity but are instead liquidated through offsetting transactions, which may result in a profit or a loss. While futures contracts on securities will usually be liquidated in this manner, the Portfolio may instead make, or take, delivery of the underlying securities or currency whenever it appears economically advantageous to do so. A clearing corporation associated with the exchange on which futures on securities are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date. Hedging, by use of futures contracts, seeks to establish with more certainty than would otherwise be possible the effective price or rate of return on portfolio securities or securities that the Portfolio proposes to acquire. The Portfolio may, for example, take a "short" position in the futures market by selling futures contracts to seek to hedge against an anticipated rise in interest rates or a decline in market prices that would adversely affect the value of the Portfolio's securities. Such futures contracts may include contracts for the future delivery of securities held by the Portfolio or securities with characteristics similar to those of the Portfolio's securities. If, in the opinion of the Adviser, there is a sufficient degree of correlation between price trends for a Portfolio's securities and futures contracts based on other financial instruments, securities indices or other indices, the Portfolio may also enter into such futures contracts as part of its hedging strategy. Although under some circumstances prices of securities the Portfolio owns may be more or less volatile than prices of such futures contracts, the Adviser will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any such differential by having the Portfolio enter into a greater or lesser number of futures contracts or by seeking to achieve only a partial hedge against price changes affecting the Portfolio's securities. When hedging of this character is successful, any depreciation in the value of portfolio securities will be substantially offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of the Portfolio's securities would be substantially offset by a decline in the value of the futures position. On other occasions, the Portfolio may take a "long" position by purchasing futures contracts. This would be done, for example, when the Portfolio anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices then available in the applicable market to be less favorable than prices that are currently available. Additionally, long positions in futures contracts may be used to hedge certain parts of the Portfolio which might be adversely affected by a drop in interest rates. The acquisition of put and call options on futures contracts will give the Portfolio the right (but not the obligation) for a specified price to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, the Portfolio obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs. -17- The writing of a call option on a futures contract generates a premium, which may partially offset a decline in the value of the Portfolio's assets. By writing a call option, the Portfolio becomes obligated, in exchange for the premium, (upon exercise of the option), to sell a futures contract if the option is exercised, which may have a value higher than the exercise price. Conversely, the writing of a put option on a futures contract generates a premium, which may partially offset an increase in the price of securities that the Portfolio intends to purchase. However, the Portfolio becomes obligated (upon exercise of the option) to purchase a futures contract if the option is exercised, which may have a value lower than the exercise price. Thus, the loss incurred by the Portfolio in writing options on futures is potentially unlimited and may exceed the amount of the premium received. The Portfolio will incur transaction costs in connection with the writing of options on futures. The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same financial instrument. There is no guarantee that such closing transactions can be affected. The Portfolio's ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market. The Portfolio will engage in futures and related options transactions for bona fide hedging and to seek to increase total return as permitted by the CFTC regulations, which permit principals of an investment company, registered under the 1940 Act to engage in such transactions without registering as commodity pool operators. The Portfolio will determine that the price fluctuations in the futures contracts and options on futures used for hedging purposes are substantially related to price fluctuations in securities held by the Portfolio or securities or instruments which it expects to purchase. Except as stated below, the Portfolio's futures transactions will be entered into for traditional hedging purposes -- i.e., futures contracts will be sold to protect against a decline in the price of securities that the Portfolio owns or securities purchased to protect the Portfolio against an increase in the price of securities it intends to purchase. The Portfolio will engage in transactions in futures contracts and options only to the extent such transactions are consistent with the requirements of the Code, for maintaining its qualification as a regulated investment company for federal income tax purposes. Transactions in futures contracts and options on futures involve brokerage costs, require margin deposits and, in some cases, may require the Portfolio to establish a segregated account consisting of cash or liquid securities in an amount equal to the underlying value of such contracts and options. The use of futures contracts entails certain risks, including but not limited to the following: no assurance that futures contracts transactions can be offset at favorable prices; possible reduction of the Portfolio's income due to the use of hedging; possible reduction in value of both the securities hedged and the hedging instrument; possible lack of liquidity due to daily limits on price fluctuations; imperfect correlation between the contract and the securities being hedged; and potential losses in excess of the amount initially invested in the futures contracts themselves. If the expectations of the Adviser regarding movements in securities -18- prices or interest rates are incorrect, the Portfolio may have experienced better investment results without hedging. The use of futures contracts and options on futures contracts requires special skills in addition to those needed to select portfolio securities. While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, while the Portfolio may benefit from the use of futures and options on futures, unanticipated changes in interest rates or securities prices may result in a poorer overall performance for the Portfolio than if it had not entered into any futures contracts or options transactions. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and the Portfolio may be exposed to risk of loss. Perfect correlation between the Portfolio's futures positions and portfolio positions will be impossible to achieve. There are no futures contracts based upon individual securities, except certain U.S. Government securities. Other futures contracts available to hedge the Portfolio's portfolio investments generally are limited to futures on various financial indices. OPTIONS ON SECURITIES. The Portfolio may write call and put options on any securities in which it may invest. The Portfolio may purchase and write such options on securities that are listed on national domestic securities exchanges or traded in the over-the-counter market. A call option written by the Portfolio obligates it to sell specified securities to the holder of the option at a specified price if the option is exercised at any time before the expiration date, regardless of the market price of the security. The purpose of writing call options is to realize greater income than would be realized in portfolio securities transactions alone. However, in writing call options for additional income, the Portfolio may forego the opportunity to profit from an increase in the market price of the underlying security. A put option written by the Portfolio obligates it to purchase specified securities from the option holder at a specified price if the option is exercised at any time before the expiration date, regardless of the market price for the security. The purpose of writing such options is to generate additional income. However, in return for the option premium, the Portfolio accepts the risk that it will be required to purchase the underlying securities at a price in excess of the securities' market value at the time of purchase. A written call option or put option may be covered by (i) maintaining cash or liquid securities in a segregated account noted on the Portfolio's records or maintained by the Portfolio's custodian with a value at least equal to the Portfolio's obligation under the option, (ii) entering into an offsetting forward commitment and/or (iii) purchasing an offsetting option or any other option which, by virtue of its exercise price or otherwise, reduces the Portfolio's net exposure on its written option position. The Portfolio may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option or with a third party by assignment. Such purchases are referred to as "closing purchase transactions" and do not result in the ownership of an option. A closing purchase -19- transaction will ordinarily be effected to realize a profit on an outstanding option, to prevent an underlying security from being called, to permit the sale of the underlying security or to permit the writing of a new option containing different terms on such underlying security. The cost of such a liquidation purchase plus transaction costs may be greater than the premium received upon the original option, in which event the Portfolio will have incurred a loss in the transaction. The Portfolio would normally purchase call options in anticipation of an increase, or put options in anticipation of a decrease ("protective puts") in the market value of securities of the type in which it may invest. The purchase of a call option would entitle the Portfolio, in return for the premium paid, to purchase specified securities at a specified price during the option period. The Portfolio would ordinarily realize a gain on the purchase of a call option if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the Portfolio would realize either no gain or a loss on the purchase of the call option. The purchase of a put option would entitle the Portfolio, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the Portfolio's securities. Put options may also be purchased by the Portfolio for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. The Portfolio would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to cover the premium and transaction costs; otherwise the fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of put options may be offset by countervailing changes in the value of the underlying portfolio securities. Transactions by the Portfolio in options on securities will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options are traded governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert, regardless of whether the options are written or purchased on the same or different exchanges, boards of trade or other trading facilities or are held or written in one or more accounts or through one or more brokers. Thus, the number of options that the Portfolio may write or purchase may be affected by options written or purchased by other investment advisory clients of the Adviser. An exchange, board of trade or other trading facility may order the liquidation of positions found to be in excess of these limits, and it may impose certain other sanctions. Although the Portfolio may use option transactions to seek to generate additional income and to seek to reduce the effect of any adverse price movement in the securities subject to the option, they do involve certain risks that are different in some respects from investment risks associated with similar mutual funds that do not engage in such activities. These risks include the following: for writing call options, the inability to effect closing transactions at favorable prices and the inability to participate in the appreciation of the underlying securities above the exercise price; for writing put options, the inability to effect closing transactions at favorable prices and the obligation to purchase the specified securities at prices which may not reflect current market values; and for purchasing call and put options, the possible loss of the entire premium paid. -20- There is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange-traded option or at any particular time. If the Portfolio is unable to effect a closing purchase transaction with respect to options it has written, the Portfolio will not be able to sell the underlying securities or dispose of assets held in a segregated account until the options expire or are exercised. Similarly, if the Portfolio is unable to effect a closing sale transaction with respect to options it has purchased, it would have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. The Portfolio's ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. The Adviser will monitor the liquidity of over-the-counter options and, if it determines that such options are not readily marketable, the Portfolio's ability to enter such options will be subject to the Portfolio's limitation on investments on illiquid securities. The writing and purchase of options is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The successful use of options for hedging purposes depends in part on the Adviser's ability to predict future price fluctuations and the degree of correlation between the options and securities markets. If the Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments on which options are written and purchased and the instruments in the Portfolio's investment portfolio, the Portfolio may incur losses that it would not otherwise incur. The use of options can also increase the Portfolio's transaction costs. INTEREST RATE SWAPS, TOTAL RETURN SWAPS, OPTIONS ON SWAPS AND INTEREST RATE CAPS, FLOORS AND COLLARS The Portfolio may enter into interest rate and total return swaps and interest rate caps, floors and collars. The Portfolio may also purchase and write (sell) options on swaps, commonly referred to as swaptions. -21- The Portfolio may enter into swap transactions for hedging purposes or to seek to increase total return. As examples, the Portfolio may enter into swap transactions for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets as a duration management technique, to protect against any increase in the price of securities the Portfolio anticipates purchasing at a later date, or to gain exposure to certain markets in an economical way. Swap agreements are two party contracts entered into primarily by institutional investors. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or "swapped" between the parties are generally calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular security, or in a "basket" of securities representing a particular index. As examples, interest rate swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Total return swaps are contracts that obligate a party to pay or receive interest in exchange for payment by the other party of the total return generated by a security, a basket of securities, an index, or an index component. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates. A great deal of flexibility is possible in the way swap transactions are structured. However, generally the Portfolio will enter into interest rate and total return, swaps on a net basis, which means that the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments. Interest rate and total return swaps do not normally involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate and total return swaps is normally limited to the net amount of payments that the Portfolio is contractually obligated to make. If the other party to an interest rate or total return swap defaults, the Portfolio's risk of loss consists of the net amount of payments that such Portfolio is contractually entitled to receive, if any. To the extent that the Portfolio's exposure in a transaction involving a swap, swaption or an interest rate floor, cap or collar is covered by the segregation of cash or liquid assets, or is -22- covered by other means in accordance with SEC guidance, the Portfolio and the Adviser believe that the transactions do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to the Portfolio's borrowing restrictions. The Portfolio will not enter into any interest rate or total return swap transactions unless the unsecured commercial paper, senior debt or claims-paying ability of the other party is rated either A or A-1 or better by Standard & Poor's or A or P-1 or better by Moody's or their equivalent ratings, or, if unrated by such rating organization, determined to be of comparable quality by the Adviser. The use of interest rate and total return swaps, as well as interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. If the Adviser is incorrect in its forecasts of market values, credit quality, interest rates and currency exchange rates, the investment performance of the Portfolio would be less favorable than it would have been if these investment instruments were not used. In addition, these transactions can involve greater risks than if the Portfolio had invested in the reference obligation directly because, in addition to general market risks, swaps are subject to illiquidity risk, counterparty risk, credit risk and pricing risk. Because they are two party contracts and because they may have terms of greater than seven days, swap transactions may be considered to be illiquid. Moreover, the Portfolio bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap counterparty. Many swaps are complex and often valued subjectively. Swaps may be subject to pricing or "basis" risk, which exists when a particular swap becomes extraordinarily expensive relative to historical prices or the price of corresponding cash market instruments. Under certain market conditions it may not be economically feasible to imitate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity. If a swap transaction is particularly large or if the relevant market is illiquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with the markets for other similar instruments which are traded in the interbank market. The Adviser, under the supervision of the Board of Directors, is responsible for determining and monitoring the liquidity of the Portfolio's transactions in swaps, swaptions, caps, floors and collars. ZERO COUPON BONDS. To the extent consistent with its investment objective, the Portfolio generally may invest in zero coupon bonds, which are debt securities that have been stripped of their unmatured interest coupons, the coupons themselves or receipts or certificates representing interests in such stripped debt obligations or coupons. A portion of the discount -23- with respect to stripped tax-exempt securities or their coupons may be taxable. Zero coupon bonds are used to manage cash flow. Zero coupon bonds involve the additional risk that, unlike securities that periodically pay interest to maturity, the Portfolio will realize no cash until a specified future payment date unless a portion of such securities is sold and, if the issuer of such securities defaults, the Portfolio may obtain no return at all on its investment. In addition, even though such securities may not provide for the payment of current interest in cash, the Portfolio is nonetheless required to accrue income on such investments for each taxable year and generally is required to distribute such accrued amounts (net of deductible expenses, if any) to avoid being subject to tax. Because no cash is generally received at the time of the accrual, the Portfolio may be required to liquidate other portfolio securities to obtain sufficient cash to satisfy federal tax distribution requirements applicable to the Portfolio. Additionally, the market prices of zero coupon bonds generally are more volatile than the market prices of interest bearing securities and are likely to respond to a greater degree to changes in interest rates than interest bearing securities having similar maturities and credit quality. PORTFOLIO TURNOVER. There are no limitations on the length of time that securities must be held by the Portfolio and the Portfolio's annual portfolio turnover rate may vary significantly from year to year. A high rate of portfolio turnover (100% or more) involves correspondingly greater transaction costs, which would be borne by the Portfolio and its shareholders. In determining such portfolio turnover, U.S. Government securities and all other securities (including options) which have maturities at the time of acquisition of one year or less ("short-term securities") are excluded. The annual portfolio turnover rate is calculated by dividing the lesser of the cost of purchases or proceeds from sales of portfolio securities for the year by the monthly average of the value of the portfolio securities owned by the Portfolio during the year. The monthly average is calculated by totaling the values of the portfolio securities as of the beginning and end of the first month of the year and as of the end of the succeeding 11 months and dividing the sum by 13. A turnover rate of 100% would occur if all of the Portfolio's securities (other than short-term securities) were replaced once in a period of one year. It should be noted that if the Portfolio were to write a substantial number of options, which are exercised, the portfolio turnover rate would increase. SECURITIES OF UNSEASONED ISSUERS. The Portfolio may invest in securities of unseasoned issuers, including fixed income securities of unseasoned issuers which are not readily marketable, provided the aggregate investment in such securities generally would not exceed 15% of the Portfolio's net assets. The term "unseasoned" refers to issuers which, together with their predecessors, have been in operation for less than three years. SHORT SALES. The Portfolio may enter into short sales. Short sales are transactions in which the Portfolio sells a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Portfolio must borrow the security to make delivery to the buyer. The Portfolio then is obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Portfolio. Until the security is -24- replaced, the Portfolio is required to pay to the lender amounts equal to any dividend which accrues during the period of the loan. To borrow the security, the Portfolio also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. Until the Portfolio replaces a borrowed security in connection with a short sale, the Portfolio will: (a) maintain daily a segregated account, containing cash, cash equivalents, or liquid marketable securities, at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short; or (b) otherwise cover its short position in accordance with positions taken by the staff of the Securities and Exchange Commission (the "SEC"). The Portfolio will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Portfolio replaces the borrowed security. The Portfolio will realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of any premium or amounts in lieu of interest the Portfolio may be required to pay in connection with a short sale. The Portfolio may purchase call options to provide a hedge against an increase in the price of a security sold short by the Portfolio. The Portfolio anticipates that the frequency of short sales will vary substantially in different periods, and it does not intend that any specified portion of its assets, as a matter of practice, will be invested in short sales. However, no securities will be sold short if, after effect is given to any such short sale, the total market value of all securities sold short would exceed 100% of the value of the Portfolio's net assets. LEVERAGE. Under the 1940 Act, the Portfolio may borrow an amount up to 33-1/3% of its total assets (including the amount borrowed) less all liabilities other than borrowings. Although the use of leverage by the Portfolio may create an opportunity for increased return, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on the securities and instruments purchased with leverage proceeds are greater than the cost of the leverage, the Portfolio's return will be greater than if leverage had not been used. Conversely, if the income or gains from the securities and investments purchased with such proceeds does not cover the cost of leverage, the Portfolio's return will be less than if leverage had not been used. There is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations for the Portfolio including: o the likelihood of greater volatility of the Portfolio's NAV than a comparable portfolio without leverage; o the risk that fluctuations in interest rates on borrowings and short-term debt will reduce the Portfolio's return and -25- o the effect of leverage in a declining market, which is likely to cause a greater decline in the Portfolio's NAV than if the Portfolio were not leveraged. The Portfolio nevertheless may determine to continue to use leverage if the benefits to the Portfolio's shareholders of maintaining the leveraged position are expected to outweigh the current reduced return. NON-DIVERSIFIED STATUS. Since the Portfolio is "non-diversified" under the 1940 Act, it is subject only to certain federal tax diversification requirements. Under federal tax laws, with respect to 50% of its total assets, the Portfolio may invest up to 25% of its total assets in the securities of any issuer. With respect to the remaining 50% of the Portfolio's total assets, (i) the Portfolio may not invest more than 5% of its total assets in the securities of any one issuer, and (ii) the Portfolio may not acquire more than 10% of the outstanding voting securities of any one issuer. These tests apply at the end of each quarter of the taxable year and are subject to certain conditions and limitations under the Code. These tests do not apply to investments in United States Government securities and regulated investment companies. INVESTMENT LIMITATIONS The Portfolio has adopted the following fundamental investment limitations which may not be changed without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares (as defined in Section 2(a)(42) of the 1940 Act). As used in this SAI and in the Prospectus, "shareholder approval" and a "majority of the outstanding shares" of the Portfolio means, with respect to the approval of an investment advisory agreement or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such Portfolio. The Portfolio may not: 1. Borrow money, except the Portfolio may (a) borrow from banks (as defined in the 1940 Act) or enter into reverse repurchase agreements in amounts up to 33 1/3% of the value of its total assets (including the amount borrowed), provided that there is at least 300% asset coverage for all borrowings by the Portfolio; (b) to the extent permitted by applicable law, borrow up to an additional 5% of its total assets for temporary purposes; (c) obtain such credit as may be necessary for the clearance of purchases and sales of portfolio securities; and (d) engage in dollar roll transactions which are accounted for as financings. The Portfolio may not mortgage, pledge or hypothecate any assets, except in connection with any permitted borrowing and then in amounts not in excess of the lesser of the dollar amounts borrowed or 33 1/3% of the value of the Portfolio's total assets at the time of such borrowing, provided that: (a) short sales and related borrowings of securities are not subject to this restriction; and (b) for the purposes of this restriction, collateral arrangements with respect to options, short sales, futures, options on futures contracts, collateral arrangements with respect to initial and variation margin and collateral arrangements with respect to swaps and other derivatives are not deemed to be a pledge or other encumbrance of assets, and provided that any collateral arrangements with respect to the writing of options, futures contracts and options on futures contracts -26- and collateral arrangements with respect to initial and variation margin are not deemed to be a pledge of assets. The Portfolio will not purchase securities while aggregate borrowings for temporary purposes exceed 5% of the Portfolio's total assets. Securities held in escrow or separate accounts in connection with the Portfolio's investment practices are not considered to be borrowings or deemed to be pledged for purposes of this limitation. To the extent the Portfolio covers its commitment under a reverse repurchase transaction (or economically similar transaction) by segregating assets determined to be liquid equal in value to the amount of the Portfolio's commitment to repurchase, such an agreement would not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by the Portfolio. 2. Issue senior securities, except as described above in number 1 or as permitted under the 1940 Act; 3. Act as an underwriter of securities within the meaning of the Securities Act, except insofar as it might be deemed to be an underwriter upon disposition of certain portfolio securities; 4. Purchase or sell real estate (including real estate limited partnership interests), provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein; 5. Purchase or sell commodities or commodity contracts, except that the Portfolio may purchase, sell or enter into options, futures contracts, options on futures contracts, swap agreements and other derivative instruments; 6. Make loans, except through loans of portfolio instruments and repurchase agreements, provided that for purposes of this restriction the acquisition of bonds, debentures or other debt instruments or interests therein and investment in U.S. Government obligations, loan participations and assignments, certificates of deposit and bankers' acceptances shall not be deemed to be the making of a loan; 7. Invest 25% or more of its total assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); provided that the Portfolio intends to invest at least 80% of the value of its net assets (including any borrowings) in mortgage-related securities. The Portfolio's investment objective and strategies described in the Prospectus are not fundamental and may be changed by the Company's Board of Directors without the approval of the Portfolio's shareholders upon 60 days' notice to shareholders. -27- DISCLOSURE OF PORTFOLIO HOLDINGS The Company has adopted, on behalf of the Portfolio, a policy relating to the disclosure of the Portfolio's securities. The policies relating to the disclosure of the Portfolio's securities are designed to allow disclosure of portfolio holdings information where necessary to the Portfolio's operation without compromising the integrity or performance of the Portfolio. It is the policy of the Company that disclosure of the Portfolio's securities holdings to a select person or persons prior to the release of such holdings to the public ("selective disclosure") is prohibited, unless there are legitimate business purposes for selective disclosure. The Company discloses portfolio holdings information as required in regulatory filings and shareholder reports, discloses portfolio holdings information as required by federal and state securities laws and may disclose portfolio holdings information in response to requests by governmental authorities. As required by the federal securities laws, including the 1940 Act, the Company will disclose the Portfolio's holdings in applicable regulatory filings, including shareholder reports, reports on Form N-CSR and Form N-Q or such other filings, reports or disclosure documents as the applicable regulatory authorities may require. In addition to the 1940 Act requirements, the National Credit Union Administration ("NCUA") requires the Adviser to provide to existing shareholders current non-public portfolio holdings information on a monthly basis, with a [30] day lag time. Such portfolio holdings information will be available on a password protected website in a monthly report to be mailed to existing shareholders. The Adviser reserves the right to refuse to fulfill the request for portfolio data from a shareholder or non-shareholder if it believes that providing such information will be contrary to the best interests of the Portfolio. The Adviser currently makes the Portfolio's complete portfolio holdings, top ten holdings, sector weightings and other portfolio characteristics publicly available on its web site, WWW.BEARSTEARNS.COM as disclosed in the following table:
- ------------------------------------------------------------------------------------------------------------------------ INFORMATION POSTING FREQUENCY OF DISCLOSURE DATE OF WEB POSTING - ------------------------------------------------------------------------------------------------------------------------ Complete Portfolio Holdings Semi-Annual 60 calendar days following the completion of each fiscal semi-annual period - ------------------------------------------------------------------------------------------------------------------------ Top 10 Portfolio Holdings and other portfolio Quarterly 30 calendar days after the end of each characteristics calendar quarter - ------------------------------------------------------------------------------------------------------------------------
The scope of the information relating to the Portfolio that is made available on the web site may change from time to time without notice. The Adviser or its affiliates may include the Portfolio's information that has already been made public through a Web posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that, in the case of information made public through the Web, the information is disclosed no earlier than the day after the date of posting to the Web site. -28- The Company may distribute or authorize the distribution of information about its portfolio holdings that is not publicly available to its third-party service providers of the Company, which include PFPC Trust Company, the custodian for the Portfolio; PFPC Inc., the administrator, accounting agent and transfer agent; ______________, the Portfolio's independent registered public accounting firm; Drinker Biddle & Reath LLP, legal counsel; GCom 2 Solutions and Bowne & Co., Inc., the financial printers; and Institutional Shareholder Services Inc. ("ISS"), the Portfolio's proxy voting service. These service providers are required to keep such information confidential, and are prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the Portfolio. Such holdings are released on conditions of confidentiality, which include appropriate trading prohibitions. "Conditions of confidentiality" include confidentiality terms included in written agreements, implied by the nature of the relationship (e.g. attorney-client relationship), or required by fiduciary or regulatory principles (e.g., custody services provided by financial institutions). Portfolio holdings may also be provided earlier to shareholders and their agents who receive redemptions in kind that reflect a pro rata allocation of all securities held in the portfolio. Any violations of the policy set forth above as well as any corrective action undertaken to address such violations must be reported by the Adviser, director, officer or third party service provider to the Company's Chief Compliance Officer, who will determine whether the violation should be reported immediately to the Board of Directors of the Company or at its next quarterly board meeting. MANAGEMENT OF THE COMPANY The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. Pursuant to the Director Retirement Policy, Mr. Straniere and all subsequently elected Directors are required to retire from the Company's Board of Directors by the end of the calendar year in which he or she reaches age 75 ("Mandatory Retirement Age"). Messrs. Brodsky, McKay, Reichman, Sternberg, Sablowsky and Carnall are not required to retire from the Board upon reaching the Mandatory Retirement Age and, upon reaching the Mandatory Retirement Age, may continue to serve as a Director until the later of the last day of the calendar year in which the Director reaches the Mandatory Retirement Age or until December 31, 2010. A Director may retire before the Mandatory Retirement Age. The Board reserves the right to waive the requirements of the Director Retirement Policy with respect to an individual Director by vote of the Disinterested Directors. -29-
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN TERM OF FUND OTHER POSITION(S) OFFICE AND COMPLEX DIRECTORSHIPS NAME, ADDRESS, AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY DATE OF BIRTH FUND TIME SERVED 1 DURING PAST 5 YEARS DIRECTOR * DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to Since 1969, Director and Vice Chairman, 19 Director, Comcast Corporation present Comcast Corporation (cable television and Comcast 1500 Market Street, communications); Director, NDS Group Corporation 35th Floor PLC (provider of systems and applications Philadelphia, PA 19102 for digital pay TV). DOB: 7/16/33 - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to Since 2000, Vice President, Fox Chase 19 None Fox Chase Cancer Center present Cancer Center (biomedical research and 333 Cottman Avenue medical care). Philadelphia, PA 19111 DOB: 12/06/35 - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director 1991 to Since December 2000, Director, Gabelli 19 None 106 Pierrepont Street present Group Capital Partners, L.P. (an investment Brooklyn, NY 11201 partnership); Chief Operating Officer and DOB: 5/21/48 member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to Since 1974, Chairman, Director and 19 Director, Moyco Technologies, Inc. present President, Moyco Technologies, Inc. Moyco 200 Commerce Drive (manufacturer of precision coated and Technologies, Montgomeryville, PA 18936 industrial abrasives). Since 1999, Director, Inc. DOB: 3/24/34 Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York State Assembly (1981- 19 Director, 300 East 57th Street 2004); Founding Partner, Straniere Law Reich and New York, NY 10022 Firm (1980 to date); Partner, Gotham Tang Group; DOB: 3/28/41 Strategies (consulting firm) (2005 to date); Director, The Partner, The Gotham Global Group Sparx Japan (consulting firm) (2005 to date); and Fund; President, The New York City Hot Dog Director; Company (2005 to date). Weiss, Peck & Greer Fund Group - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to Since July 2002, Senior Vice President and 19 Director, Oppenheimer & Company, present prior thereto, Executive Vice President of Kensington Inc. Oppenheimer & Co., Inc., formerly Funds 200 Park Avenue Fahnestock & Co., Inc. (a registered broker- New York, NY 10166 dealer). Since November 2004, Director of DOB: 4/16/38 Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to Director of PFPC Inc. from January 1987 to 19 Director, 400 Bellevue Parkway present April 2002, Chairman and Chief Executive Cornerstone Wilmington, DE 19809 Officer of PFPC Inc. until April 2002, Bank DOB: 9/25/38 Executive Vice President of PNC Bank, National Association from October 1981 to April 2002, Director of PFPC International Ltd. (financial services) from August 1993 - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN TERM OF FUND OTHER POSITION(S) OFFICE AND COMPLEX DIRECTORSHIPS NAME, ADDRESS, AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY DATE OF BIRTH FUND TIME SERVED 1 DURING PAST 5 YEARS DIRECTOR * DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ to April 2002, Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to Certified Public Accountant; Vice N/A N/A 400 Bellevue Parkway and present and Chairman of the Board, Fox Chase Cancer 4th Floor Treasurer 1988 to Center; Trustee Emeritus, Pennsylvania Wilmington, DE 19809 present School for the Deaf; Trustee Emeritus, DOB: 6/29/24 Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Tina M. Payne Secretary 2004 to Since 2003, Vice President and Associate N/A N/A 301 Bellevue Parkway present Counsel, PFPC Inc. (financial services 2nd Floor company); Associate, Stradley, Ronon, Wilmington, DE 19809 Stevens & Young, LLC (law firm) from DOB: 5/19/74 2001 to 2003. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 President, Vigilant Compliance Services, N/A N/A Vigilant Compliance Compliance LLC, since 2004; Senior Legal Counsel, Services, LLC Officer PFPC Inc. from 2002 to 2004; Chief Legal 186 Dundee Drive, Suite 700 Counsel, Corviant Corporation (Investment Williamstown, NJ 08094 Adviser, Broker-Dealer and Service DOB: 12/25/62 Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that have not commenced operations as of the date of this SAI. 1. Subject to the Director Retirement Policy described above, each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2. Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc. and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer. -31- THE BOARD AND STANDING COMMITTEES BOARD. The Board of Directors is comprised of seven individuals, two of whom are considered "interested" Directors as defined by the 1940 Act. The remaining Directors are referred to as "Disinterested" or "Independent" Directors. The Board meets at least quarterly to review the investment performance of each portfolio in the mutual fund family and other operational matters, including policies and procedures with respect to compliance with regulatory and other requirements. Currently, the Board of Directors has an Audit Committee, an Executive Committee and a Nominating Committee. The responsibilities of each committee and its members are described below. AUDIT COMMITTEE. The Board has an Audit Committee comprised only of Independent Directors. The current members of the Audit Committee are Messrs. McKay, Sternberg and Brodsky. The Audit Committee, among other things, reviews results of the annual audit and approves the firm(s) to serve as independent auditors. The Audit Committee convened seven times during the fiscal year ended August 31, 2005. EXECUTIVE COMMITTEE. The Board has an Executive Committee comprised only of Independent Directors. The current members of the Executive Committee are Messrs. Reichman and McKay. The Executive Committee may generally carry on and manage the business of the Company when the Board of Directors is not in session. The Executive Committee did not convene during the fiscal year ended August 31, 2005. NOMINATING COMMITTEE. The Board has a Nominating Committee comprised only of Independent Directors. The current members of the Nominating Committee are Messrs. McKay and Brodsky. The Nominating Committee recommends to the Board of Directors all persons to be nominated as Directors of the Company. The Nominating Committee will consider nominees recommended by shareholders. Recommendations should be submitted to the Committee in care of the Company's Secretary. The Nominating Committee did not convene during the fiscal year ended August 31, 2005. DIRECTOR OWNERSHIP OF SHARES OF THE COMPANY The following table sets forth the dollar range of equity securities beneficially owned by each Director in the Portfolio and in all of the portfolios (which for each Director comprise all registered investment companies within the Company's family of investment companies overseen by him), as of December 31, 2005. Mr. Straniere was not a Director of the Company as of December 31, 2005. -32-
- ----------------------------------------------------------------------------------------------------------------------- AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED DOLLAR RANGE OF INVESTMENT COMPANIES OVERSEEN BY DIRECTOR NAME OF DIRECTOR EQUITY SECURITIES IN THE PORTFOLIO WITHIN THE FAMILY OF INVESTMENT COMPANIES - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS - ----------------------------------------------------------------------------------------------------------------------- Julian A. Brodsky None None - ----------------------------------------------------------------------------------------------------------------------- Francis J. McKay None Over $100,000 - ----------------------------------------------------------------------------------------------------------------------- Arnold M. Reichman None Over$100,000 - ----------------------------------------------------------------------------------------------------------------------- Marvin E. Sternberg None None - ----------------------------------------------------------------------------------------------------------------------- INTERESTED DIRECTORS - ----------------------------------------------------------------------------------------------------------------------- J. Richard Carnall None None - ----------------------------------------------------------------------------------------------------------------------- Robert Sablowsky None Over $100,000 - -----------------------------------------------------------------------------------------------------------------------
DIRECTORS' AND OFFICERS' COMPENSATION Since February 6, 2006, the Company pays each Director at the rate of $17,500 annually and $3,500 per meeting of the Board of Directors or any committee thereof that was not held in conjunction with a Board meeting. In addition, the Chairman of the Board receives an additional fee of $12,000 per year for his services in this capacity, and the Chairman of the Audit Committee of the Board of the Company receives an additional fee of $4,000 per year for his services. Prior to February 6, 2006, the Company paid each Director at the rate of $16,500 annually and $1,375 per meeting of the Board of Directors or any committee thereof that was not held in conjunction with a Board meeting. In addition, the Chairman of the Board received an additional fee of $6,600 per year for his services in this capacity. Directors are reimbursed for any reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors or any committee thereof. The Company also compensates its President and Treasurer and Chief Compliance Officer for their respective services to the Company. For the fiscal year ended August 31, 2005, each of the following members of the Board of Directors and the President and Treasurer and Chief Compliance Officer received compensation from the Company in the following amounts:
TOTAL PENSION OR COMPENSATION RETIREMENT ESTIMATED FROM FUND AND AGGREGATE BENEFITS ACCRUED ANNUAL FUND COMPLEX COMPENSATION AS PART OF FUND BENEFITS UPON PAID TO DIRECTORS NAME OF DIRECTOR/OFFICER FROM REGISTRANT EXPENSES RETIREMENT OR OFFICERS - -------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT DIRECTORS: Julian A. Brodsky, Director $28,750 N/A N/A $28,750 Francis J. McKay, Director $32,875 N/A N/A $32,875
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TOTAL PENSION OR COMPENSATION RETIREMENT ESTIMATED FROM FUND AND AGGREGATE BENEFITS ACCRUED ANNUAL FUND COMPLEX COMPENSATION AS PART OF FUND BENEFITS UPON PAID TO DIRECTORS NAME OF DIRECTOR/OFFICER FROM REGISTRANT EXPENSES RETIREMENT OR OFFICERS - -------------------------------------------------------------------------------------------------------------------------------- Arnold M. Reichman, Director $27,375 N/A N/A $27,375 Marvin E. Sternberg, Director $32,875 N/A N/A $32,875 - -------------------------------------------------------------------------------------------------------------------------------- INTERESTED DIRECTORS: J. Richard Carnall, Director and Chairman $33,975 N/A N/A $33,975 Robert Sablowsky, Director $27,375 N/A N/A $27,375 - -------------------------------------------------------------------------------------------------------------------------------- OFFICERS: - -------------------------------------------------------------------------------------------------------------------------------- Salvatore Faia, Esquire, CPA Chief Compliance Officer $203,374 N/A N/A $203,374 Edward J. Roach, President and Treasurer $36,300 $3,630 N/A $39,930 - --------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2005, the Independent Directors and their respective immediate family members (spouse or dependent children) did not own beneficially or of record any securities of the Company's investment advisers or distributor, or of any person directly or indirectly controlling, controlled by, or under common control with the investment advisers or distributor. On October 24, 1990, the Company adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach), pursuant to which the Company will contribute on a quarterly basis amounts equal to 10% of the quarterly compensation of each eligible employee. By virtue of the services performed by the Company's investment advisers, custodians, administrators and distributor, the Company itself requires only one part-time employee. No officer, Director or employee of the Advisers or the distributor currently receives any compensation from the Company. CODE OF ETHICS The Company, the Adviser and PFPC Distributors, Inc. ("PFPC Distributors") have each adopted a code of ethics under Rule 17j-1 of the 1940 Act that permits personnel subject to the codes to invest in securities, including securities that may be purchased or held by the Company. -34- PROXY VOTING The Board of Directors has delegated the responsibility of voting proxies with respect to the portfolio securities purchased and/or held by the Portfolio to the Adviser, subject to the Board's continuing oversight. In exercising its voting obligations, the Adviser is guided by its general fiduciary duty to act prudently and in the interest of the Portfolio. The Adviser will consider factors affecting the value of the Portfolio's investments and the rights of shareholders in its determination on voting portfolio securities. The Adviser has adopted proxy voting procedures with respect to voting proxies relating to portfolio securities held by the Portfolio. The Adviser employs ISS, a third party service provider, to assist in the voting of proxies. These procedures have been provided to ISS, who analyzes the proxies and makes recommendations, based on the Adviser's policy, as to how to vote such proxies. A copy of the Adviser's Proxy Voting Policy is included with this SAI. Please see Appendix B to this SAI for further information. Information regarding how the Portfolio voted proxies relating to portfolio securities for its first 12-month period ended June 30, 2007 will be available, without charge, upon request, by calling _______________ and by visiting the SEC website at http://www.sec.gov. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES Prior to the date of this Statement of Additional Information, Bear Stearns Asset Management Inc. held all of the Portfolio's outstanding shares. INVESTMENT ADVISORY AND OTHER SERVICES INVESTMENT ADVISER BSAM, a wholly-owned subsidiary of The Bear Stearns Companies Inc. ("Bear Stearns"), serves as investment adviser to the Portfolio pursuant to an investment advisory agreement with the Company (the "Advisory Agreement"). Under the Advisory Agreement, BSAM will provide for the overall management of the Portfolio including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained, or sold by the Portfolio, and (iii) the placement from time to time of orders for all purchases and sales made for the Portfolio. The Adviser will provide the services rendered by it in accordance with the Portfolio's investment objectives, restrictions and policies stated in the prospectus and Statement of Additional Information. BSAM will not be liable for any error of judgment or mistake of law or for any loss suffered by the Portfolio or the Company in connection with the performance of the Advisory Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BSAM in the performance of its duties or from reckless disregard of its duties and obligations thereunder. -35- For its services to the Portfolio, BSAM is entitled to receive a monthly advisory fee under the Advisory Agreement computed at an annual rate of 0.48% of the Portfolio's average daily net assets. BSAM is voluntarily waiving a portion of its advisory fee and reimbursing certain expenses in order to limit the Portfolio's total annual Portfolio operating expenses to 0.60% of the Portfolio's average daily net assets. These waivers or reimbursements can be terminated at any time. The Portfolio bears its own expenses not specifically assumed by BSAM. General expenses of the Company not readily identifiable as belonging to a portfolio of the Company are allocated among all investment portfolios by or under the direction of the Company's Board of Directors in such manner as it deems to be fair and equitable. Expenses borne by the Portfolio include, but are not limited to the expenses listed in the Prospectus and the following (or the Portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by the Portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of the Portfolio by BSAM; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Company or the Portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (f) the cost of investment company literature and other publications provided by the Company to its Directors and officers; (g) organizational costs; (h) fees to the Adviser and PFPC Inc. ("PFPC"); (i) fees and expenses of officers and Directors who are not affiliated with the Portfolio's Adviser or PFPC Distributors; (j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees; (o) brokerage fees and commissions; (p) certain of the fees and expenses of registering and qualifying the Portfolio and its shares for distribution under federal and state securities laws; (q) expenses of preparing prospectuses and statements of additional information and distributing annually to existing shareholders that are not attributable to a particular portfolio or class of shares of the Company; (r) the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of the Company; (s) fidelity bond and directors' and officers' liability insurance premiums; (t) the expense of using independent pricing services; and (u) other expenses which are not expressly assumed by the Adviser under its advisory agreement with the Portfolio. The Advisory Agreement was initially approved on May 25, 2006 for a term ended August 16, 2007 by a vote of the Company's Board of Directors, including a majority of those Directors who are not parties to the Advisory Agreement or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreement was approved by the sole shareholder of the Portfolio. The Advisory Agreement is terminable by vote of the Company's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 90 days' written notice to BSAM. The Advisory Agreement may also be terminated by BSAM on 60 days' written notice to the Company. The Advisory Agreement terminates automatically in the event of assignment thereof. PORTFOLIO MANAGER OTHER ACCOUNTS. The table below discloses accounts, other than the Portfolio, managed by a team led by Andrew Headley, who is primarily responsible for the day-to-day management -36- of the Portfolio. This information is as of July 1, 2006. NONE OF THE ACCOUNTS IDENTIFIED BELOW REPRESENT ACCOUNTS FOR WHICH THE ADVISORY FEE IS BASED ON THE PERFORMANCE OF THE ACCOUNT.
- --------------------------------------------------------------------------------------------- REGISTERED INVESTMENT OTHER POOLED INVESTMENT OTHER ACCOUNTS COMPANIES VEHICLES - --------------------------------------------------------------------------------------------- PORTFOLIO NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL MANAGER ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS - --------------------------------------------------------------------------------------------- Andrew Headley, 0 N/A 0 N/A 50 $7,570 CFA Million - ---------------------------------------------------------------------------------------------
MATERIAL CONFLICTS OF INTEREST. Actual or potential conflicts of interest may arise when a portfolio manager has management responsibilities to more than one account (including the Portfolio), such as devotion of unequal time and attention to the management of the accounts, inability to allocate limited investment opportunities across a broad band of accounts and incentive to allocate opportunities to an account where the portfolio manager or Adviser has a greater financial incentive, such as a performance fee account. The Adviser has adopted policies and procedures reasonably designed to address these types of conflicts and that serve to operate in a manner that is fair and equitable among its clients, including the Portfolio. DESCRIPTION OF COMPENSATION. Portfolio managers are compensated with an annual salary and incentive bonus. The salary generally accounts for less than half of their total income. In addition to product performance, they are paid based upon teamwork, asset growth and contribution to the franchise. Product performance is examined relative to the appropriate benchmarks and to the appropriate peer groups on both one-year and three-year trailing time periods. The appropriate benchmarks for this Portfolio include ________ and _______. Mr. Headley is not compensated differently based on the performance of the Portfolio as compared to the performance of Other Accounts disclosed above. All officers of BSAM who meet a total minimum compensation level participate in a restricted stock plan and a stock options plan and Mr. Headley is expected to satisfy the minimum compensation levels to participate in BSAM stock plans. SECURITIES OWNERSHIP. The Portfolio has not offered shares to the public as of the date of this Statement of Additional Information and, accordingly, the Portfolio Manager does not own any shares of the Portfolio as of that date; the Portfolio Manager will not likely ever purchase Shares of the Portfolio because the Portfolio is designed for credit unions, not individual investors. -37- CUSTODIAN AGREEMENT PFPC Trust Company, 8800 Tinicum Boulevard, Suite 200, Philadelphia, Pennsylvania 19153 is the custodian of the Portfolio's assets pursuant to a Custodian Agreement dated August 16, 1988, as amended. Under the Custodian Agreement, PFPC Trust Company: (a) maintains a separate account or accounts in the name of the Portfolio; (b) holds and transfers portfolio securities on account of the Portfolio; (c) accepts receipts and makes disbursements of money on behalf of the Portfolio; (d) collects and receives all income and other payments and distributions on account of the Portfolio's securities; and (e) makes periodic reports to the Company's Board of Directors concerning the Portfolio's operations. PFPC Trust Company is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Portfolio, provided that PFPC Trust Company remains responsible for the performance of all of its duties under the Custodian Agreement and holds the Portfolio harmless from the acts and omissions of any sub-custodian. For its services to the Portfolio under the Custodian Agreement, PFPC Trust Company receives a fee of __________ on average daily gross assets of the Portfolio calculated daily and payable monthly, or a minimum monthly fee of $______, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Portfolio. TRANSFER AGENCY AGREEMENT PFPC, 301 Bellevue Parkway, Wilmington, Delaware 19809, an affiliate of PFPC Distributors, serves as the transfer and dividend disbursing agent for the Portfolio pursuant to a transfer agency agreement dated November 5, 1991, as supplemented (the "Transfer Agency Agreement"), under which PFPC: (a) issues and redeems shares of the Portfolio; (b) addresses and mails all communications by the Portfolio to record owners of the shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders; (c) maintains shareholder accounts and, if requested, sub-accounts; and (d) makes periodic reports to the Company's Board of Directors concerning the operations of the Portfolio. PFPC may, on 30 days' notice to the Company, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Portfolio under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $____ per account in the Portfolio, with a minimum monthly fee of $_____ per class payable monthly on a pro rata basis, exclusive of out-of-pocket expenses, and also receives reimbursement of its out-of-pocket expenses. PFPC also provides services relating to the implementation of the Company's Anti-Money Laundering Program. The Company pays an annual fee, ranging from $3,000 - $50,000, based on the number of open accounts in each portfolio of the Company. In addition, PFPC provides services relating to the implementation of the Portfolio's Customer Identification Program, including verification of required customer information and the maintenance of records with respect to such verification. The Portfolio will pay PFPC $____ per customer verification and $.02 per month per record result maintained. -38- ADMINISTRATION AND ACCOUNTING AGREEMENT PFPC serves as administrator to the Portfolio pursuant to administration and accounting services agreements dated ____________, 2006 (the "Administration Agreement"). PFPC has agreed to furnish to the Portfolio statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Portfolio. In addition, PFPC has agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Portfolio. The Administration Agreement provides that PFPC shall be obligated to exercise care and diligence in the performance of its duties, to act in good faith and to use its best efforts, within reasonable limits, in performing services thereunder. PFPC shall be responsible for failure to perform its duties under the Administration Agreement arising out of its willful misfeasance, bad faith, negligence or reckless disregard. For its services to the Portfolio, PFPC is entitled to receive a fee calculated at an annual rate of: o ____% of each Fund's first $____ million of average daily net assets; and o ____% of each Fund's average daily net assets in excess of $___ million. The minimum monthly fee will be $_______ for, exclusive of out-of-pocket expenses. The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Company or the Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, bad faith, gross negligence or reckless disregard by it of its duties and obligations thereunder. On June 1, 2003, the Company entered into a regulatory administration services agreement with PFPC. Under this agreement, PFPC has agreed to provide regulatory administration services to the Company. These services include the preparation and coordination of the Company's annual post-effective amendment filing and supplements to the Portfolio's registration statement, the preparation and assembly of board meeting materials, and certain other services necessary to the Company's regulatory administration. PFPC receives an annual fee based on the average daily net assets of the portfolios of the Company. DISTRIBUTION ARRANGEMENTS DISTRIBUTION AGREEMENT PFPC Distributors, whose principal business address is 760 Moore Road, King of Prussia, Pennsylvania 19406, serves as the distributor of the Portfolio pursuant to the terms of a distribution agreement, dated as of January 2, 2001, as supplemented (the "Distribution Agreement"). Pursuant to the Distribution Agreement, PFPC Distributors will use appropriate efforts to solicit orders for the sale of the Portfolio's shares. Shares of the Portfolio are continuously offered. No compensation is payable by the Company to PFPC Distributors for distribution services with respect to the Portfolio. -39- ADMINISTRATIVE SERVICES AGENT PFPC Distributors provides certain administrative services to the Portfolio that are not provided by PFPC, pursuant to an Administrative Services Agreement, dated as of January 2, 2001, as supplemented, between the Company and PFPC Distributors. These services include furnishing data processing and clerical services, acting as liaison between the Portfolio and various service providers and coordinating the preparation of annual, semi-annual and quarterly reports. As compensation for such administrative services, PFPC Distributors is entitled to receive an annual fee of $______ from the Portfolio. PORTFOLIO TRANSACTIONS The Adviser is responsible for executing portfolio transactions for the Portfolio, subject to policies established by the Board of Directors and applicable rules. Debt and U.S. Government securities are generally traded on the over-the-counter market on a "net" basis without a stated commission, through dealers acting for their own account and not as brokers. The Portfolio will engage in transactions with these dealers or deal directly with the issuer unless a better price or execution could be obtained by using a broker. Prices paid to a dealer in debt securities will generally include a "spread," which is the difference between the prices at which the dealer is willing to purchase and sell the specific security at the time, and includes the dealer's normal profit. In transactions for securities not actively traded on a securities exchange, the Portfolio will deal directly with the dealers who make a market in the securities involved, except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Such portfolio securities are generally traded on a net basis and do not normally involve brokerage commissions. For transactions involving securities actively traded on a securities exchange, in selecting brokers or dealers, the Adviser will consider various relevant factors, including, but not limited to: the best net price available, the size and type of the transaction, the nature and character of the markets for the security to be purchased or sold, the execution efficiency, settlement capability, financial condition of the broker-dealer firm, the broker-dealer's execution services rendered on a continuing basis and the reasonableness of any commissions. Securities firms may receive brokerage commissions on certain portfolio transactions, including options, futures and options on futures transactions and the purchase and sale of underlying securities upon exercise of options. PURCHASE AND REDEMPTION INFORMATION You may purchase shares through an account maintained by your brokerage firm and you may also purchase shares directly by mail or wire. The Company reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Portfolio's shares by making payment in whole or in part in securities chosen by the Company and valued in the same way as they would be valued for purposes of computing the -40- Portfolio's NAV. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. A shareholder will also bear any market risk or tax consequences as a result of a payment in securities. The Company has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its NAV during any 90-day period for any one shareholder of the Portfolio. A shareholder will bear the risk of a decline in market value and any tax consequences associated with a redemption in securities. Under the 1940 Act, the Company may suspend the right to redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange, Inc. (the "NYSE") is closed (other than customary weekend and holiday closings), or during which the SEC restricts trading on the NYSE or determines an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Company may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.) Shares of the Company are subject to redemption by the Company, at the redemption price of such shares as in effect from time to time, including, without limitation: (1) to reimburse the Portfolio for any loss sustained by reason of the failure of a shareholder to make full payment for shares purchased by the shareholder or to collect any charge relating to a transaction effected for the benefit of a shareholder as provided in the Prospectus from time to time; (2) if such redemption is, in the opinion of the Company's Board of Directors, desirable in order to prevent the Company or the Portfolio from being deemed a "personal holding company" within the meaning of the Code; (3) or if the net income with respect to any particular class of common stock should be negative or it should otherwise be appropriate to carry out the Company's responsibilities under the 1940 Act. TELEPHONE TRANSACTION PROCEDURES The Company's telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Portfolio, all of which must match the Company's records; (3) requiring the Company's service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges (if applicable) only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) business days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Company elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than PFPC Distributors), financial institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. -41- VALUATION OF SHARES Shares of the Portfolio are priced at their net asset value ("NAV"). The NAV per Share is calculated as follows: Value of Assets Attributable to the Portfolio NAV = - Value of Liabilities Attributable to the Portfolio -------------------------------------------------- Number of Outstanding Shares of the Portfolio The Portfolio's NAV is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Currently, the NYSE is closed on New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and on the preceding Friday or subsequent Monday when one of those holidays falls on a Saturday or Sunday. Certain securities are valued at the closing price or last sale price on a national securities exchange or the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. If there are no sales on that day or the securities are traded in over-the-counter markets, the mean of the last bid and ask price available prior to the market close is used. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Short term debt securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Certain fixed income securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement value. Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Prices may be obtained from independent pricing services which use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. If market quotations are unavailable or deemed unreliable, securities will be valued by the Portfolio's Valuation Committee as determined by procedures adopted by the Board of Directors. Subject to the approval of the Company's Board of Directors, the Portfolio may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments in determining the approximate market value of portfolio investments. This may result in the securities being valued at a price that differs from the price that would have been determined had the matrix or formula method not been used. All cash, receivables, and current payables are carried on the Portfolio's books at their face value. Other assets, if any, are valued at fair value as determined -42- in good faith by the Company's Valuation Committee under the direction of its Board of Directors. TAXES The following summarizes certain additional tax considerations generally affecting the Portfolio that are not described in the Prospectus. The discussions of the federal tax consequences in the Prospectus and this SAI are based on the Internal Revenue Code (the "Code") and the laws and regulations issued thereunder as in effect on the date of this SAI. Future legislative or administrative changes or court decisions may significantly change the statements included herein, and any such changes or decisions may have a retroactive effect. FEDERAL TAXES The Portfolio intends to qualify in each taxable year as a regulated investment company under Subchapter M of Subtitle A, Chapter 1, of the Code. As a regulated investment company, the Portfolio generally is exempt from federal income tax on its net investment income and realized capital gains that it distributes to shareholders, provided that it distributes an amount equal to at least the sum of 90% of its tax-exempt income and 90% of its investment company taxable income (net investment income and the excess of net short-term capital gain over net long-term capital loss), if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. The Portfolio intends to make sufficient distributions or deemed distributions each year to avoid liability for corporate income tax. If the Portfolio were to fail to make sufficient distributions, it could be liable for corporate income tax and for excise tax in respect of the shortfall or, if the shortfall is large enough, the Portfolio could be disqualified as a regulated investment company. In addition to satisfaction of the Distribution Requirement, the Portfolio must derive with respect to a taxable year at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans and gains from the sale or other disposition of stock or securities or foreign currencies, or from other income derived with respect to its business of investing in such stock, securities, or currencies or net income derived from an interest in a qualified publicly traded partnership. Also, at the close of each quarter of its taxable year, at least 50% of the value of the Portfolio's assets must consist of cash and cash items, U.S. Government securities, securities of other regulated investment companies and securities of other issuers (as to which the Portfolio has not invested more than 5% of the value of its total assets in securities of such issuer and as to which the Portfolio does not hold more than 10% of the outstanding voting securities (including equity securities of a qualified publicly traded partnership) of such issuer), and no more than 25% of the value of the Portfolio's total assets may be invested (1) in the securities of any one issuer (other than U.S. government securities and securities of other regulated investment companies), (2) in the securities of two or more issuers which such Portfolio controls and which are engaged in the same or similar trades or businesses or (3) in the securities of one or more qualified publicly traded partnerships. The Portfolio intends to comply with these requirements. -43- If for any taxable year the Portfolio does not qualify as a regulated investment company, all of its taxable income will be subject to tax at regular corporate rates without any deduction for distributions to shareholders. The Code imposes a nondeductible 4% excise tax on regulated investment companies that fail to distribute each year an amount equal to specified percentages of their ordinary taxable income and capital gain net income (excess of capital gains over capital losses). The Portfolio intends to make sufficient distributions or deemed distributions of its ordinary taxable income and capital gain net income each calendar year to avoid liability for this excise tax. STATE AND LOCAL TAXES Although the Portfolio expects to qualify as a "regulated investment company" and to be relieved of all or substantially all federal income taxes, depending upon the extent of its activities in states and localities in which its offices are maintained, in which its agents or independent contractors are located or in which it is otherwise deemed to be conducting business, the Portfolio may be subject to the tax laws of such states or localities. ADDITIONAL INFORMATION CONCERNING COMPANY SHARES The Company has authorized capital of 30 billion shares of common stock at a par value of $0.001 per share. Currently, 26.573 billion shares have been classified into 104 classes as shown in the table below, however, the Company only has 26 active share classes that have begun investment operations. Under the Company's charter, the Board of Directors has the power to classify and reclassify any unissued shares of common stock from time to time.
NUMBER OF NUMBER OF AUTHORIZED AUTHORIZED CLASS OF COMMON STOCK SHARES CLASS OF COMMON STOCK SHARES (MILLIONS) (MILLIONS) - ----------------------------------------------------------- ------------------------------------------------------------------ A (Growth & Income) 100 BBB 100 B 100 CCC 100 C (Balanced) 100 DDD (Robeco Boston Partners Institutional Small Cap Value Fund 100 II) D (Tax-Free) 100 EEE (Robeco Boston Partners Investors Small Cap Value Fund II) 100 E (Money) 500 FFF 100 F (Municipal Money) 500 GGG 100 G (Money) 500 HHH 100 H (Municipal Money) 500 III (Robeco Boston Partners Long/Short Equity-Institutional 100 Class) I (Sansom Money) 1,500 JJJ (Robeco Boston Partners Long/Short Equity-Investor Class) 100 J (Sansom Municipal Money) 500 KKK (Robeco Boston Partners Funds) 100 K (Sansom Government Money) 500 LLL (Robeco Boston Partners Funds) 100 L (Bedford Money) 1,500 MMM (n/i numeric Small Cap Value) 100 M (Bedford Municipal Money) 500 NNN (Bogle Investment Management Small Cap Growth - 100 Institutional Class)
-44-
NUMBER OF NUMBER OF AUTHORIZED AUTHORIZED CLASS OF COMMON STOCK SHARES CLASS OF COMMON STOCK SHARES (MILLIONS) (MILLIONS) - ----------------------------------------------------------- ------------------------------------------------------------------ N (Bedford Government Money) 500 OOO (Bogle Investment Management Small Cap Growth - 100 Investor Class) O (Bedford N.Y. Money) 500 PPP (Schneider Value Fund) 100 P (RBB Government) 100 QQQ (Institutional Liquidity Fund for 2,500 Credit Unions) Q 100 RRR (Liquidity Fund for Credit 2,500 Unions) R (Municipal Money) 500 SSS (Robeco WPG Core Bond Fund 100 - Retirement Class) S (Government Money) 500 TTT (Robeco WPG Core Bond Fund 50 - Institutional Class) T 500 UUU (Robeco WPG Tudor Fund - 50 Institutional Fund) U 500 VVV (Robeco WPG Large Cap 50 Growth Fund - Institutional Class) V 500 WWW (Senbanc Fund) 50 W 100 XXX (Robeco WPG Core Bond Fund 100 - Investor Class) X 50 YYY (Bear Stearns CUFS MLP 100 Mortgage Portfolio) Y 50 Select (Money) 700 Z 50 Beta 2 (Municipal Money) 1 AA 50 Beta 3 (Government Money) 1 BB 50 Beta 4 (N.Y. Money) 1 CC 50 Principal Class (Money) 700 DD 100 Gamma 2 (Municipal Money) 1 EE 100 Gamma 3 (Government Money) 1 FF (n/i numeric Emerging Growth) 50 Gamma 4 (N.Y. Money) 1 GG (n/i numeric Growth) 50 Bear Stearns Money 2,500 HH (n/i numeric Mid Cap) 50 Bear Stearns Municipal Money 1,500 II (Baker 500 Growth Fund) 100 Bear Stearns Government Money 1,000 JJ (Baker 500 Growth Fund) 100 Delta 4 (N.Y. Money) 1 KK 100 Epsilon 1 (Money) 1 LL 100 Epsilon 2 (Municipal Money) 1 MM 100 Epsilon 3 (Government Money) 1 NN 100 Epsilon 4 (N.Y. Money) 1 OO 100 Zeta 1 (Money) 1 PP 100 Zeta 2 (Municipal Money) 1 QQ (Robeco Boston Partners Zeta 3 (Government Money) 1 Institutional Large Cap) 100 RR (Robeco Boston Partners Zeta 4 (N.Y. Money) 1 Investors Large Cap) 100 SS (Robeco Boston Partners Adviser Eta 1 (Money) 1 Large Cap) 100 TT (Robeco Boston Partners Eta 2 (Municipal Money) 1 Investors Mid Cap) 100 UU (Robeco Boston Partners Eta 3 (Government Money) 1 Institutional Mid Cap) 100 VV (Robeco Boston Partners Eta 4 (N.Y. Money) 1 Institutional All Cap Value) 100 WW (Robeco Boston Partners Theta 1 (Money) 1 Investors All Cap Value) 100 YY (Schneider Capital Small Cap Theta 2 (Municipal Money) 1 Value) 100 ZZ 100 Theta 3 (Government Money) 1 AAA 100 Theta 4 (N.Y. Money) 1
-45- The classes of common stock have been grouped into separate "families." There are eight families that currently have operating portfolios, including: the Sansom Street Family, the Bedford Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Robeco Investment Funds Family, the Bogle Investment Management Family, the Hilliard Lyons Family and the Bear Stearns Family. The Bedford Family and the Sansom Street Family represent interests in the Money Market Portfolio; the n/i numeric investors family of funds represents interests in four non-money market portfolios; the Robeco Investment Funds Family represents interests in eight non-money market portfolios; the Bogle Investment Management Family represents interests in one non-money market portfolio; the Schneider Capital Management Family represents interests in two non-money market portfolios; the Hilliard Lyons Family represents interests in one non-money market portfolio; and the Bear Stearns Family represents interests in one non-money market portfolio. Each Share that represents an interest in the Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other Share that represents an interest in the Portfolio. Shares of the Company do not have preemptive or conversion rights. When issued for payment as described in the Prospectus, Shares of the Portfolio will be fully paid and non-assessable. The Company does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Company's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of common stock of the Company have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Company will assist in shareholder communication in such matters. Holders of shares of each class of the Company will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Company will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Company shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2 the approval of an investment advisory agreement or distribution plan or any change in a fundamental investment objective or fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio. Shareholders of the Company are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights -46- are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of common stock of the Company may elect all of the Directors. Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Company's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Company's Articles of Incorporation and By-Laws, the Company may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of common stock voting without regard to class (or portfolio). SHAREHOLDER APPROVALS. As used in this SAI and in the Prospectus, "shareholder approval" and a "majority of the outstanding shares" of the Portfolio means, with respect to the approval of the advisory agreement or a change in the Portfolio's fundamental investment limitations, the lesser of (1) 67% of the shares of the Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of the Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of the Portfolio. MISCELLANEOUS COUNSEL Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets, Philadelphia, Pennsylvania 19103-6996, serves as counsel to the Company and independent legal counsel to the Disinterested Directors. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ___________________, serves as the Portfolio's independent registered public accounting firm. -47- APPENDIX A DESCRIPTION OF SECURITIES RATINGS SHORT-TERM CREDIT RATINGS A Standard & Poor's short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by Standard & Poor's for short-term issues: "A-1" - Obligations are rated in the highest category and indicate that the obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. "A-2" - The obligor's capacity to meet its financial commitment on the obligation is satisfactory. Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in the highest rating category. "A-3" - Obligor has adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. "B" - An obligation is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. Ratings of "B1", "B-2" and "B-3" may be assigned to indicate finer distinction within the "B" category. "C" - Obligations are currently vulnerable to nonpayment and are dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. "D" - Obligations are in payment default. This rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Local Currency and Foreign Currency Risks - Country risk considerations are a standard part of Standard & Poor's analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor's capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government's own relatively lower A-1 capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign Currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer. Moody's Investors Service ("Moody's") short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted. Moody's employs the following designations to indicate the relative repayment ability of rated issuers: "P-1" - Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations. "P-2" - Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations. "P-3" - Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term debt obligations. "NP" - Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories. Fitch Ratings, Inc. ("Fitch") short-term ratings scale applies to foreign currency and local currency. A short-term rating has a time horizon of less than 13 months for most obligations, or up to three years for U.S. public finance in line with industry standards, to reflect unique risk characteristics of bond, tax, and revenue anticipation notes that are commonly issued with terms up to three years. Short-term ratings thus place greater emphasis on the liquidity necessary to meet financial commitments in a timely manner. The following summarizes the rating categories used by Fitch for short-term obligations: "F1" - Securities possess the highest credit quality. This designation indicates the strongest capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature. "F2" - Securities possess good credit quality. This designation indicates a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings. "F3" - Securities possess fair credit quality. This designation indicates that the capacity for timely payment of financial commitments is adequate; however, near term adverse changes could result in a reduction to non investment grade. A-2 "B" - Securities possess speculative credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. "C" - Securities possess high default risk. Default is a real possibility. This designation indicates a capacity for meeting financial commitments which is solely reliant upon a sustained, favorable business and economic environment. "D" - Indicates an entity or sovereign that has defaulted on all of its financial obligations. "NR" - This designation indicates that Fitch does not rate the issuer or issue in question. "Withdrawn" - A rating is withdrawn when Fitch deems the amount of information available to be inadequate for rating purposes, or when an obligation matures, is called, or refinanced, or for any other reason Fitch deems sufficient. The following summarizes the ratings used by Dominion Bond Rating Service Limited ("DBRS") for commercial paper and short-term debt: "R-1 (high)" - Short-term debt rated "R-1 (high)" is of the highest credit quality, and indicates an entity possessing unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels, and profitability that is both stable and above average. Companies achieving an "R-1 (high)" rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results, and no substantial qualifying negative factors. Given the extremely tough definition DBRS has established for an "R-1 (high)", few entities are strong enough to achieve this rating. "R-1 (middle)" - Short-term debt rated "R-1 (middle)" is of superior credit quality and, in most cases, ratings in this category differ from "R-1 (high)" credits by only a small degree. Given the extremely tough definition DBRS has established for the "R-1 (high)" category, entities rated "R-1 (middle)" are also considered strong credits, and typically exemplify above average strength in key areas of consideration for the timely repayment of short-term liabilities. "R-1 (low)" - Short-term debt rated "R-1 (low)" is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt and profitability ratios are not normally as favorable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors that exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry. "R-2 (high)" - Short-term debt rated "R-2 (high)" is considered to be at the upper end of adequate credit quality. The ability to repay obligations as they mature remains acceptable, although the overall strength and outlook for key liquidity, debt, and profitability ratios is not as strong as credits rated in the "R-1 (low)" category. Relative to the latter category, other shortcomings often include areas such as stability, financial flexibility, and the relative size and market position of the entity within its industry. A-3 "R-2 (middle)" - Short-term debt rated "R-2 (middle)" is considered to be of adequate credit quality. Relative to the "R-2 (high)" category, entities rated "R-2 (middle)" typically have some combination of higher volatility, weaker debt or liquidity positions, lower future cash flow capabilities, or hold a weaker industry position. Ratings in this category would also be more vulnerable to adverse changes in financial and economic conditions. "R-2 (low)" - Short-term debt rated "R-2 (low)" is considered to be of only adequate credit quality, one step up from being speculative. While not yet defined as speculative, the "R-2 (low)" category signifies that although repayment is still expected, the certainty of repayment could be impacted by a variety of possible adverse developments, many of which would be outside of the issuer's control. Entities in this area often have limited access to capital markets and may also have limitations in securing alternative sources of liquidity, particularly during periods of weak economic conditions. "R-3 (high)," "R-3 (middle)," "R-3 (low)" - Short-term debt rated "R-3" is speculative, and within the three sub-set grades, the capacity for timely repayment ranges from mildly speculative to doubtful. "R-3" credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with "R-3" ratings would normally have very limited access to alternative sources of liquidity. Earnings and cash flow would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present. "D" - A security rated "D" implies the issuer has either not met a scheduled payment or the issuer has made it clear that it will be missing such a payment in the near future. In some cases, DBRS may not assign a "D" rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the "D" rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by DBRS. LONG-TERM CREDIT RATINGS The following summarizes the ratings used by Standard & Poor's for long-term issues: "AAA" - An obligation rated "AAA" has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. "AA" - An obligation rated "AA" differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. "A" - An obligation rated "A" is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. A-4 "BBB" - An obligation rated "BBB" exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments or the obligation. Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as having significant speculative characteristics. "BB" indicates the least degree of speculation and "C" the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. "BB" - An obligation rated "BB" is less vulnerable in the near term to nonpayment than other lower-rated issues. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. "B" - An obligation rated "B" is more vulnerable to nonpayment than obligations rated "BB," but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. "CCC" - An obligation rated "CCC" is currently vulnerable, and is dependent upon favorable business, financial and economic conditions to meet its financial commitments on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. "CC" - An obligation rated "CC" is currently highly vulnerable to non-payment. "C" - A subordinated debt or preferred stock obligation rated "C" is currently highly vulnerable to nonpayment. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A "C" also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying. "D" - An obligation rated "D" is in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Plus (+) or minus (-) - The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. "N.R." - Not rated. Local Currency and Foreign Currency Risks - Country risk considerations are a standard part of Standard & Poor's analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor A-5 in this analysis. An obligor's capacity to repay Foreign Currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government's own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign Currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer. The following summarizes the ratings used by Moody's for long-term debt: "Aaa" - Obligations rated "Aaa" are judged to be of the highest quality, with minimal credit risk. "Aa" - Obligations rated "Aa" are judged to be of high quality and are subject to very low credit risk. "A" - Obligations rated "A" are considered upper-medium grade and are subject to low credit risk. "Baa" - Obligations rated "Baa" are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. "Ba" - Obligations rated "Ba" are judged to have speculative elements and are subject to substantial credit risk. "B" - Obligations rated "B" are considered speculative and are subject to high credit risk. "Caa" - Obligations rated "Caa" are judged to be of poor standing and are subject to very high credit risk. "Ca" - Obligations rated "Ca" are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. "C" - Obligations rated "C" are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest. Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from "Aa" through "Caa." The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. The following summarizes long-term ratings used by Fitch: "AAA" - Securities considered to be of the highest credit quality. "AAA" ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. A-6 "AA" - Securities considered to be of very high credit quality. "AA" ratings denote expectations of very low credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. "A" - Securities considered to be of high credit quality. "A" ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. "BBB" - Securities considered to be of good credit quality. "BBB" ratings indicate that there are currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category. "BB" - Securities considered to be speculative. "BB" ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade. "B" - Securities considered to be highly speculative. "B" ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. "CCC," "CC" and "C" - Securities have high default risk. Default is a real possibility, and capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A "CC" rating indicates that default of some kind appears probable. "C" ratings signal imminent default. "RD" - Indicates an entity has failed to make due payments (within the applicable grace period) on some but not all material financial obligations, but continues to honor other classes of obligations. "D" - Indicates an entity or sovereign that has defaulted on all of its financial obligations. Plus (+) or minus (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the "AAA" category or to categories below "CCC". "NR" indicates that Fitch does not rate the issuer or issue in question. The following summarizes the ratings used by DBRS for long-term debt: "AAA" - Long-term debt rated "AAA" is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. A-7 There are few qualifying factors present which would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a creditable track record of superior performance. Given the extremely high standard which DBRS has set for this category, few entities are able to achieve a "AAA" rating. "AA" - Long-term debt rated "AA" is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated "AAA" only to a small degree. Given the extremely restrictive definition DBRS has for the "AAA" category, entities rated "AA" are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events. "A" - Long-term debt rated "A" is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of "AA" rated entities. While "A" is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities. "BBB" - Long-term debt rated "BBB" is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities. "BB" - Long-term debt rated "BB" is defined to be speculative and non investment-grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the "BB" range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations. "B" - Long-term debt rated "B" is highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity. "CCC", CC" and "C" -Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated "B." Long-term debt rated below "B" often has characteristics which, if not remedied, may lead to default. In practice, there is little difference between these categories, with "CC" and "C" normally used for lower ranking debt of companies for which the senior debt is rated in the "CCC" to "B" range. "D" - A security rated "D" implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, DBRS may not assign a "D" rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the "D" rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued or reinstated by DBRS. A-8 ("high", "low") - Each rating category is denoted by the subcategories "high" and "low". The absence of either a "high" or "low" designation indicates the rating is in the "middle" of the category. The "AAA" and "D" categories do not utilize "high", "middle", and "low" as differential grades. MUNICIPAL NOTE RATINGS A Standard & Poor's note rating reflects the liquidity factors and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: o Amortization schedule-the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and o Source of payment-the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. Note rating symbols are as follows: "SP-1" - The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay debt service are given a plus (+) designation. "SP-2" - The issuers of these municipal notes exhibit a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. "SP-3" - The issuers of these municipal notes exhibit speculative capacity to pay principal and interest. Moody's uses three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade ("MIG") and are divided into three levels - "MIG-1" through "MIG-3". In addition, those short-term obligations that are of speculative quality are designated "SG", or speculative grade. MIG ratings expire at the maturity of the obligation. The following summarizes the ratings used by Moody's for these short-term obligations: "MIG-1" - This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing. "MIG-2" - This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group. "MIG-3" - This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established. A-9 "SG" - This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection. In the case of variable rate demand obligations ("VRDOs"), a two-component rating is assigned; a long- or short-term debt rating and a demand obligation rating. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the ability to receive purchase price upon demand ("demand feature"), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or "VMIG" rating. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated "NR", e.g., "Aaa/NR" or "NR/VMIG-1". VMIG rating expirations are a function of each issue's specific structural or credit features. "VMIG-1" - This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. "VMIG-2" - This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. "VMIG-3" - This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. "SG" - This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand. Fitch uses the same ratings for municipal securities as described above for other short-term credit ratings. ABOUT CREDIT RATINGS A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including rating on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor. A-10 Moody's credit ratings must be construed solely as statements of opinion and not as statements of fact or recommendations to purchase, sell or hold any securities. Fitch's credit ratings provide an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Fitch credit ratings are used by investors as indications of the likelihood of receiving their money back in accordance with the terms on which they invested. Fitch's credit-ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets. DBRS credit ratings are not buy, hold or sell recommendations, but rather the result of qualitative and quantitative analysis focusing solely on the credit quality of the issuer and its underlying obligations. A-11 APPENDIX B BEAR STEARNS ASSET MANAGEMENT INC. PROXY VOTING POLICIES AND PROCEDURES Bear Stearns Asset Management Inc. ("BSAM") has been authorized by the vast majority of its clients to vote proxies relating to the securities held in their portfolios. This authority carries with it the responsibility on BSAM's part to analyze the issues connected with shareholder votes, evaluate the probable impact on share prices and vote proxies in what it views to be the best interests of its clients. This duty arises from the fact that an investment adviser's proxy votes can affect the outcome of a shareholder vote and, consequently, the value of the securities held by its clients. Proxy-voting is therefore integral to an adviser's investment management process. At BSAM, the duty to monitor corporate developments and vote proxies falls upon its portfolio managers. Because BSAM's portfolio managers acquire an enormously diverse and substantial number of securities, BSAM has determined to augment its internal research on corporate governance with the services-of Institutional Shareholder Services, Inc. ("ISS"), an independent firm that specializes in analyzing shareholder voting matters, issuing research reports on such matters and making objective voting recommendations intended to maximize shareholder value. ISS currently covers domestic and foreign shareholder votes. VOTING PROCEDURES AUTHORITY TO VOTE. As part of its fiduciary duty as an investment adviser, BSAM votes proxies for all clients who have not expressly reserved proxy-voting responsibility to themselves. Employee benefit plan clients covered by ERISA may reserve the right to vote proxies to themselves only if their governing instruments expressly provide therefor. INDEPENDENT PROXY RESEARCH. All proxies received by BSAM from issuers of securities held in BSAM's managed accounts are initially referred to ISS for its analysis and recommendation as to each matter being submitted for a vote. This referral of proxies to ISS is intended to avoid any possible conflict of interest that may exist between BSAM, BSAM's clients and the issuers of the securities whose proxies are being voted. ISS's recommendations are reported to the relevant BSAM portfolio managers who may or may not follow such recommendations depending upon the results of their own research and their familiarity with the companies and issues in question. Where and to the extent BSAM's portfolio managers agree with an ISS recommendation regarding a specific vote, ISS will vote the proxies reflecting its recommendation on behalf of BSAM's clients. Given the depth and breadth of ISS's corporate governance research, and given its single-minded focus on the objective pursuit of shareholder value, it is expected that BSAM's proxies will generally be voted in accordance with ISS's recommendations. B-1 To assure its own independence from issuers, ISS maintains and enforces a "Chinese Wall" that separates the staff and systems involved in proxy analysis operations and corporate governance consulting services. Additionally, ISS provides BSAM a representation confirming that ISS does not face a conflict of interest in respect to each issuer every time for which ISS casts a proxy vote. If a conflict of interest does arise, ISS will inform BSAM of their inability to vote. ISS's research group will provide a complete analytical summary, but will not issue a final vote recommendation. BSAM will have the responsibility to provide ISS with the specific voting recommendation. PORTFOLIO MANAGER ELECTION/PROXY COMMITTEE. In certain circumstances, one or more BSAM portfolio managers may disagree with an ISS recommendation and elect to diverge from ISS's recommendation. It is possible, that with respect to a particular vote, a BSAM portfolio manager may wish to vote proxies in accordance with ISS's recommendations for certain of its clients and differently for other clients with different investment objectives, risk profiles or time horizons. In each such case, the portfolio manager in question must notify BSAM's Proxy Committee of such an election before instructing ISS to vote any proxies. The Proxy Committee is responsible for determining whether any of the portfolio managers involved in the election or BSAM has a conflict of interest which would affect the proxies being voted. BSAM's Compliance Director will conduct the conflict investigation on behalf of the Proxy Committee and report his findings to the other members. If a conflict is found to exist, the portfolio manager challenging the ISS recommendation in question will not be permitted to vote the proxies and the proxies will be voted in accordance with ISS's recommendation. Where ISS does not cover a company or otherwise cannot recommend a vote, BSAM's portfolio managers will vote the proxies solely in accordance with their own views unless the Proxy Committee determines that a conflict of interest exists. If the Proxy Committee determines that a conflict of interest exists, the portfolio manager will refer the matter to his or her clients and recommend that they vote the proxies themselves. In any such case, the referral of a voting matter to clients will be undertaken jointly by the relevant portfolio managers and a member of BSAM's Legal & Compliance group in order to make certain that the voting issue and its implications for the company in question are described and discussed in an evenhanded manner, with full disclosure of the relevant conflict of interest. CONFLICTS OF INTEREST. Any circumstance or relationship which would compromise a portfolio manager's objectivity in voting proxies in the best interests of his/her clients would constitute a conflict of interest. Whether any such conflict exists for proxy-voting purposes will be determined by the Proxy Committee. The Proxy Committee is comprised of BSAM's General Counsel, Compliance Director, Chief Financial Officer, Head of Operations and Chief Investment Officers (or their respective designees). The Proxy Committee will deem a conflict to exist whenever BSAM or one of its portfolio managers has a personal or business interest in the outcome of a particular matter before shareholders. A conflict would arise, for example, in any case where BSAM has a business or financial relationship with a company B-2 whose management or shareholders are soliciting proxies. Another example of a conflict of interest would be where BSAM or one of its portfolio managers is related to an incumbent director or a candidate seeking a seat on the board. Putative conflicts of interest deemed by the Proxy Committee to be immaterial to a shareholder vote will not disable BSAM's portfolio managers from voting proxies where they disagree with ISS or ISS has given no voting recommendation. In addition, the existence of an issue with respect to which BSAM is determined to have a conflict of interest will not prevent its portfolio managers from voting on other issues on the same proxy with respect to which BSAM does not have a conflict of interest. In this regard, it should be noted that BSAM is a subsidiary of a world-wide, full-service investment banking and brokerage firm. As such, BSAM could be subject to a much wider array of potential conflicts of interest affecting its proxy votes on behalf of clients than if it were a stand-alone investment advisor. In order to minimize such conflicts with affiliated business units, however, BSAM has erected a Chinese Wall around itself which is designed to prevent BSAM and its affiliates from influencing each other's businesses and which has the consequential effect of minimizing inter-unit conflicts. As a matter of policy, BSAM's Proxy Committee will presume the existence of a conflict of interest for proxy-voting purposes whenever: o a current BSAM client is affiliated with a company soliciting proxies or has communicated its view to BSAM on an impending proxy vote; or o the portfolio manager responsible for voting a proxy has identified a personal or business interest either in a company soliciting proxies or in the outcome of a shareholder vote; or o a third-party with an interest in the outcome of a shareholder vote has attempted to influence either BSAM or the portfolio manager responsible for voting a proxy; or o a company with respect to which proxies are being solicited is on the Bear Steams Corporate Finance Restricted List. DUTY TO REPORT. Any Bear Stearns employee who is aware of any actual or apparent conflict of interest relevant to, or any attempt to improperly influence, how Bear Steams or an AR votes its proxies has a duty to disclose the existence of the situation to IA Compliance. CLIENT ELECTIONS. If a BSAM client who has authorized BSAM to vote proxies on its behalf nevertheless instructs BSAM to vote its proxy in a fashion different from ISS's recommendation with respect to such vote, BSAM will vote the proxy in accordance with the client's written instructions. SECURITIES ON LOAN. When a security held in an account managed by BSAM is loaned B-3 to a third party, the loan agreement normally provides for the borrower to vote any proxies on shareholder matters that arise during the term of the loan. If, in the opinion of BSAM's portfolio manager responsible for the account, it is important for any such proxy to be voted on behalf of client accounts notwithstanding the economic benefits attributable to the loan, the portfolio manager will arrange to terminate the loan prior to the date on which the proxy is to be voted. If the portfolio manager in question is uncertain as to whether a loan should be terminated in order to vote a proxy, he or she may refer the matter to the Proxy Committee for its determination. RECORD-KEEPING. BSAM will, for a period of at least five years, maintain or have ready access to the following documents: o a copy of BSAM's current PROXY- VOTING POLICIES AND PROCEDURES. o a copy of each proxy statement received by BSAM regarding securities held on behalf of its clients (which may be obtained from the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system and maintained by ISS). o a record of each vote cast by BSAM on behalf of its clients (maintained by ISS). o a copy of any document created by BSAM that was material to a proxy vote on behalf of clients. o a copy of each written request received from a client as to how BSAM voted proxies on its behalf and a copy of any written response from BSAM to any oral or written client request for information as to how BSAM voted proxies on its behalf. Where BSAM relies upon ISS to maintain any of the above records, it has obtained an undertaking from ISS to provide copies of such records promptly upon BSAM's request. DISCLOSURE TO CLIENTS. BSAM will include a summary of its PROXY-VOTING POLICIES AND PROCEDURES in Part II of its Form ADV. A copy of BSAM's PROXY-VOTING POLICIES AND PROCEDURES WILL also be made available to any client upon request. All BSAM clients will be provided with a contact at BSAM from whom they may obtain the proxy-voting records with respect to the securities held in their accounts. ISS PERFORMANCE REVIEW. Because BSAM is relying to a large extent on the corporate governance research and proxy-voting recommendations of ISS, its Proxy Committee will annually review the effectiveness of ISS's services from both substantive and administrative viewpoints. Substantive review will focus on evaluations by BSAM's portfolio managers as to whether ISS's voting recommendations were consistent with the maximization of shareholder value. Administrative review will focus on the timeliness and completeness of ISS's proxy-voting procedures. B-4 ISS RECOMMENDATIONS Following are BSAM's voting policies with respect to the most common matters submitted for shareholder votes. These policies are based on ISS's current voting recommendations.
OPERATIONAL MATTERS - ------------------------------------------------------------------------------------------------------------------------------------ VOTE FOR: VOTE AGAINST VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------------ MINOR BY-LAW OR CHARTER AMENDMENTS ADJOURNMENT OF MEETING proposals to SHAREHOLDER PROPOSALS TO PROHIBIT OR changes that are of a housekeeping nature provide management with the authority to LIMIT AUDITORS FROM ENGAGING IN NON-AUDIT (updates or corrections) adjourn an annual or special meeting absent SERVICES compelling reasons to support the proposal AUDIT FIRM ROTATION (taking into account CHANGE OF CORPORATE NAME REDUCTION OF QUORUM REQUIREMENTS FOR the tenure of the audit firm, the length SHAREHOLDER MEETINGS BELOW A MAJORITY of rotation specified in the proposal, any (absent compelling reasons to support the significant audit-related issues at the proposal) company, and whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price.) MANAGEMENT PROPOSALS TO CHANGE DATE, SHAREHOLDER PROPOSALS TO CHANGE DATE, Shareholder proposals asking companies to TIME OR LOCATION OF ANNUAL MEETING TIME OR LOCATION OF ANNUAL MEETING prohibit or limit their auditors from (unless the proposed change is unreasonable) (unless the current scheduling or engaging in non-audit services. location is unreasonable) RATIFICATION OF AUDITORS (unless an auditor TRANSACTION OF OTHER BUSINESS has a financial interest in or association with the company and is therefore not independent; fees for non-audit services are excessive; or there is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position) Shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services
B-5 BOARD OF DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------ VOTE FOR: WITHHOLD VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------------ RESTORING SHAREHOLDER VOTING ON DIRECTOR NOMINEES IN PROPOSALS TO ENABLE PROPOSALS TO ESTABLISH OR ABILITY TO REMOVE UNCONTESTED MANAGEMENT TO ALTER THE SIZE AMEND DIRECTOR QUALIFICATIONS DIRECTORS WITH OR WITHOUT Elections (instances include OF THE BOARD OUTSIDE OF A (based on how reasonable the CAUSE directors who attend less than 75 SPECIFIED RANGE WITHOUT criteria are and to what percent of the board and SHAREHOLDER APPROVAL degree they may preclude committee meetings without a dissident nominees from valid excuse, implement or joining the board) renew a dead-hand or modified dead-hand poison pill, ignore a shareholder proposal that is approved by a majority of the shares outstanding, ignore a shareholder proposal that is approved by a majority of the votes cast for two consecutive years, failed to act on takeover offers where the majority of the shareholders tendered their shares, are inside directors or affiliated outsiders and sit on the audit, compensation, or nominating committees, are inside directors or affiliated outsiders and the full board serves as the audit, compensation, or nominating committee or the company does not have one of these committees, are audit committee members and the non-audit fees paid to the auditor are excessive, are inside directors or affiliated outside directors and the full board is less than majority independent, sit on more than six boards or are members of a compensation committee that has allowed a pay for-performance disconnect as described in Section 8 (Executive and Director Compensation) PROPOSALS PERMITTING VOTING ON DIRECTOR NOMINEES IN SHAREHOLDER PROPOSALS SHAREHOLDER PROPOSALS SHAREHOLDERS TO ELECT UNCONTESTED ELECTIONS (directors REQUIRING TWO REQUIRING POSITIONS OF DIRECTORS TO FILL BOARD who enacted egregious corporate CANDIDATES PER BOARD CHAIRMAN AND CEO TO BE VACANCIES governance policies or failed to SEAT HELD SEPARATELY (because replace management as appropriate) some companies have governance structures in place that counterbalance a combined position, the following factors should be taken into account in determining whether the proposal warrants support: designated lead director appointed from the ranks of the independent board members with clearly delineated duties; majority of independent directors on board; all-independent key committees; committee chairpersons nominated by the independent directors; CEO performance reviewed annually by a committee of outside directors; established governance guidelines; and company performance) SHAREHOLDER PROPOSALS CLASSIFICATION OR PERMISSION OR RESTORATION OF REQUIRING A MAJORITY OR DECLASSIFICATION OF THE CUMULATIVE VOTING (relative MORE OF DIRECTORS TO BE BOARD (Shareholder or to the company's other INDEPENDENT (unless the management proposals to governance provisions) board composition already limit the tenure of outside meets the proposed directors either through threshold term limits or mandatory by ISS's definition of retirement ages) independence)
B-6 BOARD OF DIRECTORS
VOTE FOR: WITHHOLD VOTE AGAINST: VOTE CASE-BY-CASE: - --------------------------------------------------------------------------------------------------------------------------------- PROPOSALS SEEKING TO FIX THE PROPOSALS PROVIDING VOTING ON DIRECTOR BOARD SIZE OR DESIGNATE A THAT DIRECTORS BE NOMINEES IN UNCONTESTED RANGE FOR THE BOARD SIZE REMOVED ONLY FOR ELECTIONS (examining the CAUSE following factors: composition of the board & key board committees, attendance at board meetings, corporate governance provisions and takeover activity, long-term company performance relative to a market index, directors' investment in the company, whether the chairman is also serving as CEO, and whether a retired CEO sits on the board) CLASSIFICATION/DECLASSIFICATION PROPOSALS PROVIDING PROPOSALS ON DIRECTOR AND OF THE BOARD PROPOSALS THAT ONLY CONTINUING OFFICER INDEMNIFICATION AND to repeal classified boards DIRECTORS MAY ELECT LIABILITY PROTECTION (using and to elect all directors REPLACEMENTS TO FILL Delaware law as a standard) annually BOARD VACANCIES
B-7 BOARD OF DIRECTORS
- -------------------------------------------------------------------------------------------------------------------------- VOTE FOR: WITHHOLD VOTE AGAINST: VOTE CASE-BY-CASE: - -------------------------------------------------------------------------------------------------------------------------- PROPOSALS PROVIDING SUCH STOCK OWNERSHIP SHAREHOLDER PROPOSALS EXPANDED COVERAGE IN CASES REQUIREMENTS ASKING FOR OPEN ACCESS WHEN A DIRECTOR'S OR SHAREHOLDER PROPOSALS (taking into account the OFFICER'S LEGAL DEFENSE WAS MANDATING A MINIMUM ownership threshold specified UNSUCCESSFUL (if both of the AMOUNT OF STOCK THAT in the proposal and the following apply: the director DIRECTORS MUST OWN IN proponent's rationale for was found to have acted in ORDER TO QUALIFY AS targeting the company in good faith and in a manner DIRECTORS OR TO REMAIN terms of bard and director that he reasonably believed ON THE BOARD conduct) was in the best interest of the company and only if the director's legal expenses would be covered) SHAREHOLDER PROPOSALS SHAREHOLDER PROPOSALS SHAREHOLDER PROPOSAL ASKING THAT BOARD AUDIT, TO LIMIT THE TENURE OF ASKING FOR ADOPTION OF COMPENSATION, AND/OR OUTSIDE DIRECTORS HOLDING OR RETENTION PERIOD NOMINATING COMMITTEES BE FOR EXECUTIVES (taking into COMPOSED EXCLUSIVELY OF account any stock ownership INDEPENDENT DIRECTORS (if requirements or holding they currently do not meet period/retention ratio already that standard) in place and the actual ownership level of executives) PROPOSALS TO ELIMINATE CUMULATIVE VOTING PROPOSALS TO ELIMINATE ENTIRELY DIRECTORS' AND OFFICERS' LIABILITY FOR MONETARY DAMAGES FOR VIOLATING THE DUTY OF CARE INDEMNIFICATION PROPOSALS THAT WOULD EXPAND COVERAGE BEYOND JUST LEGAL EXPENSES TO ACTIONS, SUCH AS NEGLIGENCE, THAT ARE MORE SERIOUS VIOLATIONS OF FIDUCIARY OBLIGATION THAN MERE CARELESSNESS
B-8 PROXY CONTESTS
- ------------------------------------------------------------------------------------------------------------------------------ VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER PROPOSALS TO ADOPT DIRECTOR NOMINEES IN CONTESTED ELECTIONS CONFIDENTIAL VOTING, INDEPENDENT VOTE (considering the following factors: long-term TABULATORS AND INDEPENDENT INSPECTORS financial performance of the target company OF ELECTION (as long as the proposal relative to its industry; management's track record; includes a provision for proxy contests as background to the proxy contest; qualifications of follows: in the case of a contested election, director nominees (both slates); evaluation of what management should be permitted to request each side is offering shareholders as well as the that the dissident group honor its likelihood that the proposed objectives and goals confidential voting policy. If the dissidents can be met; and stock ownership positions) agree, the policy remains in place; if the dissidents will not agree, the confidential voting policy is waived) MANAGEMENT PROPOSALS TO ADOPT REIMBURSEMENT OF PROXY SOLICITATION EXPENSES CONFIDENTIAL VOTING
ANTI-TAKEOVER DEFENSES AND VOTING-RELATED ISSUES
- ------------------------------------------------------------------------------------------------------------------------------------ VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER PROPOSALS REQUIRING BYLAW AMENDMENTS WITHOUT SHAREHOLDER SHAREHOLDER PROPOSALS TO REDEEM POISON PILLS SHAREHOLDER RATIFICATION OF POISON PILLS CONSENT PROPOSALS TO ALLOW OR SIMPLIFY PROPOSALS TO RESTRICT OR PROHIBIT MANAGEMENT PROPOSALS TO RATIFY POISON PILLS SHAREHOLDER ACTION BY WRITTEN SHAREHOLDER ACTIONS BY WRITTEN CONSENT CONSENT PROPOSALS REMOVING RESTRICTIONS ON THE PROPOSALS TO RESTRICT OR PROHIBIT ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER RIGHT OF SHAREHOLDERS TO ACT SHAREHOLDER ABILITY TO CALL SPECIAL PROPOSALS/NOMINATIONS (giving support to those INDEPENDENTLY OF MANAGEMENT MEETINGS proposals that allow shareholders to submit proposals as close to the meeting date as reasonably possible and within the broadest window possible) Proposals to lower supermajority vote Proposals to require a supermajority requirements shareholder vote Proposals giving the board the ability to amend the bylaws in addition to shareholders Proposals asking that any future pill be put to a shareholder vote AMENDMENT OF BYLAWS WITHOUT SHAREHOLDER CONSENT (proposals giving the board the ability to amend the bylaws in addition to shareholders)
B-9 MERGERS AND CORPORATE RESTRUCTURINGS
- ------------------------------------------------------------------------------------------------------------------------------------ VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------------ PROPOSALS TO PROVIDE SHAREHOLDERS FORMING A HOLDING COMPANY IF THE PURCHASES OF ASSETS (considering the following WITH APPRAISAL RIGHTS. TRANSACTION INVOLVES AN ADVERSE factors: purchase price; fairness opinion; financial CHANGE IN SHAREHOLDER RIGHTS (absent and strategic benefits; how the deal was negotiated; compelling financial reasons to conflicts of interest; other alternatives for the recommend the transaction) business; and non-completion risk) PROPOSALS TO RESTRUCTURE DEBT IF SALES OF ASSETS (considering the following factors: DISAPPROVAL IS LIKELY TO RESULT impact on the balance sheet/working capital; IN A BANKRUPTCY FILING potential elimination of diseconomies; anticipated financial and operating benefits; anticipated use of funds; value received for the asset; fairness opinion; how the deal was negotiated; and conflicts of interest) CONVERSION OF SECURITIES IF BUNDLED OR CONDITIONED PROPOSALS (in the case of DISAPPROVAL WOULD RESULT IN EITHER items that are conditioned upon each other, examine ONEROUS PENALTIES OR A BANKRUPTCY the benefits and costs of the packaged items. In FILING instances when the joint effect of the conditioned items is not in shareholders' best interests, vote against the proposals. If the combined effect is positive, support such proposals) PROPOSALS TO LIQUIDATE IF DISAPPROVAL CONVERSION OF SECURITIES (when evaluating these WOULD RESULT IN A BANKRUPTCY FILING proposals, the investor should review the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties and conflicts of interest) PRIVATE PLACEMENTS IF DISAPPROVAL IS ISSUANCES OF NEW COMMON OR PREFERRED SHARES LIKELY TO RESULT IN A BANKRUPTCY IN CONNECTION WITH CORPORATE REORGANIZATIONS, FILING DEBT RESTRUCTURING, PREPACKAGED BANKRUPTCY PLANS, REVERSE LEVERAGED BUYOUTS OR WRAP PLANS (considering the following factors: dilution to existing shareholders' position; terms of the offer; financial issues; management's efforts to pursue other alternatives; control issues; and conflicts of interest) FORMATION OF HOLDING COMPANIES (considering the following factors: the reasons for the change; any financial or tax benefits; regulatory benefits; increases in capital structure; changes to the articles of incorporation or bylaws of the company) GOING PRIVATE TRANSACTIONS (LBOS AND MINORITY SQUEEZE OUTS) (considering the following factors: offer price/premium, fairness opinion, how the deal was negotiated, conflicts of interest, other alternatives/offers considered and non-completion risk) JOINT VENTURES (considering the following factors: percentage of assets/business contributed, percentage ownership, financial and strategic benefits, governance structure, conflicts of interest, other alternatives and non-completion risk) LIQUIDATIONS (considering the following factors: management's efforts to pursue other alternatives, appraisal value of assets and the compensation plan for executives managing the liquidation)
B-10 MERGERS AND CORPORATE RESTRUCTURINGS
- ----------------------------------------------------------------------------------------------------------------------------------- VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ----------------------------------------------------------------------------------------------------------------------------------- MERGERS AND ACQUISITIONS (determining whether the transaction enhances shareholder value by giving consideration to the following: prospects of the combined company; anticipated financial and operating benefits; offer price; fairness opinion; how the deal was negotiated; changes in corporate governance; change in the capital structure and conflicts of interest) PRIVATE PLACEMENTS/WARRANTS/CONVERTIBLE DEBENTURES (when evaluating these proposals, the investor should review: dilution to existing shareholders' position, terms of the offer, financial issues, management's efforts to pursue other alternatives, control issues and conflicts of interest) SPIN-OFFS (depending on: tax and regulatory advantages; planned use of the sale proceeds; valuation of spin-off, fairness opinion; benefits to the parent company; conflicts of interest; managerial incentives; corporate governance changes and changes in the capital structure). ` SHAREHOLDER PROPOSALS SEEKING TO MAXIMIZE SHAREHOLDER VALUE BY HIRING A FINANCIAL ADVISOR TO EXPLORE STRATEGIC ALTERNATIVES, SELLING THE COMPANY OR LIQUIDATING THE COMPANY AND DISTRIBUTING THE PROCEEDS TO SHAREHOLDERS (considering the following factors: prolonged poor performance with no turnaround in sight, signs of entrenched board and management, strategic plan in place for improving value, likelihood of receiving reasonable value in a sale or dissolution and whether company is actively exploring its strategic options, including retaining a financial advisor) VALUE MAXIMIZATION PROPOSALS (on shareholder proposals seeking to maximize shareholder value by hiring a financial advisor to explore strategic alternatives, selling the company or liquidating the company and distributing the proceeds to shareholders. These proposals should be evaluated based on the following factors: prolonged poor performance with no turnaround in sight, signs of entrenched board and management, strategic plan in place for improving value, likelihood of receiving reasonable value in a sale or dissolution, and whether company is actively exploring its strategic options, including retaining a financial advisor.)
B-11 STATE OF INCORPORATION
- ------------------------------------------------------------------------------------------------------------------------ VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------ OPTING OUT OF CONTROL SHARE PROPOSALS TO AMEND CHARTERS TO ADOPTION OF FAIR PRICE PROVISIONS ACQUISITION STATUTES (unless INCLUDE CONTROL SHARE ACQUISITION (evaluating factors such as the vote doing so would enable the PROVISIONS required to approve the proposed completion of a takeover that acquisition, the vote required to would be detrimental to repeal the fair price provision and shareholders) the mechanism for determining the fair price) PROPOSALS TO RESTORE VOTING FAIR PRICE PROVISIONS WITH ANTI-GREENMAIL PROPOSALS (when they are RIGHTS TO CONTROL SHARES SHAREHOLDER VOTE REQUIREMENTS bundled with other charter or by-law GREATER THAN A MAJORITY OF amendments) DISINTERESTED SHARES. OPTING OUT OF CONTROL SHARE PROPOSALS REQUESTING BOARD REINCORPORATION (considering both CASHOUT STATUTES CONSIDERATION OF NON-SHAREHOLDER financial and corporate governance CONSTITUENCIES OR OTHER concerns, including the reasons for NON-FINANCIAL EFFECTS WHEN reincorporating, a comparison of the EVALUATING A MERGER OR BUSINESS governance provisions and a comparison COMBINATION of the jurisdictional laws) REINCORPORATION (when the economic factors outweigh any OPTING IN OR OUT OF STATE neutral or negative governance ANTI-TAKEOVER STATUTES (including changes) control share acquisition statutes, control share cash-out statutes, freeze-out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions) OPTING OUT OF DISGORGEMENT STATUTES OPTING OUT OF FREEZE-OUT STATUTES ADOPTION OF ANTI-GREENMAIL CHARTER OR BY-LAW AMENDMENTS (or other restrictions on a company's ability to make greenmail payments) CAPITAL STRUCTURE - ---------------------------------------------------------------------------------------------------------------- VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ---------------------------------------------------------------------------------------------------------------- MANAGEMENT PROPOSALS TO REDUCE THE PROPOSALS AT COMPANIES WITH DUAL-CLASS PROPOSALS TO INCREASE THE PAR VALUE OF COMMON STOCK CAPITAL STRUCTURES TO INCREASE THE NUMBER OF SHARES OF NUMBER OF AUTHORIZED SHARES OF STOCK COMMON STOCK AUTHORIZED FOR CLASSES WITH SUPERIOR VOTING RIGHTS ISSUANCE PROPOSALS TO APPROVE INCREASES IN PROPOSALS TO CREATE A NEW CLASS OF SHAREHOLDER PROPOSAL SEEKING AUTHORIZED SHARES BEYOND THE COMMON STOCK WITH SUPERIOR VOTING PREEMPTIVE RIGHTS (considering ALLOWABLE INCREASES WHEN SHARES ARE IN RIGHTS. the size of a company, the DANGER OF BEING DELISTED OR A characteristics of its COMPANY'S ABILITY TO OPERATE AS A shareholder base and the GOING CONCERN IS UNCERTAIN liquidity of the stock) PROPOSALS TO CREATE NEW CLASSES OF NON- PROPOSALS THAT INCREASE AUTHORIZED PROPOSALS TO INCREASE THE VOTING OR SUB-VOTING COMMON Stock (if COMMON STOCK FOR THE EXPLICIT PURPOSE NUMBER OF BLANK it is intended for financing purposes OF IMPLEMENTING SHAREHOLDER RIGHTS CHECK PREFERRED SHARES (after with minimal or no dilution PLANS (POISON PILLS) analyzing the number to current shareholders and it is of preferred shares not designed to preserve the voting available) power of an insider or significant shareholder)
B-12 CAPITAL STRUCTURE
- -------------------------------------------------------------------------------------------------- VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - -------------------------------------------------------------------------------------------------- PROPOSALS TO CREATE PROPOSALS AUTHORIZING RECAPITALIZATIONS/RECLASSIFICATIONS "DECLAWED" BLANK CHECK THE CREATION OF OF SECURITIES PREFERRED STOCK (stock NEW CLASSES OF (considering the following that cannot PREFERRED STOCK WITH factors: more simplified be used as a takeover UNSPECIFIED VOTING, capital structure, enhanced defense) CONVERSION, liquidity, fairness of DIVIDEND DISTRIBUTION conversion terms, impact on AND OTHER RIGHTS voting power and ("blank check" dividends, reasons for the preferred stock) reclassification and conflicts of interest) PROPOSALS TO AUTHORIZE PROPOSALS TO INCREASE PROPOSALS TO IMPLEMENT THE ISSUANCE OF THE NUMBER OF REVERSE STOCK SPLITS PREFERRED STOCK (in BLANK CHECK PREFERRED THAT DO NOT PROPORTIONATELY cases where the STOCK AUTHORIZED FOR REDUCE THE NUMBER company specifies the ISSUANCE (when no shares OF AUTHORIZED SHARES voting, dividend, have been issued or conversion and other reserved for specific rights of such stock and purposes) the terms of the preferred stock appear reasonable) MANAGEMENT PROPOSALS TO TRACKING STOCK (weighing the IMPLEMENT REVERSE STOCK strategic value of SPLITS WHEN THE NUMBER OF the transaction against such AUTHORIZED SHARES Will BE factors as: adverse PROPORTIONATELY REDUCED governance changes, excessive increases in authorized capital stock, unfair method of distribution, diminution of voting rights, adverse conversion features, negative impact on stock option plans and other alternatives such as spin-off) MANAGEMENT PROPOSALS TO IMPLEMENT REVERSE STOCK SPLITS TO AVOID DELISTING MANAGEMENT PROPOSALS TO INSTITUTE OPEN-MARKET SHARE REPURCHASE PLANS IN WHICH All SHAREHOLDERS PARTICIPATE ON EQUAL TERMS MANAGEMENT PROPOSALS TO INCREASE THE COMMON SHARE AUTHORIZATION FOR A STOCK SPLIT OR SHARE DIVIDEND (provided that the increase in authorized shares would not result in an excessive number of shares available for issuance) SOCIAL AND ENVIRONMENTAL RESPONSIBILITY ISSUES - -------------------------------------------------------------------------------------------------- VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - -------------------------------------------------------------------------------------------------- REQUESTS FOR REPORTS PROPOSALS SEEKING ADVERTISING TO YOUTH DISCLOSING THE STRONGER PRODUCT (considering the company COMPANY'S ENVIRONMENTAL WARNINGS (such following factors: whether the POLICIES (unless it decisions are better complies with federal, state, already has left to public and local laws on well-documented health authorities) the marketing of tobacco or if environmental it has been fined management systems that for violations; whether the are available to the company has gone as public) far as peers in restricting advertising; whether the company entered into the Master Settlement Agreement which restricts marketing of tobacco to youth and whether restrictions on marketing to youth extend to foreign countries) ANIMAL RIGHTS (proposals PROPOSALS CEASING THE PRODUCTION OF seeking a report on the PROHIBITING TOBACCO-RELATED company's animal welfare INVESTMENT IN PRODUCTS OR SELLING PRODUCTS standards unless: the TOBACCO STOCKS TO TOBACCO COMPANIES company has already (such decisions are (considering the percentage published a set of animal better left to of the company's business welfare standards and portfolio managers) affected and the economic monitors compliance the loss of eliminating the company's standards are business versus any comparable to or better potential tobacco-related than those of peer firms, liabilities) and there are no serious controversies surrounding the company's treatment of animals)
B-13 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY ISSUES
- ------------------------------------------------------------------------------------------------------ VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------ SEXUAL ORIENTATION (proposals PROPOSALS ASKING COMPANIES TO SPINNING-OFF TOBACCO-RELATED seeking to amend a company's AFFIRM POLITICAL BUSINESSES (considering the EEO statement in order to NON-PARTISANSHIP IN THE percentage of the company's prohibit discrimination based on WORKPLACE (so long as the business affected, the sexual orientation, unless company is in compliance with feasibility of a spin-off and the change would result in laws governing corporate potential future liabilities excessive costs for the political activities and the related to the company's company) company has procedures in tobacco business) place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and not coercive) GLASS CEILING (reports SECOND-HAND SMOKE outlining the company's (whether the company progress towards the Glass complies with all local Ceiling Commission's business ordinances and recommendations, unless: the regulations, the degree composition of senior that voluntary management and the board is restrictions beyond those fairly inclusive, the company mandated by law has well- documented programs might hurt the company's addressing diversity competitiveness and initiatives and leadership the risk of any development, the company health-related already issues public reports liabilities) on its company-wide affirmative initiatives, and provides data on its workforce diversity, and the company has had no recent, significant EEO related violations or litigation) EQUAL EMPLOYMENT OPPORTUNITY PROPOSALS TO ADOPT THE CERES (EEO) (reports outlining the PRINCIPLES (considering the company's affirmative action following factors; the initiatives unless all of the company's current following apply: the company environmental disclosure has well-documented equal beyond legal Requirements, opportunity programs, the including environmental health company already publicly and safety (EHS) audits and reports on its company-wide reports that may duplicate affirmative initiatives and CERES; the company's provides data on its workforce environmental performance diversity, and the company has record, including violations no recent EEO- related of federal and state violations or litigation) regulations, level of toxic emissions and accidental spills; environmentally-conscious practices of peer companies, including endorsement of CERES, and the costs of membership and implementation) BOARD DIVERSITY (reports on PROPOSALS TO LINK EXECUTIVE the company's efforts to COMPENSATION TO SOCIAL diversify the board, unless: PERFORMANCE (such as corporate the board composition is downsizing, customer or employee reasonably inclusive in satisfaction, community relation to of similar size involvement, human rights, and business or the board environmental performance, already reports on its predatory lending and nominating procedures and executive/employee pay diversity initiatives) disparities. Such resolutions should be evaluated in the context of: the relevance of the issue to be linked to pay; the degree that social performance is already included in the company's pay structure and disclosed; the degree that social performance is used by peer companies in setting pay; violations or complaints filed against the company relating to the particular social performance measure; artificial limits sought by the proposal, such as freezing or capping executive pay; independence of the compensation committee and current company pay levels) TOBACCO-RELATED PROPOSALS (considering the following factors: second-hand smoke: whether the company complies with all local ordinances and regulations; the degree that voluntary restrictions beyond those mandated by law might hurt the company's competitiveness and the risk of any health-related liabilities)
B-14 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY ISSUES
- ------------------------------------------------------------------------------------------------------------------------------------ VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------------ SPACED-BASED WEAPONIZATION (reports on A ANIMAL RIGHTS (on proposals to phase out the company's involvement in spaced-based use of animals in product testing, taking into weaponization unless: the information is account: The nature of the product and the already publicly available or the degree that animal testing is necessary or disclosures sought could compromise federally mandated (such as medical products), proprietary information) the availability and feasibility of alternatives to animal testing to ensure product safety, and the degree that competitors are using animal-free testing. ENVIRONMENTAL REPORTS (requests for GENETICALLY MODIFIED FOODS DRUG PRICING (on proposals asking the company reports disclosing the company's (proposals asking companies to to implement price restraints on pharmaceutical environmental policies unless it already voluntarily label genetically engineered products, taking into account: whether the has well-documented environmental (GE) ingredients in their products or proposal focuses on a specific drug and region management systems that are available to alternatively to provide interim whether the economic benefits of providing the public) labeling and eventually eliminate subsidized drugs (e.g., public goodwill) GE ingredients due to the costs outweigh the costs in terms of reduced profits, and feasibility of labeling and/or lower R&D spending, and harm to phasing out the use of GE ingredients. competitiveness, the extent that reduced prices can be offset through the company's marketing budget without affecting R&D spending, whether the company already limits price increases of its products, whether the company already contributes life-saving pharmaceuticals to the needy and Third World countries, the extent that peer companies implement price restraints GLOBAL WARMING (reports on the level of GENETICALLY MODIFIED FOODS GENETICALLY MODIFIED FOODS (on proposals greenhouse gas emissions from the (proposals seeking a report on the asking for a report on the feasibility of company's operations and products, unless health and environmental effects of labeling products containing GE ingredients the report is duplicative of the genetically modified organisms taking into account: the relevance of the company's current environmental (GMOs). Health studies of this sort are proposal in terms of the company's business and disclosure and reporting or is not better undertaken by regulators and the the proportion of it affected by the integral to the company's line of scientific community. resolution, the quality of the company's business. However, additional reporting disclosure on GE product labeling and related may be warranted if: the company's level voluntary initiatives and how this disclosure of disclosure lags that of its compares with peer company disclosure, competitors, or the company has a poor company's current disclosure on the environmental track record, such as feasibility of GE product labeling, including violations of federal and state information on the related costs, any voluntary regulations) labeling initiatives undertaken or considered by the company. SUSTAINABILITY REPORT (proposals GENETICALLY MODIFIED FOODS GENETICALLY MODIFIED FOODS (on proposals requesting the company to report on its (proposals to completely phase out GE asking for the preparation of a report on the policies and practices related to social, ingredients from the company's financial, legal, and environmental impact of environmental, and economic products or proposals asking for reports continued use of GE ingredients/seeds. The sustainability, unless the company is outlining the steps necessary to relevance of the proposal in terms of the already reporting on its sustainability eliminate GE ingredients from the company's business and the proportion of it initiatives through company's products. Such resolutions affected by the resolution. The quality of the existing reports such as: a combination presuppose that there are proven health company's disclosure on risks related to GE of an EHS or other environmental report, risks to GE ingredients (an issue better product use and how this disclosure compares code of conduct, and/or supplier/vendor left to federal regulators) that with peer company disclosure. The percentage standards, and equal opportunity and outweigh the economic benefits of revenue derived from international diversity data and programs, all of which derived from biotechnology.) operations, particularly in Europe, where GE are publicly available, or a report based products are more regulated and consumer on Global Reporting Initiative (GRI) or backlash is more pronounced. similar guidelines)
B-15 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY ISSUES
- ------------------------------------------------------------------------------------------------------------------- VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------- SUSTAINABILITY REPORT HANDGUNS (requests for reports on HIV/AIDS (on requests for reports (shareholder proposals asking a company's policies aimed at outlining the impact of the health companies to provide a curtailing gun violence in the pandemic HIV/AIDS, malaria and sustainability report applying United States unless the report tuberculosis) on the company's SubSaharan the GRI guidelines unless: the is confined to product safety operations and how the company is company already has a information. Criminal misuse of responding to it, taking into account: the comprehensive sustainability firearms is beyond company nature and size of the company's report or equivalent addressing control and instead falls within operations in SubSaharan Africa and the the essential elements of the the purview of law enforcement number of local employees, the company's GRI guidelines or the company agencies.) existing healthcare policies, including has publicly committed to using benefits and healthcare access for local the GRI format by a specific workers, company donations to healthcare date) providers operating in the region). RENEWABLE ENERGY (requests for SEXUAL ORIENTATION (proposals HIV/AIDS (on proposals asking companies to reports on the feasibility of to extend company benefits to establish, implement, and report on a developing renewable energy or eliminate benefits from standard of response to the HIV/AIDS, sources, unless the report is domestic partners. Benefits tuberculosis and malaria health pandemic duplicative of the company's decisions should be left to the in Africa and other developing countries, current environmental disclosure discretion of the company) taking into account: the company's actions and reporting or is not integral in developing countries to address to the company's line of HIV/AIDS, tuberculosis and malaria, business) including donations of pharmaceuticals and work with public health organizations, the company's initiatives in this regard compared to those of peer companies). INTERNATIONAL CODES OF EQUAL EMPLOYMENT OPPORTUNITY PREDATORY LENDING (on requests for reports CONDUCT/VENDOR STANDARDS (EEO) (proposals seeking on the company's procedures for preventing (reports outlining vendor information on the diversity predatory lending, including the standards compliance unless any efforts of suppliers and establishment of a board committee for of the following apply: the service providers, which can oversight, taking into account whether the company does not operate in pose a significant cost and company has adequately disclosed countries with significant human administration burden on the mechanisms in place to prevent abusive rights violations, the company company. lending practices, whether the company has has no recent human rights adequately disclosed the financial risks controversies or violations, or of its subprime business, whether the the company already publicly company has been subject to violations of discloses information on its lending laws or serious lending vendor standards compliance) controversies, peer companies' policies to prevent abusive lending practices. NUCLEAR WEAPONS (proposals asking BOARD DIVERSITY (on proposals asking the a company to cease production of company to increase the representation of nuclear weapons components and women and minorities on the board, taking delivery systems, including into account: the degree of board disengaging from current and diversity, comparison with peer companies, proposed contracts. Components established process for improving board and delivery systems serve diversity, existence of independent multiple military and non- nominating committee, use of outside military uses, and withdrawal search firm and history of EEO violations) from these contracts could have a negative impact on the company's business) FOREIGN MILITARY SALES/OFFSETS OPERATIONS IN NATIONS SPONSORING (reports on foreign military TERRORISM (IRAN) (on requests for a board sales or offsets. Such committee review and report outlining the disclosures may involve sensitive company's financial and reputational risks and confidential information. from its operations in Iran, taking into Moreover, companies must comply account current disclosure on: the nature with government controls and and purpose of the Iranian operations and reporting on foreign military the amount of business involved (direct sales) and indirect revenues and expenses) that could be affected by political disruption and Compliance with U.S. sanctions and LAWS) CHINA PRINCIPLES (proposals to LANDMINES AND CLUSTER BOMBS (on proposals implement the China Principles asking a company to renounce future unless: there are serious involvement in antipersonnel landmine controversies surrounding the production, taking into account: whether company's China operations, and the company has in the past manufactured the company does not have a code landmine components, whether the company's of conduct with standards similar peers have renounced future production) to those promulgated by the International Labor Organization (ILO)
B-16 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY ISSUES
- -------------------------------------------------------------------------------------------------------------------------------- VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - -------------------------------------------------------------------------------------------------------------------------------- CHARITABLE/POLITICAL CONTRIBUTIONS LANDMINES AND CLUSTER BOMBS (on proposals (proposals asking the company to affirm asking a company to renounce future political nonpartisanship in the workplace involvement in cluster bomb production, taking so long as: the company is in compliance into account: what weapons classifications the with laws governing corporate political proponent views as cluster bombs, whether the activities, and the company has procedures company currently or in the past has in place to ensure that employee manufactured cluster bombs or their contributions to company-sponsored components, the percentage of revenue derived political action committees (PACs) are from cluster bomb manufacturing and whether strictly voluntary and not coercive) the company's peers have renounced future production) CHARITABLE/POLITICAL CONTRIBUTIONS COUNTRY-SPECIFIC HUMAN RIGHTS REPORTS (on (proposals to report or publish in requests for reports detailing the company's newspapers the company's political operations in a particular country and steps to contributions. Federal and state laws protect human rights, based on: the nature and restrict the amount of corporate amount of company business in that country, the contributions and include reporting company's workplace code of conduct, requirements) proprietary and confidential information involved, company compliance with U.S. regulations on investing in the country and level of peer company involvement in the country) CHARITABLE/POLITICAL CONTRIBUTIONS ARCTIC NATIONAL WILDLIFE REFUGE (REPORTS (proposals disallowing the company from outlining potential environmental damage from making political contributions. Businesses drilling in the Arctic National Wildlife Refuge are affected by legislation at the federal, (ANWR), taking into account: whether there are state, and local level and barring publicly available environmental impact reports, contributions can put the company at a whether the company has a poor environmental competitive disadvantage) track record, such as violations of federal and state regulations or accidental spills and the current status of legislation regarding drilling in ANWR) CHARITABLE/POLITICAL CONTRIBUTIONS ENVIRONMENTAL-ECONOMIC RISK REPORT (proposals restricting the company from (proposals requesting reports assessing making charitable contributions. Charitable economic risks of environmental pollution or contributions are generally useful for climate change, taking into account whether the assisting worthwhile causes and for company has clearly disclosed the following in creating goodwill in the community. its public documents: approximate costs of In the absence of bad faith, self-dealing, complying with current or proposed or gross negligence, management should environmental laws, steps company is taking to determine which contributions are in the reduce greenhouse gasses or other best interests of the company) environmental pollutants, measurements of the company's emissions levels and reduction targets or goals for environmental pollutants including greenhouse gasses) CHARITABLE/POLITICAL CONTRIBUTIONS (proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders) Recycling (proposals to adopt a comprehensive recycling strategy, taking into account: the nature of the company's business and the percentage affected, the extent that peer companies are recycling, the timetable prescribed by the proposal, the costs and methods of implementation and whether the company has a poor environmental track record, such as violations of federal and state regulations)
B-17 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY ISSUES
- ---------------------------------------------------------------------------------------------------------------- VOTE FOR: VOTE AGAINST: VOTE CASE-BY-CASE: - ---------------------------------------------------------------------------------------------------------------- RENEWABLE ENERGY (proposals to invest in renewable energy sources, taking into account: the nature of the company's business and the percentage affected, the extent that peer companies are switching from fossil fuels to cleaner sources, the timetable and specific action prescribed by the proposal, the costs of implementation and the company's initiatives to address climate change) INTERNATIONAL CODES OF CONDUCT/VENDOR STANDARDS (proposals to implement certain human rights standards at company facilities or those of its suppliers and to commit to outside, independent monitoring. In evaluating these proposals, the following should be considered: the company's current workplace code of conduct or adherence to other global standards and the degree they meet the standards promulgated by the proponent, agreements with foreign suppliers to meet certain workplace standards, whether company and vendor facilities are monitored and how, company participation in fair labor organizations, type of business, proportion of business conducted overseas, countries of operation with known human rights abuses, whether the company has been recently involved in significant labor and human rights, controversies or violations, peer company standards and practices and union presence in company's international factories) MACBRIDE PRINCIPLES (proposals to endorse or increase activity on the MacBride Principles, taking into account: company compliance with or violations of the Fair Employment Act of 1989, company antidiscrimination policies that already exceed the legal requirements, the cost and feasibility of adopting all nine principles, the cost of duplicating efforts to follow two sets of standards (Fair Employment and the MacBride Principles), the potential for charges of reverse discrimination, the potential that any company sales or contracts in the rest of the United Kingdom could be negatively impacted, the level of the company's investment in Northern Ireland, the number of company employees in Northern Ireland, the degree that industry peers have adopted the MacBride Principles and applicable state and municipal laws that limit contracts with companies that have not adopted the MacBride Principles)
B-18 EXECUTIVE AND DIRECTOR COMPENSATION
EXECUTIVE AND DIRECTOR COMPENSATION - ------------------------------------------------------------------------------------------------------------------------------------ VOTE FOR WITHHOLD VOTE AGAINST: VOTE CASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------------ Plans which provide a dollar- EXECUTIVE AND Plans that expressly permit the repricing Votes with respect to for-dollar cash for stock exchange DIRECTOR of underwater stock options without equity-based compensation plans COMPENSATION (votes shareholder approval from the Compensation Committee members) DIRECTOR RETIREMENT PLANS Plans in which the CEO participates if DIRECTOR COMPENSATION (shareholder proposals to there is a disconnect between the CEO's (compensation plans for eliminate retirement plans for pay and company performance (an directors) nonemployee directors) increase in pay and a decrease in performance) and the main source of the pay increase (over half) is equity-based. A decrease in performance is based on negative one- and three- year total shareholder returns. An increase in pay is based on the CEO's total direct compensation (salary, cash bonus, present value of stock options, face value of restricted stock, face value of long-term incentive plan payouts, and all other compensation) increasing over the previous year EMPLOYEE STOCK PURCHASE PLANS DIRECTOR RETIREMENT PLANS (Retirement STOCK PLANS IN LIEU OF CASH (employee stock purchase plans plans for nonemployee directors) (plans which provide where any of the following apply: participants with the option purchase price is less than 85 of taking all or a portion of percent of fair market value, or their cash compensation in the offering period is greater than 27 form of stock) months, or the number of shares allocated to the plan is more than ten percent of the outstanding shares) INCENTIVE BONUS PLANS AND TAX EMPLOYEE STOCK PURCHASE PLANS (employee MANAGEMENT PROPOSALS SEEKING DEDUCTIBILITY PROPOSALS stock purchase plans where any of the APPROVAL TO REPRICE OPTIONS (OBRA-RELATED COMPENSATION following apply: purchase price is less (consideration given to the PROPOSALS) proposals that simply than 85 percent of fair market value, or following: historic trading amend shareholder-approved offering period is greater than 27 months, patterns, rationale for the compensation plans to include or the number of shares allocated to the repricing, value-for-value administrative features or place a plan is more than 10 percent of the exchange, option vesting, term cap on the annual grants any one outstanding shares) of the option, exercise price participant may receive to comply and participation) with the provisions of Section 162(m) INCENTIVE BONUS PLANS AND TAX SHAREHOLDER PROPOSALS REGARDING EXECUTIVE Employee Stock Purchase Plans DEDUCTIBILITY PROPOSALS AND DIRECTOR PAY (shareholder proposals (OBRA-RELATED COMPENSATION seeking to set absolute levels on PROPOSALS) proposals to add compensation or otherwise dictate the performance goals to existing amount or form of compensation) compensation plans to comply with the provisions of Section 162(m) unless they are clearly inappropriate INCENTIVE BONUS PLANS AND TAX SHAREHOLDER PROPOSALS REGARDING EXECUTIVE INCENTIVE BONUS PLANS AND TAX DEDUCTIBILITY PROPOSALS AND DIRECTOR PAY (shareholder proposals DEDUCTIBILITY PROPOSALS (OBRA (OBRA-RELATED COMPENSATION requiring director fees be paid in stock RELATED COMPENSATION PROPOSALS) PROPOSALS) cash or cash and stock only) votes to amend existing plans bonus plans that are submitted to to increase shares reserved and shareholders for the purpose of to qualify for favorable tax exempting compensation from taxes treatment under the provisions under the provisions of Section of Section 162(m) 162(m) if no increase in shares is requested
B-19 EXECUTIVE AND DIRECTOR COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------------ VOTE FOR: WITHHOLD VOTE AGAINST: VOTE VASE-BY-CASE: - ------------------------------------------------------------------------------------------------------------------------------------ EMPLOYEE STOCK OWNERSHIP PLANS SHAREHOLDER PROPOSALS (ESOPS) proposals to implement an ESOP REGARDING EXECUTIVE AND or increase authorized shares for existing DIRECTOR PAY (basis for all other ESOPs, unless the number of shares shareholder proposals regarding allocated to the ESOP is excessive (more executive and director pay, taking than five percent of outstanding shares into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook) 401(K) EMPLOYEE BENEFIT PLANS (proposals GOLDEN PARACHUTES AND to implement a 401(k) savings plan for EXECUTIVE SEVERANCE employees) AGREEMENTS (proposals to ratify or cancel golden parachutes. An acceptable parachute should include the following: the parachute should be less attractive than an ongoing employment opportunity with the firm, the triggering mechanism should be beyond the control of management and the amount should not exceed three times base salary plus guaranteed benefits) SHAREHOLDER PROPOSALS REGARDING EXECUTIVE AND DIRECTOR EXECUTIVE AND DIRECTOR PAY (shareholder COMPENSATION (votes for plans proposals seeking additional disclosure of which do not provide a dollar-for executive and director pay information, dollar cash for stock exchange) provided the information requested is relevant to shareholders' needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company) SHAREHOLDER PROPOSALS REGARDING EXECUTIVE AND DIRECTOR PAY (shareholder proposals to put option repricings to a shareholder vote) OPTION EXPENSING (shareholder proposals asking the company to expense stock options, unless the company has already publicly committed to expensing options by a specific date) PERFORMANCE-BASED STOCK OPTIONS (shareholder proposals advocating the use of performance-based stock options (indexed, premium-priced, and performance-vested options), unless: the proposal is overly restrictive (e.g., it mandates that awards to all employees must be performance-based or all awards to top executives must be a particular type, such as indexed options) and the company demonstrates that it is using a substantial portion of performance-based awards for its top executives) PENSION PLAN INCOME ACCOUNTING (shareholder proposals to exclude pension plan income in the calculation of earnings used in determining executive bonuses/compensation)
B-20
EXECUTIVE AND DIRECTOR COMPENSATION - --------------------------------------------------------------------------------------------------------------- VOTE FOR: WITHHOLD VOTE AGAINST: VOTE CASE-BY-CASE: - --------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERPS) shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the company's executive pension plans do not contain excessive benefits beyond what is offered under employee wide plans GOLDEN PARACHUTES AND EXECUTIVE SEVERANCE AGREEMENTS (shareholder proposals to require golden parachutes or executive severance agreements to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts)
B-21 THE RBB FUND, INC. PEA 103 PART C: OTHER INFORMATION Item 23. EXHIBITS (a) Articles of Incorporation. (1) Articles of Incorporation of Registrant are incorporated herein by reference to Registrant's Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (2) Articles Supplementary of Registrant are incorporated herein by reference to Registrant's Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (3) Articles of Amendment to Articles of Incorporation of Registrant are incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrant's Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (4) Articles Supplementary of Registrant are incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrant's Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (5) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement (No. 33-20827) filed on April 27, 1990, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (6) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement (No. 33-20827) filed on May 1, 1990, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (7) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (8) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 8 to the Registrant's Registration Statement (No. 33-20827) filed on October 22, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (9) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1993, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (10) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1993, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (11) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (12) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (13) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (14) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (15) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 27 to the Registrant's Registration Statement (No. 33-20827) filed on March 31, 1995. (16) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (17) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 39 to the Registrant's Registration Statement (No. 33-20827) filed on October 11, 1996. (18) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrant's Registration Statement (No. 33-20827) filed on May 9, 1997. (19) Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrant's Registration Statement (No. 33-20827) filed on September 25, 1997. (20) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrant's Registration Statement (No. 33-20827) filed on September 25, 1997. (21) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (22) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (23) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (24) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (25) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (26) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrant's Registration Statement (No. 33-20827) filed on November 29, 1999. C-2 (27) Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2000. (28) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2000. (29) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2000. (30) Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2000. (31) Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrant's Registration Statement (No. 33-20827) filed on March 15, 2001. (32) Articles Supplementary of Registrant (BOSTON PARTNERS BOND FUND - INSTITUTIONAL CLASS AND BOSTON PARTNERS BOND FUND - INVESTOR CLASS) are incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrant's Registration Statement (No. 33-20827) filed on May 15, 2002. (33) Articles of Amendment to Charter of the Registrant (BOSTON PARTNERS ALL-CAP VALUE FUND - INSTITUTIONAL CLASS AND BOSTON PARTNERS BOND FUND - INSTITUTIONAL CLASS) are incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrant's Registration Statement (No. 33-20827) filed on May 15, 2002. (34) Articles Supplementary of Registrant (SCHNEIDER VALUE FUND) are incorporated herein by reference to Post-Effective Amendment No. 78 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 2002. (35) Articles Supplementary of Registrant (BAKER 500 GROWTH FUND - INSTITUTIONAL CLASS AND CLASS S) are incorporated herein by reference to Post-Effective Amendment No. 79 to the Registrant's Registration Statement (No. 33-20827) filed on September 18, 2002. (36) Articles Supplementary of Registrant (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS AND LIQUIDITY FUND FOR CREDIT UNION MEMBERS) are incorporated herein by reference to Post-Effective Amendment No. 84 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2003. (37) Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 89 to the Registrant's Registration Statement (No. 33-20827) filed on December 30, 2004. (38) Articles Supplementary of Registrant ((ROBECO WPG CORE BOND FUND - INVESTOR CLASS, ROBECO WPG CORE BOND FUND - INSTITUTIONAL CLASS, ROBECO WPG TUDOR FUND - INSTITUTIONAL CLASS, ROBECO WPG LARGE CAP GROWTH FUND - INSTITUTIONAL CLASS) are incorporated herein by reference to Post-Effective Amendment No. 93 to the Registrant's Registration Statement (No. 33-20827) filed on March 4, 2005. (39) Certificate of Correction of Registrant is incorporated herein by reference to Post-Effective Amendment No. 95 to the Registrant's Registration Statement (No. 33-20827) filed on March 23, 2005. (40) Articles Supplementary of Registrant (ROBECO WPG CORE BOND FUND - INVESTOR CLASS, ROBECO WPG CORE BOND FUND - INSTITUTIONAL CLASS, ROBECO WPG TUDOR FUND - INSTITUTIONAL CLASS, ROBECO WPG LARGE CAP GROWTH FUND - INSTITUTIONAL CLASS) are incorporated herein by reference to Post-Effective Amendment No. 95 to the Registrant's Registration Statement (No. 33-20827) filed on March 23, 2005. (41) Articles Supplementary of Registrant (SENBANC FUND) are incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June C-3 6, 2005. (42) Articles of Amendment of Registrant (ROBECO WPG CORE BOND FUND - RETIREMENT CLASS) are incorporated herein by reference to Post-Effective Amendment No. 97 to the Registrant's Registration Statement (No. 33-20827) filed on August 19, 2005. (43) Articles Supplementary of Registrant (ROBECO WPG CORE BOND FUND - INVESTOR CLASS) are incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrant's Registration Statement (No. 33-20827) filed on September 27, 2005. (44) ARTICLES SUPPLEMENTARY OF REGISTRANT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) ARE FILED HEREWITH. (b) By-Laws. (1) By-Laws, as amended are incorporated herein by reference to Post-Effective Amendment No. 89 to the Registrant's Registration Statement (No. 33-20827) filed on December 30, 2004. (c) Instruments Defining Rights of Security Holders. (1) See Articles VI, VII, VIII, IX and XI of Registrant's Articles of 1 Incorporation dated February 17, 1988 which are incorporated herein by reference to Registrant's Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (2) See Articles II, III, VI, XIII, and XIV of Registrant's By-Laws as amended through August 25, 2004, which are incorporated herein by reference to Post-Effective Amendment No. 89 to the Registrant's Registration Statement (No. 33-20827) filed on December 30, 2004. (d) Investment Advisory Contracts. (1) Investment Advisory Agreement (MONEY MARKET) between Registrant and Provident Institutional Management Corporation, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (2) Sub-Advisory Agreement (MONEY MARKET) between Provident Institutional Management Corporation and Provident National Bank, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (3) Assumption Agreement (MONEY MARKET FUND) between PNC Bank, N.A. and BlackRock Institutional Management Corporation (formerly PNC Institutional Management Corporation) dated April 29, 1998 is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (4) Investment Advisory Agreement (BOSTON PARTNERS LARGE CAP VALUE FUND) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (5) Investment Advisory Agreement (BOSTON PARTNERS MID CAP VALUE FUND) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (6) Investment Advisory Agreement (SCHNEIDER SMALL CAP VALUE FUND) between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (7) Investment Advisory Agreement (BOSTON PARTNERS SMALL CAP VALUE FUND II (FORMERLY MICRO CAP VALUE)) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33- C-4 20827) filed on April 8, 2003. (8) Investment Advisory Agreement (BOSTON PARTNERS LONG/SHORT EQUITY FUND (FORMERLY MARKET NEUTRAL)) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (9) Investment Advisory Agreement (BOGLE SMALL CAP GROWTH FUND) between Registrant and Bogle Investment Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (10) Investment Advisory Agreement (BOSTON PARTNERS ALL-CAP VALUE FUND) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (11) Investment Advisory Agreement (SCHNEIDER VALUE FUND) between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (12) Form of Investment Advisory Agreement (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS) between Registrant and WesCorp Investment Services, LLC is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. (13) Form of Investment Advisory Agreement (LIQUIDITY FUND FOR CREDIT UNIONS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) between Registrant and WesCorp Investment Services, LLC is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (14) Investment Advisory Agreement (N/I GROWTH FUND) between Registrant and Numeric Investors LLC is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (15) Investment Advisory Agreement (N/I EMERGING GROWTH FUND) between Registrant and Numeric Investors LLC incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (16) Investment Advisory Agreement (N/I SMALL CAP VALUE FUND) between Registrant and Numeric Investors LLC is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (17) Investment Advisory Agreement (N/I MID CAP FUND) between Registrant and Numeric Investors LLC is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (18) Amendment No. 1 to Investment Advisory Agreement (N/I MID CAP FUND) between Registrant and Numeric Investors LLC is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (19) Amendment No. 1 to Investment Advisory Agreement (N/I GROWTH FUND) between Registrant and Numeric Investors LLC is incorporated herein by reference to Post-Effective Amendment No. 97 to the Registrant's Registration Statement (No. 33-20827) filed on August 19, 2005. (20) Amendment No. 1 to Investment Advisory Agreement (N/I SMALL CAP VALUE FUND) between Registrant and Numeric Investors LLC is incorporated herein by reference to Post-Effective Amendment No. 97 to the Registrant's Registration Statement (No. 33-20827) filed on August 19, 2005. (21) Amendment No. 2 to Investment Advisory Agreement (N/I MID CAP FUND) between Registrant and Numeric Investors LLC is incorporated herein by reference to Post-Effective Amendment No. 97 to the Registrant's Registration Statement (No. 33-20827) filed on August 19, 2005. (22) Contractual Fee Waiver Agreement dated December 12, 2003, between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment C-5 No. 89 to the Registrant's Registration Statement (No. 33-20827) filed on December 30, 2004. (23) Contractual Fee Waiver Agreement (SCHNEIDER SMALL CAP VALUE FUND) dated November 21, 2005, between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2005. (24) Contractual Fee Waiver Agreement (SCHNEIDER VALUE FUND) dated November 21, 2005, between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2005. (25) Contractual Fee Waiver Agreement (BOGLE SMALL CAP GROWTH FUND) dated November 21, 2005, between Registrant and Bogle Investment Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2005. (26) Investment Advisory Agreement (ROBECO WPG CORE BOND FUND) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 98 to the Registrant's Registration Statement (No. 33-20827) filed on August 30, 2005. (27) Investment Advisory Agreement (SENBANC FUND) dated August 31, 2005 between Registrant and Hilliard Lyons Research Advisors is incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrant's Registration Statement (No. 33-20827) filed on September 27, 2005. (28) Investment Advisory Agreement (ROBECO WPG LARGE CAP GROWTH FUND) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (29) Investment Advisory Agreement (ROBECO WPG TUDOR FUND) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (30) Contractual Fee Waiver Agreement (ROBECO WPG CORE BOND FUND, ROBECO WPG LARGE CAP GROWTH FUND AND ROBECO WPG TUDOR FUND) dated April 29, 2005 between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (31) FORM OF INVESTMENT ADVISORY AGREEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) BETWEEN REGISTRANT AND BEAR STEARNS ASSET MANAGEMENT INC. IS FILED HEREWITH. (e) Underwriting Contracts. (1) Distribution Agreement between Registrant and PFPC Distributors, Inc. dated as of January 2, 2001 is incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrant's Registration Statement (No. 33-20827) filed on March 15, 2001. (2) Distribution Agreement Supplement (BOSTON PARTNERS ALL-CAP VALUE FUND - INVESTOR CLASS) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (3) Distribution Agreement Supplement (BOSTON PARTNERS ALL-CAP VALUE FUND - INSTITUTIONAL CLASS) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (4) Distribution Agreement Supplement (SCHNEIDER VALUE FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. C-6 (5) Form of Distribution Agreement Supplement (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (6) Form of Distribution Agreement Supplement (LIQUIDITY FUND FOR CREDIT UNION MEMBERS (FORMERLY CU MEMBERS' LIQUIDITY FUND)) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (7) Distribution Agreement Supplement (SENBANC FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (8) Distribution Agreement Supplement (ROBECO WPG CORE BOND FUND - INSTITUTIONAL CLASS) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2005. (9) Distribution Agreement Supplement (ROBECO WPG LARGE CAP GROWTH FUND - INSTITUTIONAL CLASS) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2005. (10) Distribution Agreement Supplement (ROBECO WPG TUDOR FUND - INSTITUTIONAL CLASS) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2005. (11) DISTRIBUTION AGREEMENT SUPPLEMENT (ROBECO WPG CORE BOND FUND - RETIREMENT CLASS) BETWEEN REGISTRANT AND PFPC DISTRIBUTORS, INC. IS FILED HEREIN. (12) DISTRIBUTION AGREEMENT SUPPLEMENT (ROBECO WPG CORE BOND FUND -INVESTOR CLASS) BETWEEN REGISTRANT AND PFPC DISTRIBUTORS, INC. IS FILED HEREIN. (13) FORM OF DISTRIBUTION AGREEMENT SUPPLEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) BETWEEN REGISTRANT AND PFPC DISTRIBUTORS, INC. IS FILED HEREWITH. (f) Bonus or Profit Sharing Contracts. (1) Fund Office Retirement Profit-Sharing and Trust Agreement, dated as of October 24, 1990, as amended is incorporated herein by reference to Post-Effective Amendment No. 49 to the Registrant's Registration Statement (No. 33-20827) filed on December 1, 1997. (2) Form of Amendment No. 1 to Fund Office Retirement Profit Sharing Plan and Trust Reflecting EGTRRA is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (g) Custodian Agreements. (1) Custodian Agreement between Registrant and Provident National Bank dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (2) Sub-Custodian Agreement among The Chase Manhattan Bank, N.A., the Registrant and Provident National Bank, dated as of July 13, 1992, relating to custody of Registrant's foreign securities is incorporated herein by reference to Post-Effective Amendment No. 8 to the Registrant's Registration Statement (No. 33-20827) filed on October 22, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. C-7 (3) Amendment No. 1 to Custodian Agreement dated August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (4) Custodian Contract between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 21 to the Registrant's Registration Statement (No. 33-20827) filed on October 28, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (5) Custody Agreement (N/I MICRO CAP FUND, N/I GROWTH FUND AND N/I MID CAP FUND (FORMERLY GROWTH & VALUE) between Registrant and Custodial Trust Company is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (6) Custodian Agreement Supplement between Registrant and PNC Bank, National Association dated October 16, 1996 is incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrant's Registration Statement (No. 33-20827) filed on November 27, 1996. (7) Custodian Agreement Supplement (BOSTON PARTNERS MID CAP VALUE FUND) between Registrant and PNC Bank, National Association is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrant's Registration Statement (No. 33-20827) filed on September 25, 1997. (8) Custodian Agreement Supplement (BOSTON PARTNERS BOND FUND) between Registrant and PNC Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 51 to the Registrant's Registration Statement (No. 33-20827) filed on December 8, 1997. (9) Custodian Agreement Supplement (SCHNEIDER SMALL CAP VALUE FUND) between Registrant and PNC Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (10) Custodian Agreement Supplement (BOSTON PARTNERS SMALL CAP VALUE FUND II (FORMERLY MICRO CAP VALUE)) between Registrant and PNC Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (11) Custodian Agreement Supplement (BOSTON PARTNERS LONG/SHORT EQUITY FUND (FORMERLY MARKET NEUTRAL)) between Registrant and PNC Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (12) Custodian Agreement Supplement (N/I SMALL CAP VALUE FUND) between Registrant and Custodial Trust Company is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (13) Form of Custodian Agreement Supplement (BOSTON PARTNERS FUND - FORMERLY LONG SHORT EQUITY) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrant's Registration Statement (No. 33-20827) filed on May 19, 1999. (14) Custodian Agreement Supplement (BOGLE SMALL CAP GROWTH FUND) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (15) Letter Agreement among Registrant, The Chase Manhattan Bank and PFPC Trust Company, dated as of July 2, 2001, relating to custody of Registrant's foreign securities is incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrant's Registration Statement (No. 33-20827) filed on May 15, 2002. (16) Custodian Agreement Supplement (BOSTON PARTNERS ALL-CAP VALUE FUND) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. C-8 (17) Custodian Agreement Supplement (SCHNEIDER VALUE FUND) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (18) Form of Custodian Agreement Supplement (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. (19) Form of Custodian Agreement Supplement (LIQUIDITY FUND FOR CREDIT UNION MEMBERS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (20) CUSTODIAN AGREEMENT (ROBECO WPG CORE BOND FUND, ROBECO WPG LARGE CAP GROWTH FUND, AND ROBECO WPG TUDOR FUND) BETWEEN REGISTRANT AND MELLON BANK N.A. IS FILED HEREWITH. (21) Custodian Agreement Supplement (SENBANC FUND) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (22) Custodian Agreement among Registrant, PFPC Trust Company and Citibank, N.A., dated as of September 13, 2005, relating to custody of Registrant's foreign securities is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2005. (23) FORM OF CUSTODIAN AGREEMENT SUPPLEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) SUPPLEMENT BETWEEN REGISTRANT AND PFPC TRUST COMPANY IS FILED HEREWITH. (h) Other Material Contracts. (1) Transfer Agency Agreement (SANSOM STREET) between Registrant and Provident Financial Processing Corporation, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (2) Shareholder Servicing Agreement (SANSOM STREET MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (3) Shareholder Servicing Agreement (SANSOM STREET GOVERNMENT OBLIGATIONS MONEY Market) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (4) Shareholder Services Plan (SANSOM STREET MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (5) Transfer Agency Agreement (BEDFORD MONEY MARKET) between Registrant and Provident Financial Processing Corporation, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (6) Transfer Agency Agreement and Supplements (BRADFORD, BETA, GAMMA, DELTA, EPSILON, ZETA, ETA AND THETA) between Registrant and Provident Financial Processing Corporation dated as of November 5, 1991 is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrant's C-9 Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (7) Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Company and PFPC Inc. dated February 1, 1995 is incorporated herein by reference to Post-Effective Amendment No. 28 to the Registrant's Registration Statement (No. 33-20827) filed on October 6, 1995. (8) Supplement to Transfer Agency and Service Agreement between Registrant, State Street Bank and Trust Company, Inc. and PFPC dated April 10, 1995 is incorporated herein by reference to Post-Effective Amendment No. 28 to the Registrant's Registration Statement (No. 33-20827) filed on October 6, 1995. (9) Amended and Restated Credit Agreement dated December 15, 1994 is incorporated herein by reference to Post-Effective Amendment No. 29 to the Registrant's Registration Statement (No. 33-20827) filed on October 25, 1995. (10) Transfer Agency Agreement Supplement (N/I MICRO CAP FUND, N/I GROWTH FUND AND N/I MID CAP FUND (FORMERLY GROWTH & VALUE)) between Registrant and PFPC Inc. dated April 14, 1996 is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (11) Administration and Accounting Services Agreement (N/I MICRO CAP FUND) between Registrant and PFPC INC. dated April 24, 1996 is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (12) Administration and Accounting Services Agreement (N/I GROWTH FUND) between Registrant and PFPC Inc. dated April 24, 1996 is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (13) Administration and Accounting Services Agreement (N/I MID CAP FUND (FORMERLY GROWTH & VALUE)) between Registrant and PFPC Inc. dated April 24, 1996 is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (14) Transfer Agreement and Service Agreement between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 37 to the Registrant's Registration Statement (No. 33-20827) filed on July 30, 1996. (15) Administration and Accounting Services Agreement (BOSTON PARTNERS LARGE CAP VALUE FUND) between Registrant and PFPC Inc. dated October 16, 1996 is incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrant's Registration Statement (No. 33-20827) filed on May 9, 1997. (16) Transfer Agency Agreement Supplement (BOSTON PARTNERS LARGE CAP VALUE FUND, INSTITUTIONAL CLASS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrant's Registration Statement (No. 33-20827) filed on November 27, 1996. (17) Transfer Agency Agreement Supplement (BOSTON PARTNERS LARGE CAP VALUE FUND - INVESTOR CLASS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrant's Registration Statement (No. 33-20827) filed on November 27, 1996. (18) Transfer Agency Agreement Supplement (BOSTON PARTNERS MID CAP VALUE FUND - INSTITUTIONAL CLASS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrant's Registration Statement (No. 33-20827) filed on September 25, 1997. (19) Transfer Agency Agreement Supplement (BOSTON PARTNERS MID CAP VALUE FUND - INVESTOR CLASS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrant's Registration Statement (No. 33-20827) filed on September 25, 1997. (20) Administration and Accounting Services Agreement (BOSTON PARTNERS MID CAP VALUE FUND) between Registrant and PFPC Inc. dated, May 30, 1997 is incorporated herein by reference to Post-Effective C-10 Amendment No. 46 to the Registrant's Registration Statement (No. 33-20827) filed on September 25, 1997. (21) Administration and Accounting Services Agreement (SCHNEIDER SMALL CAP VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (22) Transfer Agency Agreement Supplement (SCHNEIDER SMALL CAP VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (23) Transfer Agency Agreement Supplement (BOSTON PARTNERS SMALL CAP VALUE FUND II (FORMERLY MICRO CAP VALUE) - INSTITUTIONAL CLASS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (24) Transfer Agency Agreement Supplement (BOSTON PARTNERS SMALL CAP VALUE FUND II (FORMERLY MICRO CAP VALUE) - INVESTOR CLASS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (25) Administration and Accounting Services Agreement (BOSTON PARTNERS MICRO CAP VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (26) Administrative Services Agreement between Registrant and Provident Distributors, Inc. dated as of May 29, 1998 and relating to the n/i family of funds, Schneider Small Cap Value Fund and Institutional Shares of the Boston Partners Funds is incorporated herein by reference to Post-Effective Amendment No. 56 to the Registrant's Registration Statement (No. 33-20827) filed on June 25, 1998. (27) Administrative Services Agreement Supplement (BOSTON PARTNERS LONG/SHORT EQUITY FUND (FORMERLY MARKET NEUTRAL) - INSTITUTIONAL CLASS) between Registrant and Provident Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (28) Administrative and Accounting Services Agreement (BOSTON PARTNERS LONG/SHORT EQUITY FUND (FORMERLY MARKET NEUTRAL) - INSTITUTIONAL AND INVESTOR CLASSES) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (29) Transfer Agency Agreement Supplement (BOSTON PARTNERS LONG/SHORT EQUITY FUND (FORMERLY MARKET NEUTRAL) - INSTITUTIONAL AND INVESTOR CLASSES) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (30) Transfer Agency Agreement Supplement (N/I SMALL CAP VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (31) Administration and Accounting Services Agreement (N/I SMALL CAP VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (32) Co-Administration Agreement (N/I SMALL CAP VALUE FUND) between Registrant and Bear Stearns Funds Management, Inc. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (33) Administrative Services Agreement (N/I SMALL CAP VALUE FUND) between Registrant and Provident Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (34) Form of Transfer Agency Agreement Supplement (BOSTON PARTNERS FUND (FORMERLY LONG-SHORT EQUITY)) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective C-11 Amendment No. 65 to the Registrant's Registration Statement (No. 33-20827) filed on May 19, 1999. (35) Form of Administrative Services Agreement Supplement (BOSTON PARTNERS FUND (FORMERLY LONG-SHORT EQUITY) - INSTITUTIONAL SHARES) between Registrant and Provident Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrant's Registration Statement (No. 33-20827) filed on May 19, 1999. (36) Form of Administration and Accounting Services Agreement (BOSTON PARTNERS FUND (FORMERLY LONG-SHORT EQUITY)) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrant's Registration Statement (No. 33-20827) filed on May 19, 1999. (37) Transfer Agency Agreement Supplement (BOGLE SMALL CAP GROWTH FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (38) Administrative Services Agreement (BOGLE SMALL CAP GROWTH FUND) between Registrant and Provident Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (39) Non 12b-1 Shareholder Services Plan and Agreement (BOGLE SMALL CAP GROWTH - INVESTOR SHARES) is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (40) Agreement between E*TRADE Group, Inc., Registrant and Registrant's principal underwriter is incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrant's Registration Statement (No. 33-20827) filed on December 1, 1999. (41) Fee Waiver Agreement for n/i Numeric Investors Funds is incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrant's Registration Statement (No. 33-20827) filed on December 1, 1999. (42) Administration and Accounting Services Agreement (BOGLE SMALL CAP GROWTH FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrant's Registration Statement (No. 33-20827) filed on December 1, 1999. (43) Solicitation Agreement between n/i numeric Investors and Shareholder Communications Corporation is incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrant's Registration Statement (No. 33-20827) filed on December 1, 1999. (44) Administrative Services Assignment Agreement between Registrant and PFPC Distributors, Inc. dated January 2, 2001 is incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrant's Registration Statement (No. 33-20827) filed on March 15, 2001. (45) Transfer Agency Supplement (BEAR STEARNS MONEY MARKET FAMILY) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 75 to the Registrant's Registration Statement (No. 33-20827) filed on December 4, 2001. (46) Form of Transfer Agency Supplement (BOSTON PARTNERS ALL-CAP VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (47) Form of Administration and Accounting Services Agreement (BOSTON PARTNERS ALL-CAP VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrant's Registration Statement (No. 33-20827) filed on May 15, 2002. (48) Administrative Services Agreement Supplement (BOSTON PARTNERS ALL-CAP VALUE FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (49) Transfer Agency Supplement (SCHNEIDER VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. C-12 (50) Form of Administration and Accounting Services Agreement (SCHNEIDER VALUE FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 78 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 2002. (51) Administrative Services Agreement Supplement (SCHNEIDER VALUE FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (52) Non-12b-1 Shareholder Services Plan and Related Form of Shareholder Servicing Agreement is incorporated herein by reference to Post-Effective Amendment No. 79 to the Registrant's Registration Statement (No. 33-20827) filed on September 18, 2002. (53) Shareholder Servicing Agreement (BOGLE SMALL CAP GROWTH FUND) is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (54) Administrative Services Agreement Supplement (BOSTON PARTNERS FUNDS - INVESTOR SHARES) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (55) Form of Administration and Accounting Services Agreement (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. (56) Form of Administrative Services Agreement Supplement (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. (57) Form of Transfer Agency Agreement Supplement (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. (58) Amended and Restated Non-12b-1 Shareholder Services Plan (NUMERIC FUNDS) is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. (59) Form of Administration and Accounting Services Agreement (LIQUIDITY FUND FOR THE CREDIT UNION MEMBERS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (60) Form of Administrative Services Agreement Supplement (LIQUIDITY FUND FOR THE CREDIT UNION MEMBERS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (61) Form of Transfer Agency Agreement Supplement (LIQUIDITY FUND FOR THE CREDIT UNION MEMBERS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (62) Amended and Restated Non-12b-1 Shareholder Services Plan (LIQUIDITY FUND FOR THE CREDIT UNION MEMBERS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (63) Form of Transfer Agency Agreement Supplement (Customer Identification Program) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 84 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2003. C-13 (64) Regulatory Administration Services Agreement between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 84 to the Registrant's Registration Statement (No. 33-20827) filed on December 29, 2003. (65) Administration and Accounting Services Agreement (ROBECO WPG CORE BOND FUND, ROBECO WPG LARGE CAP GROWTH FUND, AND ROBECO WPG TUDOR FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (66) Administrative Services Agreement Supplement (ROBECO WPG CORE BOND FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (67) Administrative Services Agreement Supplement (ROBECO WPG LARGE CAP GROWTH FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (68) Administrative Services Agreement Supplement (ROBECO WPG TUDOR FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (69) Transfer Agency Agreement Supplement (ROBECO WPG CORE BOND FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (70) Transfer Agency Agreement Supplement (ROBECO WPG LARGE CAP GROWTH FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (71) Transfer Agency Agreement Supplement (ROBECO WPG TUDOR FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (72) Non-12b-1 Shareholder Services Plan and Related Form of Shareholder Servicing Agreement (ROBECO WPG CORE BOND FUND - INSTITUTIONAL CLASS) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (73) Non-12b-1 Shareholder Services Plan and Related Form of Shareholder Servicing Agreement (ROBECO WPG LARGE CAP GROWTH FUND - INSTITUTIONAL CLASS) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (74) Non-12b-1 Shareholder Services Plan and Related Form of Shareholder Servicing Agreement (ROBECO WPG TUDOR FUND - INSTITUTIONAL CLASS) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (75) Non-12b-1 Shareholder Services Plan and Related Form of Shareholder Servicing Agreement (ROBECO WPG CORE BOND FUND - RETIREMENT CLASS) is incorporated herein by reference to Post-Effective Amendment No. 97 to the Registrant's Registration Statement (No. 33-20827) filed on August 19, 2005. (76) Administration and Accounting Services Agreement (SENBANC FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (77) Transfer Agency Agreement Supplement (SENBANC FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. C-14 (78) Administrative Services Agreement Supplement (SENBANC FUND) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (79) Amended Schedule A to Regulatory Administration Services Agreement (SENBANC FUND) between Registrant and PFPC Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (80) FORM OF ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) BETWEEN REGISTRANT AND PFPC INC. IS FILED HEREWITH. (81) FORM OF TRANSFER AGENCY AGREEMENT SUPPLEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) BETWEEN REGISTRANT AND PFPC INC. IS FILED HEREWITH. (82) FORM OF ADMINISTRATION SERVICES AGREEMENT SUPPLEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) BETWEEN REGISTRANT AND PFPC INC. IS FILED HEREWITH. (83) FORM OF AMENDED SCHEDULE A TO REGULATORY ADMINISTRATION SERVICES AGREEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) BETWEEN REGISTRANT AND PFPC INC. IS FILED HEREWITH. (i) (1) Opinion and Consent of Counsel To be filed by amendment. (j) (1) Consent of Independent Public Accountants To be filed by amendment. (k) None (l) Initial Capital Agreements. (1) Subscription Agreement, relating to Classes A through N, is incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrant's Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (2) Subscription Agreement between Registrant and Planco Financial Services, Inc., relating to Classes O and P is incorporated herein by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1990. (3) Subscription Agreement between Registrant and Planco Financial Services, Inc., relating to Class Q is incorporated herein by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1990. (4) Subscription Agreement between Registrant and Counsellors Securities Inc. relating to Classes R, S, and Alpha 1 through Theta 4 is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (5) Purchase Agreement between Registrant and Numeric Investors, L.P. relating to Class FF (N/I MICRO CAP FUND) is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (6) Purchase Agreement between Registrant and Numeric Investors, L.P. relating to Class GG (N/I GROWTH FUND) is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (7) Purchase Agreement between Registrant and Numeric Investors, L.P. relating to Class HH (N/I MID C-15 CAP FUND (FORMERLY GROWTH & VALUE)) is incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996. (8) Purchase Agreement between Registrant and Boston Partners Asset Management, L.P. relating to Classes QQ, RR and SS (BOSTON PARTNERS LARGE CAP VALUE FUND) is incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrant's Registration Statement (No. 33-20827) filed on May 9, 1997. (9) Purchase Agreement between Registrant and Boston Partners Asset Management, L.P. relating to Classes TT and UU (BOSTON PARTNERS MID CAP VALUE FUND) is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrant's Registration Statement (No. 33-20827) filed on September 25, 1997. (10) Purchase Agreement between Registrant and Boston Partners Asset Management L.P. relating to Classes VV and WW (BOSTON PARTNERS BOND FUND) is incorporated herein by reference to Post-Effective Amendment No. 51 to the Registrant's Registration Statement (No. 33-20827) filed on December 8, 1997. (11) Purchase Agreement between Registrant and Schneider Capital Management Company relating to Class YY (SCHNEIDER SMALL CAP VALUE FUND) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (12) Purchase Agreement between Registrant and Boston Partners Asset Management, L.P. relating to Classes DDD and EEE (BOSTON PARTNERS SMALL CAP VALUE FUND II (FORMERLY MICRO CAP VALUE)) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (13) Purchase Agreement between Registrant and Boston Partners Asset Management relating to Classes III and JJJ (BOSTON PARTNERS LONG/SHORT EQUITY FUND (FORMERLY MARKET NEUTRAL)) is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (14) Purchase Agreement between Registrant and Provident Distributors, Inc. relating to Class MMM (N/I SMALL CAP VALUE FUND) is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (15) Form of Purchase Agreement between Registrant and Boston Partners Asset Management, L. P. relating to Classes KKK and LLL (BOSTON PARTNERS FUND (FORMERLY LONG-SHORT EQUITY)) is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrant's Registration Statement (No. 33-20827) filed on May 19, 1999. (16) Purchase Agreement (BOGLE SMALL CAP GROWTH FUND) between Registrant and Bogle Investment Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrant's Registration Statement (No. 33-20827) filed on September 30, 1999. (17) Purchase Agreement (BOSTON PARTNERS ALL-CAP VALUE FUND) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (18) Purchase Agreement (SCHNEIDER VALUE FUND) between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (19) Purchase Agreement (BAKER 500 GROWTH FUND) between Registrant and Baker 500 Corporation is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. (20) Form of Purchase Agreement (INSTITUTIONAL LIQUIDITY FUND FOR CREDIT UNIONS) between Registrant and WesCorp Investment Services, LLC is incorporated herein by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement (No. 33-20827) filed on March 5, 2003. C-16 (21) Form of Purchase Agreement (LIQUIDITY FUND FOR CREDIT UNION MEMBERS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) between Registrant and WesCorp Investment Services, LLC is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (22) Purchase Agreement (ROBECO WPG CORE BOND FUND ) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (23) Purchase Agreement (ROBECO WPG LARGE CAP GROWTH FUND) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (24) Purchase Agreement (ROBECO WPG TUDOR FUND) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrant's Registration Statement (No. 33-20827) filed on June 6, 2005. (25) Purchase Agreement (SENBANC FUND) between Registrant and Hilliard Lyons Research Advisers is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (26) FORM OF PURCHASE AGREEMENT (BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO) BETWEEN REGISTRANT AND BEAR STEARNS ASSET MANAGEMENT INC. IS FILED HEREWITH. (m) Rule 12b-1 Plan. (1) Plan of Distribution (SANSOM STREET MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (2) Plan of Distribution (BEDFORD MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (3) Amendment No. 1 to Plans of Distribution (CLASSES A THROUGH Q) is incorporated herein by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement (No. 33-20827) filed on October 24, 1991, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (4) Plan of Distribution (ZETA MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (5) Plan of Distribution (ETA MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (6) Plan of Distribution (THETA MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement (No. 33-20827) filed on July 15, 1992, and refilled electronically with Post-Effective Amendment No. 61 to Registrant's Registration Statement filed on October 30, 1998. (7) Plan of Distribution (BOSTON PARTNERS LARGE CAP VALUE FUND - INVESTOR CLASS) is incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrant's Registration Statement (No. 33-20827) filed on May 9, 1997. (8) Plan of Distribution (BOSTON PARTNERS MID CAP VALUE FUND - INVESTOR CLASS) is incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrant's Registration Statement (No. 33- C-17 20827) filed on May 9, 1997. (9) Plan of Distribution (BOSTON PARTNERS BOND FUND - INVESTOR CLASS) is incorporated herein by reference to Post-Effective Amendment No. 51 to the Registrant's Registration Statement (No. 33-20827) filed on December 8, 1997. (10) Plan of Distribution (BOSTON PARTNERS SMALL CAP VALUE FUND II (FORMERLY MICRO CAP VALUE) - INVESTOR CLASS) is incorporated herein by reference to Post-Effective Amendment No. 53 to the Registrant's Registration Statement (No. 33-20827) filed on April 10, 1998. (11) Amendment to Plans of Distribution pursuant to Rule 12b-1 is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrant's Registration Statement (No. 33-20827) filed on December 14, 1998. (12) Plan of Distribution (BOSTON PARTNERS LONG/SHORT EQUITY FUND (FORMERLY MARKET NEUTRAL) - INVESTOR CLASS) is incorporated herein by reference to Post-Effective Amendment No. 62 to the Registrant's Registration Statement (No. 33-20827) filed on November 12, 1998. (13) Plan of Distribution (PRINCIPAL MONEY MARKET) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1998. (14) Plan of Distribution (BOSTON PARTNERS FUND (FORMERLY LONG SHORT EQUITY) - INVESTOR CLASS) is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrant's Registration Statement (No. 33-20827) filed on May 19, 1999. (15) Plan of Distribution pursuant to Rule 12b-1 (BOSTON PARTNERS ALL-CAP VALUE FUND) is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement (No. 33-20827) filed on November 1, 2002. (16) Plan of Distribution pursuant to Rule 12b-1 (LIQUIDITY FUND FOR CREDIT UNION MEMBERS (FORMERLY THE CU MEMBERS' LIQUIDITY FUND)) is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement (No. 33-20827) filed on April 8, 2003. (17) Plan of Distribution pursuant to Rule 12b-1 (SENBANC FUND) is incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrant's Registration Statement (No. 33-20827) filed on September 27, 2005. (18) Plan of Distribution pursuant to Rule 12b-1 (ROBECO CORE BOND FUND - INVESTOR CLASS) is incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrant's Registration Statement (No. 33-20827) filed on September 27, 2005. (19) Agreement between Registrant, Bear, Stearns Securities Corp. and PFPC Distributors, Inc. dated as of November 17, 2005 is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrant's Registration Statement filed on December 29, 2005. (n) Rule 18f-3 Plan. (1) Amended Rule 18f-3 Plan is incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrant's Registration Statement (No. 33-20827) filed on September 27, 2005. (p) Code of Ethics. (1) CODE OF ETHICS OF THE REGISTRANT IS FILED HEREWITH. (2) CODE OF ETHICS OF BOSTON PARTNERS ASSET MANAGEMENT, L.P. IS FILED HEREWITH. (3) CODE OF ETHICS OF NUMERIC INVESTORS LLC IS FILED HEREWITH. (4) CODE OF ETHICS OF SCHNEIDER CAPITAL MANAGEMENT COMPANY IS FILED HEREWITH. (5) CODE OF ETHICS OF BOGLE INVESTMENT MANAGEMENT, L.P. IS FILED C-18 HEREWITH. (6) CODE OF ETHICS OF PFPC DISTRIBUTORS, INC. IS FILED HEREWITH. (7) Code of Ethics of Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 88 to the Registrant's Registration Statement (No. 33-20827) filed on December 20, 2004. (8) Code Of Ethics of J.J.B. Hilliard W.L. Lyons, Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrant's Registration Statement (No. 33-20827) filed on November 25, 2005. (9) CODE OF ETHICS OF BEAR STEARNS ASSET MANAGEMENT INC. IS FILED HEREWITH. Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT None. Item 25. INDEMNIFICATION Sections 1, 2, 3 and 4 of Article VIII of Registrant's Articles of Incorporation, as amended, incorporated herein by reference as Exhibits (a)(1) and (a)(3), provide as follows: Section 1. To the fullest extent that limitations on the liability of directors and officers are permitted by the Maryland General Corporation Law, no director or officer of the Corporation shall have any liability to the Corporation or its shareholders for damages. This limitation on liability applies to events occurring at the time a person serves as a director or officer of the Corporation whether or not such person is a director or officer at the time of any proceeding in which liability is asserted. Section 2. The Corporation shall indemnify and advance expenses to its currently acting and its former directors to the fullest extent that indemnification of directors is permitted by the Maryland General Corporation Law. The Corporation shall indemnify and advance expenses to its officers to the same extent as its directors and to such further extent as is consistent with law. The Board of Directors may by law, resolution or agreement make further provision for indemnification of directors, officers, employees and agents to the fullest extent permitted by the Maryland General Corporation law. Section 3. No provision of this Article shall be effective to protect or purport to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Section 4. References to the Maryland General Corporation Law in this Article are to the law as from time to time amended. No further amendment to the Articles of Incorporation of the Corporation shall decrease, but may expand, any right of any person under this Article based on any event, omission or proceeding prior to such amendment. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Sections 2 and 3 of the Assumption Agreement between PNC Bank, N.A. ("PNC") and BlackRock Institutional Management Corporation ("BIMC"), dated April 29, 1998 and incorporated herein by reference to exhibit (d)(3), provide for the indemnification of BIMC and PNC against certain losses. C-19 Section 13 of the Investment Advisory Agreements between Registrant and Numeric Investors, LLC ("Numeric"), each dated November 12, 2004 and incorporated herein by reference to exhibits (d)(15), (d)(16), (d)(17) and (d)(18), provides for the indemnification of Numeric against certain losses. Section 12 of the Investment Advisory Agreements between Registrant and Boston Partners Asset Management, L.P. ("Boston Partners"), each dated October 25, 2002 and incorporated herein by reference to exhibits (d)(4), (d)(5), (d)(6), (d)(7), (d)(8), and (d)(9), provides for the indemnification of Boston Partners against certain losses. Section 12 of the Investment Advisory Agreement between Registrant and Bogle Investment Management, L.P. ("Bogle"), dated September 15, 1999 and incorporated herein by reference to exhibit (d) (10) provides for the indemnification of Bogle against certain losses. Section 12 of the Investment Advisory Agreements between Registrant and WesCorp Investment Services, LLC is incorporated herein by reference as exhibits (d)(13) and (d)(14) provides for the indemnification of WesCorp Investment Services, LLC against certain losses. Section 12 of the Investment Advisory Agreements between the Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference as exhibits (d)(27), (d)(28) and (d)(29) provides for the indemnification of Weiss, Peck & Greer Investments against certain losses. Section 9 of the Distribution Agreement between Registrant and PFPC Distributors, Inc. ("PFPC"), dated January 2, 2001 and incorporated herein by reference to exhibit (e)(1) provides for the indemnification of PFPC Distributors against certain losses. Section 12 of the Investment Advisory Agreement between the Registrant and Hilliard Lyons Research Advisors, a division of J. J. B. Hilliard, W. L. Lyons ("Hilliard") is incorporated herein by reference as exhibit (d)(27) provides for the indemnification of Hilliard against certain losses. Section 12 of the Investment Advisory Agreement between the Registrant and Bear Stearns Asset Management Inc., ("Bear Stearns") is filed herewith as exhibit (d)(31) provides for the indemnification of Bear Stearns against certain losses. Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS. 1. BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION: BlackRock Institutional Management Corporation ("BIMC") is an indirect majority-owned subsidiary of The PNC Financial Services Group, Inc. BIMC's principal business address is 100 Bellevue Parkway, Wilmington, DE 19809. BIMC is registered under the Investment Advisers Act of 1940 and serves as an investment adviser for registered investment companies. Information as to the directors and officers of BIMC is as follows:
NAME AND POSITION WITH OTHER COMPANY POSITION WITH OTHER COMPANY ---------------------- ------------- --------------------------- BIMC ---- Paul L. Audet BlackRock Provident Treasurer Director Institutional Funds Wilmington, DE BlackRock Funds Treasurer Wilmington, DE
C-20 BlackRock Capital Director Management, Inc. Wilmington, DE BlackRock Advisors, Inc. Director Wilmington, DE BlackRock Financial Director Management, Inc. New York, NY BlackRock (Japan), Inc. Chief Financial Officer & New York, NY Managing Director BlackRock International, Chief Financial Officer & Ltd. Managing Director Edinburgh, Scotland BlackRock, Inc. Chief Financial Officer & New York, NY Managing Director Laurence J. Carolan BlackRock Capital Managing Director & Director Managing Director and Director Management, Inc. Wilmington, DE BlackRock, Inc. Managing Director New York, NY BlackRock Advisors, Inc. Managing Director & Director Wilmington, DE Robert P. Connolly BlackRock Capital Managing Director, General Managing Director, General Management, Inc. Counsel & Secretary Counsel and Secretary Wilmington, DE BlackRock, Inc. Managing Director, General New York, NY Counsel & Secretary BlackRock International, Managing Director, General Ltd. Counsel & Secretary Edinburgh, Scotland BlackRock (Japan), Inc. Managing Director, General New York, NY Counsel & Secretary BlackRock Advisors, Inc. Managing Director, General Wilmington, DE Counsel & Secretary BlackRock Financial Managing Director, General Management, Inc. Counsel & Secretary New York, NY
C-21 BlackRock Investments, General Counsel & Secretary Inc. New York, NY Laurence D. Fink BlackRock Funds President & Trustee Chief Executive Officer Wilmington, DE BlackRock Capital Chief Executive Officer Management, Inc. Wilmington, DE BlackRock, Inc. Chairman & CEO New York, NY BlackRock International, Chairman & CEO Ltd. Edinburgh, Scotland BlackRock (Japan), Inc. Chairman & CEO New York, NY BlackRock Investments, Chairman & CEO Inc. New York, NY BlackRock Advisors, Inc. Chief Executive Officer Wilmington, DE BlackRock Financial Chairman & CEO Management, Inc. New York, NY BlackRock HPB Management Director LLC New York, NY Robert S. Kapito BlackRock Capital Vice Chairman & Director Vice Chairman and Director Management, Inc. Wilmington, DE BlackRock International, Vice Chairman & Director Ltd. Edinburgh, Scotland BlackRock, Inc. Vice Chairman New York, NY BlackRock Advisors, Inc. Vice Chairman & Director Wilmington, DE
C-22 BlackRock (Japan), Inc. Vice Chairman & Director New York, NY BlackRock Investments, Director Inc. New York, NY BlackRock Financial Vice Chairman & Director Management, Inc. New York, NY Kevin M. Klingert BlackRock Capital Managing Director & Director Managing Director and Director Management, Inc. Wilmington, DE BlackRock, Inc. Managing Director New York, NY BlackRock Advisors, Inc. Managing Director & Director Wilmington, DE BlackRock Financial Managing Director Management, Inc. New York, NY John P. Moran BlackRock Capital Managing Director & Director Managing Director and Director Management, Inc. Wilmington, DE BlackRock, Inc. Managing Director New York, NY BlackRock Advisors, Inc. Managing Director & Director Wilmington, DE BlackRock Investments, President Inc. New York, NY Ralph L. Schlosstein BlackRock Provident Chairman & President President and Director Institutional Funds Wilmington, DE BlackRock Capital President & Director Management, Inc. Wilmington, DE BlackRock, Inc. President & Director New York, NY BlackRock International, President & Director Ltd. Edinburgh, Scotland BlackRock (Japan), Inc. President & Director New York, NY
C-23 BlackRock Investments, Director Inc. New York, NY BlackRock Advisors, Inc. President & Director Wilmington, DE BlackRock Financial President & Director Management, Inc. New York, NY BlackRock HPB Management Director LLC New York, NY Keith T. Anderson BlackRock Capital Managing Director Managing Director Management, Inc. Wilmington, DE BlackRock, Inc. Managing Director New York, NY BlackRock Advisors, Inc. Managing Director Wilmington, DE BlackRock Financial Managing Director Management, Inc. New York, NY BlackRock International, Managing Director Ltd. Edinburgh, Scotland BlackRock (Japan), Inc. Managing Director New York, NY
2. NUMERIC INVESTORS, LLC: The sole business activity of Numeric Investors, LLC ("Numeric"), One Memorial Drive, 4th Floor, Cambridge, Massachusetts 02142, is to serve as an investment adviser. Numeric is registered under the Investment Advisers Act of 1940. Information as to the directors and officers of Numeric is as follows:
NAME AND POSITION WITH OTHER COMPANY POSITION WITH OTHER COMPANY ---------------------- ------------- --------------------------- NUMERIC ------- P. Andrews McLane TA Associates Managing Director and Member of Director of Numeric Boston, MA the Executive Committee of Board Michael Wilson TA Associates Principal Director of Numeric Boston, MA
C-24 3. BOGLE INVESTMENT MANAGEMENT, LP: The sole business activity of Bogle Investment Management, LP ("Bogle"), 57 River Street, Suite 206, Wellesley, Massachusetts 02481, is to serve as an investment adviser. Bogle is registered under the Investment Advisers Act of 1940. The directors and officers have not held any positions with other companies during the last two fiscal years. 4. BOSTON PARTNERS ASSET MANAGEMENT, LLC: The sole business activity of Boston Partners Asset Management, LLC ("BPAM"), 28 State Street, 21st Floor, Boston, Massachusetts 02109, is to serve as an investment adviser. BPAM is registered under the Investment Advisers Act of 1940. BPAM is registered under the Investment Advisers Act of 1940 and serves as an investment adviser for registered investment companies. Information as to the directors and officers of Boston is as follows:
NAME AND POSITION WITH OTHER COMPANY POSITION WITH OTHER COMPANY ---------------------- ------------- --------------------------- BPAM ---- William J. Kelly Robeco USA, LLC Chief Financial Officer Chief Executive Officer Robeco USA, Inc. Chief Executive Officer and Treasurer Mary Ann Iudice Robeco USA, LLC Chief Compliance Officer Compliance Officer Robeco USA, Inc. Chief Compliance Officer
5. SCHNEIDER CAPITAL MANAGEMENT COMPANY: The sole business activity of Schneider Capital Management Company ("Schneider"), 460 E. Swedesford Road, Suite 1080, Wayne, PA 19087, is to serve as an investment adviser. Schneider is registered under the Investment Advisers Act of 1940. Information as to the directors and officers of Schneider is as follows:
NAME AND POSITION WITH OTHER COMPANY POSITION WITH OTHER COMPANY ---------------------- ------------- --------------------------- SCHNEIDER --------- Arnold C. Schneider, III Turnbridge Management President President and Chief Investment Partners Corp. Officer Steven J. Fellin Turnbridge Management Vice President Sr. Vice President and Chief Partners Corp. Financial Officer
C-25 6. WESCORP INVESTMENT SERVICES, LLC: The sole business activity of WesCorp Investment Services, LLC, 924 Overland Court, San Dimas, California 91773 ("WesCorp"), is to serve as an investment adviser. WesCorp is registered under the Investment Advisers Act of 1940. The directors and officers have not held any positions with other companies during the last two fiscal years. 7. WEISS, PECK & GREER INVESTMENTS: The sole business activity of Weiss, Peck & Greer Investments ("WPG"), 909 Third Avenue, New York, NY 10022, is to serve as an investment adviser. WPG is registered under the Investment Advisers Act of 1940. Information as to the directors and officers of WPG is as follows:
NAME AND POSITION WITH OTHER COMPANY POSITION WITH OTHER COMPANY ---------------------- ------------- --------------------------- WPG --- Stan Bichel Robeco USA, LLC Chief Executive Officer Chief Executive Officer Robeco USA, Inc. Chairman of the Board William J. Kelly Robeco USA, LLC Chief Financial Officer Chief Financial Officer Robeco USA, Inc. Chief Executive and Treasurer Mary Ann Iudice Robeco USA, LLC Chief Compliance Officer Chief Compliance Officer Robeco USA, Inc. Chief Compliance Officer Robert Kleinberg Robeco USA, Inc. Chief Legal Officer Chief Legal Officer
8. HILLIARD LYONS RESEARCH ADVISORS: The sole business activity of Hilliard Lyons Research Advisors ("Hilliard"), 501 South Fourth Street, Louisville, Kentucky 40202, is to serve as an investment adviser. Hilliard is registered under the Investment Advisers Act of 1940. Information as to the directors and officers of Hilliard is as follows:
NAME AND POSITION WITH OTHER COMPANY POSITION WITH OTHER COMPANY ---------------------- ------------- --------------------------- HILLIARD -------- James M. Rogers None Executive Vice President, Chief Operating Officer and Director James R. Allen None President and Director
C-26 Paul J. Moretti None Executive Vice President and Chief Financial Officer William S. Demchak PNC Financial Services Vice Chairman Director Group, Inc. Joseph C. Guyaux PNC Financial Services President Director Group, Inc. Joan L. Gulley PNC Advisors Executive Vice President Director John R. Bugh None Executive Vice President Carmella Miller None Executive Vice President, Chief Administrative Officer and Director
9. BEAR STEARNS ASSET MANAGEMENT INC. The sole business activity of Bear Stearns Asset Management Inc. ("Bear Stearns"), 383 Madison Avenue, New York, New York 10179 is to serve as an investment adviser. [Bear Stearns is registered under the Investment Advisers Act of 1940]. Information as to the directors and officers of Bear Stearns is as follows:
NAME AND POSITION WITH BEAR OTHER COMPANY POSITION WITH OTHER COMPANY --------------------------- ------------- --------------------------- STEARNS ------- [Information to be provided]
Item 27. PRINCIPAL UNDERWRITER (a) PFPC Distributors, Inc. ("the Distributor") is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the National Association of Securities Dealers. As of April 9, 2006, the Distributor acted as principal underwriter for the following investment companies: AFBA 5 Star Funds, Inc. Atlantic Whitehall Funds Trust CRM Mutual Fund Trust E.I.I. International Property Fund E.I.I. Realty Securities GuideStone Funds Highland Floating Rate Fund Highland Floating Rate Advantage Fund Harris Insight Funds Trust Kalmar Pooled Investment Trust Matthews Asian Funds Metropolitan West Funds C-27 Old Westbury Funds The RBB Fund, Inc. RS Investment Trust Stratton Growth Fund, Inc. Stratton Monthly Dividend REIT Shares, Inc. The Stratton Funds, Inc. Van Wagoner Funds Wilshire Mutual Funds, Inc. Wilshire Variable Insurance Trust Distributed by ABN AMRO Distribution Services (USA), Inc., a wholly-owned subsidiary of PFPC Distributors, Inc.: ABN AMRO Funds Distributed by BlackRock Distributors, Inc., a wholly-owned subsidiary of PFPC Distributors, Inc.: BlackRock Funds BlackRock Bond Allocation Target Shares BlackRock Liquidity Funds International Dollar Reserve Fund I, Ltd. Distributed by MGI Funds Distributors, Inc., a wholly-owned subsidiary of PFPC Distributors, Inc.: MGI Funds Distributed by Northern Funds Distributors, LLC, a wholly-owned subsidiary of PFPC Distributors, Inc.: Northern Funds Northern Institutional Funds (b) The Distributor is a Massachusetts corporation located at 301 Bellevue Parkway, Wilmington, DE 19809. The Distributor is a wholly-owned subsidiary of PFPC, Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., a publicly traded company. The following is a list of the directors and executive officers of the Distributor: NAME POSITION(S) WITH DISTRIBUTOR ---- ---------------------------- Brian Burns Chairman; Director; President; Chief Executive Officer Michael Denofrio Director Nicholas Marsini Director Rita G. Adler Chief Compliance Officer John Munera Anti-Money Laundering Officer Christine P. Ritch Chief Legal Officer; Assistant Secretary; Assistant Clerk C-28 Bradley A. Stearns Secretary; Clerk Julie Bartos Assistant Secretary; Assistant Clerk Amy Brennan Assistant Secretary; Assistant Clerk Craig Stokarski Treasurer; Chief Financial Officer; Financial & Operations Principal Maria Schaffer Assistant Treasurer; Controller Bruno Di Stefano Vice President Susan K. Moscaritolo Vice President (c) Not applicable. Item 28. LOCATION OF ACCOUNTS AND RECORDS (1) PFPC Trust Company (assignee under custodian agreement), 8800 Tinicum Boulevard, Suite 200, Philadelphia, Pennsylvania 19153 (records relating to its functions as sub-adviser and custodian). (2) PFPC Distributors, Inc., 760 Moore Road, Valley Forge, Pennsylvania 19406. (records relating to its functions as distributor). (3) BlackRock Institutional Management Corporation, Bellevue Corporate Center, 100 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its functions as investment adviser, sub-adviser and administrator). (4) PFPC Inc., Bellevue Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its functions as transfer agent and dividend disbursing agent). (5) Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets, Philadelphia, Pennsylvania 19103 (Registrant's Articles of Incorporation, By-Laws and Minute Books). (6) Numeric Investors LLC, 1 Memorial Drive, Cambridge, Massachusetts 02142 (records relating to its function as investment adviser). (7) Boston Partners Asset Management, L.L.C., 28 State Street, Boston, Massachusetts 02111 (records relating to its function as investment adviser). (8) Schneider Capital Management Co., 460 East Swedesford Road, Suite 1080, Wayne, Pennsylvania 19087 (records relating to its function as investment adviser). (9) Bogle Investment Management, L.P., 57 River Street, Suite 206, Wellesley, Massachusetts 02481 (records relating to its function as investment adviser). (10) Bear Stearns & Co. Inc., Funds Management Department, 383 Madison Avenue, New York, New York 10179 (records relating to its function as co-administrator for investment portfolios advised by Numeric Investors, LLC) (11) WesCorp Investment Services, LLC, 924 Overland Court, San Dimas, California 91773 (records relating to its function as investment adviser). (12) Weiss, Peck & Greer Investments, 909 Third Avenue, New York, New York 10022 (records relating to its function as investment adviser). (13) Hilliard Lyons Research Advisors, a division of J. J. B. Hilliard, W. L. Lyons, Inc., 501 South 4th Street, Louisville, Kentucky 40202 (records relating to its function as investment adviser). (14) Bear Stearns & Co. Inc., 383 Madison Avenue, New York, New York 10179 (records relating to its function as investment adviser). C-29 Item 29. MANAGEMENT SERVICES None. Item 30. UNDERTAKINGS (a) Registrant hereby undertakes to hold a meeting of shareholders for the purpose of considering the removal of directors in the event the requisite number of shareholders so request. (b) Registrant hereby undertakes to furnish each person to whom a prospectus is delivered a copy of Registrant's latest annual report to shareholders upon request and without charge. C-30 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Post-Effective Amendment No. 103 to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Wilmington, and State of Delaware on the 18th day of July, 2006. THE RBB FUND, INC. BY: /s/ EDWARD J. ROACH ----------------------- Edward J. Roach President and Treasurer Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to Registrant's Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ EDWARD J. ROACH President (Principal Executive Officer) and July 18, 2006 - ------------------- Treasurer (Principal Financial and Accounting Edward J. Roach Officer) *J. RICHARD CARNALL Director July 18, 2006 - ------------------- J. Richard Carnall *FRANCIS J. MCKAY Director July 18, 2006 - ----------------- Francis J. McKay *MARVIN E. STERNBERG Director July 18, 2006 - -------------------- Marvin E. Sternberg *JULIAN A. BRODSKY Director July 18, 2006 - ------------------ Julian A. Brodsky *ARNOLD M. REICHMAN Director July 18, 2006 - ------------------- Arnold M. Reichman *ROBERT SABLOWSKY Director July 18, 2006 - ----------------- Robert Sablowsky *ROBERT STRANIERE Director July 18, 2006 - ----------------- Robert Straniere *BY: /s/ EDWARD J. ROACH - ------------------------ Edward J. Roach Attorney-in-Fact
C-31 THE RBB FUND, INC. (the "Company") POWER OF ATTORNEY Know All Men by These Presents, that the undersigned, Francis J. McKay, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved. DATED: November 9, 2000 /s/ FRANCIS J. MCKAY -------------------- Francis J. McKay C-32 THE RBB FUND, INC. (the "Company") POWER OF ATTORNEY Know All Men by These Presents, that the undersigned, Marvin E. Sternberg, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved. DATED: November 9, 2000 /s/ MARVIN E. STERNBERG ----------------------- Marvin E. Sternberg C-33 THE RBB FUND, INC. (the "Company") POWER OF ATTORNEY Know All Men by These Presents, that the undersigned, Julian Brodsky, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved. DATED: November 9, 2000 /s/ JULIAN BRODSKY ------------------ Julian Brodsky C-34 THE RBB FUND, INC. (the "Company") POWER OF ATTORNEY Know All Men by These Presents, that the undersigned, Arnold Reichman, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved. DATED: November 9, 2000 /s/ ARNOLD REICHMAN ------------------- Arnold Reichman C-35 THE RBB FUND, INC. (the "Company") POWER OF ATTORNEY Know All Men by These Presents, that the undersigned, Robert Sablowsky, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved. DATED: November 9, 2000 /s/ ROBERT SABLOWSKY -------------------- Robert Sablowsky C-36 THE RBB FUND, INC. (the "Company") POWER OF ATTORNEY Know All Men by These Presents, that the undersigned, J. Richard Carnall, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved. DATED: September 10, 2002 /s/ J. RICHARD CARNALL ---------------------- J. Richard Carnall C-37 THE RBB FUND, INC. (the "Company") POWER OF ATTORNEY Know All Men by These Presents, that the undersigned, Robert Straniere, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved. DATED: June 8, 2006 /s/ ROBERT STRANIERE -------------------- Robert Straniere C-38 EXHIBIT INDEX The following exhibits are filed as part of this Registration Statement. EXHIBIT DESCRIPTION - ------- ----------- (a)(44) Articles Supplementary of Registrant (Bear Stearns CUFS MLP Mortgage Portfolio) (d)(31) Form of Investment Advisory Agreement between Registrant and Bear Stearns Asset Management Inc. (e)(11) Distribution Agreement Supplement between Registrant and PFPC Distributors, Inc. (Robeco WPG Core Bond Fund - Retirement Class) (e)(12) Distribution Agreement Supplement between Registrant and PFPC Distributors, Inc. (Robeco WPG Core Bond Fund - Investor Class) (e)(13) Form of Distribution Agreement Supplement between Registrant and PFPC Distributors, Inc. (Bear Stearns CUFS MLP Mortgage Portfolio) (g)(20) Custodian Agreement (ROBECO WPG CORE BOND FUND, ROBECO WPG LARGE CAP GROWTH FUND, AND ROBECO WPG TUDOR FUND) between Registrant and Mellon Bank N.A. (g)(23) Form of Custodian Agreement Supplement between Registrant and PFPC Trust Company (Bear Stearns CUFS MLP Mortgage Portfolio) (h)(80) Form of Administration and Accounting Services Agreement between Registrant and PFPC Inc. (Bear Stearns CUFS MLP Mortgage Portfolio) (h)(81) Form of Transfer Agency Agreement Supplement between Registrant and PFPC Inc. (Bear Stearns CUFS MLP Mortgage Portfolio) (h)(82) Form of Administrative Services Agreement Supplement between Registrant and PFPC Inc. (Bear Stearns CUFS MLP Mortgage Portfolio) (h)(83) Form of Amended Schedule A to Regulatory Administration Services Agreement between Registrant and PFPC Inc. (Bear Stearns CUFS MLP Mortgage Portfolio) (l)(26) Form of Purchase Agreement between Registrant and Bear Stearns Asset Management Inc. (Bear Stearns CUFS MLP Mortgage Portfolio) (p)(1) Code of Ethics of the Registrant (p)(2) Code of Ethics of Boston Partners Asset Management, L.P. (p)(3) Code of Ethics of Numeric Investors, Inc. (p)(4) Code of Ethics of Schneider Capital Management Company (p)(5) Code of Ethics of Bogle Investment Management, L.P. (p)(6) Code of Ethics of PFPC Distributors, Inc. (p)(9) Code of Ethics of Bear Stearns Asset Management Inc. C-39 EX-99.A(44) 2 g34307_exa44.txt EXHIBIT (A)(44) - ARTICLES SUPPLEMENTARY Exhibit (a)(44) THE RBB FUND, INC. ARTICLES SUPPLEMENTARY THE RBB FUND, INC., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: In accordance with the requirements of Section 2-208 of the Maryland General Corporation Law, the Board of Directors of the Corporation has classified One Hundred Million (100,000,000) authorized but unclassified and unissued shares of Common Stock of the Corporation as Class YYY shares of Common Stock representing interests in the Bear Stearns CUFS Fund pursuant to the following resolutions adopted by the Board of Directors of the Corporation on May 25, 2006: RESOLVED, that pursuant to the authority expressly given to the Board of Directors in Article VI, Section (4) of the Corporation's Charter, the Board hereby classifies authorized and unissued shares of Common Stock of the Corporation, par value $.001 per share, and hereby fixes and determines the rights, preferences, restrictions and other matters relating to such classes of Common Stock as follows: CLASS YYY SHARES. One Hundred Million (100,000,000) of the authorized, unissued and unclassified shares of the Corporation (par value $.001 per share) are hereby classified and designated as Class YYY shares of Common Stock representing interests in the Bear Stearns CUFS Fund. All shares of Class YYY Common Stock shall be issued without stock certificates. FURTHER RESOLVED, that a description of the shares so classified with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as set or changed by the Board of Directors of the Corporation is as set forth in Article VI, section (6) of the Corporation's Articles of Incorporation and as is set forth elsewhere in the Charter of the Corporation with respect to stock of the Corporation generally, and as follows: 1. To the full extent permitted by applicable law, the Corporation may, without the vote of the shares of any class of capital stock of the Corporation then outstanding and if so determined by the Board of Directors: (A)(1) sell and convey the assets belonging to Class YYY Common Stock (the "Class") to another trust or corporation that is a management investment company (as defined in the Investment Company Act of 1940, as amended) and is organized under the laws of any state of the United States for consideration, which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, belonging to the Class and which may include securities issued by such trust or corporation. Following such sale and conveyance, and after making provision for the payment of any liabilities belonging to the Class that are not assumed by the purchaser of the assets belonging to the Class, the Corporation may, at its option, redeem all outstanding shares of the Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors. Notwithstanding any other provision of the Charter of the Corporation to the contrary, the redemption price may be paid in any combination of cash or other assets belonging to the Class, including but not limited to the distribution of the securities or other consideration received by the Corporation for the assets belonging to the Class upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter of the Corporation; (2) sell and convert the assets belonging to the Class into money and, after making provision for the payment of all obligations, taxes and other liabilities, accrued or contingent, belonging to the Class, the Corporation may, at its option, redeem all outstanding shares of the Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter of the Corporation; or (3) combine the assets belonging to the Class with the assets belonging to any one or more other classes of capital stock of the Corporation if the Board of Directors reasonably determines that such combination will not have a material adverse effect on the stockholders of any class of capital stock of the Corporation participating in such combination. In connection with any such combination of assets, the shares of the Class then outstanding may, if so determined by the Board of Directors, be converted into shares of any other class or classes of capital stock of the Corporation with respect to which conversion is permitted by applicable law, or may be redeemed, at the option of the Corporation, at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, or conversion cost, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter of the Corporation. Notwithstanding any other provision of these Articles Supplementary or the Articles of Incorporation to the contrary, any redemption price, or part thereof, paid pursuant to this section may be paid in shares of any other existing or future class or classes of capital stock of the Corporation; and (B) without limiting the foregoing, at its option, redeem shares of the Class for any other reason if the Board of Directors has determined that it is in the best interest of the Corporation to do so. Any such redemption shall be at the net asset value of such shares -2- of the Class less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors and shall be made and effective upon such terms and in accordance with procedures approved by the Board of Directors at such time. 2. The shares of Class YYY Common Stock will be issued without stock certificates. SECOND: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the Charter of the Corporation. THIRD: (1) Immediately before the increase in the number of shares of Common Stock that have been classified into separate classes: (a) the Corporation had the authority to issue thirty billion (30,000,000,000) shares of its Common Stock and the aggregate par value of all the shares of all classes was thirty million dollars ($30,000,000); and (b) the number of authorized shares of each class was as follows: Class A - one hundred million (100,000,000), par value $.001 per share; Class B - one hundred million (100,000,000), par value $.001 per share; Class C - one hundred million (100,000,000), par value $.001 per share; Class D - one hundred million (100,000,000), par value $.001 per share; Class E - five hundred million (500,000,000), par value $.001 per share; Class F - five hundred million (500,000,000), par value $.001 per share; Class G - five hundred million (500,000,000), par value $.001 per share; Class H - five hundred million (500,000,000), par value $.001 per share; Class I - one billion five hundred million (1,500,000,000), par value $.001 per share; Class J - five hundred million (500,000,000), par value $.001 per share; Class K - five hundred million (500,000,000), par value $.001 per share; Class L - one billion five hundred million (1,500,000,000), par value $.001 per share; Class M - five hundred million (500,000,000), par value $.001 per share; -3- Class N - five hundred million (500,000,000), par value $.001 per share; Class O - five hundred million (500,000,000), par value $.001 per share; Class P - one hundred million (100,000,000), par value $.001 per share; Class Q - one hundred million (100,000,000), par value $.001 per share; Class R - five hundred million (500,000,000), par value $.001 per share; Class S - five hundred million (500,000,000), par value $.001 per share; Class T - five hundred million (500,000,000), par value $.001 per share; Class U - five hundred million (500,000,000), par value $.001 per share; Class V - five hundred million (500,000,000), par value $.001 per share; Class W - one hundred million (100,000,000), par value $.001 per share; Class X - fifty million (50,000,000), par value $.001 per share; Class Y - fifty million (50,000,000), par value $.001 per share; Class Z - fifty million (50,000,000), par value $.001 per share; Class AA - fifty million (50,000,000), par value $.001 per share; Class BB - fifty million (50,000,000), par value $.001 per share; Class CC - fifty million (50,000,000), par value $.001 per share; Class DD - one hundred million (100,000,000), par value $.001 per share; Class EE - one hundred million (100,000,000), par value $.001 per share; Class FF - fifty million (50,000,000), par value $.001 per share; Class GG - fifty million (50,000,000), par value $.001 per share; Class HH - fifty million (50,000,000), par value $.001 per share; Class II - one hundred million (100,000,000), par value $.001 per share; Class JJ - one hundred million (100,000,000), par value $.001 per share; Class KK - one hundred million (100,000,000), par value $.001 per share; -4- Class LL - one hundred million (100,000,000), par value $.001 per share; Class MM - one hundred million (100,000,000), par value $.001 per share; Class NN - one hundred million (100,000,000), par value $.001 per share; Class OO - one hundred million (100,000,000), par value $.001 per share; Class PP - one hundred million (100,000,000), par value $.001 per share; Class QQ - one hundred million (100,000,000), par value $.001 per share; Class RR - one hundred million (100,000,000), par value $.001 per share; Class SS - one hundred million (100,000,000), par value $.001 per share; Class TT - one hundred million (100,000,000), par value $.001 per share; Class UU - one hundred million (100,000,000), par value $.001 per share; Class VV - one hundred million (100,000,000), par value $.001 per share; Class WW - one hundred million (100,000,000), par value $.001 per share; Class YY - one hundred million (100,000,000), par value $.001 per share; Class ZZ - one hundred million (100,000,000), par value $.001 per share; Class AAA - one hundred million (100,000,000), par value $.001 per share; Class BBB - one hundred million (100,000,000), par value $.001 per share; Class CCC - one hundred million (100,000,000), par value $.001 per share; Class DDD - one hundred million (100,000,000), par value $.001 per share; Class EEE - one hundred million (100,000,000), par value $.001 per share; Class FFF - one hundred million (100,000,000), par value $.001 per share; Class GGG - one hundred million (100,000,000), par value $.001 per share; Class HHH - one hundred million (100,000,000), par value $.001 per share; Class III - one hundred million (100,000,000), par value $.001 per share; Class JJJ - one hundred million (100,000,000), par value $.001 per share; -5- Class KKK - one hundred million (100,000,000), par value $.001 per share; Class LLL - one hundred million (100,000,000), par value $.001 per share; Class MMM - one hundred million (100,000,000), par value $.001 per share; Class NNN - one hundred million (100,000,000), par value $.001 per share; Class OOO - one hundred million (100,000,000), par value $.001 per share; Class PPP - one hundred million (100,000,000), par value $.001 per share; Class QQQ - two billion five hundred million (2,500,000,000), par value $.001 per share; Class RRR - two billion five hundred million (2,500,000,000), par value $.001 per share; Class SSS - one hundred million (100,000,000), par value $.001 per shares; Class TTT - fifty million (50,000,000), par value $.001 per share; Class UUU - fifty million (50,000,000), par value $.001 per share; Class VVV - fifty million (50,000,000), par value $.001 per share; Class WWW - fifty million (50,000,000), par value $0.01 per share; Class XXX - one hundred million (100,000,000), par value $.001 per share; Class Select - seven hundred million (700,000,000), par value $.001 per share; Class Beta 2 - one million (1,000,000), par value $.001 per share; Class Beta 3 - one million (1,000,000), par value $.001 per share; Class Beta 4 - one million (1,000,000), par value $.001 per share; Class Principal Money seven hundred million (700,000,000), par value $.001 per share; Class Gamma 2 - one million (1,000,000), par value $.001 per share; Class Gamma 3 - one million (1,000,000), par value $.001 per share; Class Gamma 4 - one million (1,000,000), par value $.001 per share; -6- Class Bear Stearns Money - two billion five hundred million (2,500,000,000), par value $.001 per share; Class Bear Stearns Municipal Money - one billion five hundred million (1,500,000,000), par value $.001 per share; Class Bear Stearns Government Money - one billion (1,000,000,000), par value $.001 per share; Class Delta 4 - one million (1,000,000), par value $.001 per share; Class Epsilon 1 - one million (1,000,000), par value $.001 per share; Class Epsilon 2 - one million (1,000,000), par value $.001 per share; Class Epsilon 3 - one million (1,000,000), par value $.001 per share; Class Epsilon 4 - one million (1,000,000), par value $.001 per share; Class Zeta 1 - one million (1,000,000), par value $.001 per share; Class Zeta 2 - one million (1,000,000), par value $.001 per share; Class Zeta 3 - one million (1,000,000), par value $.001 per share; Class Zeta 4 - one million (1,000,000), par value $.001 per share; Class Eta 1 - one million (1,000,000), par value $.001 per share; Class Eta 2 - one million (1,000,000), par value $.001 per share; Class Eta 3 - one million (1,000,000), par value $.001 per share; Class Eta 4 - one million (1,000,000), par value $.001 per share; Class Theta 1 - one million (1,000,000), par value $.001 per share; Class Theta 2 - one million (1,000,000), par value $.001 per share; Class Theta 3 - one million (1,000,000), par value $.001 per share; Class Theta 4 - one million (1,000,000), par value $.001 per share; -7- for a total of twenty-six billion four hundred seventy-three million (26,473,000,000) shares classified into separate classes of common stock. (2) After the increase in the number of shares of common stock that have been classified into separate classes: (a) the Corporation has the authority to issue thirty billion (30,000,000,000) shares of its Common Stock and the aggregate par value of all the shares of all classes is thirty million dollars ($30,000,000); and (b) the number of authorized shares of each class is now as follows: Class A - one hundred million (100,000,000), par value $.001 per share; Class B - one hundred million (100,000,000), par value $.001 per share; Class C - one hundred million (100,000,000), par value $.001 per share; Class D - one hundred million (100,000,000), par value $.001 per share; Class E - five hundred million (500,000,000), par value $.001 per share; Class F - five hundred million (500,000,000), par value $.001 per share; Class G - five hundred million (500,000,000), par value $.001 per share; Class H - five hundred million (500,000,000), par value $.001 per share; Class I - one billion five hundred million (1,500,000,000), par value $.001 per share; Class J - five hundred million (500,000,000), par value $.001 per share; Class K - five hundred million (500,000,000), par value $.001 per share; Class L - one billion five hundred million (1,500,000,000), par value $.001 per share; Class M - five hundred million (500,000,000), par value $.001 per share; Class N - five hundred million (500,000,000), par value $.001 per share; Class O - five hundred million (500,000,000), par value $.001 per share; Class P - one hundred million (100,000,000), par value $.001 per share; Class Q - one hundred million (100,000,000), par value $.001 per share; -8- Class R - five hundred million (500,000,000), par value $.001 per share; Class S - five hundred million (500,000,000), par value $.001 per share; Class T - five hundred million (500,000,000), par value $.001 per share; Class U - five hundred million (500,000,000), par value $.001 per share; Class V - five hundred million (500,000,000), par value $.001 per share; Class W - one hundred million (100,000,000), par value $.001 per share; Class X - fifty million (50,000,000), par value $.001 per share; Class Y - fifty million (50,000,000), par value $.001 per share; Class Z - fifty million (50,000,000), par value $.001 per share; Class AA - fifty million (50,000,000), par value $.001 per share; Class BB - fifty million (50,000,000), par value $.001 per share; Class CC - fifty million (50,000,000), par value $.001 per share; Class DD - one hundred million (100,000,000), par value $.001 per share; Class EE - one hundred million (100,000,000), par value $.001 per share; Class FF - fifty million (50,000,000), par value $.001 per share; Class GG - fifty million (50,000,000), par value $.001 per share; Class HH - fifty million (50,000,000), par value $.001 per share; Class II - one hundred million (100,000,000), par value $.001 per share; Class JJ - one hundred million (100,000,000), par value $.001 per share; Class KK - one hundred million (100,000,000), par value $.001 per share; Class LL - one hundred million (100,000,000), par value $.001 per share; Class MM - one hundred million (100,000,000), par value $.001 per share; Class NN - one hundred million (100,000,000), par value $.001 per share; Class OO - one hundred million (100,000,000), par value $.001 per share; -9- Class PP - one hundred million (100,000,000), par value $.001 per share; Class QQ - one hundred million (100,000,000), par value $.001 per share; Class RR - one hundred million (100,000,000), par value $.001 per share; Class SS - one hundred million (100,000,000), par value $.001 per share; Class TT - one hundred million (100,000,000), par value $.001 per share; Class UU - one hundred million (100,000,000), par value $.001 per share; Class VV - one hundred million (100,000,000), par value $.001 per share; Class WW - one hundred million (100,000,000), par value $.001 per share; Class YY - one hundred million (100,000,000), par value $.001 per share; Class ZZ - one hundred million (100,000,000), par value $.001 per share; Class AAA - one hundred million (100,000,000), par value $.001 per share; Class BBB - one hundred million (100,000,000), par value $.001 per share; Class CCC - one hundred million (100,000,000), par value $.001 per share; Class DDD - one hundred million (100,000,000), par value $.001 per share; Class EEE - one hundred million (100,000,000), par value $.001 per share; Class FFF - one hundred million (100,000,000), par value $.001 per share; Class GGG - one hundred million (100,000,000), par value $.001 per share; Class HHH - one hundred million (100,000,000), par value $.001 per share; Class III - one hundred million (100,000,000), par value $.001 per share; Class JJJ - one hundred million (100,000,000), par value $.001 per share; Class KKK - one hundred million (100,000,000), par value $.001 per share; Class LLL - one hundred million (100,000,000), par value $.001 per share; Class MMM - one hundred million (100,000,000), par value $.001 per share; Class NNN - one hundred million (100,000,000), par value $.001 per share; -10- Class OOO - one hundred million (100,000,000), par value $.001 per share; Class PPP - one hundred million (100,000,000), par value $.001 per share; Class QQQ - two billion five hundred million (2,500,000,000), par value $.001 per share; Class RRR - two billion five hundred million (2,500,000,000), par value $.001 per share; Class SSS - one hundred million (100,000,000), par value $.001 per shares; Class TTT - fifty million (50,000,000), par value $.001 per share; Class UUU - fifty million (50,000,000), par value $.001 per share; Class VVV - fifty million (50,000,000), par value $.001 per share; Class WWW - fifty million (50,000,000), par value $0.01 per share; Class XXX - one hundred million (100,000,000), par value $.001 per share; Class YYY - one hundred million (100,000,000), par value $.001 per share; Class Select - seven hundred million (700,000,000), par value $.001 per share; Class Beta 2 - one million (1,000,000), par value $.001 per share per share; Class Beta 3 - one million (1,000,000), par value $.001 per share per share; Class Beta 4 - one million (1,000,000), par value $.001 per share per share; Class Principal Money seven hundred million (700,000,000), par value $.001 per share; Class Gamma 2 - one million (1,000,000), par value $.001 per share per share; Class Gamma 3 - one million (1,000,000), par value $.001 per share; Class Gamma 4 - one million (1,000,000), par value $.001 per share; Class Bear Stearns Money - two billion five hundred million (2,500,000,000), par value $.001 per share; -11- Class Bear Stearns Municipal Money - one billion five hundred million (1,500,000,000), par value $.001 per share; Class Bear Stearns Government Money - one billion (1,000,000,000), par value $.001 per share; Class Delta 4 - one million (1,000,000), par value $.001 per share; Class Epsilon 1 - one million (1,000,000), par value $.001 per share; Class Epsilon 2 - one million (1,000,000), par value $.001 per share; Class Epsilon 3 - one million (1,000,000), par value $.001 per share; Class Epsilon 4 - one million (1,000,000), par value $.001 per share; Class Zeta 1 - one million (1,000,000), par value $.001 per share; Class Zeta 2 - one million (1,000,000), par value $.001 per share; Class Zeta 3 - one million (1,000,000), par value $.001 per share; Class Zeta 4 - one million (1,000,000), par value $.001 per share; Class Eta 1 - one million (1,000,000), par value $.001 per share; Class Eta 2 - one million (1,000,000), par value $.001 per share; Class Eta 3 - one million (1,000,000), par value $.001 per share; Class Eta 4 - one million (1,000,000), par value $.001 per share; Class Theta 1 - one million (1,000,000), par value $.001 per share; Class Theta 2 - one million (1,000,000), par value $.001 per share; Class Theta 3 - one million (1,000,000), par value $.001 per share; Class Theta 4 - one million (1,000,000), par value $.001 per share; for a total of twenty-six billion five hundred seventy-three million (26,573,000,000) shares classified into separate classes of common stock. FOURTH: These Articles Supplementary do not increase the total number of shares that the Company is authorized to issue or the aggregate par value thereof. -12- IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on the 25th day of May, 2006. THE RBB FUND, INC. WITNESS: By: /s/ Tina M. Payne By: /s/ Edward J. Roach ------------------------- ------------------------ Tina M. Payne Edward J. Roach Secretary President -13- CERTIFICATE THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on behalf of said Corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges that the foregoing Articles Supplementary are the act of the said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Edward J. Roach ---------------------------------- Edward J. Roach President and Treasurer -14- EX-99.D(31) 3 g34307_exd33.txt EXHIBIT (D)(31) - INVESTMENT ADVISORY AGREEMENT Exhibit (d)(31) FORM OF INVESTMENT ADVISORY AGREEMENT AGREEMENT made as of [__________], 2006, between THE RBB FUND, INC., a Maryland corporation (herein called the "Fund"), and BEAR STEARNS ASSET MANAGEMENT INC. (herein called the "Investment Adviser"). WHEREAS, the Fund is registered as an open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), and currently offers or proposes to offer shares representing interests in separate investment portfolios; WHEREAS, the Fund desires to retain the Investment Adviser to render certain investment advisory services to the Fund with respect to the Fund's Bear Stearns Fund (the "Portfolio"), and the Investment Adviser is willing to so render such services; and WHEREAS, the Board of Directors of the Fund have approved this Agreement, and the Adviser is willing to furnish such services upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows: SECTION 1. APPOINTMENT. The Fund hereby appoints the Investment Adviser to act as investment adviser for the Portfolio for the period and on the terms set forth in this Agreement. The Investment Adviser accepts such appointment and agrees to render the services herein set forth for the compensation herein provided. SECTION 2. DELIVERY OF DOCUMENTS. The Fund has furnished the Investment Adviser with copies properly certified or authenticated of each of the following: (a) Resolutions of the Board of Directors of the Fund authorizing the appointment of the Investment Adviser and the execution and delivery of this Agreement; (b) Each prospectus and statement of additional information relating to any class of Shares representing interests in the Portfolio of the Fund in effect under the Securities Act of 1933 (such prospectus and statement of additional information, as presently in effect and as they shall from time to time be amended and supplemented, are herein collectively called the "Prospectus" and "Statement of Additional Information," respectively). The Fund will promptly furnish the Investment Adviser from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any. In addition to the foregoing, the Fund will also provide the Investment Adviser with copies of the Fund's Charter and By-laws, and any registration statement or service contracts related to the Portfolio, and will promptly furnish the Investment Adviser with any amendments of or supplements to such documents. SECTION 3. MANAGEMENT. Subject to the supervision of the Board of Directors of the Fund, the Investment Adviser will provide for the overall management of the Portfolio including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained, or sold by the Fund for the Portfolio, and (iii) the placement from time to time of orders for all purchases and sales made for the Portfolio. The Investment Adviser will provide the services rendered by it hereunder in accordance with the Portfolio's investment objectives, restrictions and policies as stated in the applicable Prospectus and Statement of Additional Information, provided that the Investment Adviser has actual notice or knowledge of any changes by the Board of Directors to such investment objectives, restrictions or policies. The Investment Adviser further agrees that it will render to the Fund's Board of Directors such periodic and special reports regarding the performance of its duties under this Agreement as the Board may reasonably request. The Investment Adviser agrees to provide to the Fund (or its agents and service providers) prompt and accurate data with respect to the Portfolio's transactions and, where not otherwise available, the daily valuation of securities in the Portfolio. SECTION 4. BROKERAGE. Subject to the Investment Adviser's obligation to obtain best price and execution, the Investment Adviser shall have full discretion to select brokers or dealers to effect the purchase and sale of securities. When the Investment Adviser places orders for the purchase or sale of securities for the Portfolio, in selecting brokers or dealers to execute such orders, the Investment Adviser is expressly authorized to consider the fact that a broker or dealer has furnished statistical, research or other information or services for the benefit of the Portfolio directly or indirectly. Without limiting the generality of the foregoing, the Investment Adviser is authorized to cause the Portfolio to pay brokerage commissions which may be in excess of the lowest rates available to brokers who execute transactions for the Portfolio or who otherwise provide brokerage and research services utilized by the Investment Adviser, provided that the Investment Adviser determines in good faith that the amount of each such commission paid to a broker is reasonable in relation to the value of the brokerage and research services provided by such broker viewed in terms of either the particular transaction to which the commission relates or the Investment Adviser's overall responsibilities with respect to accounts as to which the Investment Adviser exercises investment discretion. The Investment Adviser may aggregate securities orders so long as the Investment Adviser adheres to a policy of allocating investment opportunities to the Portfolio over a period of time on a fair and equitable basis relative to other clients. In no instance will the Portfolio's securities be purchased from or sold to the Fund's principal underwriter, the Investment Adviser, or any affiliated person thereof, except to the extent permitted by SEC exemptive order or by applicable law. The Investment Adviser shall report to the Board of Directors of the Fund at least quarterly with respect to brokerage transactions that were entered into by the Investment Adviser, pursuant to the foregoing paragraph, and shall certify to the Board that the commissions paid were reasonable in terms either of that transaction or the overall responsibilities of the - 2 - Investment Adviser to the Fund and the Investment Adviser's other clients, that the total commissions paid by the Fund were reasonable in relation to the benefits to the Fund over the long term, and that such commissions were paid in compliance with Section 28(e) of the Securities Exchange Act of 1934. SECTION 5. CONFORMITY WITH LAW; CONFIDENTIALITY. The Investment Adviser further agrees that it will comply with all applicable rules and regulations of all federal regulatory agencies having jurisdiction over the Investment Adviser in the performance of its duties hereunder. The Investment Adviser will treat confidentially and as proprietary information of the Fund all records and other information relating to the Fund and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where the Investment Adviser may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund. Where the Investment Adviser maybe exposed to civil or criminal contempt proceedings for failure to comply with a request for records or other information relating to the Fund, the Investment Adviser may comply with such request prior to obtaining the Fund's written approval, provided that the Investment Adviser has taken reasonable steps to promptly notify the Fund, in writing, upon receipt of the request. SECTION 6. SERVICES NOT EXCLUSIVE. The Investment Adviser and its officers may act and continue to act as investment managers for others, and nothing in this Agreement shall in any way be deemed to restrict the right of the Investment Adviser to perform investment management or other services for any other person or entity, and the performance of such services for others shall not be deemed to violate or give rise to any duty or obligation to the Portfolio or the Fund. Nothing in this Agreement shall limit or restrict the Investment Adviser or any of its partners, officers, affiliates or employees from buying, selling or trading in any securities for its or their own account. The Fund acknowledges that the Investment Adviser and its partners, officers, affiliates, employees and other clients may, at any time, have, acquire, increase, decrease, or dispose of positions in investments which are at the same time being acquired or disposed of for the Portfolio. The Investment Adviser shall have no obligation to acquire for the Portfolio a position in any investment which the Investment Adviser, its partners, officers, affiliates or employees may acquire for its or their own accounts or for the account of another client, so long as it continues to be the policy and practice of the Investment Adviser not to favor or disfavor consistently or consciously any client or class of clients in the allocation of investment opportunities so that, to the extent practical, such opportunities will be allocated among clients over a period of time on a fair and equitable basis. The Investment Adviser agrees that this Section 6 does not constitute a waiver by the Fund of the obligations imposed upon the Investment Adviser to comply with Sections 17(d) and 17(j) of the 1940 Act, and the rules thereunder, nor constitute a waiver by the Fund of the obligations imposed upon the Investment Adviser under Section 206 of the Investment Advisers Act of 1940 and the rules thereunder. Further, the Investment Adviser agrees that this Section 6 does not constitute a waiver by the Fund of the fiduciary obligation of the Investment Adviser - 3 - arising under federal or state law, including Section 36 of the 1940 Act. The Investment Adviser agrees that this Section 6 shall be interpreted consistent with the provisions of Section 17(i) of the 1940 Act. SECTION 7. BOOKS AND RECORDS. In compliance with the requirements of Rule 3la-3 under the 1940 Act, the Investment Adviser hereby agrees that all records which it maintains for the Portfolio are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the Fund's request. The Investment Adviser further agrees to preserve for the periods prescribed by Rule 3la-2 under the 1940 Act the records required to be maintained by Rule 3la-1 under the 1940 Act. SECTION 8. EXPENSES. During the term of this Agreement, the Investment Adviser will pay all expenses incurred by it in connection with its activities under this Agreement. The Portfolio shall bear all of its own expenses not specifically assumed by the Investment Adviser. General expenses of the Fund not readily identifiable as belonging to a Portfolio of the Fund shall be allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by the Portfolio shall include, but are not limited to, the following (or the Portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by the Portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of the Portfolio by the Investment Adviser; (c) filing fees and expenses relating to the registration and qualification of the Fund and the Portfolio's shares under federal and/or state securities laws and maintaining such registrations and qualifications; (d) fees and salaries payable to the Fund's directors and officers; (e) taxes (including any income or franchise taxes) and governmental fees; (f) costs of any liability and other insurance or fidelity bonds; (g) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Fund or the Portfolio for violation of any law; (h) legal, accounting and auditing expenses, including legal fees of special counsel for the independent directors; (i) charges of custodians and other agents; (j) expenses of setting in type and printing prospectuses, statements of additional information and supplements thereto for existing shareholders, reports, statements, and confirmations to shareholders and proxy material that are not attributable to a class; (k) costs of mailing prospectuses, statements of additional information and supplements thereto to existing shareholders, as well as reports to shareholders and proxy material that are not attributable to a class; (1) any extraordinary expenses; (m) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (n) costs of mailing and tabulating proxies and costs of shareholders' and directors' meetings; (o) costs of independent pricing services to value a portfolio's securities; and (p) the costs of investment company literature and other publications provided by the Fund to its directors and officers. Distribution expenses, transfer agency expenses, expenses of preparation, printing and mailing, prospectuses, statements of additional information, proxy statements and reports to shareholders, and organizational expenses and registration fees, identified as belonging to a particular class of the Fund are allocated to such class. SECTION 9. VOTING. The Investment Adviser shall have the authority to vote as agent for the Fund, either in person or by proxy, tender and take all actions incident to the ownership of all securities in which the Portfolio's assets may be invested from time to time, - 4 - subject to such policies and procedures as the Board of Directors of the Fund may adopt from time to time. SECTION 10. RESERVATION OF NAME. The Investment Adviser shall at all times have all rights in and to the Portfolio's name and all investment models used by or on behalf of the Portfolio. The Investment Adviser may use the Portfolio's name or any portion thereof in connection with any other mutual fund or business activity without the consent of any shareholder and the Fund shall execute and deliver any and all documents required to indicate the consent of the Fund to such use. The Fund hereby agrees that in the event that neither the Investment Adviser nor any of its affiliates acts as investment adviser to the Portfolio, the name of the Portfolio will be changed to one that does not contain the names "Bear Stearns" or the initials "BS" or otherwise suggest an affiliation with the Investment Adviser. SECTION 11. COMPENSATION. (a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Fund will pay the Investment Adviser from the assets of the Portfolio and the Investment Adviser will accept as full compensation therefor a fee, computed daily and payable monthly, at the annual rate of 0.48% of the Portfolio's average daily net assets. For any period less than a full month during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to a full month. (b) The fee attributable to the Portfolio shall be satisfied only against assets of the Portfolio and not against the assets of any other investment portfolio of the Fund. The Investment Adviser may from time to time agree not to impose all or a portion of its fee otherwise payable hereunder (in advance of the time such fee or portion thereof would otherwise accrue) and/or undertake to pay or reimburse the Portfolio for all or a portion of its expenses not otherwise required to be borne or reimbursed by the Investment Adviser. SECTION 12. LIMITATION OF LIABILITY. The Investment Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement ("disabling conduct"). The Portfolio will indemnify the Investment Adviser against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit not resulting from disabling conduct by the Investment Adviser. Indemnification shall be made only following: (i) a final decision on the merits by a court or other body before whom the proceeding was brought that the Investment Adviser was not liable by reason of disabling conduct or (ii) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the Investment Adviser was not liable by reason of disabling conduct by (a) the vote of a majority of a quorum of directors of the Fund who are neither "interested persons" of the Fund nor parties to the proceeding ("disinterested non-party directors") or (b) an independent legal counsel in a written opinion. The Investment Adviser shall be entitled to advances from the Portfolio for payment of the reasonable expenses incurred by it in connection with the matter as to which it is seeking indemnification in the manner and to the fullest extent permissible under the Maryland General Corporation Law. The Investment Adviser shall provide to the Portfolio a written affirmation of its good faith belief that the - 5 - standard of conduct necessary for indemnification by the Portfolio has been met and a written undertaking to repay any such advance if it should ultimately be determined that the standard of conduct has not been met. In addition, at least one of the following additional conditions shall be met: (a) the Investment Adviser shall provide a security in form and amount acceptable to the Portfolio for its undertaking; (b) the Portfolio is insured against losses arising by reason of the advance; or (c) a majority of a quorum of disinterested non-party directors, or independent legal counsel, in a written opinion, shall have determined, based upon a review of facts readily available to the Portfolio at the time the advance is proposed to be made, that there is reason to believe that the Investment Adviser will ultimately be found to be entitled to indemnification. Any amounts payable by the Portfolio under this Section shall be satisfied only against the assets of the Portfolio and not against the assets of any other investment portfolio of the Fund. The limitations on liability and indemnification provisions of this Section 12 shall not be applicable to any losses, claims, damages, liabilities or expenses arising from the Investment Adviser's rights to the Portfolio's name. The Investment Adviser shall indemnify and hold harmless the Fund and the Portfolio for any claims arising from the use of the terms "Bear Stearns" or "BS" in the name of the Portfolio. SECTION 13. DURATION AND TERMINATION. This Agreement shall become effective with respect to the Portfolio as of the date first above written and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 2007. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, PROVIDED such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Fund who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Fund or by vote of a majority of the outstanding voting securities of the Portfolio; PROVIDED, HOWEVER, that this Agreement may be terminated with respect to the Portfolio by the Fund at any time, without the payment of any penalty, by the Board of Directors of the Fund or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' prior written notice to the Investment Adviser, or by the Investment Adviser at any time, without payment of any penalty, on 60 days' prior written notice to the Fund. This Agreement will immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act). SECTION 14. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed, discharged or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio. SECTION 15. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the - 6 - benefit of the parties hereto and their respective successors and shall be governed by Delaware law. SECTION 16. NOTICE. All notices hereunder shall be given in writing and delivered by hand, national overnight courier, facsimile (provided written confirmation of receipt is obtained and said notice is sent via first class mail on the next business day) or mailed by certified mail, return receipt requested, as follows: If to the Investment Adviser: Bear Stearns Asset Management Inc. Stephen Bernstein General Counsel Bear Stearns Asset Management Inc. 383 Madison Avenue, 30th Floor New York, New York 10179 Fax: If to the Fund: The RBB Fund, Inc. 400 Bellevue Parkway Suite 100 Wilmington, DE 19809 Attn: Edward J. Roach Fax: 302-791-4830 The effective date of any notice shall be (i) the date such notice is sent if such delivery is effected by hand or facsimile, (ii) one business day after the date such notice is sent if such delivery is effected by national overnight courier; or (iii) the fifth (5th) Business Day after the date of mailing thereof. SECTION 17. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. SECTION 18. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. - 7 - IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. THE RBB FUND, INC. By: __________________________ Name: Edward J. Roach Title:President and Treasurer BEAR STEARNS ASSET MANAGEMENT INC. By: __________________________ Name: Title: - 8 - EX-99.E(11) 4 g34307_exe11.txt EXHIBIT (E)(11) - DISTRIB AGREEMENT SUPPLEMENT Exhibit (e)(11) DISTRIBUTION AGREEMENT SUPPLEMENT The RBB Fund, Inc. Robeco WPG Core Bond Fund Retirement Class This supplemental agreement is entered into this 31st day of August, 2005, by and between THE RBB FUND, INC. (the "Company") and PFPC DISTRIBUTORS, INC. (the "Distributor"). The Company is a corporation organized under the laws of the State of Maryland and is an open-end management investment company. The Company and the Distributor have entered into a Distribution Agreement, dated as of January 2, 2001 (as from time to time amended and supplemented, the "Distribution Agreement"), pursuant to which the Distributor has undertaken to act as distributor for the Company, as more fully set forth therein. Certain capitalized terms used without definition in this Distribution Agreement Supplement have the meaning specified in the Distribution Agreement. The Company agrees with the Distributor as follows: 1. ADOPTION OF DISTRIBUTION AGREEMENT. The Distribution Agreement is hereby adopted for the Robeco WPG Core Bond Fund Retirement Class of Common Stock (Class SSS) of the Company (the "Class"). 2. PAYMENT OF FEES. For all services to be rendered, facilities furnished and expenses paid or assumed by the Distributor on behalf of the Class as provided in the Distribution Agreement and herein, the Company shall pay the Distributor no compensation. 3. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have entered into this Agreement, intending to be legally bound hereby, as of the date and year first above written. THE RBB FUND, INC. PFPC DISTRIBUTORS, INC. By: /s/ Edward J. Roach By: /s/ Bruno Distefano ------------------- ------------------- Name: Edward J. Roach Name: Bruno Distefano Title: President Title: Vice President EX-99.E(12) 5 g34307_exe12.txt EXHIBIT (E)(12) - DISTRIB AGREEMENT SUPPLEMENT Exhibit (e)(12) DISTRIBUTION AGREEMENT SUPPLEMENT The RBB Fund, Inc. Robeco WPG Core Bond Fund Investor Class This supplemental agreement is entered into this 26th day of November, 2005, by and between THE RBB FUND, INC. (the "Company") and PFPC DISTRIBUTORS, INC. (the "Distributor"). The Company is a corporation organized under the laws of the State of Maryland and is an open-end management investment company. The Company and the Distributor have entered into a Distribution Agreement, dated as of January 2, 2001 (as from time to time amended and supplemented, the "Distribution Agreement"), pursuant to which the Distributor has undertaken to act as distributor for the Company, as more fully set forth therein. Certain capitalized terms used without definition in this Distribution Agreement Supplement have the meaning specified in the Distribution Agreement. The Company agrees with the Distributor as follows: 1. ADOPTION OF DISTRIBUTION AGREEMENT. The Distribution Agreement is hereby adopted for the Robeco WPG Core Bond Fund Investor Class of Common Stock (Class XXX) of the Company (the "Class"). 2. PAYMENT OF FEES. For all services to be rendered, facilities furnished and expenses paid or assumed by the Distributor on behalf of the Class as provided in the Distribution Agreement and herein, the Company shall pay the Distributor no compensation. 3. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have entered into this Agreement, intending to be legally bound hereby, as of the date and year first above written. THE RBB FUND, INC. PFPC DISTRIBUTORS, INC. By: /s/ Edward J. Roach By: /s/ Bruno Distefano ------------------- ------------------- Name: Edward J. Roach Name: Bruno Distefano Title: President Title: Vice President EX-99.E(13) 6 g34307_exe13.txt EXHIBIT (E)(13) - FORM OF DISTR AGRMNT SUPP Exhibit (e)(13) FORM OF DISTRIBUTION AGREEMENT SUPPLEMENT The RBB Fund, Inc. Bear Stearns CUFS Fund This supplemental agreement is entered into this ___ day of ________, 2006, by and between THE RBB FUND, INC. (the "Company") and PFPC DISTRIBUTORS, INC. (the "Distributor"). The Company is a corporation organized under the laws of the State of Maryland and is an open-end management investment company. The Company and the Distributor have entered into a Distribution Agreement, dated as of January 2, 2001 (as from time to time amended and supplemented, the "Distribution Agreement"), pursuant to which the Distributor has undertaken to act as distributor for the Company, as more fully set forth therein. Certain capitalized terms used without definition in this Distribution Agreement Supplement have the meaning specified in the Distribution Agreement. The Company agrees with the Distributor as follows: 1. ADOPTION OF DISTRIBUTION AGREEMENT. The Distribution Agreement is hereby adopted for the Bear Stearns CUFS Fund Class of Common Stock of the Company (the "Class"). 2. PAYMENT OF FEES. For all services to be rendered, facilities furnished and expenses paid or assumed by the Distributor on behalf of the Class as provided in the Distribution Agreement and herein, the Company shall pay the Distributor no compensation. 3. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have entered into this Agreement, intending to be legally bound hereby, as of the date and year first above written. THE RBB FUND, INC. PFPC DISTRIBUTORS, INC. By: By: ----------------------- ---------------------------- Name: Edward J. Roach Name: Title: President Title: EX-99.G(20) 7 g34307_exg20.txt EXHIBIT (G)(20) - CUSTODIAN AGREEMENT Exhibit (g)(20) MUTUAL FUND CUSTODY AND SERVICES AGREEMENT TABLE OF CONTENTS SECTION PAGE - ------- ---- DEFINITIONS....................................................................2 ARTICLE I - CUSTODY PROVISIONS.................................................4 1. APPOINTMENT OF CUSTODIAN.............................................4 2. CUSTODY OF CASH AND SECURITIES.......................................4 3. SETTLEMENT OF SERIES TRANSACTIONS....................................8 4. LENDING OF SECURITIES................................................8 5. PERSONS HAVING ACCESS TO ASSETS OF THE SERIES........................8 6. STANDARD OF CARE; SCOPE OF CUSTODIAL RESPONSIBILITIES................9 7. APPOINTMENT OF SUBCUSTODIANS........................................11 8. OVERDRAFT FACILITY AND SECURITY FOR PAYMENT.........................11 9. TAX OBLIGATIONS.....................................................12 ARTICLE II - FOREIGN CUSTODY MANAGER SERVICES.................................12 1. DELEGATION..........................................................12 2. CHANGES TO APPENDIX C...............................................12 3. REPORTS TO BOARD....................................................12 4. MONITORING SYSTEM...................................................13 5. STANDARD OF CARE....................................................13 6. USE OF SECURITIES DEPOSITORIES......................................13 ARTICLE III - INFORMATION SERVICES............................................13 1. RISK ANALYSIS.......................................................13 2. MONITORING OF SECURITIES DEPOSITORIES...............................13 3. USE OF AGENTS.......................................................13 4. EXERCISE OF REASONABLE CARE.........................................13 5. LIABILITIES AND WARRANTIES..........................................14 ARTICLE IV - GENERAL PROVISIONS...............................................14 1. COMPENSATION........................................................14 2. INSOLVENCY OF FOREIGN CUSTODIANS....................................14 3. LIABILITY FOR DEPOSITORIES..........................................14 4. DAMAGES.............................................................14 5. INDEMNIFICATION; LIABILITY OF THE SERIES............................15 6. FORCE MAJEURE.......................................................15 7. TERMINATION.........................................................15 8. INSPECTION OF BOOKS AND RECORDS.....................................16 9. MISCELLANEOUS.......................................................16 APPENDIX A. AUTHORIZED PERSONS................................................19 APPENDIX B. FUND OFFICERS.....................................................20 APPENDIX C. SELECTED COUNTRIES................................................21 APPENDIX D. LIST OF FUNDS.....................................................22 EXHIBIT A. CUSTOMER IDENTIFICATION PROGRAM NOTICE.............................24 i MUTUAL FUND CUSTODY AND SERVICES AGREEMENT THIS AGREEMENT, effective as of the 29th day of April, 2005, and is between THE RBB FUND, INC., (the "Fund") a corporation organized under the laws of the State of Maryland having its principal office and place of business at 400 Bellevue Parkway, Suite 100, Wilmington, DE 19809, and MELLON TRUST OF NEW ENGLAND, N.A., (the "Custodian") a national banking association with its principal place of business at One Boston Place, Boston, MA 02108. W I T N E S S E T H: WHEREAS, the Custodian (formerly known as Boston Safe Deposit and Trust Company) has previously provided custody and related services to certain Weiss Peck and Greer Funds ("WPG"); WHEREAS, effective April 29, 2005, WPG was acquired by the Fund pursuant to a Reorganization Agreement between WPG and the Fund; WHEREAS, the Fund and the Custodian hereby wish to provide for the continuation of services with respect to the former WPG funds; WHEREAS, the Fund is authorized to issue shares in separate series with each such series representing interests in a separate portfolio of securities and other assets, and the Fund has made the Series listed on Appendix D subject to this Agreement (each such series, together with all other series subsequently established by the Fund and made subject to the Agreement in accordance with the terms hereof, shall be referred to as a "Series" and collectively as the "Series"); WHEREAS, the Fund and the Custodian desire to set forth their agreement with respect to the custody of the Series' Securities and cash and the processing of Securities transactions; WHEREAS, the Board desires to delegate certain of its responsibilities for performing the services set forth in paragraphs (c)(1), (c)(2) and (c)(3) of Rule 17f-5 to the Custodian as a Foreign Custody Manager; WHEREAS, the Custodian agrees to accept such delegation with respect to Assets, including those held by Foreign Custodians in the Selected Countries as set forth in jurisdictions listed on APPENDIX C as set forth in Article II; and WHEREAS, the Custodian agrees to perform the function of a Primary Custodian under Rule 17f-7; NOW THEREFORE, the Fund and the Custodian agree as follows: DEFINITIONS The following words and phrases, unless the context requires otherwise, shall have the following meanings: 1. "ACT": the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time. 2. "AGREEMENT": this agreement and any amendments. 3. "ASSETS": any of the Series' investments, including foreign currencies and investments for which the primary market is outside the United States, and such cash and cash equivalents as are reasonably necessary to effect the Series' transactions in such investments. 4. "AUTHORIZED PERSON": the Chairman of the Fund's Board, its President, and any Vice President, Secretary, Treasurer or any other person, whether or not any such person is an officer or employee of the Fund, duly authorized by the Board to add or delete jurisdictions pursuant to Article II and to give Instructions on behalf of a Series which is listed in the Certificate annexed hereto as APPENDIX A or such other Certificate as may be received by the Custodian from time to time. 5. "BOARD": the Board of Managers (or the body authorized to exercise authority similar to that of the board of directors of a corporation) of the Fund. 6. "BOOK-ENTRY SYSTEM": the Federal Reserve/Treasury book-entry system for United States and federal agency Securities, its successor or successors and its nominee or nominees. 7. "BUSINESS DAY": any day on which the Series, the Custodian, the Book-Entry System and appropriate clearing corporation(s) are open for business. 8. "CERTIFICATE": any notice, instruction or other instrument in writing, authorized or required by this Agreement to be given to the Custodian, which is actually received by the Custodian and signed on behalf of a Series by an Authorized Person or Persons designated by the Board to issue a Certificate. 9. "ELIGIBLE SECURITIES DEPOSITORY": the meaning of the term set forth in Rule 17f-7(b)(1). 10. "FOREIGN CUSTODIAN": (a) a banking institution or trust company incorporated or organized under the laws of a country other than the United States, that is regulated as such by the country's government or an agency of the country's government; (b) a majority-owned direct or indirect subsidiary of a U.S. Bank or bank-holding company; or (c) any entity other than a Securities Depository with respect to which exemptive or no-action relief has been granted by the Securities and Exchange Commission. For the avoidance of doubt, the term "Foreign Custodian" shall not include Euroclear, 2 Clearstream, Bank One or any other transnational system for the central handling of securities or equivalent book-entries regardless of whether or not such entities or their service providers are acting in a custodial capacity with respect to Assets, Securities or other property of the Series. 11. "FOREIGN CUSTODY MANAGER": the meaning set forth in Rule 17f-5(a)(3). 12. "INSTRUCTIONS": (i) all directions to the Custodian from an Authorized Person pursuant to the terms of this Agreement; (ii) all directions by or on behalf of the Fund to the Custodian in its corporate capacity (or any of its affiliates) with respect to contracts for foreign exchange; (iii) all directions by or on behalf of the Fund pursuant to an agreement with Custodian (or any of its affiliates) with respect to benefit disbursement services or information or transactional services provided via a web site sponsored by the Custodian (or any of its affiliates) (e.g., the "Workbench web site") and (iv) all directions by or on behalf of the Fund pursuant to any other agreement or procedure between the Custodian (or any of its affiliates) and the Fund, if such agreement or procedure specifically provides that authorized persons thereunder are deemed to be authorized to give instructions under this Agreement. Instructions shall be in writing, transmitted by first class mail, overnight delivery, private courier, facsimile, or any other method, including electronic transmission subject to the Custodian's practices, or any other method specifically agreed to in writing by the Fund and Custodian, provided that the Custodian may, in its discretion, accept oral directions and instructions from an Authorized Person and may require confirmation in writing. 13. "PRIMARY CUSTODIAN": the meaning set forth in Rule 17f-7(b)(2). 14. "PROSPECTUS": a Series' current prospectus and statement of additional information relating to the registration of the Shares under the Securities Act of 1933, as amended. 15. "RISK ANALYSIS": the analysis required under Rule 17f-7(a)(1)(i)(A). 16. "RULES 17F-4, 17F-5 and 17F-7": such Rules as promulgated under Section 17(f) of the Act, as such rules (and any successor rules or regulations) may be amended from time to time. 17. "SECURITY" or "SECURITIES": bonds, debentures, notes, stocks, shares, evidences of indebtedness, and other securities, commodities, interests and investments from time to time owned by the Series. 18. "SECURITIES DEPOSITORY": a system for the central handling of securities as defined in Rule 17f-4. 19. "SELECTED COUNTRIES": the jurisdictions listed on APPENDIX C as such may be amended from time to time in accordance with Article II. 20. "SHARES": shares of each Series, however designated. 3 ARTICLE I. - CUSTODY PROVISIONS 1. APPOINTMENT OF CUSTODIAN. The Board appoints, and the Custodian accepts appointment as custodian of all the Securities and monies at the time owned by or in the possession of the Series during the period of this Agreement. 2. CUSTODY OF CASH AND SECURITIES. a. RECEIPT AND HOLDING OF ASSETS. The Series will deliver or cause to be delivered to the Custodian all Securities and monies owned by it at any time during the period of this Custody Agreement. The Custodian will not be responsible for such Securities and monies until actually received. The Board specifically authorizes the Custodian to hold Securities, Assets or other property of the Series with any domestic subcustodian, or Securities Depository, and Foreign Custodians or Eligible Securities Depositories in the Selected Countries as provided in Article II. Securities and monies of the Series deposited in a Securities Depository or Eligible Securities Depositories will be reflected in an account or accounts which include only assets held by the Custodian or a Foreign Custodian for its customers. b. DISBURSEMENTS OF CASH AND DELIVERY OF SECURITIES. The Custodian shall disburse cash or deliver out Securities only for the purposes listed below. Instructions must specify or evidence the purpose for which any transaction is to be made and the Series shall be solely responsible to assure that Instructions are in accord with any limitations or restrictions applicable to the Series (1) In payment for Securities purchased for the applicable Series; (2) In payment of dividends or distributions with respect to Shares; (3) In payment for Shares which have been redeemed by the applicable Series; (4) In payment of taxes; (5) When Securities are sold, called, redeemed, retired, or otherwise become payable; (6) In exchange for or upon conversion into other securities alone or other securities and cash pursuant to any plan or merger, consolidation, reorganization, recapitalization or readjustment; (7) Upon conversion of Securities pursuant to their terms into other securities; (8) Upon exercise of subscription, purchase or other similar rights 4 represented by Securities; (9) For the payment of interest, management or supervisory fees, distributions or operating expenses; (10) In payment of fees and in reimbursement of the expenses and liabilities of the Custodian attributable to the applicable Series; (11) In connection with any borrowings by the applicable Series or short sales of securities requiring a pledge of Securities, but only against receipt of amounts borrowed; (12) In connection with any loans, but only against receipt of adequate collateral as specified in Instructions which shall reflect any restrictions applicable to the Series. (13) For the purpose of redeeming Shares of the capital stock of the applicable Series and the delivery to, or the crediting to the account of, the Custodian or the applicable Series' transfer agent, such Shares to be purchased or redeemed; (14) For the purpose of redeeming in kind Shares of the applicable Series against delivery to the Custodian, its Subcustodian or the Customer Series' transfer agent of such Shares to be so redeemed; (15) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund. The Custodian will act only in accordance with Instructions in the delivery of Securities to be held in escrow and will have no responsibility or liability for any such Securities which are not returned promptly when due other than to make proper requests for such return; (16) For spot or forward foreign exchange transactions to facilitate security trading, receipt of income from Securities or related transactions; (17) Upon the termination of this Agreement; and (18) For other proper purposes as may be specified in Instructions issued by an officer of the Fund which shall include a statement of the purpose for which the delivery or payment is to be made, the amount of the payment or specific Securities to be delivered, the name of the person or persons to whom delivery or payment is to be made, and a Certificate stating that the purpose is a proper purpose under the instruments governing the Fund. 5 c. ACTIONS WHICH MAY BE TAKEN WITHOUT INSTRUCTIONS. Unless an Instruction to the contrary is received, the Custodian shall: (1) Collect all income due or payable, provided that the Custodian shall not be responsible for the failure to receive payment of (or late payment of) distributions or other payments with respect to Securities or other property held in the account; (2) Present for payment and collect the amount payable upon all Securities which may mature or be called, redeemed, retired or otherwise become payable. Notwithstanding the foregoing, the Custodian shall have no responsibility to the Series for monitoring or ascertaining any call, redemption or retirement dates with respect to put bonds or similar instruments which are owned by the Series and held by the Custodian or its nominees where such dates are not published in sources routinely used by the Custodian. Nor shall the Custodian have any responsibility or liability to the Series for any loss by the Series for any missed payments or other defaults resulting therefrom, unless the Custodian received timely notification from the Series specifying the time, place and manner for the presentment of any such put bond owned by the Series and held by the Custodian or its nominee. The Custodian shall not be responsible and assumes no liability for the accuracy or completeness of any notification the Custodian may furnish to the Series with respect to put bonds or similar instruments; (3) Surrender Securities in temporary form for definitive Securities; (4) Hold directly, or through a Securities Depository with respect to Securities therein deposited, for the account of the applicable Series all rights and similar Securities issued with respect to any Securities held by the Custodian hereunder for that Series; (5) Submit or cause to be submitted to the applicable Series or its investment advisor as designated by the Fund information actually received by the Custodian regarding ownership rights pertaining to property held for the applicable Series; (6) Deliver or cause to be delivered any Securities held for the applicable Series in exchange for other Securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege; (7) Deliver or cause to be delivered any Securities held for the applicable Series to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation or recapitalization or sale of assets of any corporation, and receive and hold under the terms of this Agreement such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; (8) Make or cause to be made such transfers or exchanges of the assets 6 specifically allocated to the applicable Series and take such other steps as shall be stated in Instructions to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the applicable Series; (9) Deliver Securities upon the receipt of payment in connection with any repurchase agreement related to such Securities entered into by the Series; (10) Deliver Securities owned by the applicable Series to the issuer thereof or its agent when such Securities are called, redeemed, retired or otherwise become payable; provided, however, that in any such case the cash or other consideration is to be delivered to the Custodian. Notwithstanding the foregoing, the Custodian shall have no responsibility to the Series for monitoring or ascertaining any call, redemption or retirement dates with respect to the put bonds or similar instruments which are owned by the Series and held by the Custodian or its nominee where such dates are not published in sources routinely used by the Custodian. Nor shall the Custodian have any responsibility or liability to the Series for any loss by the Series for any missed payment or other default resulting therefrom unless the Custodian received timely notification from the Series specifying the time, place and manner for the presentment of any such put bond owned by the Series and held by the Custodian or its nominee. The Custodian shall not be responsible and assumes no liability to the Series for the accuracy or completeness of any notification the Custodian may furnish to the applicable Series with respect to put bonds or similar investments; (11) Endorse and collect all checks, drafts or other orders for the payment of money received by the Custodian for the account of the applicable Series; and (12) Execute any and all documents, agreements or other instruments as may be necessary or desirable for the accomplishment of the purposes of this Agreement. d. CONFIRMATION AND STATEMENTS. Promptly after the close of business on each day, the Custodian shall furnish each Series with confirmations and a summary of all transfers to or from the account of the Series during the day. Where securities purchased by a Series are in a fungible bulk of securities registered in the name of the Custodian (or its nominee) or shown on the Custodian's account on the books of a Securities Depository, the Custodian shall by book-entry or otherwise identify the quantity of those securities belonging to that Series. At least monthly, the Custodian shall furnish each Series with a detailed statement of the Securities and monies held for the Series under this Custody Agreement. e. REGISTRATION OF SECURITIES. The Custodian is authorized to hold all Securities, Assets, or other property of each Series in nominee name, in bearer form or in book-entry form. The Custodian may register any Securities, Assets or other property of each Series in the name of the Fund or the Series, in the name of the Custodian, any domestic subcustodian, or Foreign Custodian, in the name of any duly appointed registered nominee of such entity, or in the name of a Securities Depository or its 7 successor or successors, or its nominee or nominees. The Fund agrees to furnish to the Custodian appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of its registered nominee or in the name of a Securities Depository, any Securities which it may hold for the account of the applicable Series and which may from time to time be registered in the name of the Fund or the applicable Series. f. SEGREGATED ACCOUNTS. Upon receipt of Instructions, the Custodian will, from time to time establish segregated accounts on behalf of the applicable Series to hold and deal with specified assets as shall be directed. 3. SETTLEMENT OF SERIES TRANSACTIONS. a. CUSTOMARY PRACTICES. Settlement of transactions may be effected in accordance with trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Fund acknowledges that this may, in certain circumstances, require the delivery of cash or Securities (or other property) without the concurrent receipt of Securities (or other property) or cash. In such circumstances, the Custodian shall have no responsibility for nonreceipt of payments (or late payment) or nondelivery of Securities or other property (or late delivery) by the counterparty. b. CONTRACTUAL INCOME. The Custodian shall credit the applicable Series, in accordance with the Custodian's standard operating procedure, with income and maturity proceeds on securities on contractual payment date net of any taxes or upon actual receipt. To the extent the Custodian credits income on contractual payment date, the Custodian may reverse such accounting entries to the contractual payment date if the Custodian reasonably believes that such amount will not be received. c. CONTRACTUAL SETTLEMENT. The Custodian will attend to the settlement of securities transactions in accordance with the Custodian's standard operating procedure, on the basis of either contractual settlement date accounting or actual settlement date accounting. To the extent the Custodian settles certain securities transactions on the basis of contractual settlement date accounting, the Custodian may reverse to the contractual settlement date any entry relating to such contractual settlement if the Custodian reasonably believes that such amount will not be received. 4. LENDING OF SECURITIES. The Custodian may lend the assets of the Series in accordance with the terms and conditions of a separate securities lending agreement, approved by the Fund. 5. PERSONS HAVING ACCESS TO ASSETS OF THE SERIES. a. No trustee or agent of the Fund, and no officer, director, employee or agent of the Fund's investment adviser, of any sub-investment adviser of the Fund, or of the Fund's administrator, shall have physical access to the assets of the Series held by the Custodian or be authorized or permitted to withdraw any investments of the Series, nor 8 shall the Custodian deliver any assets of the Series to any such person. No officer, director, employee or agent of the Custodian who holds any similar position with the Fund's investment adviser, with any sub-investment adviser of the Fund or with the Fund's administrator shall have access to the assets of the Series. b. Nothing in this Section 5 shall prohibit any duly authorized officer, employee or agent of the Fund, or any duly authorized officer, director, employee or agent of the investment adviser, of any sub-investment adviser of the Series or of the Series' administrator, from giving Instructions to the Custodian or executing a Certificate so long as it does not result in delivery of or access to assets of the Series prohibited by paragraph (a) of this Section 5. 6. STANDARD OF CARE; SCOPE OF CUSTODIAL RESPONSIBILITIES. a. STANDARD OF CARE. Custodian shall be required to exercise reasonable care with respect to its duties under this Agreement unless otherwise provided. (1) Notwithstanding any other provision of this Custody Agreement, the Custodian shall not be liable for any loss or damage, including counsel fees, resulting from its action or omission to act or otherwise, except for any such loss or damage arising out of the negligence or willful misconduct of the Custodian. (2) The Custodian may, with respect to questions of law, apply for and obtain the advice and opinion of counsel to the Fund or of its own counsel, at the expense of the Fund, and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice or opinion. The Fund will reimburse the Custodian for reasonable legal expenses, provided that the Custodian receives the approval of the Fund, which approval may not be unreasonably withheld. b. SCOPE OF DUTIES. Without limiting the generality of the foregoing, the Custodian shall be under no duty or obligation to inquire into, and shall not be liable for: (1) The acts or omissions of any agent appointed pursuant to Instructions of the Fund or its investment advisor including, but not limited to, any broker-dealer or other entity to hold any Securities or other property of the Fund as collateral or otherwise pursuant to any investment strategy. (2) The validity of the issue of any Securities purchased by the Series, the legality of the purchase thereof, or the propriety of the amount paid therefor; (3) The legality of the sale of any Securities by the Series or the propriety of the amount for which the same are sold; (4) The legality of the issue or sale of any Shares, or the sufficiency of the amount to be received therefor; (5) The legality of the redemption of any Shares, or the propriety of the 9 amount to be paid therefore (6) The legality of the declaration or payment of any distribution of the Series; (7) The legality of any borrowing for temporary administrative or emergency purposes. c. NO LIABILITY UNTIL RECEIPT. The Custodian shall not be liable for, or considered to be the Custodian of, any money, whether or not represented by any check, draft, or other instrument for the payment of money, received by it on behalf of the Series until the Custodian actually receives and collects such money. d. AMOUNTS DUE FROM TRANSFER AGENT. The Custodian shall not be required to effect collection of any amount due to the Series from the Series' transfer agent nor be required to cause payment or distribution by such transfer agent of any amount paid by the Custodian to the transfer agent. e. COLLECTION WHERE PAYMENT REFUSED. The Custodian shall not be required to take action to effect collection of any amount, if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until it shall be directed to take such action and it shall be assured to its satisfaction of reimbursement of its related costs and expenses. f. NO DUTY TO ASCERTAIN AUTHORITY. The Custodian shall not be under any duty or obligation to ascertain whether any Securities at any time delivered to or held by it for the Series are such as may properly be held by the Series under the provisions of its governing instruments or Prospectus. g. RELIANCE ON INSTRUCTIONS. The Custodian shall be entitled to rely upon any Instruction, notice or other instrument in writing received by the Custodian and reasonably believed by the Custodian to be genuine and to be signed by an officer or Authorized Person of the Series. Where the Custodian is issued Instructions orally, the Series acknowledge that if written confirmation is requested, the validity of the transactions or enforceability of the transactions authorized by the Series shall not be affected if such confirmation is not received or is contrary to oral Instructions given. The Custodian shall be fully protected in acting in accordance with all such Instructions and in failing to act in the absence thereof. The Custodian shall be under no duty to question any direction of an Authorized Person with respect to the portion of the account over which such Authorized Person has authority, to review any property held in the account, to make any suggestions with respect to the investment and reinvestment of the assets in the account, or to evaluate or question the performance of any Authorized Person. The Custodian shall not be responsible or liable for any diminution of value of any securities or other property held by the Custodian or its subcustodians pursuant to Instructions. In following Instructions, the Custodian shall be fully protected and shall not be liable for the acts or omissions of any person or entity not selected or retained by the Custodian in 10 its sole discretion, including but not limited to, any broker-dealer or other entity designed by the Fund or Authorized Person to hold property of the account as collateral or otherwise pursuant to an investment strategy. 7. APPOINTMENT OF SUBCUSTODIANS. The Custodian is hereby authorized to appoint one or more domestic subcustodians (which may be an affiliate of the Custodian) to hold Securities and monies at any time owned by the Series. The Custodian is also hereby authorized when acting pursuant to Instructions to: 1) place assets with any Foreign Custodian located in a jurisdiction which is not a Selected Country and with Euroclear, Clearstream, Banc One or any other transnational depository; and 2) place assets with a broker or other agent as subcustodian in connection with futures, options, short selling or other transactions. When acting pursuant to such Instructions, the Custodian shall not be liable for the acts or omissions of any subcustodian so appointed. 8. OVERDRAFT FACILITY AND SECURITY FOR PAYMENT. In the event that the Custodian receives Instructions to make payments or transfers of monies on behalf of the Series for which there would be, at the close of business on the date of such payment or transfer, insufficient monies held by the Custodian on behalf of the Series, the Custodian may, in its sole discretion, provide an overdraft (an "Overdraft") to the Series in an amount sufficient to allow the completion of such payment or transfer. Any Overdraft provided hereunder: (a) shall be payable on the next Business Day, unless otherwise agreed by the Series and the Custodian; and (b) shall accrue interest from the date of the Overdraft to the date of payment in full by the Series at a rate agreed upon from time to time by the Custodian and the Series or, in the absence of specific agreement, by such rate as charged to other customers of Custodian under procedures uniformly applied. The Custodian and the Series acknowledge that the purpose of such Overdraft is to temporarily finance the purchase of Securities for prompt delivery in accordance with the terms hereof, to meet unanticipated or unusual redemptions, to allow the settlement of foreign exchange contracts or to meet other unanticipated Series expenses. The Custodian shall promptly notify the Series (an "Overdraft Notice") of any Overdraft. To secure payment of any Overdraft and related interest and expenses, the Series hereby grants to the Custodian a first priority security interest in and right of setoff against the Securities and cash in the Series' account, including all income, substitutions and proceeds, whether now owned or hereafter acquired (the "Collateral"), in the full amount of such Overdraft, interest and expenses; provided that the Series does not grant the Custodian a security interest in any Securities issued by an affiliate of the Custodian (as defined in Section 23A of the Federal Reserve Act). The Custodian and the Series intend that, as the securities intermediary with respect to the Collateral, the Custodian's security interest shall automatically be perfected when it attaches. Should the Series fail to pay promptly any amounts owed hereunder, the Custodian shall be entitled to use available cash in the Series' account and to liquidate Securities in the account as necessary to meet the Series' obligations relating to such Overdraft, interest and expenses. In any such case, and without limiting the foregoing, the Custodian shall be entitled to take such other actions(s) or exercise such other options, powers and rights as the Custodian now or hereafter has as a secured creditor under the Massachusetts Uniform Commercial Code or any other applicable law. 11 9. TAX OBLIGATIONS. For purposes of this Agreement, "Tax Obligations" shall mean taxes, withholding, certification and reporting requirements, claims for exemptions or refund, interest, penalties, additions to tax and other related expenses. To the extent that the Custodian has received relevant and necessary information with respect to the account, the Custodian shall perform the following services with respect to Tax Obligations: a. The Custodian shall file claims for exemptions or refunds with respect to withheld foreign (non-U.S.) taxes in instances in which such claims are appropriate; b. The Custodian shall withhold appropriate amounts, as required by U.S. tax laws, with respect to amounts received on behalf of nonresident aliens; and c. The Custodian shall provide to the Fund or the Authorized Person such information received by the Custodian which could, in the Custodian's reasonable belief, assist the Fund or the Authorized Person in the submission of any reports or returns with respect to Tax Obligations. The Fund shall inform the Custodian in writing as to which party or parties shall receive information from the Custodian. The Custodian shall provide such other services with respect to Tax Obligations, including preparation and filing of tax returns and reports and payment of amounts due (to the extent funded), as requested by the Fund and agreed to by the Custodian in writing. The Custodian shall have no independent obligation to determine the existence of any information with respect to, or the extent of, any Tax Obligations now or hereafter imposed on the Fund or the account by any taxing authority. Except as specifically provided herein or agreed to in writing by the Custodian, the Custodian shall have no obligations or liability with respect to Tax Obligations, including, without limitation, any obligation to file or submit returns or reports with any taxing authorities. In making payments to service providers pursuant to Instructions, the Fund acknowledges that the Custodian is acting as a paying agent and not as the payor, for tax information reporting and withholding purposes. ARTICLE II. - FOREIGN CUSTODY MANAGER SERVICES 1. DELEGATION. The Board delegates to, and the Custodian hereby agrees to accept responsibility as the Fund's Foreign Custody Manager for selecting, contracting with and monitoring Foreign Custodians in Selected Countries set forth in Appendix C in accordance with Rule 17f-5(c). 2. CHANGES TO APPENDIX C. Appendix C may be amended by written agreement from time to time to add or delete jurisdictions by written agreement signed by an Authorized Person of the Fund and the Custodian, but the Custodian reserves the right to delete jurisdictions upon reasonable notice to the Series. 3. REPORTS TO BOARD. Custodian shall provide written reports notifying the Board of the placement of Assets with a particular Foreign Custodian and of any material change in 12 a Series' foreign custody arrangements. Such reports shall be provided to the Board quarterly, except as otherwise agreed by the Custodian and the Fund. 4. MONITORING SYSTEM. In each case in which the Custodian has exercised delegated authority to place Assets with a Foreign Custodian, the Custodian shall establish a system, to re-assess or re-evaluate selected Foreign Custodians, at least annually in accordance with Rule 17f-5(c)(3). 5. STANDARD OF CARE. In exercising the delegated authority under this Article II of the Agreement, the Custodian agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of the Assets would exercise in like circumstances. Contracts with Foreign Custodians shall provide for reasonable care for Assets based on the standards applicable to Foreign Custodians in the Selected Country. In making this determination, the Custodian shall consider the provisions of Rule 17f-5(c)(2). 6. USE OF SECURITIES DEPOSITORIES. In exercising its delegated authority, the Custodian may assume that the Series and its investment adviser have determined, pursuant to Rule 17f-7, that the depository provides reasonable safeguards against custody risks, if a Series decides to place and maintain foreign assets with any Securities Depository as to which the Custodian has provided the Fund on behalf of such Series with a Risk Analysis. ARTICLE III. - INFORMATION SERVICES 1. RISK ANALYSIS. The Custodian will provide the Fund on behalf of the Series with a Risk Analysis with respect to Securities Depositories operating in the countries listed in Appendix C. If the Custodian is unable to provide a Risk Analysis with respect to a particular Securities Depository, it will notify the Fund on behalf of the Series. If a new Securities Depository commences operation in one of the Appendix C countries, the Custodian will provide the Fund on behalf of the Series with a Risk Analysis in a reasonably practicable time after such Securities Depository becomes operational. If a new country is added to Appendix C, the Custodian will provide the Fund on behalf of the Series with a Risk Analysis with respect to each Securities Depository in that country within a reasonably practicable time after the addition of the country to Appendix C. 2. MONITORING OF SECURITIES DEPOSITORIES. The Custodian will monitor the custody risks associated with maintaining assets with each Securities Depository for which it has provided the Fund on behalf of the Series with a Risk Analysis as required under Rule 17f-7. The Custodian will promptly notify the Fund on behalf of the Series or its investment adviser of any material change in these risks. 3. USE OF AGENTS. The Custodian may employ agents, including, but not limited to Foreign Custodians, to perform its responsibilities under Sections 1 and 2 above. 4. EXERCISE OF REASONABLE CARE The Custodian will exercise reasonable care, 13 prudence, and diligence in performing its responsibilities under this Article III. With respect to the Risk Analyses provided or monitoring performed by an agent, the Custodian will exercise reasonable care in the selection of such agent, and shall be entitled to rely upon information provided by agents so selected in the performance of its duties and responsibilities under this Article III. 5. LIABILITIES AND WARRANTIES. While the Custodian will take reasonable precautions to ensure that information provided is accurate, the Custodian shall have no liability with respect to information provided to it by third parties. Due to the nature and source of information, and the necessity of relying on various information sources, most of which are external to the Custodian, the Custodian shall have no liability for direct or indirect use of such information. ARTICLE IV. - GENERAL PROVISIONS 1. COMPENSATION. a. The Fund will compensate the Custodian for its services rendered under this Agreement in accordance with the fees set forth in a separate Fee Schedule which schedule may be modified by the Custodian upon not less than sixty days prior written notice to the Fund. b. The Custodian will bill the Fund as soon as practicable after the end of each calendar month. The Fund will promptly pay to the Custodian the amount of such billing. c. If not paid directly or timely by the Fund, the Custodian may charge against assets held on behalf of the Series compensation and any expenses incurred by the Custodian in the performance of its duties pursuant to this Agreement. The Custodian shall also be entitled to charge against assets of the Series the amount of any loss, damage, liability or expense incurred with respect to the Series, including counsel fees, for which it shall be entitled to reimbursement under the provisions of this Agreement. The expenses which the Custodian may charge include, but are not limited to, the expenses of domestic subcustodians and Foreign Custodians incurred in settling transactions. 2. INSOLVENCY OF FOREIGN CUSTODIANS. The Custodian shall be responsible for losses or damages suffered by the Series arising as a result of the insolvency of a Foreign Custodian only to the extent that the Custodian failed to comply with the standard of care set forth in Article II with respect to the selection and monitoring of such Foreign Custodian. 3. LIABILITY FOR DEPOSITORIES. The Custodian shall not be responsible for any losses resulting from the deposit or maintenance of Securities, Assets or other property of the Series with a Securities Depository. 4. DAMAGES. Under no circumstances shall the Custodian be liable for any indirect, 14 consequential or special damages with respect to its role as Foreign Custody Manager, Custodian or information vendor. 5. INDEMNIFICATION; LIABILITY OF THE SERIES. a. The Fund shall indemnify and hold the Custodian harmless from all liability and costs, including reasonable counsel fees and expenses, relating to or arising out of the performance of the Custodian's obligations under this Agreement except to the extent resulting from the Custodian's negligence or willful misconduct. This provision shall survive the termination of this Agreement. b. The Series and the Custodian agree that the obligations of the Fund under this Agreement shall not be binding upon any of the trustees, shareholders, nominees, officers, employees or agents, whether past, present or future, of the Series, individually, but are binding only upon the assets and property of the Fund. 6. FORCE MAJEURE. Notwithstanding anything in this Agreement to the contrary contained herein, the Custodian shall not be responsible or liable for its failure to perform under this Agreement or for any losses to the account resulting from any event beyond the reasonable control of the Custodian, its agents or subcustodians. This provision shall survive the termination of this Agreement 7. TERMINATION. a. Either party may terminate this Agreement by giving the other party sixty (60) days notice in writing, specifying the date of such termination. In the event notice is given by the Fund, it shall be accompanied by a Certificate evidencing the vote of the Fund's Board to terminate this Agreement and designating a successor. b. In the event notice of termination is given by the Custodian, the Fund shall, on or before the termination date, deliver to the Custodian a Certificate evidencing the vote of the Board designating a successor custodian. In the absence of such designation, the Custodian may designate a successor custodian, which shall be a person qualified to so act under the Act or the Series. If the Fund fails to designate a successor custodian, the Fund shall, upon the date specified in the notice of termination, and upon the delivery by the Custodian of all Securities and monies then owned by the Series, be deemed to be its own custodian and the Custodian shall thereby be relieved of all duties and or the Series responsibilities under this Agreement other than the duty with respect to Securities held in the Book-Entry System which cannot be delivered to the Series. c. Upon termination of the Agreement, the Custodian shall, upon receipt of a notice of acceptance by the successor custodian, deliver to the successor all Securities and monies then held by the Custodian on behalf of the Series, after deducting all fees, expenses and other amounts owed. d. In the event of a dispute following the termination of this Agreement, all relevant provisions shall be deemed to continue to apply to the obligations and liabilities 15 of the parties. 8. INSPECTION OF BOOKS AND RECORDS. The books and records of the Custodian directly related to the Fund shall be open to inspection and audit at reasonable times by officers and auditors employed by the Fund at its own expense and with prior written notice to the Custodian, and by the appropriate employees of the Securities and Exchange Commission. 9. MISCELLANEOUS. a. APPENDIX A is a Certificate signed by the Secretary of the Fund setting forth the names and the signatures of Authorized Persons. The Fund shall furnish a new Certificate when the list of Authorized Persons is changed in any way. Until a new certification is received, the Custodian shall be fully protected in acting upon Instructions from Authorized Persons as set forth in the last delivered Certificate. b. APPENDIX B is a Certificate signed by the Secretary of the Fund setting forth the names and the signatures of the present officers of the Fund. The Fund agrees to furnish to the Custodian a new Certificate when any changes are made. Until a new Certificate is received, the Custodian shall be fully protected in relying upon the last delivered Certificate. c. Any required written notice or other instrument shall be sufficiently given if addressed to the Custodian or the Fund as the case may be and delivered to it at its offices at: The Custodian: Mellon Trust of New England, N.A. 135 Santilli Highway Everett, MA 02149 Attn: Greg D. Taylor The Fund: The RBB Fund, Inc. 400 Bellevue Parkway, Suite 100 Wilmington, DE 19809 Attn. Edward J. Roach or at such other place as the parties may from time to time designate to the other in writing. d. This Agreement may not be amended or modified except by a written agreement executed by both parties. e. This Agreement shall extend to and shall be binding upon the parties 16 hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of the Custodian, or by the Custodian without the written consent of the Fund authorized or approved by a vote of the Board, provided, however, that the Custodian may assign the Agreement or any function thereof to any corporation or entity which directly or indirectly is controlled by, or is under common control with, the Custodian and any other attempted assignment without written consent shall be null and void. f. Nothing in this Agreement shall give or be construed to give or confer upon any third party any rights hereunder. g. The Custodian represents that it is a U.S. Bank within the meaning of paragraph (a)(7) of Rule 17f-5. h. The Fund acknowledges and agrees that, except as expressly set forth in this Agreement, the Fund is solely responsible to assure that the maintenance of the Series' Securities and cash hereunder complies with applicable laws and regulations, including without limitation the Act and the rules and regulations promulgated thereunder and applicable interpretations thereof or exemptions therefrom. The Fund represents that it has determined that it is reasonable to rely on Custodian to perform the responsibilities delegated pursuant to this Agreement. i. This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts. j. The captions of the Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. k. Each party represents and warrants to the other that it has all necessary power and authority, and has obtained any consent or approval necessary to permit it, to enter into and perform this Agreement and that this Agreement does not violate, give rise to a default or right of termination under or otherwise conflict with any applicable law, regulation, ruling, decree or other governmental authorization or any contract to which it is a party or by which any of its assets is bound. Each party represents and warrants that the individual executing this Agreement on its behalf has the requisite authority to bind the Fund or the Custodian to this Agreement. The Fund has received and read the "Customer Identification Program Notice", a copy of which is attached to this Agreement as Exhibit A. l. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. 17 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective representatives duly authorized as of the day and year first above written. THE RBB FUND, INC. By: /s/ Edward J. Roach ------------------- Name: Edward J. Roach Title: President and Treasurer MELLON TRUST OF NEW ENGLAND, N.A. By: /s/ Kelly Carroll ----------------- Name: Kelly Carroll Title: Vice President APPENDIX A LIST OF AUTHORIZED PERSONS I, TINA PAYNE, the Secretary of THE RBB FUND, INC., a corporation organized under the laws of the State of Maryland (the "Fund"), do hereby certify that: The following individuals have been duly authorized as Authorized Persons to give Instructions on behalf of the Fund and each Series thereof and the specimen signatures set forth opposite their respective names are their true and correct signatures: NAME SIGNATURE Peter Albanese /s/ Peter Albanese Sid Bakst /s/ Sid Bakst Christopher Blume /s/ Christopher Blume David Dabora /s/ David Dabora Mark E. Donovan /s/ Mark E. Donovan Emily Escott /s/ Emily Escott Chris Hart /s Chris Hart Desmond J. Heathwood /s/ Desmond J. Heathwood Robert Jones /s/ Robert Jones William J. Kelly /s/ William J. Kelly Ken Lengieza /s/ Ken Lengieza Christine Mevs /s/ Christine Mevs Sharon O'Brien /s/ Sharon O'Brien Steve Pollack /s/ Steve Pollack David Pyle /s/ David Pyle Easton Ragsdale /s/ Easton Ragsdale 19 Duilio Ramallo /s/ Duilio Ramallo Harry Rosenbluth /s/ Harry Rosenbluth Richard Shuster /s/ Richard Shuster Eric Sullivan /s/ Eric Sullivan Daniel S. Vandivort /s/ Daniel S. Vandivort Gregory Weiss /s/ Gregory Weiss By: /s/ Tina Payne -------------- Secretary Dated: April 29, 2005 20 APPENDIX B FUND OFFICERS I, TINA M. PAYNE, the Secretary of THE RBB FUND, INC., a corporation organized under the laws of the State of Maryland (the "Fund"), do hereby certify that: The following individuals serve in the following positions with the Series and each individual has been duly elected or appointed to each such position and qualified therefor in conformity with the Fund's governing instrument and the specimen signatures set forth opposite their respective names are their true and correct signatures: NAME POSITION SIGNATURE - ---- -------- --------- J. Richard Carnall Chairman of the Board /s/ J. Richard Carnall Edward J. Roach President and Treasurer /s/ Edward J. Roach James G. Shaw Assistant Treasurer /s/ James G. Shaw Tina M. Payne Secretary /s/ Tina M. Payne Michael P. Malloy Assistant Secretary /s/ Michael P. Malloy Salvatore Faia Chief Compliance Officer /s/ Salvatore Faia By: /s/ Tina M. Payne Secretary Tina M. Payne Dated: April 29, 2005 21 APPENDIX C SELECTED COUNTRIES Australia Austria Belgium Canada China/Shenzhen China/Shanghai Denmark Finland France Germany Greece Hong Kong Ireland Italy Japan Luxembourg The Netherlands New Zealand Norway Portugal Singapore Spain Sweden Switzerland Turkey United Kingdom "*Note, Custodian will not act as a Foreign Custody Manager with respect to assets held in this country. Holding assets and use of Mellon's usual subcustodian in this country is subject to Instructions by the Fund and its execution of a separate letter-agreement pertaining to custody and market risks." 22 APPENDIX D LIST OF FUNDS WPG LARGE CAP GROWTH FUND TUDOR FUND WPG CORE BOND FUND 23 EXHIBIT A CUSTOMER IDENTIFICATION PROGRAM NOTICE [LOGO] MELLON - -------------------------------------------------------------------------------- CUSTOMER IDENTIFICATION PROGRAM NOTICE IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT To help the government fight the funding of terrorism and money laundering activities, all financial institutions are required by law to obtain, verify and record information that identifies each individual or entity that opens an account. What this means for you: When you open an account, we will ask you for your name, address, taxpayer or other government identification number and other information, such as date of birth for individuals, that will allow us to identify you. We may also ask to see identification documents such as a driver's license, passport or documents showing existence of the entity. - -------------------------------------------------------------------------------- REV. 09/03 24 EX-99.G(23) 8 g34307_exg23.txt EXHIBIT (G)(23) - FORM OF CUSTODIAN AGRMNT SUPP Exhibit (g)(23) FORM OF CUSTODIAN AGREEMENT SUPPLEMENT (Bear Stearns Fund of The RBB Fund, Inc.) This supplemental agreement is entered into this ___ day of ________, 2006 by and between THE RBB FUND, INC. (the "Fund") and PFPC Trust Company ("PFPC Trust"). The Fund is a corporation organized under the laws of the State of Maryland and is an open-end management investment company. The Fund and PFPC Trust have entered into a Custodian Agreement, dated as of August 16, 1988 (as from time to time amended and supplemented, the "Custodian Agreement"), pursuant to which PFPC Trust has undertaken to act as custodian for the Fund with respect to the portfolios of the Fund, as more fully set forth therein. Certain capitalized terms used without definition in this Custodian Agreement Supplement have the meaning specified in the Custodian Agreement. The Fund agrees with the Custodian as follows: 1. ADOPTION OF CUSTODIAN AGREEMENT. The Custodian Agreement is hereby adopted for the Bear Stearns Fund (the "Portfolio"). 2. COMPENSATION. As compensation for the services rendered by the Custodian during the term of the Custodian Agreement, the Fund will pay to the Custodian, with respect to the Portfolio, monthly fees as shall be agreed to from time to time by the Fund and PFPC Trust. 3. COUNTERPARTS. This Supplement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have entered into this Supplement, intending to be legally abound hereby, as of the date and year first above written. THE RBB FUND, INC. PFPC TRUST COMPANY By: __________________________ By: ___________________________ Name: __________________________ Name: ___________________________ Title: __________________________ Title: ___________________________ EX-99.H(80) 9 g34307_exh80.txt EXHIBIT (H)(80) - FORM OF ADMINACCTNGSERVAGRMNT Exhibit (h)(80) FORM OF ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT THIS AGREEMENT is made as of _________, 2006 by and between PFPC Inc., a Massachusetts corporation ("PFPC") and The RBB Fund, Inc. a Maryland corporation (the "Fund"). W I T N E S S E T H : WHEREAS, the Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund wishes to retain PFPC to provide administration and accounting services to the Bear Stearns Fund (the "Portfolio"), and PFPC wishes to furnish such services. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and intending to be legally bound hereby the parties hereto agree as follows: 1. DEFINITIONS. AS USED IN THIS AGREEMENT: (a) "1933 Act" means the Securities Act of 1933, as amended. (b) "1934 Act" means the Securities Exchange Act of 1934, as amended. (c) "Authorized Person" means any officer of the Fund and any other person duly authorized by the Fund's Board of Directors to give Oral Instructions and Written Instructions on behalf of the Fund. An Authorized Person's scope of authority may be limited by setting forth such limitation in a written document signed by both parties hereto. (d) "CEA" means the Commodities Exchange Act, as amended. (e) "Change of Control" means a change in ownership or control (not including transactions between wholly-owned direct or indirect subsidiaries of a common parent) of 25% or more of the beneficial ownership of the shares of common stock or shares of beneficial interest of an entity or its parent(s). (f) "Oral Instructions" mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person. PFPC may, in its sole discretion in each separate instance, consider and rely upon instructions it receives from an Authorized Person via electronic mail as Oral Instructions. (g) "SEC" means the Securities and Exchange Commission. (h) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act and the CEA. (i) "Shares" means the shares of beneficial interest of any series or class of the Fund. (j) "Written Instructions" mean (i) written instructions signed by an Authorized Person and received by PFPC or (ii) trade instructions transmitted (and received by PFPC) by means of an electronic transaction reporting system access to which requires use of a password or other authorized identifier. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device. 2. APPOINTMENT. The Fund hereby appoints PFPC to provide administration and accounting services to the Portfolio, in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services. 3. INFORMATION. The Fund will provide such information and documentation as PFPC may reasonably request in connection with services provided by PFPC to the Fund. 4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with all applicable requirements of the Securities Laws, and 2 any laws, rules and regulations of governmental authorities having jurisdiction with respect to the duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Fund or other entity. 5. INSTRUCTIONS. (a) Unless otherwise provided in this Agreement, PFPC shall act only upon Oral Instructions or Written Instructions. (b) PFPC shall be entitled to rely upon any Oral Instruction or Written Instruction it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral Instruction or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Board of Directors or of the Fund's shareholders, unless and until PFPC receives Written Instructions to the contrary. (c) The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC or its affiliates) so that PFPC receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC or differ from the Oral Instructions shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions or PFPC's ability to rely upon such Oral Instructions. 6. RIGHT TO RECEIVE ADVICE. 3 (a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral Instructions or Written Instructions, from the Fund. (b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of law pertaining to any action it should or should not take, PFPC may request advice from counsel of its own choosing (who may be counsel for the Fund, the Fund's investment adviser or PFPC, at the option of PFPC). (c) CONFLICTING ADVICE. In the event of a conflict between directions or advice or Oral Instructions or Written Instructions PFPC receives from the Fund and the advice PFPC receives from counsel, PFPC may rely upon and follow the advice of counsel. (d) PROTECTION OF PFPC. PFPC shall be indemnified by the Fund and without liability for any action PFPC takes or does not take in reliance upon directions or advice or Oral Instructions or Written Instructions PFPC receives from or on behalf of the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions or advice and Oral Instructions or Written Instructions. Nothing in this section shall be construed so as to impose an obligation upon PFPC (i) to seek such directions or advice or Oral Instructions or Written Instructions, or (ii) to act in accordance with such directions or advice or Oral Instructions or Written Instructions. 7. RECORDS; VISITS. (a) The books and records pertaining to the Fund and the Portfolios which are in the possession or under the control of PFPC shall be the property of the Fund. Such 4 books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person, at the Fund's expense. (b) PFPC shall keep the following records: (i) all books and records with respect to the Portfolio's books of account; (ii) records of the Portfolio's securities transactions; and (iii) all other books and records as PFPC is required to maintain pursuant to Rule 31a-1 of the 1940 Act in connection with the services provided hereunder. 8. CONFIDENTIALITY. Each party shall keep confidential any information relating to the other party's business ("Confidential Information"). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Fund or PFPC, their respective subsidiaries and affiliated companies and the customers, clients and suppliers of any of them; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Fund or PFPC a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, 5 source code, object code, flow charts, databases, inventions, know-how, and trade secrets, whether or not patentable or copyrightable; and (d) anything designated as confidential. Notwithstanding the foregoing, information shall not be subject to such confidentiality obligations if it: (a) is already known to the receiving party at the time it is obtained; (b) is or becomes publicly known or available through no wrongful act of the receiving party; (c) is rightfully received from a third party who, to the best of the receiving party's knowledge, is not under a duty of confidentiality; (d) is released by the protected party to a third party without restriction; (e) is required to be disclosed by the receiving party pursuant to a requirement of a court order, subpoena, governmental or regulatory agency or law (provided the receiving party will provide the other party written notice of such requirement, to the extent such notice is permitted); (f) is relevant to the defense of any claim or cause of action asserted against the receiving party; or (g) has been or is independently developed or obtained by the receiving party. 9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules with respect to the Portfolio. PFPC shall take all reasonable action in the performance of its duties under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund. 10. PFPC SYSTEM. PFPC shall retain title to and ownership of any and all data bases, computer programs, screen formats, report formats, interactive design techniques, derivative works, inventions, discoveries, patentable or copyrightable matters, concepts, 6 expertise, patents, copyrights, trade secrets, and other related legal rights utilized by PFPC in connection with the services provided by PFPC to the Fund. 11. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PFPC shall have no liability with respect to the loss of data or service interruptions caused by equipment failure, provided such loss or interruption is not caused by PFPC's own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties or obligations under this Agreement. 12. COMPENSATION. As compensation for services rendered by PFPC during the term of this Agreement, the Fund, on behalf of the Portfolio, will pay to PFPC a fee or fees as may be agreed to in writing by the Fund and PFPC. 13. INDEMNIFICATION. The Fund, on behalf of the Portfolio, agrees to indemnify, defend and hold harmless PFPC and its affiliates, including their respective officers, directors, agents and employees from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, attorneys' fees and disbursements and liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws) arising directly or indirectly from any action or omission to act which PFPC takes in connection with the provision of services to the Fund. Neither PFPC, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) caused by PFPC's or its affiliates' own willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of PFPC's activities under this Agreement. Any amounts 7 payable by the Fund hereunder shall be satisfied only against the relevant Portfolio's assets and not against the assets of any other investment portfolio of the Fund. The provisions of this Section 13 shall survive termination of this Agreement. 14. RESPONSIBILITY OF PFPC. (a) PFPC shall be under no duty to take any action hereunder on behalf of the Fund or any Portfolio except as specifically set forth herein or as may be specifically agreed to by PFPC and the Fund in a written amendment hereto. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder and to act in good faith in performing services provided for under this Agreement. PFPC shall be liable only for any damages arising out of PFPC's failure to perform its duties under this Agreement to the extent such damages arise out of PFPC's willful misfeasance, bad faith, gross negligence or reckless disregard of such duties. (b) Notwithstanding anything in this Agreement to the contrary, (i) PFPC shall not be liable for losses, delays, failure, errors, interruption or loss of data occurring directly or indirectly by reason of circumstances beyond its reasonable control, including without limitation acts of God; action or inaction of civil or military authority; public enemy; war; terrorism; riot; fire; flood; sabotage; epidemics; labor disputes; civil commotion; interruption, loss or malfunction of utilities, transportation, computer or communications capabilities; insurrection; elements of nature; or non-performance by a third party; and (ii) PFPC shall not be under any duty or obligation to inquire into and shall not be liable for the validity or invalidity, authority or lack thereof, or truthfulness or accuracy or lack thereof, of 8 any instruction, direction, notice, instrument or other information which PFPC reasonably believes to be genuine. (c) Notwithstanding anything in this Agreement to the contrary, (i) neither PFPC nor its affiliates shall be liable for any consequential, special or indirect losses or damages, whether or not the likelihood of such losses or damages was known by PFPC or its affiliates and (ii) PFPC's cumulative liability to the Fund for all losses, claims, suits, controversies, breaches or damages for any cause whatsoever (including but not limited to those arising out of or related to this Agreement) and regardless of the form of action or legal theory shall not exceed the lesser of $100,000 or the fees received by PFPC for services provided hereunder during the 12 months immediately prior to the date of such loss or damage. (d) No party may assert a cause of action against PFPC or any of its affiliates that allegedly occurred more than 12 months immediately prior to the filing of the suit (or, if applicable, commencement of arbitration proceedings) alleging such cause of action. (e) Each party shall have a duty to mitigate damages for which the other party may become responsible. (f) The provisions of this Section 14 shall survive termination of this Agreement. 15. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS. PFPC will perform the following accounting services with respect to the Portfolio: (i) Journalize investment, capital share and income and expense activities; (ii) Verify investment buy/sell trade tickets when received from the investment adviser for the Portfolio (the "Adviser") and transmit trades to the Fund's custodian (the "Custodian") for proper settlement; 9 (iii) Maintain individual ledgers for investment securities; (iv) Maintain historical tax lots for each security; (v) Reconcile cash and investment balances of the Fund with the Custodian, and provide the Adviser with the beginning cash balance available for investment purposes; (vi) Update the cash availability throughout the day as required by the Adviser; (vii) Post to and prepare the Statement of Assets and Liabilities and the Statement of Operations; (viii) Calculate various contractual expenses (E.G., advisory and custody fees); (ix) Monitor the expense accruals and notify an officer of the Fund of any proposed adjustments; (x) Control all disbursements and authorize such disbursements upon Written Instructions; (xi) Calculate capital gains and losses; (xii) Determine net income; (xiii) Obtain security market quotes from independent pricing services approved by the Adviser, or if such quotes are unavailable, then obtain such prices from the Adviser, and in either case calculate the market value of the Portfolio's Investments; (xiv) Transmit or mail a copy of the daily portfolio valuation to the Adviser; (xv) Compute net asset value; (xvi) As appropriate, compute yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity; and (xvii) Prepare a monthly financial statement which includes the following items: Schedule of Investments Statement of Assets and Liabilities Statement of Operations Cash Statement Schedule of Capital Gains and Losses. 10 16. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS. PFPC will perform the following administration services with respect to the Portfolio: (i) Prepare quarterly broker security transactions summaries; (ii) Prepare monthly security transaction listings; (iii) Supply various normal and customary Portfolio and Fund statistical data as requested on an ongoing basis; (iv) Prepare for execution and file the Fund's Federal and state tax returns; (v) Prepare and file the Fund's Semi-Annual Reports with the SEC on Form N-SAR; (vi) Prepare and file with the SEC the Fund's annual, semi-annual, and quarterly shareholder reports; (vii) Assist in the preparation of registration statements and other filings relating to the registration of Shares; (viii) Monitor the Portfolio's status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended; (ix) Coordinate contractual relationships and communications between the Fund and its contractual service providers; and (x) Monitor the Fund's compliance with the amounts and conditions of each state qualification. 17. DURATION AND TERMINATION. This Agreement shall continue until terminated by the Fund or by PFPC on sixty (60) days' prior written notice to the other party. In the event the Fund gives notice of termination, all expenses associated with movement (or duplication) of records and materials and conversion thereof to a successor accounting and administration services agent(s) (and any other service provider(s)), and all trailing expenses incurred by PFPC, will be borne by the Fund. 18. CHANGE OF CONTROL. Notwithstanding any other provision of this Agreement, in the event 11 of an agreement to enter into a transaction that would result in a Change of Control of the Fund's adviser or sponsor, the Fund's ability to terminate the Agreement pursuant to Section 17 will be suspended from the time of such agreement until two years after the Change of Control. 19. NOTICES. Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809, Attention: President; (b) if to the Fund, at 400 Bellevue Parkway, Wilmington, Delaware 19809, Attention: Edward A. Roach or (c) if to neither of the foregoing, at such other address as shall have been given by like notice to the sender of any such notice or other communication by the other party. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered. 20. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought. 21. ASSIGNMENT. PFPC may assign its rights hereunder to any majority-owned direct or indirect subsidiary of PFPC or of The PNC Financial Services Group, Inc., provided that PFPC gives the Fund 30 days prior written notice of such assignment. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 23. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further 12 documents as are necessary to effectuate the purposes hereof. 24. MISCELLANEOUS. (a) Notwithstanding anything in this Agreement to the contrary, the Fund agrees not to make any modifications to its registration statement or adopt any policies which would affect materially the obligations or responsibilities of PFPC hereunder without the prior written approval of PFPC, which approval shall not be unreasonably withheld or delayed. (b) Except as expressly provided in this Agreement, PFPC hereby disclaims all representations and warranties, express or implied, made to the Fund or any other person, including, without limitation, any warranties regarding quality, suitability, merchantability, fitness for a particular purpose or otherwise (irrespective of any course of dealing, custom or usage of trade), of any services or any goods provided incidental to services provided under this Agreement. PFPC disclaims any warranty of title or non-infringement except as otherwise set forth in this Agreement. (c) This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. Notwithstanding any provision hereof, the services of PFPC are not, nor shall they be, construed as constituting legal advice or the 13 provision of legal services for or on behalf of the Fund or any other person. (d) This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law, without regard to principles of conflicts of law. (e) If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. (f) The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party. 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. PFPC INC. By: Title: THE RBB FUND, INC. By: Title: 15 EX-99.H(81) 10 g34307_exh81.txt EXHIBIT (H)(81) - FORM OF TRANSAGENCYAGRMNTSUPP Exhibit (h)(81) FORM OF TRANSFER AGENCY AGREEMENT SUPPLEMENT (Bear Stearns CUFS Fund of The RBB Fund, Inc.) This supplemental agreement is entered into this ____ day of ___________, 200_ by and between THE RBB FUND, INC. (the "Fund") and PFPC INC., a Massachusetts corporation ("PFPC"). The Fund is a corporation organized under the laws of the State of Maryland and is an open-end management investment company. The Fund and PFPC have entered into a Transfer Agency Agreement, dated as of November 5, 1991 (as from time to time amended and supplemented, the "Transfer Agency Agreement"), pursuant to which PFPC has undertaken to act as transfer agent, registrar and dividend disbursing agent for the Fund with respect to the portfolios of the Fund, as more fully set forth therein. Certain capitalized terms used without definition in this Transfer Agency Agreement Supplement have the meaning specified in the Transfer Agency Agreement. The Fund agrees with the Transfer Agent as follows: 1. ADOPTION OF TRANSFER AGENCY AGREEMENT. The Transfer Agency Agreement is hereby adopted for Bear Stearns CUFS Fund (the "Portfolio"). 2. COMPENSATION. As compensation for the services rendered by PFPC during the term of the Transfer Agency Agreement, the Fund will pay to the Transfer Agent, with respect to the Portfolio, monthly fees that shall be agreed to from time to time by the Fund and PFPC, for each account open at any time during the month for which payment is being made, plus certain of PFPC's expenses relating to such services. 3. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have entered into this Agreement, intending to be legally bound hereby, as of the date and year first above written. THE RBB FUND, INC. PFPC INC. By: __________________________ By: ___________________________ Name: __________________________ Name: ___________________________ Title: __________________________ Title: ___________________________ EX-99.H(82) 11 g34307_exh82.txt EXHIBIT (H)(82) - FORM OF ADMINSERVAGRMNTSUPP Exhibit (h)(82) FORM OF ADMINISTRATIVE SERVICES AGREEMENT SUPPLEMENT The RBB Fund, Inc. Bear Stearns CUFS Fund This supplemental agreement is entered into this day of ___________, 200__, by and between THE RBB FUND, INC. (the "Company") and PFPC DISTRIBUTORS, INC. ("PFPC Distributors"). The Company is a corporation organized under the laws of the State of Maryland and is an open-end management investment company. The Company and PFPC Distributors have entered into a Administrative Services Agreement, dated as of May 29, 1998 (as from time to time amended and supplemented, the "Administrative Services Agreement"), pursuant to which PFPC Distributors has undertaken to provide certain administrative services to certain of the Company's portfolios and classes, as more fully set forth therein. The Company agrees with PFPC Distributors as follows: 1. ADOPTION OF ADMINISTRATIVE SERVICES AGREEMENT. The Administrative Services Agreement is hereby adopted for the Class of Common Stock of Bear Stearns CUFS Fund of the Company. 2. PAYMENT OF FEES. For all services to be rendered, facilities furnished and expenses paid or assumed by PFPC Distributors as provided in the Administrative Services Agreement and herein, the Company shall pay PFPC Distributors a monthly fee, as well as reimburse out-of-pocket expenses, on the first business day of each month, as provided in the Administrative Services Agreement. 3. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have entered into this Agreement, intending to be legally bound hereby, as of the date and year first above written. THE RBB FUND, INC. PFPC DISTRIBUTORS, INC. By: ______________________ By: ________________________ Edward J. Roach President EX-99.H(83) 12 g34307_exh83.txt EXHIBIT (H)(83) - AMENDSCHEDA TO REGADMSERVAGRMNT Exhibit (h)(83) FORM OF AMENDED SCHEDULE A THIS SCHEDULE A, amended and restated as of __________ , 2006, is the Schedule A to that certain Regulatory Administration Services Agreement dated as of June 1, 2003 between PFPC Inc. and The RBB Fund, Inc. LIST OF PORTFOLIOS Money Market Portfolio Baker 500 Growth Fund Bogle Investment Management Small Cap Growth Fund Robeco Boston Partners Large Cap Value Fund Robeco Boston Partners Mid Cap Value Fund Robeco Boston Partners All-Cap Fund Robeco Boston Partners Small Cap Value Fund II (formerly the Micro Cap Value Fund) Robeco Boston Partners Long/Short Equity Fund (formerly the Market Neutral Fund) Robeco WPG Core Bond Fund Robeco WPG Large Cap Growth Fund Robeco WPG Tudor Fund n/i Growth Fund n/i Mid Cap Fund (formerly the n/i Growth & Value Fund) n/i Emerging Growth Fund (formerly the n/i Micro Cap Fund) n/i Small Cap Value Fund Schneider Small Cap Value Fund Schneider Value Fund Institutional Liquidity Fund for Credit Unions Liquidity Fund for Credit Union Members Senbanc Fund Bear Stearns Fund PFPC INC. By: _________________________ Name: _________________________ Title: _________________________ THE RBB FUND, INC. By: _________________________ Name: _________________________ Title: _________________________ EX-99.I(26) 13 g34307_exi26.txt EXHIBIT (I)(26) - FORM OF PURCHASE AGREEMENT Exhibit (i)(26) FORM OF PURCHASE AGREEMENT The RBB Fund, Inc. (the "Company"), a Maryland corporation, and _______________ ("_______") intending to be legally bound, hereby agree with each other as follows: 1. The Company hereby offers _____________ and _____________ hereby purchases $____ worth of shares of Class YYY Common Stock (Bear Stearns Fund) (par value $.001 per share) (such shares hereinafter sometimes collectively known as "Shares") at price per Share of $1.00. 2. The Company hereby acknowledges receipt from _____________ of funds in the amount of $_____ in full payment for the Shares. 3. _____________ represents and warrants to the Company that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. 4. This agreement may be executed in counterparts, and all such counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the __ day of ______, 2006. THE RBB FUND, INC. By:____________________________ Edward J. Roach President & Treasurer BEAR STEARNS ASSET MANAGEMENT INC. By: Name: Title: EX-99.P(1) 14 g34307_exp1.txt EXHIBIT (P)(1) - CODE OF ETHICS REGISTRANT Exhibit (p)(1) THE RBB FUND, INC. (the "Company") CODE OF ETHICS I. LEGAL REQUIREMENT. Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the "1940 Act"), makes it unlawful for any officer or director of the Company in connection with the purchase or sale by such person of a security "held or to be acquired" by the Company: 1. To employ any device, scheme or artifice to defraud the Company; 2. To make to the Company any untrue statement of a material fact or omit to state to the Company a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; 3. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Company; or 4. To engage in any manipulative practice with respect to the Company's investment portfolios. II. PURPOSE OF THE CODE OF ETHICS. The Company expects that its officers and directors will conduct their personal investment activities in accordance with (1) the duty at all times to place the interests of the Company's shareholders first, (2) the requirement that all personal securities transactions be conducted consistent with this Code of Ethics and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility, and (3) the fundamental standard that investment company personnel should not take inappropriate advantage of their positions. In view of the foregoing, the provisions of Section 17(j) of the 1940 Act, the Securities and Exchange Commission's 1940 Act Release No. 23958 "Personal Investment Activities of Investment Company Personnel" (August 24, 1999), the "Report of the Advisory Group on Personal Investing" issued by the Investment Company Institute on May 9, 1994 and the Securities and Exchange Commission's September 1994 Report on "Personal Investment Activities of Investment Company Personnel," the Company has determined to adopt this Code of Ethics on behalf of the Company to specify a code of conduct for certain types of personal securities transactions which might involve conflicts of interest or an appearance of impropriety, and to establish reporting requirements and enforcement procedures. III. DEFINITIONS. A. An "Access Person" means: (1) each director and officer of the Company; (2) each director, officer or general partner of the Company's investment advisers; (3) any of the Company or its investment advisers (or of any company in a control relationship to the Company or its investment advisers) 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 Company or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (4) any natural person in a control relationship to the Company or its investment advisers who obtains information concerning recommendations made to the Company with regard to the purchase or sale of a security. For purposes of this Code of Ethics, an "Access Person" does not include any person who is subject to the securities transaction pre-clearance requirements and securities transaction reporting requirements of the Code of Ethics adopted by the Company's investment advisers or principal underwriter, if any, in compliance with Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Investment Advisers Act of 1940, as amended, (the "Advisers Act") or Section 15(f) of the Securities Exchange Act of 1934 (the "1934 Act"), as applicable. B. "Restricted Director" or "Restricted Officer" means each director or officer of the Company who is not also a director, officer, partner, employee or controlling person of the Company's investment advisers, co-administrators, custodian, transfer agent or principal underwriter. C. An Access Person's "immediate family" includes a spouse, minor children and adults living in the same household as the Access Person. D. A security is "held or to be acquired" if within the most recent 15 days it (1) is or has been held by the Company, or (2) is being or has been considered by the Company or its investment adviser for purchase by the Company. A purchase or sale includes the writing of an option to purchase or sell and any security that is exchangeable for or convertible into, any security that is held or to be acquired by the Company. E. An "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934. F. "Investment Personnel" of the Company means: (i) Any employee of the Company (or of any company in a control relationship to the Company) who, in connection with his or her regular functions - 2 - or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Company. (ii) Any natural person who controls the Company and who obtains information concerning recommendations made to the Company regarding the purchase or sale of securities by the Company. G. A "Limited Offering" means an offering that is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 under the Securities Act of 1933. H. "Covered Security" means a security as defined in Section (2)(a)(36) of the 1940 Act, except that it does not include direct obligations of the Government of the United States; bankers' acceptances; bank certificates of deposit; commercial paper; high quality short-term debt instruments (any instrument having a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a nationally recognized statistical rating organization), including repurchase agreements; and shares of registered open-end investment companies(1) other than Exchange Traded Funds. I. "De Minimis Security" means securities issued by any company included in the Standard and Poor's 500 Stock Index and in an amount less than $10,000. J. "Automatic Investment Plan" means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An Automatic Investment Plan includes a dividend reinvestment plan. IV. POLICIES OF THE COMPANY REGARDING PERSONAL SECURITIES TRANSACTIONS. A. General Policy. No Access Person of the Company shall engage in any act, practice or course of business that would violate the provisions of Rule 17j-1(b) set forth above, or in connection with any personal investment activity, engage in conduct inconsistent with this Code of Ethics. B. Specific Policies. - ---------- 1. Shares of certain registered open-end investment companies are included as "Covered Securities" with respect to Access Persons of the Company's investment advisers or any company controlled by or under common control with the investment advisers. - 3 - 1. Restrictions on Personal Securities Transactions By Access Persons Other Than Restricted Directors and Restricted Officers. a. Except as provided below in paragraph IV.B.1.d., no Access Person who is not a Restricted Director or Restricted Officer may buy or sell Covered Securities for his or her personal portfolio or the portfolio of a member of his or her immediate family without obtaining oral authorization from the Compliance Officer of the Company's investment adviser PRIOR to effecting such security transaction. A written authorization for such security transaction will be provided by the investment adviser's Compliance Officer to the person receiving the authorization (if granted) and to the Company's administrator to memorialize the oral authorization that was granted. NOTE: If an Access Person has questions as to whether purchasing or selling a security for his or her personal portfolio or the portfolio of a member of his or her immediate family requires prior oral authorization, the Access Person should consult the investment adviser's Compliance Officer for clearance or denial of clearance to trade PRIOR to effecting any securities transactions. b. Pre-clearance approval under paragraph (a) will expire at the close of business on the seventh trading day after the date on which oral authorization is received, and the Access Person is required to renew clearance for the transaction if the trade is not completed before the authority expires. c. No clearance will be given to an Access Person other than a Restricted Director or Restricted Officer to purchase or sell any Covered Security (1) on a day when any portfolio of the Company has a pending "buy" or "sell" order in that same Covered Security until that order is executed or withdrawn or (2) when the Compliance Officer has been advised by the investment adviser that the same Covered Security is being considered for purchase or sale for any portfolio of the Company. d. The pre-clearance requirements contained in paragraph IV.B.1.a, above, shall not apply to the following securities ("Exempt Securities"): (i) Securities that are not Covered Securities. (ii) De Minimis Securities. - 4 - (iii) Securities purchased or sold in any account over which the Access Person has no direct or indirect influence or control. (iv) Securities purchased or sold in a transaction which is non-volitional on the part of either the Access Person or the Company. (v) Securities acquired as a part of an automatic dividend reinvestment plan. (vi) Securities acquired upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired. (vii) Securities which the Company's investment portfolios are not permitted to purchase under the investment objectives and policies set forth in the Company's then current prospectuses under the Securities Act of 1933 or the Company's registration statements on Form N-1A. e. The pre-clearance requirement contained in paragraph IV.B.1.a, above, shall apply to ALL purchases of a beneficial interest in any security through an Initial Public Offering or a Limited Offering by any Access Person who is also classified as Investment Personnel. A record of any decision and the reason supporting such decision to approve the acquisition by Investment Personnel of Initial Public Offerings or Limited Offerings shall be made by the Compliance Officer. 2. Restrictions on Personal Securities Transactions by Access Persons Who Are Restricted Directors and Restricted Officers. The Company recognizes that an Access Person who is a Restricted Director or a Restricted Officer does not have on-going, day-to-day involvement with the operations of the Company. In addition, it has been the practice of the Company to give information about securities purchased or sold by the Company or considered for purchase or sale by the Company to Restricted Directors and Restricted Officers in materials circulated more than 15 days after such securities are purchased or sold by the Company or are considered for purchase or sale by the Company. Accordingly, the Company believes that less stringent controls are appropriate for Restricted Directors and Restricted Officers, as follows: a. The securities pre-clearance requirement contained in paragraph IV.B.1.a. above shall only apply to an Access Person who is a Restricted Director or Restricted Officer if he or she knew or, in - 5 - the ordinary course of fulfilling his or her official duties as a director or officer, should have known, that during the fifteen day period before the transaction in a Covered Security (other than an Exempt Security) or at the time of the transaction that the Covered Security purchased or sold by him or her other than an Exempt Security, was also purchased or sold by the Company or considered for the purchase or sale by the Company. b. Pre-clearance approval under paragraph (a) will expire at the close of business on the seventh trading day after the date on which oral authorization is received, and the Access Person is required to renew clearance for the transaction if the trade is not completed before the authority expires. c. If the pre-clearance provisions of paragraph IV.B.2.a. apply, no clearance will be given to an Access Person who is a Restricted Director or Restricted Officer to purchase or sell any Covered Security (1) on a day when any portfolio of the Company has a pending "buy" or "sell" order in that same Covered Security until that order is executed or withdrawn or (2) when the Compliance Officer has been advised by the investment adviser that the same Covered Security is being considered for purchase or sale for any portfolio of the Company. V. PROCEDURES. In order to provide the Company with information to enable it to determine with reasonable assurance whether the provisions of this Code are being observed by its Access Persons: A. Each Access Person of the Company other than a director who is not an "interested person" of the Company (as defined in the 1940 Act) will submit to the administrator an Initial Holdings Report in the form attached hereto as Exhibit A that lists all Covered Securities beneficially owned (2) by the Access Person - ---------- 2. You will be treated as the "beneficial owner" of a security under this policy only if you have a direct or indirect pecuniary interest in the security. (a) A direct pecuniary interest is the opportunity, directly or indirectly, to profit, or to share the profit, from the transaction. (b) An indirect pecuniary interest is any nondirect financial interest, but is specifically defined in the rules to include securities held by members of your immediate family sharing the same household; securities held by a partnership of which you are a general partner; securities held by a trust of which you are the settlor if you can revoke the trust without the consent of another person, or a beneficiary if you have or share investment control with the trustee; and equity securities which may be acquired upon exercise of an option or other right, or through conversion. (continued...) - 6 - except as stated below. The Initial Holdings Report must be submitted within ten days of becoming an Access Person and must contain information current as of a date no more than 45 days prior to becoming an Access Person. The Initial Holdings Report must include the title of each security, the number of shares held, and the principal amount of the security as well as a list of any securities accounts maintained with any broker, dealer or bank. B. Each Access Person of the Company other than a director who is not an "interested person" of the Company (as defined in the 1940 Act) will also submit to the administrator an Annual Holdings Report attached hereto as Exhibit A no later than 45 days after the end of the calendar year. Except as stated below, the Annual Holdings Report must list ALL Covered Securities beneficially owned by the Access Person, the title of each security, the number of shares held, and the principal amount of the security, as well as a list of any securities accounts maintained with any broker, dealer or bank. C. Each Access Person of the Company other than a Restricted Director or Restricted Officer shall direct his or her broker to supply to the Compliance Officer of the Company's administrator, on a timely basis, duplicate copies of confirmations of all securities transactions in which the person has, or by reason of such transaction acquires any direct or indirect beneficial ownership and copies of periodic statements for all securities accounts. D. Except as stated below, each Access Person of the Company, other than a director who is not an "interested person" (as defined in the 1940 Act), shall submit reports in the form attached hereto as Exhibit B to the Company's administrator, showing all transactions in Covered Securities in which the person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, as well as all accounts established with brokers, dealers or banks during the quarter in which any Covered Securities were held for the direct or indirect beneficial interest of the Access Person. (3) Such reports shall be filed no later than 30 days after the end of each calendar quarter. An Access Person of the Company need not make a quarterly transaction report under this paragraph with respect to transactions effected pursuant to an Automatic Investment Plan or if all of the information required by this paragraph V.D. is contained in the brokerage confirmations or account statements required to be submitted under paragraph V.C. and is received by the administrator in the time period stated above. E. Each director who is not an "interested person" of the Company need not make an initial or annual holdings report but shall submit the same quarterly report as - ---------- (..continued) For interpretive guidance on this test, you should consult counsel. 3. See footnote 1 above. - 7 - required under paragraph V.D. to the administrator, but only for a transaction in a Covered Security (except as stated below) where he or she knew at the time of the transaction or, in the ordinary course of fulfilling his or her official duties as a director, should have known that during the 15-day period immediately preceding or after the date of the transaction, such Covered Security is or was purchased or sold, or considered for purchase or sale, by the Company. F. The reporting requirements of this Section V. do not apply to securities transactions effected for, and any Covered Securities held in, any account over which an Access Person does not have any direct or indirect influence or control. G. The administrator of the Company shall notify each Access Person of the Company who may be subject to the pre-clearance requirement or required to make reports pursuant to this Code that such person is subject to the pre-clearance or reporting requirements and shall deliver a copy of this Code to each such person. H. The administrator of the Company shall review the initial holdings reports, annual holdings reports, and quarterly transaction reports received, and as appropriate compare the reports with the pre-clearance authorization received, and report to the Company's Board of Directors: a. with respect to any transaction that appears to evidence a possible violation of this Code; and b. apparent violations of the reporting requirement stated herein. I. The Board shall consider reports made to it hereunder and shall determine whether the policies established in Sections IV and V of this Code of Ethics have been violated, and what sanctions, if any, should be imposed on the violator, including but not limited to a letter of censure, suspension or termination of the employment of the violator, or the unwinding of the transaction and the disgorgement of any profits to the Company. The Board shall review the operation of this Code of Ethics at least once a year. J. The Company's investment advisers and principal underwriter (4) shall adopt, maintain and enforce separate codes of ethics with respect to their personnel which comply with Rule 17j-1 under the 1940 Act, and Rule 204-1 of the Advisers Act or Section 15(f) of the 1934 Act, as applicable ( and shall forward to the Company's administrator and the Company's counsel copies of such codes and all future amendments and modifications thereto. The Board of Directors, - ---------- 4 The provisions of Rule 17j-1 only apply to principal underwriters if (a) the principal underwriter is an affiliated person of the Company or the Company's investment adviser; or (b) an officer, director or general partner of the principal underwriter serves as an officer, director or general partner of the Company or of the Company's investment adviser. - 8 - including a majority of the directors who are not "interested persons" of the Company (as defined in the 1940 Act), shall approve this Code of Ethics, and the codes of ethics of each investment adviser and principal underwriter of the Company, and any material amendments to such codes. Such approval must be based on a determination that such codes contain provisions reasonably necessary to prevent Access Persons of the Company from engaging in any conduct prohibited under such codes and under Rule 17j-1 under the 1940 Act. The Board shall review and approve such codes at least once a year. Furthermore, any material changes to an investment adviser's or principal underwriter's code will be approved by the Board at the next scheduled quarterly board meeting and in no case more than six months after such change. Before approving any material amendments to the investment adviser's or principal underwriter's code of ethics, the Board must receive a certification from the investment adviser or principal underwriter that it has adopted procedures reasonably necessary to prevent Access Persons from violating its code of ethics and under Rule 17j-1 under the 1940 Act. K. At each quarterly Board of Directors' meeting the administrator (on behalf of the Company), investment adviser and principal underwriter of the Company shall provide a written report to the Company's Board of Directors stating: a. any reported securities transaction that occurred during the prior quarter that may have been inconsistent with the provisions of the codes of ethics adopted by the Company, the Company's investment advisers or principal underwriter; and b. all disciplinary actions(5) taken in response to such violations. L. At least once a year, the administrator shall provide to the Board with respect to this Code of Ethics, and the Company's investment adviser and principal underwriter shall provide to the Board, with respect to their codes of ethics, a written report which contains: (a) a summary of existing procedures concerning personal investing by advisory persons and any changes in the procedures during the past year, as applicable; (b) an evaluation of current compliance procedures and a report on any recommended changes in existing restrictions or procedures based upon the Company's experience under this Code of Ethics, industry practices, or developments in applicable laws and regulations; (c) a summary of any issues arising under the Code of Ethics or procedures since the last report, including but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to material violations; and (d) a certification that the procedures which have been adopted are those reasonably - ---------- 5. Disciplinary action includes but is not limited to any action that has a material financial effect upon the employee, such as fining, suspending, or demoting the employee, imposing a substantial fine or requiring the disgorgement of profits. - 9 - necessary to prevent Access Persons from violating the respective Codes of Ethics. M. This Code, the codes of the investment advisers and principal underwriter, a record of any violation of such codes and any action taken as a result of the violation, a copy of each report by an Access Person, any written report hereunder by the Company's administrator, investment adviser or principal underwriter, records of approvals relating to Initial Public Offerings and Limited Offerings, lists of all persons required to make reports and a list of all persons responsible for reviewing such reports shall be preserved with the Company's records for the period and in the manner required by Rule 17j-1. VI. CERTIFICATION. Each Access Person will be required to certify annually that he or she has read and understood this Code of Ethics, and will abide by it. Each Access Person will further certify annually that he or she has disclosed or reported all personal securities transactions required to be disclosed or reported under the Code of Ethics. A form of such certification is attached hereto as Exhibit C. The Board of Directors of The RBB Fund. Inc. Adopted: February 1, 1995 As Revised Effective: February 15, 2006 - 10 - EXHIBIT A THE RBB FUND, INC. HOLDINGS REPORT For the Year/Period Ended _______________________ (month/day/year) [ ] Check Here if this is an Initial Holdings Report To: PFPC, Inc., as Administrator of the above listed Company As of the calendar year/period referred to above, I have a direct or indirect beneficial ownership interest in the securities listed below which are required to be reported pursuant to the Code of Ethics of the Company: TITLE OF CUSIP NUMBER PRINCIPAL SECURITY NUMBER OF SHARES AMOUNT -------- ------ --------- ------ The name of any broker, dealer or bank with whom I maintain an account in which my securities are held for my direct or indirect benefit are as follows: For Initial Holdings Reports: This report contains information current as of a date no more than 45 days prior to the date of becoming an Access Person. THIS REPORT (I) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I HAD NO DIRECT OR INDIRECT INFLUENCE OR CONTROL, (II) EXCLUDES OTHER TRANSACTIONS NOT REQUIRED TO BE REPORTED, AND (III) IS NOT AN ADMISSION THAT I HAVE OR HAD ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE. Date: Signature: ----------------------- --------------------------------- Print Name: -------------------------------- Exhibit B THE RBB FUND, INC. (the "Company") QUARTERLY TRANSACTION REPORT* For the Calendar Quarter Ended _______________________ (month/day/year) To: PFPC, Inc., as Administrator of the above listed Company A. SECURITIES TRANSACTIONS. During the quarter referred to above, the following transactions were effected in securities of which I had, or by reason of such transactions acquired, direct or indirect beneficial ownership, and which are required to be reported pursuant to the Code of Ethics of the Company:
INTEREST RATE NUMBER OF NATURE OF BROKER/DEALER OR AND MATURITY SHARES OR DOLLAR TRANSACTION BANK THROUGH TITLE OF CUSIP DATE (IF DATE OF PRINCIPAL AMOUNT OF (PURCHASE, WHOM SECURITY NUMBER APPLICABLE) TRANSACTION AMOUNT TRANSACTION SALE, OTHER) PRICE EFFECTED -------- ------ ----------- ----------- ------ ----------- ------------ ----- --------
- ---------- * Non-interested directors only have to complete this report for transactions where they knew at the time of the transaction or, in the ordinary course of fulfilling their official duties as a director or officer, should have known that during the 15-day period immediately preceding or after the date of the transaction, such security was purchased or sold, or such security was being considered for purchase or sale, by the Company. B. NEW BROKERAGE ACCOUNTS. During the quarter referred to above, I established the following accounts in which securities were held during the quarter for my direct or indirect benefit: NAME OF BROKER, DEALER OR BANK DATE ACCOUNT WAS ESTABLISHED ------------------------------ ---------------------------- C. OTHER MATTERS. This report (i) excludes transactions with respect to which I had no direct or indirect influence or control, (ii) excludes other transactions not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the securities listed above. Date: Signature: ------------------------ ------------------------------- Print Name: ------------------------------ EXHIBIT C THE RBB FUND, INC. ANNUAL CERTIFICATE Pursuant to the requirements of the Code of Ethics of The RBB Fund, Inc., the undersigned hereby certifies as follows: 1. I have read the Company's Code of Ethics. 2. I understand the Code of Ethics and acknowledge that I am subject to it. 3. Since the date of the last Annual Certificate (if any) given pursuant to the Code of Ethics, I have reported all personal securities transactions and provided any securities holding reports required to be reported under the requirements of the Code of Ethics. Date: -------------------------------------- Print Name -------------------------------------- Signature EX-99.P(2) 15 g34307_exp2.txt EXHIBIT (P)(2) - CODE OF ETHICS BP Exhibit (p)(2) ROBECO USA, INC. WEISS PECK & GREER INVESTMENTS ROBECO SECURITIES, LLC CODE OF ETHICS Robeco USA Inc., Weiss Peck & Greer Investments, a division of Robeco USA, LLC ("WPG"), and Robeco Securities, LLC, (together "RUSA"), has built a reputation for integrity and professionalism among its clients. We value the confidence and trust those clients have placed in us and strive to protect that trust. This Code of Ethics (the "Code") is our commitment to protecting our clients' trust by establishing formal standards for general personal and professional conduct. A. APPLICABILITY AND DEFINITIONS This Code applies to all Supervised Persons. "SUPERVISED PERSONS" for purposes of this Code means: 1) Directors, and officers of RUSA (or other persons occupying a similar status or performing similar functions); 2) Employees of RUSA; 3) Any other person who provides investment advisory advice on behalf of RUSA and is subject to RUSA's supervision and control; and 4) Certain other persons designated by the Legal & Compliance Department, such as temporary/contract workers who support our businesses. "ACCESS PERSON" for purposes of this Code means any Supervised Person: 1) Who has access to non-public information regarding any client's purchases or sales of securities, or 2) Who has non-public information regarding the portfolio holdings of any mutual fund, managed account, or hedge fund managed by WPG, Boston Partners, or Robeco-Sage; or 3) Who is involved in making securities recommendations to clients or who has access to such recommendations that are nonpublic; or 4) Who is a director or officer of RUSA, by virtue of the fact that RUSA's primary business is providing investment advice. Excepted from this requirement are WPG Mutual Fund directors who are not employees of RUSA nor have access to confidential information regarding client securities transactions or recommendations. 5) Certain other persons designated by the Legal & Compliance Department, such as temporary/contract workers who support our businesses. 1 "BENEFICIAL INTEREST" for purposes of this Code means any Covered Security (as that term is defined in Section F.I. below) in which a Supervised Person has an opportunity directly or indirectly to provide or share in any profit derived from a transaction in a Covered Security, including accounts held by members of the Supervised Person's household, or any person or organization (such as an investment club) with whom a Supervised Person has a direct or indirect pecuniary interest, or any trusts of which a Supervised Person is trustee. The Legal & Compliance Department will notify all individuals of their status as either a Supervised Person or an Access Person on an annual basis as well as at the time of any job status change. B. STANDARDS OF BUSINESS CONDUCT The following principles are intended to guide in the applicability of this Code of Ethics: 1. RUSA is a fiduciary and its Supervised Persons have a duty to act for the benefit of its clients and shall at all times place the financial interests of the client ahead of itself; 2. RUSA holds all Supervised Persons responsible to high standards of integrity, professionalism, and ethical conduct; and 3. RUSA fosters a spirit of cohesiveness and teamwork while ensuring the fair treatment of all Supervised Persons. C. COMPLIANCE WITH FEDERAL SECURITIES LAWS All Supervised Persons must comply with applicable federal securities laws. The applicable laws are designed to prevent the following practices, which should not be viewed as all encompassing and are not intended to be exclusive of others. Supervised Persons must never: o Defraud any client in any manner; o Mislead any client, including by making a statement that omits material facts; o Engage in any act, practice or course of conduct which operates or would operate as a fraud or deceit upon any client, including misappropriation of an investment opportunity; o Engage in any manipulative practice with respect to any client or security, including price manipulation. 2 D. CONFLICTS OF INTEREST As a fiduciary, RUSA has an affirmative duty of care, loyalty, honesty to its clients and a duty of utmost good faith to act in the best interests of the client. Compliance with this fiduciary responsibility can be accomplished by avoiding conflicts of interest and by fully, adequately, and fairly disclosing all material facts concerning any conflict which arises with respect to any client. Supervised Persons are to actively avoid any existing or potential conflicts or situations that have the appearance of conflict or impropriety. The following specific guidelines should not be viewed as all encompassing and are not intended to be exclusive of others: 1. No Supervised Person shall take inappropriate advantage of their position with respect to a client, advancing their position for self-gain. 2. No Supervised Person shall use knowledge about pending or currently considered securities transactions for clients to profit personally, directly or indirectly, as a result of such transactions. 3. All securities transactions affected for the benefit of a client account shall avoid inappropriate favoritism of one client over another client. 4. All securities transactions affected for the benefit of a Supervised Person shall be conducted in such a manner as to avoid any actual or potential conflict of interest or abuse of that individual's position of trust and responsibility. E. CONFIDENTIALITY All information obtained by any Supervised Person regarding any aspect of a client relationship shall be kept in strict confidence. The Supervised Person commits an unethical business practice by disclosing the identity, affairs, or investments of any client unless required by any regulatory or self-regulating agency, or to the extent required by law or regulation, or unless disclosure is consented to by the client. F. EMPLOYEE PERSONAL SECURITIES MONITORING I. DEFINITIONS "COVERED SECURITY" shall include any type of equity or debt instrument, including any rights, warrants, derivatives, convertibles, options, puts, calls, straddles, shares of closed-end mutual funds, shares of open end mutual 3 funds that are advised or subadvised by RUSA, Boston Partners, or Robeco-Sage, holdings in foreign funds, or, in general, any interest or investment commonly known as a security. "NON-COVERED SECURITY" shall include shares of open-ended mutual funds that are not advised or subadvised by RUSA, Boston Partners, or Robeco-Sage, direct obligations of the US government, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments, including repurchase agreements which have a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a Nationally Recognized Statistical Rating Organization ("NRSRO"). "MANAGED PORTFOLIOS" shall include any WPG equity strategy, WPG Mutual Funds, and WPG Hedge Funds. "OUTSIDE ACCOUNT" shall include any Supervised Person's Covered Securities account not held at Charles Schwab. II. BROKERAGE/ADVISORY ACCOUNTS TO BE MAINTAINED AT SCHWAB Supervised Persons are required to maintain all discretionary or non-discretionary securities or commodities accounts with Charles Schwab, unless prior written permission to maintain account(s) outside of Charles Schwab has been granted by the Legal & Compliance Department. This includes any account over which the Supervised Person has the power to exercise investment control, including but not limited to accounts in which the Supervised Person has a direct or indirect Beneficial Interest. Outside Accounts are permitted subject to the prior written consent of RUSA's Legal & Compliance Department. If an Outside Account is approved, the Supervised Person must instruct their broker to send duplicate statements and confirmations to RUSA's Legal & Compliance Department. Upon joining the firm, a Supervised Person shall within 30 days from the date of employment: 1. close any Outside Accounts for which written approval has not been granted; 2. transfer existing accounts, or to open a new account, under RUSA's agreement with Charles Schwab: a. contact a Schwab representative at: DESIGNATED.BROKERAGE@SCHWAB.COM 877-602-7419 Fax: 1-602-355-4270 b. instruct them to open your account under the Robeco Master Account. 4 3. provide copies of all brokerage transaction statements for their first month of employment with RUSA to the Legal & Compliance Department. III. TRANSACTION PRECLEARANCE All Supervised Person's securities transactions in Covered Securities are subject to preclearance. 1. If a Supervised Person has access to Lotus Notes, they are required to utilize the electronic Personal Investment Preclearance System (the "Preclearance System"). The Preclearance System will facilitate the automatic routing of Supervised Person's trades to the Legal & Compliance Department. The Preclearance System will also enable the Supervised Person to identify the holding period requirements for the particular security. 2. In the event that the Preclearance System cannot be utilized, a hardcopy preclearance form may be delivered to the Legal & Compliance Department by hand or facsimile. A copy of the preclearance form can be obtained from RUSA's Legal & Compliance Department. Pre-clearance is valid only for the day of approval. If the trade is not executed on the approved date, the pre-clearance process must be repeated PRIOR to execution on the day the transaction is to be effected. IV. INITIAL PUBLIC OFFERINGS ("IPO") Supervised Persons are prohibited from purchasing any security sold in an initial public offering, with the exception of Government Bonds and Municipal Securities. Government Bond or Municipal Securities IPOs may only be made with the prior consent of the Legal & Compliance Department. V. PRIVATE INVESTMENTS (HEDGE FUNDS, PRIVATE PLACEMENTS, ETC.) Private investments by Supervised Persons may only be made with the prior consent of the Legal & Compliance Department. VI. SHORT SALES/COVER SHORTS Short sales by Supervised Persons of securities held long in Managed Portfolios are strictly prohibited. This prohibition includes writing naked call options or buying naked put options on Managed Portfolio securities. Transactions are subject to all blackout policies including the short term profit prohibition. 5 VII. OPTIONS The purchase of options by Supervised Persons may only be made with the prior consent of the Legal & Compliance Department. Approval is determined based on the underlying security. Transactions are subject to all blackout policies including the holding period restrictions. VIII. HOLDING PERIODS The following summarizes minimum holding periods: SECURITY OR OPTION HELD SECURITY/OPTION NOT HELD IN MANAGED PORTFOLIOS IN MANAGED PORTFOLIOS ALL INDEX OPTIONS --------------------- --------------------- ----------------- Gains: 60 days Gains: 1 day Gains: 1 day Losses: 1 day Losses: 1 day Losses: 1 day It is the Supervised Person's responsibility to determine the holding period applicable to a security purchased. The Preclearance System has been designed to notify the Supervised Person if their proposed trade will be subject to the 60-day holding period. A notification will be sent to the Supervised Person informing them that the security is currently held in a Managed Portfolio and is therefore subject to a 60-day holding period. Supervised Person's violating the holding period requirement will have their profits disgorged. Hardship exemptions from the holding period requirement may be granted by the Legal & Compliance Department on a case-by-case basis. The Supervised Person seeking relief must establish a bona fide financial hardship (i.e., medical or educational expenses, purchasing a home, etc.) and demonstrate that they possess no other assets to meet the financial need. IX. BLACKOUT PERIODS 1. CLIENT PRIORITY Supervised Persons personal transactions in Covered Securities will not be approved if an open order exists on the trading desk. Supervised Persons are required to resubmit any order that was originally denied. 2. 7 DAY BEFORE AND AFTER 6 All equity portfolio managers, analysts, and traders are precluded from purchasing or selling in their personal accounts any security they purchased or sold for a Managed Portfolio advised/traded by them for a period of 7-calendar days before or after the Managed Portfolio transaction. In calculating the 7-calendar day period, the trade date of the Managed Portfolio's transaction is not counted. Violations will result in the unwinding of the transaction and disgorgement of any profit. X. EXEMPTIONS The following transactions are exempt from all preclearance, holding periods, and black-out periods. NOTE THAT WHILE THESE EXEMPTIONS APPLY, IF THEY FALL UNDER THE DEFINITION OF COVERED SECURITY, THEY ARE REPORTABLE. 1. Purchases and sales of shares of mutual funds advised or sub-advised by RUSA, Boston Partners, or Robeco-Sage (transaction/annual reportable); 2. Gifts of securities; (potential transaction/annual reportable) 3. Exchange Traded Funds ("ETFs") based on a broad-based securities index (transaction/annual reportable); 4. Covered Security transactions executed on a fully discretionary basis by an investment adviser or broker dealer (other than RUSA) on behalf of a Supervised Person (transaction/annual reportable); 5. Transactions by a Supervised Person acting as a portfolio manager for, or who has a beneficial interest in, an investment limited partnership or investment company where RUSA is the contractual investment adviser or for or any account in which the RUSA has a proprietary interest (i.e. certain hedge funds) (not reportable - RUSA maintains records); 6. Covered Security transactions for which a Supervised Person has requested and received preclearance from the Compliance Department and for which the Supervised Person is not the Portfolio Manager directly responsible for initiating the client transaction; (not reportable - RUSA maintains records); 7. Purchases or sales that are non-volitional such as margin calls; stock splits; stock dividends; bond maturities; systematic investment plans, including dividend reinvestment plans; mergers; consolidations; spin-offs; or other similar corporate reorganizations or distributions generally applicable to all holders of the same class of securities; (potentially reportable); and 8. Any acquisition of a Covered Security through the exercise of rights issued pro rata to all holders of the class, to the extent such rights were acquired in the issue and not through the acquisition of transferable rights (transaction/annual reportable). 7 XI. RESTRICTED SECURITY LIST The Legal & Compliance Department maintains a Restricted Security List (the "Restricted List") which includes all securities where a Supervised Person has, or is in a position to receive, material non-public information about a company, such as information about a company's earnings or dividends, as a result of a special relationship between RUSA or a Supervised Person and the company. If a Supervised Person knows or believes they have material, non-public information, they must immediately notify the Legal & Compliance Department. The decision whether to place a security on the Restricted List and the amount of time a security will remain on the Restricted List is made by the Legal & Compliance Department. If it is determined that the Supervised Person is in possession of material, non-public information, the Legal & Compliance Department will establish a "Protective Wall" around the Supervised Person. In order to avoid inadvertently imposing greater restrictions on trading than are necessary, a Supervised Person may not discuss this information with anyone without the approval of RUSA's Legal & Compliance Department. In addition, Supervised Persons having access to the Restricted List are to be reminded that the securities on the list are confidential and proprietary and should not be disclosed to anyone without the prior approval of the Legal and Compliance Department. When an order is received from a Supervised Persons in a security on the Restricted List, the Preclearance System will automatically flag the transaction, and the transaction may not be executed until the Legal & Compliance Department has approved the trade. The Legal & Compliance Department will check with the department or staff member with the relationship to the company to determine whether trading in the security should be permitted. When a security is added to or deleted from the Restricted List, the Legal & Compliance Department will update the Preclearance System. XII. ACTIVITY REVIEW The firm has adopted an approach requiring the Legal & Compliance Department to monitor employee trading activity with particular focus on trading which may be unusual for a particular Supervised Person either because of the size of the position bought or sold, the frequency of the activity, or the nature of the Covered Security being traded. Employees are expected to devote their full time and attention to their work responsibilities. RUSA may take steps to curtail an individual's trading activity if, in the judgment of the appropriate department manager or the Legal & Compliance Department, the Supervised Person's trading activity is having an adverse impact on their job performance. 8 XIII. REPORTING REQUIREMENTS 1. TRANSACTION REPORTING All Supervised Persons must submit brokerage statements to the Compliance Department which reports every gift, IPO, private placement, and Covered Security transaction in which they participated during the calendar quarter no later than 30 days after the end of that quarter. Supervised Person's reporting obligations may be satisfied in the following ways: a. For accounts maintained at Charles Schwab, Supervised Person's reporting obligations are automatically satisfied. b. For accounts not maintained at Charles Schwab, Supervised Person's may satisfy their reporting obligations by having their brokers deliver to the Legal & Compliance Department copies of brokerage statements which contain: i. The name of the security, the date of the transaction, the interest rate and maturity (if applicable), the number of shares, and the principal amount of each Covered Security involved; ii. The nature of the transaction (i.e., purchase, sale or other type of acquisition or disposition); iii. The price at which the transaction was effected; iv. The name of the broker, dealer, or bank through which the transaction was effected; c. Private Placements transactions effected during the quarter must be reported manually. The Compliance Department will review conduct periodic reviews of Supervised Persons' personal securities transactions in an effort to ensure the compliance with this Code. 2. INITIAL HOLDINGS REPORT All Access Persons shall disclose to the Legal & Compliance Department a listing of ALL COVERED SECURITIES BENEFICIALLY OWNED no later than 10 days after becoming a Supervised Person. The information must be current as of a date no more than 45 days prior to the date the Supervised Person becomes an Access Person. The report shall include the following: a. The title and type of security, the ticker or CUSIP, the number of shares, and the principal amount of all securities in which the Supervised Person has any direct or indirect beneficial ownership; 9 b. The name of any broker, dealer, or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and c. The date the report is submitted. The Compliance Department will review all Initial Holdings Reports in an effort to monitor potential conflicts of interest. 3. ANNUAL HOLDINGS REPORT No later than January 31st, annually, Access Persons shall deliver to The Legal & Compliance Department a listing of ALL COVERED SECURITIES BENEFICIALLY OWNED that are current as of a date no more than 45 days prior to the date the report is submitted. The report shall include the following: a. The title and type of security, the ticker or CUSIP, the number of shares, and the principal amount of all securities in which the Supervised Person has any direct or indirect beneficial ownership; b. The name of any broker, dealer, or bank with whom the Supervised Person maintains an account in which any securities are held for the direct or indirect benefit of the Supervised Person; and c. The date the report is submitted. The Compliance Department will review all Annual Holdings Reports in an effort to monitor potential conflicts of interest and to assess the Supervised Person's fulfillment of their quarterly reporting obligations. G. INSIDER TRADING/MATERIAL NON-PUBLIC INFORMATION RUSA aspires to the highest standard of business ethics. The purpose of RUSA's policies on insider trading is to reduce the risk of violation of federal insider trading laws and reporting requirements. Accordingly, RUSA has developed the following policies to monitor, restrict if necessary, and educate Supervised Persons with respect to acquiring and investing when in possession of proprietary and/or confidential information. I. USE OF CONFIDENTIAL OR PROPRIETARY INFORMATION Supervised Persons may receive or have access to material, non-public information in the course of their work at RUSA. Company policy, industry practice and federal and state law 10 establish strict guidelines for the use of material, non-public information. To ensure that Supervised Persons adhere to the applicable laws, RUSA has adopted the following policies: Supervised Persons: o may not use confidential or proprietary information for investment purposes, for personal gain, or share such information with others for their personal benefit; or o may not pass material, non-public information about an issuer on to others or recommend that they trade the issuer's securities; or o must treat as confidential all information not generally made public concerning RUSA's investment activities or plans, or the financial condition and business activity of any enterprise with which RUSA is conducting business; or o must preserve the confidentiality of proprietary information and disclose it only to other Supervised Persons who have a legitimate business need for the information. Prior to disclosing this information to others, Supervised Persons must consult with the Legal & Compliance Department. Under federal securities law, it is illegal to buy or sell a security while in possession of material, non-public information relating to the security. In some circumstances, additional elements may be required for there to be a violation of law, including breach of a duty or the misappropriation of information. It is also illegal to "tip" others about inside information. Tipping involves passing material, non-public information about an issuer on to others or recommending that they trade the issuer's securities. Insider trading is an extremely complex area of the law principally regulated by the Securities and Exchange Commission ("SEC"). Questions concerning the law or a particular situation should be addressed with the Legal & Compliance Department prior to taking any action. If the Supervised Person believes that they may have material, non-public information gained within or outside the scope of their employment, regardless of the source, they must notify the Legal & Compliance Department so that securities can be monitored and/or placed on the RUSA Restricted List as appropriate. II. RUSA'S INSIDER TRADING RULES Set forth below are three rules concerning insider trading. Failure to comply with these rules could result in violations of the federal securities laws and subject the Supervised Person to severe penalties under these laws. Violations of these rules also may result in discipline by RUSA, up to and including termination of employment. o Supervised Persons who possess, or have reason to believe they possess, material, non-public information relating to any security, may not buy or sell that publicly traded security for themselves, members of their family, RUSA or any other persons. In addition, Supervised Persons may not recommend to others that they buy or sell that security. 11 o If a Supervised Person is aware that RUSA is considering or actually trading any publicly traded security for any account it manages, the Supervised Person must regard that as material, non-public information. o Supervised Persons must contact the Legal & Compliance Department and disclose that they are in possession of this information and may not communicate material, non-public information to anyone without the advance approval of the Legal & Compliance Department. III. WHAT IS NON-PUBLIC INFORMATION? Non-public information is information that is not generally available to the investing public. Information is public if it is generally available through the media or disclosed in public documents such as corporate filings with the SEC. If it is disclosed in a national business or financial wire service (such as Dow Jones or Bloomberg), in a national news service (such as AP or Reuters), in a newspaper, magazine, on the television, on the radio or in a publicly disseminated disclosure document (such as a proxy statement, quarterly or annual report, or prospectus), consider the information to be public. If the information is not available in the general media or in a public filing, consider the information to be non-public. If you are uncertain as to whether material information is non-public, you must consult the Legal & Compliance Department. While Supervised Persons must be especially alert to sensitive information, you may consider information directly from a company representative to be public information unless you know or have reason to believe that such information is not generally available to the investing public. In addition, information you receive from company representatives during a conference call that is open to the investment community is public. The disclosure of this type of information is covered by SEC Regulation FD. Please contact the Legal & Compliance Department if you have any questions with regard to this Regulation. A RUSA Supervised Persons working on a venture capital, private equity or private securities transaction who receives information from a company representative regarding the transaction should treat the information as non-public. The termination or conclusion of the negotiations in many instances will not change the status of that information. IV. WHAT IS MATERIAL INFORMATION? There is no statutory definition of material information. Information an investor would find useful in deciding whether or when to buy or sell a security is generally material. In most instances, any non-public information that, if announced, could affect the price of the security should be considered to be material information. If you are not sure whether non-public information is material, you must consult the Legal & Compliance Department. 12 V. MATERIAL INFORMATION EXAMPLES 1. MATERIAL INFORMATION MAY BE ABOUT THE ISSUER ITSELF: FOR EXAMPLE: o information about a company's earnings or dividends, (such as whether they will be increasing or decreasing); o any merger, acquisition, tender offer, joint venture or similar transaction involving the company; o information about a company's physical assets (e.g., an oil discovery, or an environmental problem); o information about a company's Personnel (such as a valuable employee leaving or becoming seriously ill); or o information about a company's financial status (e.g., any plans or other developments concerning financial restructuring or the issuance or redemption of, or any payments on, any securities). 2. INFORMATION MAY BE MATERIAL THAT IS NOT DIRECTLY ABOUT A COMPANY, IF THE INFORMATION IS RELEVANT TO THAT COMPANY OR ITS PRODUCTS, BUSINESS, OR ASSETS. FOR EXAMPLE: o Information that a company's primary supplier is going to increase dramatically the prices it charges; or o information that a competitor has just developed a product that may cause sales of a company's products to decrease. 3. MATERIAL INFORMATION MAY INCLUDE INFORMATION ABOUT RUSA'S PORTFOLIO MANAGEMENT ACTIVITIES. You should treat as material, any information that RUSA is considering whether to buy or sell a publicly traded security of a company or is going to make a trade or has just made a trade of that security. VI. "FRONT-RUNNING" AND "SCALPING" Trading while in possession of information concerning RUSA's trades is called front-running or scalping, and is prohibited by RUSA's insider trading rules, and may also violate federal law. The terms "front-running" and "scalping" are sometimes used interchangeably in industry literature and by the SEC. Front-running is making a trade in the same direction as RUSA just before RUSA makes its trade, for example, buying a security just before RUSA buys that security, or selling just before RUSA sells that security. Scalping is making a trade in the opposite direction just after RUSA's trade, for example, selling just after RUSA stops buying such security or buying a security just after RUSA stops 13 selling such security. Scalping allows Supervised Persons the opportunity to profit from temporary artificially inflated/deflated prices caused by RUSA's transactions. VII. "CHINESE WALL" One of the primary methods of protection against the misuse of material non-public information is the restriction of communications between private and public business units. 1. RUSA's private business units are defined as: a. the Venture Capital Division ("VCD"), b. the Private Equity Division ("PED") and; c. the WPG Hedge Funds engaged in private equity transactions ("HF"). 2. RUSA's public business units are defined as the WPG's equity unit, WPG's fixed income unit, WPG Mutual Funds, and WPG Hedge Funds operating in the public market. The communication of material non-public information among these groups is prohibited. VIII. PENALTIES FOR INSIDER TRADING RUSA and/or RUSA Supervised Persons could be subject severe civil penalties as well as criminal prosecution for illegally trading while in possession of material, non-public information. IX. SPECIFIC PROCEDURES In application of the policy, the following procedures shall be followed: 1. SEGMENT AFFILIATIONS Each RUSA investment unit will be designated by the General Counsel or the Chief Compliance Officer as being associated with either the "Public" or the "Private" Segment. 2. FIRM COMMUNICATIONS AND REPORTING Supervised Persons who have business relationships with senior management of companies which can result in the receipt of material, non-public information about the company, including, without limitation, (i) the election or appointment of the Supervised Persons as a director, officer, executive employee or confidential consultant, or (ii) the acquisition of securities or the right to receive securities having sufficient voting power to influence the management policies of the Company, should be aware that, in such circumstances, they must contact a lawyer in the Legal and Compliance Department prior to acting in the marketplace. 14 A. All Supervised Persons shall promptly report to the General Counsel or Chief Compliance Officer their awareness of any information which they believe may constitute material non-public information concerning a company. B. No Supervised Person from the private business units shall attend any meeting with Supervised Persons associated with public business units in which a company is discussed, unless (i) the attending private personnel shall have obtained General Counsel's or the Chief Compliance Officer's prior clearance that private business unit is not in possession of material non-public information regarding the company, or (ii) such discussion is isolated to a portion of the meeting during which private business unit Supervised Persons are not in attendance. C. All Supervised Persons of the public business unit are prohibited from soliciting non-public information from any Supervised Person of the private business unit as to any company. D. The Legal & Compliance Department will maintain the Restricted Security List. E. Any Supervised Persons who has reason to believe that any violation of this Statement of Policy has occurred shall immediately report all material facts concerning such matter to the Legal & Compliance Department. H. GIFTS AND ENTERTAINMENT POLICY Supervised Persons should not offer gifts, favors, entertainment or other things of value that could be viewed as overly generous or aimed at influencing decision-making or making a client feel beholden to the firm or the Supervised Person. The following guidelines will further clarify this general principal. DEFINITIONS: GIFT - anything of value, including, but not limited to gratuities, tokens, objects, clothing, or certificates for anything of value. The definition also includes any meal, tickets or admission to events where the person supplying the meal or event is not present. ENTERTAINMENT - business meals and events such as sporting events, shows, concerts where the person supplying the meal or event is present. GIFTS POLICY A. No Supervised Person shall accept any gift of more than $100 value from any person or entity that does business with or on behalf of a client (or any of its portfolios), or any entity that provides a service to Adviser. Gifts of greater than $100 value are to be declined or returned in order not to compromise the reputation of Adviser or the 15 individual. Gifts valued at less than $100 and considered customary in the industry, are considered appropriate. B. No Supervised Person shall provide gifts of more than $100 value, per person, per year, to existing clients, prospective clients, or any entity that does business with or on behalf of a client (or any of its portfolios), or any entity that provides a service to Adviser. Gifts valued at less than $100 and considered customary in the industry, are considered appropriate. C. Under no circumstances may an employee accept or provide a gift of cash or cash equivalent, (such as a gift card, gift certificate or gift check.). D. Supervised Persons are expressly prohibited from soliciting anything of value from a client, or other entity with which the firm does business. E. Similarly, Supervised Persons should not agree to provide anything of value that is requested by a client, or other entity with which the firm does business, (such as concert, sporting event or theater tickets,), except that assisting a client or other entity in acquiring tickets for which they intend to pay full value, is permitted under the policy. ENTERTAINMENT POLICY A. Supervised Persons may engage in normal and customary business entertainment. Entertainment that is extraordinary or extravagant, or that does not pertain to business, is not permitted. B. Certain rules and regulations enacted by the client or a regulator of the client may exist which prevent any form of gift or entertainment. It is important to be cognizant of what each client allows, especially pertaining to public funds, where rules may be very stringent and specific. C. Prior to providing entertainment to a representative of a public entity, contact the Legal and Compliance Department in order to verify interpretation understanding of state or municipal regulations. STANDARD OF REASONABLENESS The terms "extraordinary" or "extravagant," "customary in the industry," and "normal and customary" may be subjective. Reasonableness is a standard that may vary depending on the facts and circumstances. If you have questions regarding a gift or entertainment, contact your supervisor, or the Legal/Compliance Department. RECORDS RIM must retain records of all gifts and gratuities given or received for a period of three years. These records must be made available upon request for inspection by your Supervisor, the Legal/Compliance department or a regulator. Marketing/administration must send a copy of the gift log to Legal/Compliance monthly. 16 I. CHARITABLE CONTRIBUTIONS If a contribution is requested by a client, RUSA may agree to charitable contributions subject to the following terms. a. The check must be made in RUSA's name (not the client or the supervised person) b. Any tax benefit is taken by RUSA c. The contribution does not directly benefit the client d. The contribution is not made to satisfy a pledge made by the client e. The contribution must be made payable to the 501 c 3 Charitable organization (otherwise, the contribution may be subject to LM-10 filing with the DOL) Charitable contributions must be pre-approved by your supervisor. J. POLITICAL CONTRIBUTIONS From time to time, RIM or its employees may be asked by a client to make political contributions. In addition, employees, by their own volition, may seek to make individual political contributions. As an investment manager, RIM is often eligible to manage money on behalf of a state or municipality. To avoid any real or perceived conflict of interests, Robeco requires that all personal political contributions be subject to a preclearance policy. For the purposes of this policy, political contribution include a direct payment of money to a campaign organization, volunteer work, or fund raising work done on behalf of, or to benefit, a political campaign organization or candidate. FIRM CONTRIBUTIONS RIM does not to make political contributions. INDIVIDUAL CONTRIBUTIONS FOR ALL EMPLOYEES - - RIM will not reimburse any employee for individual political contributions. In addition, the RIM corporate credit card cannot be used to make contributions. - - Preclearance is required for any political contribution made by any employee to a state or local candidate outside of the contributor's jurisdiction for whom the contributor is not eligible to vote. 17 - - Preclearance is not required prior to individual personal contributions to national election campaigns, national political parties, or political action committees or candidates for national office such as president of the US or members of the US Senate or House of Representatives. - - Certain contributions, even within your voting jurisdiction, may restrict or prohibit RIM from transacting business with a related public entity. If there is a chance that an individual contribution may cause a conflict of interest with RIM's business, please consult with the Head of Sales or the RIM Legal & Compliance Department prior to making an individual contribution. FOR EMPLOYEES IN SALES, MARKETING AND PORTFOLIO MANAGEMENT - - In addition to the above restrictions, preclearance is required for all individual contributions to state, municipal and local candidates and campaigns, whether inside or outside your voting jurisdiction. K. OUTSIDE BUSINESS ACTIVITIES A potential conflict of interest exists with respect to a Supervised Person's duties to RUSA and its clients when individuals are permitted to engage in outside business activities. Written requests must be submitted to the Supervised Person's supervisor with a copy to the Legal & Compliance Department prior to a Supervised Person seeking to: o engage in any outside business activity, or o accept any position as an officer or director of any publically-traded corporation or mutual fund. The written request must contain all of the information necessary to review the activity. The request should contain the name of the company, the nature of the business, the capacity in which the employee will serve, an identification of any possible conflicts, the term of the contemplated relationships and any compensation to be received. RUSA fully supports Supervised Persons accepting positions as officers or directors for non-profit or charitable organizations and does not require Supervised Persons to seek approval or report these laudable activities. However, Supervised Persons are cautioned to be mindful that, from time-to-time, certain conflicts of interest may arise by virtue of their position within RUSA and their position within a non-profit or charitable organization, such as when the organization is a client of RUSA's. If such a conflict of interest arises, Supervised Persons must contact the Legal & Compliance Department. The Legal & Compliance Department, in conjunction with the Supervised Person's supervisor and the Director of Human Resources, will review and/or identify any potential conflicts. 18 If approved, the Legal & Compliance Department will provide the Supervised Person with written approval. In addition, if applicable, the Legal & Compliance Department will ensure that a registered representative's Form U-4 is updated with the NASD. In the event that a resolution to the conflict cannot be reached, the Supervised Person may be asked to terminate either his outside employment or his position with RUSA. Finally, upon employment and annually thereafter, Supervised Persons are required to fill out the New Employee/Annual Compliance Acknowledgement Form and accompanying Conflicts Questionnaire ("Questionnaire"). The Questionnaire requests information regarding a Supervised Person's outside business activities. The Legal & Compliance Department will verify items reported on the Questionnaire against written requests received throughout the year. L. REPORTING VIOLATIONS All Supervised Persons must report violations of this Code promptly to both the Chief Compliance Officer and an attorney in the Legal & Compliance Department. RUSA is committed to treating all Supervised Persons in a fair and equitable manner. Individuals are encouraged to voice concerns regarding any personal or professional issue that may impact their ability or the firm's ability to provide a quality product to its clients while operating under the highest standards of integrity. 1. Any such reports will be treated confidentially to the extent permitted by law and investigated promptly and appropriately. 2. Retaliation against any individual making such a report is prohibited and constitutes a violation of the Code. M. ANNUAL REVIEWS AND CERTIFICATIONS The Legal & Compliance Department will review the Code annually and update any provisions and/or attachments which RUSA deems require revision. Upon employment, all Supervised Persons are required to certify that they have: 1. Received a copy of the Code; 2. Read and understand all provisions of the Code; and 3. Agreed to comply with all provisions of the Code. At the time of any amendments to this Code, all Supervised Persons are required to: 1. Certify they have received, read and understood the amendments to the Code; and 2. Agree to comply with the amendment and all other provisions of the Code. 19 Annually, all Supervised Persons are required to: 1. Certify they have read and understand all provisions of the Code; and 2. Agree to comply with all provisions of the Code. N. SANCTIONS Regardless of whether a government inquiry occurs, RUSA views seriously any violation of its Code of Ethics. Disciplinary sanctions may be imposed on any Supervised Persons committing a violation, including, but not necessarily limited to, censure, suspension, monetary penalties, or termination of employment. O. FURTHER INFORMATION If any Supervised Persons has any questions with regard to the applicability of the provisions of this Code, generally or with regard to any attachment referenced herein, they should consult the Legal & Compliance Department. Updates: January 2005 March 2005 May 2005 August 2005 20 EX-99.P(3) 16 g34307_exp3.txt EXHIBIT (P)(3) - CODE OF ETHICS OF NUMERIC - -------------------------------------------------------------------------------- NUMERIC INVESTORS LLC COMPLIANCE MANUAL AND CODE OF ETHICAL STANDARDS Written Policies and Procedures under Rule 206(4)-7 March 24, 2006 - -------------------------------------------------------------------------------- I. Introduction: II. Code of Ethics A) Standard of Conduct B) Confidential Information C) Material Price Sensitive/Inside Information D) Fiduciary Duty and Conflicts of Interest E) Scalping or Frontrunning F) Unfair Treatment of Certain Clients Vis-a-Vis Others G) Dealing with Clients as Agent and Principal: Section 206(3) of the Investment Advisers Act of 1940 H) Workplace Communications and Computer Usage Policy I) Personal Trading; Timely Reporting of Trades J) Employee's Responsibility to Know the Rules and Comply with Applicable Laws K) Designation and Responsibilities of Compliance Officer L) Drug and Alcohol Policy III. Portfolio Management A) Trade Aggregation and Allocation Policy and Procedures B) Consistency with Client Objectives and Restrictions and Legal Mandates C) Proxy Voting D) Trading Errors E) Cross Trades IV. Brokers, FCMs, Derivative Counterparties and Prime Brokers A) Brokerage Policy B) Selection of Futures Commission Merchants C) Selection of Derivative Counterparties D) Selection of Prime Brokers V. Client Disclosures and Advertising A) Account Statements B) Advertising C) Updating disclosure with respect to Privacy Policy, Proxy Voting Policy, Soft Dollars and Other Matters VI. Safeguarding of Client Assets VII. Recordkeeping A) Required Records B) E-mail VIII. Valuation Policy IX. Privacy Policy X. Regulatory Filings XI. Business Continuity Plan XII. Anti-Money Laundering Plan Exhibits 2 I. INTRODUCTION The purpose of this Compliance Manual and Code of Ethical Standards is to lay out some of the important business practices of Numeric Investors LLC ("Numeric"). Numeric is an investment adviser registered with the Securities and Exchange Commission ("SEC") that manages portfolios of U.S., European and Japanese equity securities for taxable and tax-exempt clients both foreign and domestic. II. CODE OF ETHICS TOPICS IN THIS CODE A) Standard of Conduct B) Confidential Information C) Material Price Sensitive/Inside Information D) Fiduciary Duty and Conflicts of Interest E) Scalping or Front running F) Unfair Treatment of Certain Clients Vis-a-Vis Others G) Dealing with Clients as Agent and Principal: Section 206(3) of the Investment Advisers Act of 1940 H) Workplace Communications and Computer Usage Policy I) Personal Trading; Timely Reporting of Trades J) Employee's Responsibility to Know the Rules and Comply with Applicable Laws K) Designation and Responsibilities of Compliance Officer L) Drug and Alcohol Policy A. STANDARD OF CONDUCT The purpose of this Code of Ethics is to set forth certain key guidelines that have been adopted by Numeric as the official policy for the guidance of all personnel and to specify the responsibility of all Employees of Numeric (as defined in B.2 below) to act in accordance with their fiduciary duty to Numeric's clients and to comply with all applicable laws and regulations concerning the securities industry. In particular, Employees should be aware of the requirements of the Investment Advisers Act of 1940 (the "Advisers Act") as well as AIMR's "The Code of Ethics and The Standards of Professional Conduct." Careful adherence is essential to safeguard the interests of Numeric and its clients. Numeric expects that all Employees will conduct 3 themselves in accordance with high ethical standards, which should be premised on the concepts of integrity, honesty and trust. Copies of this Compliance Manual and Code of Ethical Standards as well as AIMR's The Code of Ethics and The Standards of Professional Conduct handbook are made available to all new Numeric Employees as part of their orientation process. As noted, all Employees of Numeric must conduct themselves in full compliance with all applicable laws and regulations concerning the securities industry. In particular, an Employee should be familiar with those laws and regulations governing "insider trading" and fiduciary duties. It is the responsibility of every Employee to know these laws and regulations and to comply with them. If an Employee needs copies of any laws and regulations concerning the securities business or has any questions about the legality of any transaction, the Employee should consult Numeric's Compliance Officer. Failure to comply with such laws and regulations or this Code may result in sanctions and possibly, depending on the circumstances, immediate dismissal. Although our fiduciary duties require more than simply avoiding illegal and inappropriate behavior, at a minimum all Employees should be aware that, as a matter of policy and the terms of their employment with Numeric, the following types of activities are strictly prohibited: (1) Using any device, scheme or artifice to defraud, or engaging in any act, practice, or course of conduct that operates or would operate as a fraud or deceit upon, any client or prospective client or any party to any securities transaction in which Numeric or any of its clients is a participant; (2) Making any untrue statement of a material fact or omitting to state to any person a material fact necessary in order to make the statements Numeric has made to such person, in light of the circumstances under which they are made, not misleading; (3) Engaging in any act, practice, or course of business that is fraudulent, deceptive, or manipulative, particularly with respect to a client or prospective client; and (4) Causing Numeric, acting as principal for its own account or for any account in which Numeric or any person associated with Numeric (within the meaning of the Investment Advisers Act), to sell any security to or purchase any security from a client in violation of any applicable law, rule or regulation of a governmental agency. In addition, Numeric wishes to maintain a reputation for the highest integrity. To accomplish this goal requires that all Employees continually adhere to these basic principles: (1) Place the interests of our clients first; (2) Treat our clients fairly and reasonably and those in similar circumstances as equally as possible; (3) Exercise due care in handling all information concerning clients; 4 (4) Avoid any actual or potential conflict of interest in personal securities transactions; (5) Avoid taking inappropriate advantage of your positions of trust and responsibility; and (6) Do not damage the efficient, fair and orderly operation of the securities markets or investors' confidence therein. B. CONFIDENTIAL INFORMATION 1. WHAT IS CONFIDENTIAL INFORMATION? An investment adviser has a fiduciary duty to its clients not to divulge or misuse information obtained in connection with its services as an adviser. Therefore, all information, whether of a personal or business nature, that an employee obtains about a client's affairs in the course of employment with Numeric should be treated as confidential and used only to provider services to or otherwise to the benefit of the client. Such information may sometimes include information about non-clients, and that information should likewise be held in confidence. Even the fact that Numeric advises a particular client should ordinarily be treated as confidential. 2. WHO IS SUBJECT TO NUMERIC'S POLICIES CONCERNING CONFIDENTIAL INFORMATION? All Employees - officers and advisory, marketing, back office and administrative - are subject to these policies. 3. WHAT ARE THE DUTIES AND RESPONSIBILITIES OF EMPLOYEES WITH RESPECT TO CONFIDENTIAL INFORMATION? Since an investment adviser has a fiduciary duty to its clients not to divulge information obtained from or about a client in connection with its services as an adviser, Employees must not repeat or disclose confidential information received from or about clients outside Numeric TO ANYONE, including relatives, friends or strangers. Any misuse of confidential information about a client is a disservice to the client that may cause both the client and Numeric substantial injury. Failure to comply with this policy may have very serious consequences for Employees and for Numeric, including the possibility that Employees might be criminally prosecuted for misusing the information, as described in C below. 2. 4. WHAT ARE SOME STEPS THAT EMPLOYEES CAN TAKE TO ASSURE THAT CONFIDENTIAL INFORMATION IS NOT DISCLOSED TO PERSONS OUTSIDE THE OFFICE? There are a number of steps Employees should take to help preserve client and other confidences, including the following: (a) Employees should be sensitive to the problem of inadvertent or accidental disclosure. Careless conversation, naming names or describing details of a current or proposed trade, investment or transaction in a lounge, hallway, elevator 5 or restroom, or in a train, taxi, airplane, restaurant or other public place, can result in the disclosure of confidential information and should be strictly avoided. (b) Maintenance of confidentiality requires careful safeguarding of papers and documents, both inside and outside Numeric. Documents and papers should be kept in appropriately marked file folders and locked in file cabinets when appropriate. Computer files or disks should be password protected. (c) If an Employee uses a speakerphone, the Employee should be careful to refrain from using it in any way that might increase the likelihood of accidental disclosure. Use caution, for example, when participating in a speakerphone conversation dealing with confidential information if the office door is open, or if the speakerphone volume is set too high. The same applies if an Employee knows or suspects that a speakerphone or a second extension phone is being used at the other end of a telephone conversation. (d) In especially sensitive situations, it may be necessary to establish barriers to the exchange of information within Numeric and to take other steps to prevent the leak of confidential information. (e) Employees should be aware that e-mail and information transmitted through the Internet may not be secure from hacking or interception and should be cautious in transmitting confidential information by e-mail or through the Internet. C. MATERIAL PRICE SENSITIVE/INSIDE INFORMATION All Employees are reminded that purchasing or selling securities on the basis of, or while in possession of, material nonpublic information for their own, for a client's or for Numeric's account is a crime punishable by imprisonment as well as large fines. "Tipping" another person who engages in such activities is also a crime. The term "material" is described below. The sanctions for trading while in possession of material "price sensitive/inside information" can be severe. In recent years, the SEC has aggressively sought and prosecuted persons who traded on "inside information." Courts are now authorized to impose fines of up to THREE TIMES the profit gained, or loss avoided, on such transactions. Criminal prosecution is also possible. Willful misuse of material nonpublic information will result in dismissal from employment by Numeric. Employees should be careful to avoid even the appearance of wrongdoing. Even an innocent purchase or sale of securities by an Employee who is unaware that other Employees possess material nonpublic information about an issuer may damage Numeric's reputation and may lead to protracted investigations and audits of both Numeric and Employees. The following sections of this memorandum seek to answer some of the most commonly asked questions about insider trading. In the questions and answers that follow, the term "issuer" refers to an entity, such as a corporation, partnership or state agency, that has issued securities, and the term "securities" is used in the broadest sense to include privately held and 6 publicly traded stocks, bonds, options and other investment vehicles that the SEC considers to be securities. 1. WHO IS SUBJECT TO THE INSIDER TRADING RULES? All Employees and all persons - friends, relatives, business associates and others - who receive nonpublic material price sensitive/inside information from Employees concerning an issuer of securities (whether such issuer is a client or not) are subject to these rules. It does not matter whether the issuer is public or private. At Numeric, the rules apply to officers, marketing, advisory, back office, administrative, and other staff. Furthermore, if any Employee gives nonpublic material price sensitive/inside information concerning an issuer of securities to a person outside Numeric, and that person trades in securities of that issuer, the Employee and that person may both have civil and criminal liability. 2. WHAT IS MATERIAL PRICE SENSITIVE/INSIDE INFORMATION? Generally speaking, price sensitive/inside information is information about an issuer's business or operations (past, present or prospective) that becomes known to an Employee and which is not otherwise available to the public. Although neither the courts nor the SEC has defined "material" precisely, the word is similar in meaning to "important" or "significant." While the exact meaning of the word "material" is not entirely clear, it IS clear that if a person knows information about an issuer which the person believes would influence an investor in any investment decision concerning that issuer's securities and which has not been disclosed to the public, the person should not buy or sell that issuer's securities. Under current court decisions, it makes NO difference whether the material price sensitive/inside information is good or bad. Needless to say, if the undisclosed information would influence an Employee's own decision to buy or sell or to trade for a client or Numeric, the information probably is material and an Employee should not trade or permit Numeric to trade for a client or itself until it has been publicly disclosed. 3. HOW DOES "MATERIAL PRICE SENSITIVE/INSIDE INFORMATION" DIFFER FROM "CONFIDENTIAL INFORMATION"? Here is an example that should clarify the difference between the two. Suppose Numeric is engaged by the president of a publicly-traded corporation to provide advice with respect to her personal pension fund and while working on the matter an Employee learns the amount of alimony she pays to her former spouse. That discovery should be kept confidential, but it almost certainly has no bearing on the value of her corporation's securities (i.e., it is not material) and, in fact, it probably is not "price sensitive/inside information" about the corporation itself. Accordingly, an Employee of Numeric could buy or sell securities of that issuer so long as the Employee possessed no material nonpublic information about the corporation. But disclosure of the president's alimony payments would be embarrassing to her and improper. 7 In other words, confidential information should never be disclosed, but it is not always material price sensitive/inside information. Knowing it is not necessarily an impediment to participating in the securities markets concerning a particular issuer. 4. ARE THERE CERTAIN KINDS OF INFORMATION THAT ARE PARTICULARLY LIKELY TO BE "MATERIAL PRICE SENSITIVE/INSIDE information"? Yes. While the following list is by no means complete, information about the following subjects is particularly sensitive: (a) Dividends, stock dividends and stock splits. (b) Sales and earnings and forecasts of sales and earnings. (c) Changes in previously disclosed financial information. (d) Corporate acquisitions, tender offers, major joint ventures or merger proposals. (e) Significant negotiations, new contracts or changes in significant business relationships. (f) Changes in control or a significant change in management. (g) Adoption of stock option plans or other significant compensation plans. (h) Proposed public or private sales of additional or new securities. (i) Significant changes in operations. (j) Large sales or purchases of stock by principal stockholders. (k) Purchases or sales of substantial corporate assets, or decisions or agreements to make any such purchase or sale. (l) Significant increases or declines in backlogs of orders. (m) Significant new products to be introduced. (n) Write-offs. (o) Changes in accounting methods. (p) Unusual corporate developments such as major layoffs, personnel furloughs or unscheduled vacations for a significant number of workers. (q) Labor slowdowns, work stoppages, strikes, or the pending negotiation of a significant labor contract. 8 (r) Significant reductions in the availability of goods from suppliers or shortages of these goods. (s) Extraordinary borrowings. (t) Major litigation. (u) Governmental investigations concerning Numeric or any of its officers or directors. (v) Financial liquidity problems. (w) Bankruptcy proceedings. (x) Establishment of a program to repurchase outstanding securities. 5. WHAT IS THE LAW REGARDING THE USE OF MATERIAL PRICE SENSITIVE/INSIDE INFORMATION? Federal law, and the policy of Numeric, prohibit any Employee from using material price sensitive/inside information, whether obtained in the course of working at Numeric or otherwise, for his or her private gain, for Numeric's gain or for a client's gain and prohibit any Employee from furnishing such information to others for their private gain. This is true whether or not the information is considered "confidential". When in doubt, the information should be presumed to be material and not to have been disclosed to the public. No trades should be executed for any Employee, any client or for Numeric, if the person executing the trade or Numeric has material price sensitive/inside information about the issuer. 6. WHAT IS "TIPPING"? Under the federal securities laws, it is illegal to disclose (or "tip") material price sensitive/inside information to another person who subsequently uses that information for his or her profit. In order to minimize this liability, all personnel should comply with the policies regarding protection of confidential information described above, which will include the following measures: (a) To reduce the chances of inadvertent tipping of material price sensitive/inside information, any nonpublic information that might be considered material should not be discussed with any person outside Numeric. Such information should be regarded as particularly sensitive, confidential information, and Numeric's policies for safeguarding such information should be strictly observed. (b) Employees should avoid recommending to any person, including Numeric's clients, the purchase or sale of client (or client-related) securities. (c) Caution must especially be used when receiving information from securities analysts, corporations in the same business as the client and members of the press. 9 Questions regarding whether such information may constitute "inside" information should be referred to Numeric's Compliance Officer. 7. TO WHOM MUST MATERIAL PRICE SENSITIVE/INSIDE INFORMATION BE DISCLOSED BEFORE AN EMPLOYEE CAN TRADE? To the public. Public disclosure of material events is usually made by means of an official press release or filing with the SEC. An Employee's disclosure to a broker or other person will not be effective, and such Employee may face civil or criminal liability if such Employee (or the person to whom the Employee makes disclosure) trades on the basis of the information. Numeric staff should be aware that in most cases they are not authorized to disclose material events about an issuer to the public and that right usually belongs to the issuer alone. 8. HOW DOES AN EMPLOYEE KNOW WHETHER PARTICULAR MATERIAL PRICE SENSITIVE/INSIDE INFORMATION HAS BEEN PUBLICLY DISCLOSED? If an Employee sees information in a newspaper or public magazine, that information will clearly have been disclosed. Information in a filing with the SEC or a press release will also have been disclosed. If any Employee has any questions about whether information has been disclosed, SUCH EMPLOYEE SHOULD NOT TRADE in the affected securities. An employee should contact Numeric's Compliance Officer for advice in the matter. 9. WHAT MUST AN EMPLOYEE DO WITH RESPECT TO MATERIAL PRICE SENSITIVE/INSIDE INFORMATION THAT SUCH EMPLOYEE MAY LEARN ABOUT AN ISSUER THAT IS NOT A CLIENT OF NUMERIC? In connection with their work at Numeric, Employees may come into possession of material price sensitive/inside information with respect to issuers that are not clients of Numeric such as information with respect to issuers or securities of issuers which are being analyzed for purchase or sale. This is particularly likely to happen in connection with the recommendation of the purchase or sale of an issuer's securities. All personnel receiving material, nonpublic information have the same duty not to disclose OR USE that information in connection with securities transactions as they have with respect to client securities. In other words, Employees may not purchase or sell any securities with respect to which they have price sensitive/inside information for their own, Numeric's or for a client's account or cause clients to trade on such information until after such information becomes public. The foregoing prohibition applies whether or not the material price sensitive/inside information is the basis for the trade. Employees should be alert for information they receive about issuers on their recommendation or approved lists which may be material price sensitive/inside information. In addition, whenever Employees come into possession of what they believe may be material nonpublic information about an issuer, they must immediately notify the Compliance Officer because Numeric as a whole may have an obligation not to trade in the securities of the issuer. The Compliance Officer shall maintain a list of all issuers about which Numeric has price sensitive/inside information and shall circulate such list to the appropriate personnel at Numeric so as to prevent any trading in securities of such issuers. 10 10. WHO IS AVAILABLE FOR ADDITIONAL ADVICE OR ADVICE ABOUT A PARTICULAR SITUATION? The Compliance Officer designated from time to time by Numeric will oversee matters relating to price sensitive/inside information and prohibitions on insider trading. Disclosure outside Numeric of confidential information by an Employee, or participation or tipping others to participate in business or securities transactions when in possession of material price sensitive/inside information, may be a violation of law and subject the employee to severe penalties, including criminal prosecution. D. FIDUCIARY DUTY AND CONFLICTS OF INTEREST Numeric and its Employees have a fiduciary duty to Numeric clients to act for the benefit of the clients and to take action on the clients' behalf before taking action in the interest of any Employee or Numeric. The cornerstones of the fiduciary duty are the obligations to act for the clients' benefit and to treat the clients fairly. Clients may therefore expect their fiduciaries to act for clients' benefit and not for their own benefit when a conflict of interest between the client and the fiduciary arises. No Employee should ever enjoy an actual or apparent advantage over the account of any client. This Manual attempts to highlight and address many of the common conflicts of interest that may arise between (1) Numeric and its employees vs. Numeric clients and (2) between different client accounts. It is not possible for every conflict to be addressed in the Manual, however. Employees should be particularly sensitive to the existence of actual or potential conflicts of interest not addressed herein and should promptly raise any such conflicts of which they become aware with Numeric's Compliance Officer. The manner in which any Employee discharges its fiduciary duty and addresses a conflict of interest depends on the circumstances. Sometimes general disclosure of common conflicts of interest may suffice. In other circumstances, explicit consent of the client to the particular transaction giving rise to a conflict of interest may be required or an Employee may be prohibited from engaging in the transaction regardless of whether the client consents. The duty to disclose and obtain a client's consent to a conflict of interest must always be undertaken in a manner consistent with the employee's duty to deal fairly with the client. Therefore, even when taking action with a client's consent, each Employee must always seek to assure that the action taken is fair to the client. Conflicts of interest can arise in any number of situations. As noted, no comprehensive list of all possible conflicts of interest can be provided in this memorandum. However, the following are common examples of conflicts of interest. For example, an Employee may seek to induce a bank to give the Employee a loan in exchange for maintaining excessive cash balances of a client with the bank or may execute trades for a client through a broker-dealer that provides research services for Numeric but charges commissions higher than other broker-dealers. In the former case, such activity would be a violation of an employee's fiduciary duty and might subject the employee and Numeric to liability under the Investment Advisers Act of 1940 (the "Advisers Act") and other applicable laws. In the latter case, if Numeric determines in good faith that the higher commissions are reasonable in relation to the value of the brokerage and 11 research services provided by a broker or dealer viewed in terms of either a particular transaction or Numeric's overall responsibilities with respect to an account as to which Numeric exercises investment discretion and appropriate disclosure is made to the client and in Numeric's Form ADV, the payment of higher commissions may be permitted under the safe harbor of Section 28(e) of the Securities Exchange Act of 1934. Another common conflict of interest occurs when Numeric pays some consideration to a person for recommending Numeric as an adviser. In those circumstances, an Employee must make disclosure to any prospective client of any consideration paid for recommending Numeric's services to that prospective client and Numeric must comply with Rule 206(4)-3 promulgated under the Advisers Act. This Rule governs situations involving cash payments for client solicitations and requires that specific disclosure documents which contain information about the solicitor and the adviser be provided to a prospective client at the time of the solicitation. COMMISSIONS. Employees may negotiate with broker-dealers regarding the commissions charged for their personal transactions but may not enter into any arrangement to pay commissions at a rate that is better than the rate available to clients through similar negotiations. GIFTS. Employees are prohibited from receiving any gift, service or other item of more than $200 value from any person or entity that does business with or on behalf of Numeric or has in the past or may in the future do business with Numeric. This policy excludes business meals, and tickets to events, however, any meal or event with a cost in excess of $200 per person must be reported to the Compliance Officer and the gift giver must be present at the event. All invitations to events, be it sporting, theatre or otherwise, must be unsolicited. SERVICE AS A DIRECTOR OR MEMBER OF INVESTMENT COMMITTEE. Any Employee who wishes to serve as an officer or director of any public company, or of any organization where such duties might require involvement in investment decisions, or who wishes to serve on the investment committee of any organization, must obtain the prior written consent of the Compliance Officer, which shall be granted in his discretion and only if he is satisfied that such service shall not create a conflict with such Employee's fiduciary duty to clients. If any Employee is faced with any conflict of interest, he or she should consult Numeric's Compliance Officer prior to taking any action. E. SCALPING OR FRONTRUNNING As a general rule, if any Numeric Employee knows of a pending "buy" recommendation and buys stock before Numeric makes a recommendation to its non-discretionary clients or takes action on the recommendation for its clients for which it has investment discretion, or if any Numeric Employee is aware of a pending "sell" recommendation and sells stock under such circumstances, such Employee is engaged in a practice known as "scalping" or "frontrunning." A Numeric Employee or family member residing in that employee's household or person or entity over which the employee has control (the "Related Person(s)") may not engage in the practice of purchasing or selling stock before a buy or sell recommendation, as the case may be, 12 is made to a non-discretionary client or Numeric takes action for its clients for which it has investment discretion. Such activities put Numeric and its Employee in a conflict of interest and give the employee or the Related Person an advantage at the client's expense. Limited exceptions may be granted for liquid securities where the Employee is selling or selling a nonmaterial number of shares. Any trades undertaken for an Employee's own account, for the account of Numeric, for the account of any non-Numeric client or for a Related Person must be done so as not to disadvantage a Numeric client in any way. This means that all Numeric employees and their Related Persons must generally wait to trade a security until all trading in that security for all accounts of Numeric's clients is completed, although in some cases it may be appropriate to aggregate a personal trade with client trades (see Section IIIA). If all client trades are not completed before a Numeric employee or Related Person trades, the antifraud provisions of the Advisers Act may be violated. In order to preclude the possibility that material nonpublic information about Numeric's investment decisions and recommendations, and client securities holdings and transactions, could be misused, Numeric has taken steps to restrict access to such information to employees who need such information to perform their duties, including the use of password protection on computer files and limiting physical access to paper storage records. Employees who are not authorized to access such information may be subject to termination if they attempt to do so. F. UNFAIR TREATMENT OF CERTAIN CLIENTS VIS-A-VIS OTHERS A Numeric Employee who handles one or more clients may be faced with situations in which it is possible to give preference to certain clients over others. Employees must be careful not to give preference to one client over another even if the preferential treatment would benefit Numeric or the Employee. For example, an Employee should not (i) provide better advice to a large, prestigious client than is given to a smaller, less influential one, (ii) give sale advice to one client ahead of another, or (iii) direct securities of a limited supply and higher potential return to particular clients because they generate larger fees for Numeric. As in other instances, the fiduciary duty of an Employee to a client must govern the employee's actions in each situation and the extent of the fiduciary duty of an Employee to a client is determined by the specific relationship between the parties and the reasonable inferences to be drawn from the relationship. In the absence of express or implied agreements between the parties, usage and custom should be used to determine how an Employee should discharge his or her duty. Each situation should be examined closely to determine whether the client has consented to the Employee's actions favoring another client AND whether the resulting relationship with the client which was not favored is fair and consistent with the securities laws. If both parts of this test have been satisfied, most likely there has been no breach of fiduciary duty. IF A QUESTION ARISES ABOUT ACTION THAT MAY GIVE RISE TO A CONFLICT OF INTEREST INVOLVING PREFERENTIAL TREATMENT OF ONE CLIENT OVER ANOTHER, AN EMPLOYEE SHOULD CONSULT NUMERIC'S COMPLIANCE OFFICER PRIOR TO TAKING ANY ACTION. 13 G. DEALING WITH CLIENTS AS AGENT AND PRINCIPAL: SECTION 206(3) OF THE ADVISERS ACT Section 206(3) of the Advisers Act addresses specifically two conflict of interest situations: sale and purchase of securities to and from a client either as a broker for another person or as a principal for the account of the adviser. Section 206(3) makes it unlawful for an investment adviser "acting as principal for his own account, knowingly to sell any security to or purchase any security from a client, or acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of such transaction the capacity in which he is acting and obtaining the consent of the client to such transaction." Thus, Section 206(3) requires that employees involved in the situations where Numeric is buying or selling securities from a client or where Numeric acts as a broker-dealer for a non-client in a transaction with an advisory client disclose to the client the capacity in which Numeric acts AND obtain the client's consent. Disclosure under Section 206(3) must be in writing. Numeric must, under Section 206(3), disclose to the client its capacity, its profits (if it acts as principal) and its commissions (if it acts as agent for another). These types of transactions can be particularly troublesome under applicable laws and must NOT be entered into without prior consultation with Numeric's Compliance Officer. H. WORKPLACE COMMUNICATION AND COMPUTER USAGE POLICY Set forth below is Numeric's policy regarding workplace communications and computer usage. This policy applies to all employees of Numeric. Numeric provides all employees access to a wide variety of computing and other electronic and technical resources, including -- by way of example only -- computer networks, network connectivity programs and devices, software products (including highly confidential and proprietary business products owned by Numeric), laptop computers, personal digital assistants and the telephone system ("Numeric Technology"). The Numeric Technology exists to support and facilitate Numeric business and the use of these resources should be limited to work-related purposes. Every employee who uses Numeric Technology (including programs and devices enabling remote connectivity to or from Numeric's computer networks, and the voicemail and email systems) is responsible for ensuring that all communications and usage are professional, businesslike and in the interest of Numeric. IN THIS REGARD, ALL EMPLOYEES OF NUMERIC ARE REMINDED THAT THEY ARE BOUND, LEGALLY AND CONTRACTUALLY, TO KEEP NUMERIC'S CONFIDENTIAL AND PROPRIETARY BUSINESS INFORMATION -- INCLUDING, AMONG OTHER THINGS, NUMERIC-CREATED COMPUTER DATABASES, SIMULATIONS AND MODELS PREDICTIVE OF THE BEHAVIOR OF VARIOUS SEGMENTS OF THE UNITED STATES, EUROPEAN AND JAPANESE SECURITIES MARKETS ("CONFIDENTIAL INFORMATION") -- IN STRICTEST CONFIDENCE AT ALL TIMES AND NEVER TO MISAPPROPRIATE THEM FOR ANY NON-NUMERIC USE. Numeric understands that communications on its communication systems may be transmitted to and stored in several different computers on the way to their destinations, and that many people, both within Numeric and in the outside world, may be able to read an employee's email and other documents on the system. Accordingly, before sending electronic 14 communications to Numeric customers and other business contacts, employees are instructed to consider whether the matter is so confidential or sensitive that it should not be transmitted electronically without permission, encryption, or both. In a related vein, employees are reminded that, if they make use of the system for personal communications or to store personal files despite Numeric's restriction on such activity, such employees cannot expect them to be private. In addition, employees are informed that it may become necessary for Numeric, in the course of its legitimate business activities, to access documents and information contained within the systems. Accordingly: ACCESS TO NUMERIC TECHNOLOGY SAFEGUARDING NUMERIC'S PROPERTY Employees are instructed to never access or transmit to or from Numeric Technology, whether from within or remotely from outside Numeric, unless they are utilizing programs, devices and protocols specifically approved by Numeric for this purpose. Employees must also never access or transmit Numeric Confidential Information, whether within or outside the Company, unless utilizing programs, devices and protocols specifically approved by Numeric for this purpose. THE TRANSMISSION OF NUMERIC CONFIDENTIAL INFORMATION TO NON-NUMERIC COMPUTERS SYSTEMS, LAPTOPS, REMOTE CONNECTIVITY OR STORAGE DEVICES (SUCH AS BLACKBERRIES), PORTABLE CONNECTIVITY OR STORAGE DEVICES (SUCH AS THUMBDRIVES, ANY OTHER FORM OF TECHNOLOGY OR EQUIPMENT IS STRICTLY FORBIDDEN UNLESS IN ACCORDANCE WITH NUMERIC PROTOCOLS OR WITH SENIOR MANAGEMENT'S EXPRESS PERMISSION. SIMILARLY, THE TRANSMISSION OF NUMERIC CONFIDENTIAL INFORMATION TO NON-NUMERIC INTERNET OR INTRANET SITES OR ANY OTHER REMOTE STORAGE LOCATIONS IS STRICTLY FORBIDDEN UNLESS IN ACCORDANCE WITH NUMERIC PROTOCOLS OR WITH SENIOR MANAGEMENT'S EXPRESS PERMISSION. NO GUARANTEE OF PERSONAL PRIVACY Employees are reminded that all computer equipment, connectivity devices, passwords, software, files, documents, email and instant messages are the property of Numeric. Numeric reserves the right to access email and any other documents and files produced or stored on Numeric computers or disks when it determines, in its sole discretion, it has a legitimate business purpose for doing so. The telephone, voicemail system, all voice messages, beepers and beeper messages are also the property of Numeric. Numeric reserves the right to access any employee's conversations and voice messages when it determines, in its sole discretion, it has a legitimate business purpose for doing so. Due to the nature of electronic communications in general and because Numeric reserves the right to access, for legitimate business reasons, any and all documents, messages or other information maintained in its communication systems, employees of Numeric should not expect that any information created or maintained in the system is private, confidential or secure. As noted above, Numeric reserves the right to monitor the communication of individual employees in its sole discretion. 15 ARCHIVING OF EMAILS Numeric is required to maintain records of certain workplace communications. In order to facilitate the preservation of e-mail records, Numeric has established a system for archiving all e-mails sent to or from Numeric. Employees should be aware that all e-mails are being saved and may, subject to applicable law, be subject to review by Numeric's officers and by regulators. Employees are encouraged to use Numeric's e-mail system only for Numeric business and to use their own personal e-mail system/accounts for their personal communication. INTERNET ACCESS AND DOWNLOADING BAN ON UNAPPROVED ACCESSING AND TRANSMITTING TO AND FROM NUMERIC EMPLOYEES ARE PROHIBITED FROM ACCESSING OR TRANSMITTING TO OR FROM NUMERIC TECHNOLOGY, WHETHER FROM WITHIN OR REMOTELY FROM OUTSIDE THE COMPANY, UNLESS THEY ARE UTILIZING PROGRAMS, DEVICES AND PROTOCOLS SPECIFICALLY APPROVED BY NUMERIC FOR THIS PURPOSE. EMPLOYEES ARE ALSO PROHIBITED FROM ACCESSING OR TRANSMITTING NUMERIC CONFIDENTIAL INFORMATION, WHETHER WITHIN OR OUTSIDE THE COMPANY, UNLESS UTILIZING PROGRAMS, DEVICES AND PROTOCOLS SPECIFICALLY APPROVED BY NUMERIC FOR THIS PURPOSE. GUIDELINES FOR APPROPRIATE INTERNET USE Delivery of Internet email is not guaranteed. Not only can email be lost or corrupted in transmission, but an error in even one character in an Internet address may prevent delivery or cause a document to be delivered to an unintended recipient. Accordingly, in conducting Numeric business by email, employees shall: o Use Internet email for distribution of materials containing customer information only with the customer's permission or when the content is plainly not so confidential that interception would be harmful to the customer; o When considering Internet email to transmit matter that plainly is confidential, take care that the customer has given permission with knowledge that security is not guaranteed or use encryption on the confidential matter, or both. o When guaranteed, on-time delivery is important, don't rely exclusively on Internet email, unless such email is sent with a confirmation of receipt; secondary delivery medium with hard copy should be used as well for time sensitive information sent via email without confirmation of receipt. o When sending a message by Internet email, don't assume that it will be received in a short time or even at all. If delivery matters, telephone and check. If it really matters, do at least what you would do with a fax: call ahead to alert the addressee that an important message is coming, and call afterwards for confirmation that it has been received and is readable. o If a customer wants to use Internet email for something important or time-sensitive, ask the customer to observe the same practices. 16 o Double-check the Internet addresses. In addition because documents transmitted by email can be altered inadvertently, sometimes in ways that can be hard to detect, employees must guard against transmission errors by proofreading carefully everything they send and receive and authenticating hard copies of documents that they send. BAN ON INAPPROPRIATE INTERNET USE Employees should be aware that some material circulating on the Internet is illegal, for example, child pornography. In a related vein, some Internet material is noxious and, if distributed unsolicited (either intentionally or accidentally) to fellow employees who object to such content, may subject both Numeric and the sender to civil liability. Accordingly, each employee must never use Numeric's system to download or access illegal, offensive, harassing, intimidating, discriminatory, obscene or other matter generally understood to be noxious to a civilized community. In addition, some material circulating on the Internet is copyrighted or otherwise illegally distributed. It is illegal to make or distribute copies without a license from the copyright owner. Employees thus must never use Numeric's system to download or access copyrighted or otherwise illegally distributed material. Further, some material circulating on the Internet could damage Numeric's computer system or interfere with others' use of it. Such material includes, but is not limited to, viruses and extremely large files consuming large amounts of memory, such as those containing graphics or animation. Accordingly, employees should use caution and consideration when downloading Internet materials. ADDITIONAL RESTRICTIONS ON USE You must never use the computer (including but not limited to the email system) or voicemail system to create or send messages of a harassing, abusive, discriminatory, obscene, intimidating, or offensive nature, or messages that are otherwise prohibited by law or Numeric policy. Numeric will respond to complaints of harassing or discriminatory use of its computer and telephone systems and discipline such inappropriate use. Employees must also refrain from taking any of the following prohibited actions related to computer, software and telephone use: Degrading any system in any way, such that access to the system by other users is prevented or interfered with. Using another employee's computer or telephone account (including accessing or intercepting email or voicemail or accessing documents stored by other employees) without the explicit permission of that individual or the System Manager. 17 Tampering with the operation of the Numeric computer systems (i.e., all hardware), software programs or telephone system. Using the computer or telephone for commercial purposes other than Numeric business. Inspecting, modifying or copying programs or data without the authorization of the owner or Numeric. Allowing people outside of Numeric access to the computer or telephone systems without the explicit permission of System and Network Administration. Removing computer or telephone equipment from the building without the prior authorization of the Systems and Network Department. Finally, Numeric employees are strictly prohibited from disclosing in chat rooms any confidential, proprietary, personal or business information related to the Numeric, including but not limited to about its business, financial condition, customers or customer business, people or employment practices. There are no circumstances under which employees of Numeric should gossip about Numeric matters outside of Numeric, including on-line. PASSWORDS Each employee will create unique passwords to the computer and voicemail systems. Numeric reserves the right to bypass such passwords and access the systems in its sole discretion. At the same time, Numeric strongly recommends that you keep each employee keeps his or her passwords secret from other employees as well as from third parties. U.S. MAIL AND OTHER DELIVERIES Mail and other deliveries arriving at Numeric are assumed to be related to Numeric business. To preserve the integrity of its business operation, Numeric reserves the right to access any incoming mail or other deliveries, in its sole discretion. In particular, Numeric may open all mail delivered to an employee who is absent from the premises, whether due to vacation, sick time, leave time, business travel or otherwise. Employees must never use the mail system to receive illegal materials at Numeric, or misuse the mail system in any way that is otherwise prohibited by law or Numeric policy. ENFORCEMENT/SANCTIONS All employees are expected to assist in the enforcement of this policy. Any conduct expressly in violation of this policy or in any other way involving abuse or misuse of network privileges, software products, the telephone system or the mail may result in disciplinary action, ranging from suspension of network or telephone privileges or of access to software products, up to and including termination. In addition, some misconduct prohibited by this policy may also constitute harassment or discrimination or may otherwise be illegal and will be treated in accordance with Numeric's policies and the law regarding such misconduct. 18 I. PERSONAL TRADING; TIMELY REPORTING OF TRADES PERSONAL TRADING Set forth below are Numeric's policies regarding personal trading. These policies apply to all Access Persons. Under the Advisers Act, Access Persons include any of Numeric's partners, officers, directors (or other persons occupying a similar status or performing similar functions) and employees who have access to nonpublic information regarding clients' purchases or sales of securities, is involved in making securities recommendations to clients or who has access to such recommendations that are nonpublic. Because Numeric's primary business is providing investment advice, the Advisers Act presumes that all officers, director and partners are Access Persons. Because of Numeric's size and the range of duties that Employees may have, ALL NUMERIC EMPLOYEES ARE CONSIDERED "ACCESS PERSONS," and "Access Person" procedures, standards and restrictions that might be imposed only on a limited subset of employees in another, larger organization, apply to ALL Numeric Employees. Employees have a fiduciary responsibility to put their clients' interests ahead of the interest of their own accounts. Accordingly, this requires that any trades which Employees undertake for their own account, or for the account of any non-Numeric client, must be done so as not to disadvantage any Numeric client and not to interfere with client portfolios in any way. Any Employee trading activity should be entirely segregated from and have no impact on the investment process Numeric performs for its clients. Actual or perceived conflicts of interest and front-running should not take place and personal trading activity should be kept to a minimum. Certain prohibitions on personal trading, however, do not apply to any directors of Numeric who are not also employees of Numeric (the "Outside Directors"), as the Outside Directors are not involved in the investment decisions made by Numeric for its clients or in the day to day affairs of Numeric. The current Outside Directors are P. Andrews McLane, Michael Wilson and Peter Carman. The provisions of this Section I which do apply to Outside Directors are specifically noted. Provisions which do not specifically reference Outside Directors do not apply to them. For the purposes of this chapter, except as specified to the contrary, a "security" does not include shares of open end mutual funds, money market funds, direct obligations of the United States government, bankers acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. Note that the term "security" does include all securities other than those enumerated above, SPECIFICALLY INCLUDING the N/I NUMERIC family of mutual funds, exchange traded funds (including ishares), obligations of any state or local government, closed end mutual funds, partnerships and other entities formed for the purpose of purchasing real estate for investment and other pooled investment vehicles (other than open end mutual funds). Numeric actively discourages personal trading of securities or derivatives by Employees. Personal trading exposes Numeric and its Employees to additional risks for which there exists no compensation. It also might provide a distraction from managing client assets. For these reasons, Employees (including on-site consultants) are encouraged to minimize the amount of trading of securities or derivatives for their personal accounts including Covered Accounts (i.e. 19 securities trading accounts in which the Employee has any direct or indirect beneficial ownership interest) defined as those: o of immediate family members sharing the same household including the following persons: spouse, child, stepchild, parent, stepparent, sibling, mother-in-law, father-in-law, daughter-in-law, son-in-law, adoptive relationships, and any other relationship which Numeric's Compliance Officer determines could lead to the possible conflicts of interest or appearances of impropriety which this policy is intended to prevent; or o where the Employee exercises any degree of control or has an economic interest including but not limited to: trusts, estates, investment clubs, charitable organizations, or any other account if acting as authorized agent or portfolio manager. The following rules of conduct related to personal investing activities apply: o An Employee shall not take advantage of business and client information in the Employee's private affairs. o An Employee shall avoid becoming so closely involved with a client or supplier of Numeric privately, that there is a risk of price-sensitive/insider information being communicated or of inappropriate mixing of business and private interests. o An Employee may not execute a securities transaction (including a transaction in open end mutual funds) further to or in anticipation of orders on behalf of clients of Numeric. o After placing an order for a securities transaction (including a transaction in open end mutual funds) or the execution of such an order, an Employee may not place an order for a securities transaction that is the reverse of such a securities transaction in respect of securities of the same company or in respect of securities relating to that company within 24 hours and the subsequent five trading days. o An Employee may not sell, assign or otherwise trade in any stock for a period of 60 calendar days following the receipt of a stock option for such stock by Employee, and for a period of 60 days following the exercise of such stock option. o An Employee may not profit from a securities transaction (including a transaction in open end mutual funds that invest in equities, but specifically not including mutual funds that invest only in cash or near cash instruments and/or debt securities) that is the reverse of such a securities transaction in respect of the same type of securities, securities of the same company or securities relating to that company, within 60 calendar days. 20 o An Employee shall avoid any inappropriate mixing of business and private interests or reasonably foreseeable appearance thereof. Any profits realize by an Employee in contravention of the foregoing principles, will be required to be disgorged. Numeric's Compliance Officer may make an exception to this requirement for severe and extenuating circumstances. As a general rule, profits disgorged by Employees as provided above shall be credited to client accounts to the extent that such clients were affected by the improper activity, provided, however, that in the event that Numeric in its discretion determines that the amount disgorged would be immaterial from the perspective of an individual investor to whom such disgorged profits would be credited, Numeric may opt to donate such disgorged profits to charity. Employees have to seek prior approval from Numeric's Compliance Officer to execute personal security transactions, specifically including all shares of the N/I NUMERIC family of mutual funds. The Employee is prohibited from trading the security until Numeric's Compliance Officer gives explicit authorization in writing. The Employee should send the specifics of the proposed trade to Numeric's Compliance Officer by e-mail. Numeric's Compliance Officer will check current and intended trading of the portfolio management staff. Approval for purchases or short sales of securities or derivatives will generally not be granted, even if the security or derivative is not held in clients' accounts and the security or derivative is not being contemplated for purchase or sale for clients' accounts. In order to preclude any possibility of Employees profiting from their position at Numeric, no approval will be given for acquiring any securities in an initial public offering or a private placement. Exceptions to this policy may be granted if securities are offered directly to the investing public without the use of an intermediary or underwriter, and the employee purchases the shares in the offering directly from the issuing company. In this case, the acquired securities may not be sold within six months. Outside Directors may participate in initial public offerings and private placements. Approval for liquidations of existing positions will generally be granted, provided that the security or derivative is not being contemplated for purchase or sale for clients' accounts in the next five business days. For rights allocated to an Employee in a rights issue, approval for liquidation will generally be granted. If a sale of these rights is contemplated for clients' accounts, the Employee's rights will have to be sold at the last available trading day for the rights. The Compliance Officer will respond to the Employee request via e-mail. If approval to execute a personal security transaction has been granted, the Employee may trade the security as long as the Trading Procedure below is adhered to. 21 TRADING PROCEDURE The Employee should execute the trade the same or the next business day the approval was granted. Employees who have any doubt about the reporting, timing, feasibility or any other element of a personal securities transaction must seek clarification from Numeric's Compliance Officer before executing the trade, even after being authorized. Any uncertainty about the rules and regulations will require that the individual shall not execute the trade. Misinterpretation of the rules is no excuse for mistakenly executing a trade. If the Portfolio Management staff decides to trade in the security within the subsequent five trading days after the day the security was initially traded by the Employee, Numeric's Compliance Officer will require the Employee to (1) assign the trade executed earlier and disgorge any profit in the trade to the related clients' accounts or (2) give up the profits from that trade to Numeric, to be contributed to a charitable organization of Numeric's choosing. EMPLOYEE REPORTING Employees must provide written confirmation of all trades or other acquisitions or dispositions of securities to Numeric's Compliance Officer without delay. Employees are also required to report transactions in securities of non-publicly traded companies. Employees must provide Numeric's Compliance Officer with quarterly summaries showing all trades of securities executed during the preceding quarter, within ten days of the end of the preceding quarter. A copy of Numeric's current form for these reports is attached to this memorandum as EXHIBIT A. Employees must provide Numeric's Compliance Officer with a statement of all securities holdings for all Covered Accounts both at the commencement of employment at Numeric, and as of December 31st every year thereafter. A copy of Numeric's current form for these reports is attached to this memorandum as EXHIBIT B. In addition, Employees must certify within ten calendar days of the end of each calendar quarter that all trades made by the Employee or any other transactions in any securities were disclosed to Numeric and were made in conformance with all procedures as specified in this compliance manual. For convenience, it is recommended that each Employee instruct each broker, bank or other financial institution in which the Employee has a covered account to provide Numeric with duplicates of all trade confirmations and all account statements on a monthly/quarterly basis. J. EMPLOYEE'S RESPONSIBILITY TO KNOW THE RULES AND COMPLY WITH APPLICABLE LAWS Numeric's employees are responsible for their actions under the law and therefore required to be sufficiently familiar with the Advisers Act and other applicable federal and state securities laws and regulations to avoid violating them. It is the policy of Numeric to comply with all applicable laws, including securities laws, in all respects. Each Employee must promptly report any violation of the Code of Ethics of which he becomes aware to the Compliance Officer, regardless of whether the violation was committed by the Employee or another Employee. The Compliance Officer shall consider whether it is appropriate to protect 22 the confidentiality of the identity of an Employee reporting a violation by another Employee. It is the strict policy of Numeric that no Employee shall be subject to any form of retaliation in connection with reporting a violation of the Code, and any person found to have engaged in retaliation may be subject to dismissal or other sanction. Employees must certify in writing by October 5, 2004, and thereafter on an annual basis, that they have read and understood this memorandum, that they will conduct themselves professionally in complete accordance with the requirements and standards described here and that they are not aware of any violations of the Code during the prior year. A copy of Numeric's current form of compliance certificate is attached to this memorandum as EXHIBIT C. ADDITIONAL EMPLOYEE RESPONSIBILITIES o REPORT KNOWLEDGE OF ANY VIOLATIONS TO NUMERIC'S COMPLIANCE OFFICER. Employees have an obligation to report to Numeric's Compliance Officer any knowledge they have of violations of this Compliance Manual or violations of any other applicable law, rule, or regulation of any government, governmental agency, or regulatory organization governing Numeric's professional, financial, or business activities. Failure to report knowledge of any violation will be considered a violation and will potentially subject the employee to immediate dismissal. o CLIENT COMPLAINTS. Client complaints must be promptly reported to the Numeric's Compliance Officer. o BROKERS. Employees must promptly inform Numeric's Compliance Officer when they receive information that a broker with whom Numeric does business has its license revoked or is subject to an investigation that could lead to its license being revoked. K. DESIGNATION OF AND RESPONSIBILITIES OF COMPLIANCE OFFICER Raymond J. Joumas shall serve as Numeric's Chief Compliance Officer (the "Compliance Officer") until such time as a new Compliance Officer is appointed by Numeric's President. In his absence, Shanta A. Puchtler shall be the acting Compliance Officer. It will be the responsibility of the Compliance Officer of Numeric to oversee the enforcement of the matters described in this memorandum and to educate employees to their responsibilities herein. The Compliance Officer will provide new employees with a copy of this memorandum as soon as possible after they join the firm and, upon their request, of the Advisers Act and other applicable laws and regulations. Numeric's Compliance Officer shall conduct training for new and existing employees on the provisions and requirements of this manual from time to time as the Compliance Officer determines to be appropriate. Numeric's Compliance Officer is responsible for staying current with significant new legal developments in the area of financial advisory services, fiduciary responsibilities, and insider trading and to convey such developments to Numeric's employees. As part of his duties, the Compliance Officer shall review this Compliance Manual no less frequently than annually 23 and recommend changes as appropriate or necessary. The review shall include consideration of any compliance matters that arose during the prior year, whether the existing policies have proven effective and any changes in the business activities of Numeric and any changes in the Advisers Act and related regulations that might necessitate revisions to the Manual. Numeric's Compliance Officer will review all employee trading reports in a timely manner to identify any violation of the Code's approval procedures and any improper trades or any patterns of trading (including achieving execution or results which differ materially from the execution or results obtained for clients) which suggest that an Employee may be engaging in abusive practices, and take such action as he or she deems necessary to obtain compliance with the policies set forth in this memorandum and with applicable laws provided, however, that the trading report of the Compliance Officer shall be reviewed by the President of Numeric. L. DRUG AND ALCOHOL POLICY I. INTRODUCTION It is the goal of Numeric to provide for all of our employees a workplace that is free of drug and alcohol abuse. Numeric believes it to be critical that Numeric and its employees share a commitment to a safe and healthy work environment. An employee who abuses drugs or alcohol poses a serious threat to his or her own well-being, to that of fellow employees and to the general public. For the safety of the employees and of others, Numeric and each of its employees must be able to depend on each other employee each other to report for work and to perform our duties free of alcohol and illegal drugs. THIS POLICY APPLIES TO ALL EMPLOYEES OF THE COMPANY. THIS POLICY DOES NOT IN ANY WAY CONSTITUTE, AND SHOULD NOT BE CONSTRUED TO CREATE, A CONTRACT OF EMPLOYMENT OR A PROMISE OF EMPLOYMENT BETWEEN AN EMPLOYEE AND THE COMPANY. IT IS MERELY A GUIDE TO SOME OF THE COMPANY'S POLICIES AND PROCEDURES AS OF THE DATE SET FORTH BELOW. THE COMPANY RESERVES THE RIGHT TO DEPART FROM, INTERPRET, UPDATE, MODIFY, AMEND AND/OR RESCIND THE POLICIES AND OTHER MATTERS DESCRIBED HEREIN FROM TIME TO TIME IN ITS SOLE DISCRETION WITHOUT PRIOR NOTICE. II. VOLUNTARY SELF-REFERRAL FOR TREATMENT. The Company strongly encourages any employee with a drug or alcohol problem to seek treatment before his or her job is jeopardized. In the Company's sole discretion, it may grant a leave of absence and reinstatement to any employee who voluntarily seeks treatment in a residential drug or alcohol treatment program prior to violation of this policy. Among other things, evidence of successful completion of the program and the employee's written commitment to remain drug and alcohol-free and to continue his/her participation in any recommended follow-up treatment will be required as a condition of continued employment. 24 III. DEFINITIONS. As used in this policy, the term "drug" means any controlled substance listed on Schedules I through V of the federal Controlled Substances Act. Controlled substances include, for example, narcotics such as codeine and heroin, depressants such as barbiturates, stimulants such as cocaine and amphetamines, hallucinogens such as LSD and PCP and cannabis (marijuana). An "illegal drug" is any controlled substance that cannot be obtained legally (such as LSD) or that, although available legally (by prescription), has been obtained illegally. In other words, "illegal drugs" include not only "street" drugs, but also prescription drugs that have not been lawfully prescribed for the individual. A "distribution" includes sale, purchase and any other form of transfer or attempted transfer. IV. PROHIBITIONS. A. ALCOHOL AND ILLEGAL DRUGS. Employees are prohibited from manufacturing, distributing, dispensing, possessing, or using illegal drugs, in any amount, while on Company premises or while at work or on duty. In addition, employees are prohibited from reporting for work or performing any work for the Company, whether on or off Company premises, while abusing or under the influence of any drug, illegal drug, or alcohol, or having measurable traces of any illegal drug in his or her system. Violators of this policy may be subject to immediate discipline, up to and including termination. B. PRESCRIBED AND OVER-THE-COUNTER DRUGS. This policy does not prohibit employee use of legally-prescribed drugs, consistent with appropriate medical treatment plans, provided that use of such drugs does not impair the employee's ability to perform safely and effectively. Any employee using prescription medication that could impair the employee's safety or job performance must report the use of such medication to Numeric prior to performance of such employee's duties. The employee may be required to provide the Company or its designee with a copy of the prescription and/or other medical verification. If the employee is unable to perform his or her job duties safely and effectively while taking a prescribed medication, the employee may be reassigned or, if no suitable position is available, placed on leave of absence. The distribution of a prescription drug by one employee to or from another is prohibited. 25 Employees are also prohibited from using or reporting to work under the influence of or impaired by any over-the-counter ("OTC") drug that could impair the employee's safety or job performance. An exception is made in the case of an OTC drug taken as directed on the instructions of a physician, which drugs will be treated like prescription drugs for purposes of this policy. III. PORTFOLIO MANAGEMENT A. TRADE AGGREGATION AND ALLOCATION POLICY AND PROCEDURES Governing principles: (1) All clients (at the account level) must be treated fairly and (2) we have a fiduciary responsibility to act in the best interest of each client. AGGREGATION OF REQUESTED TRADES: 1. If the Numeric-wide requested trade size in a given security exceeds the Numeric Trading Threshold (initially set to 15% of the historical twenty-day median daily trading volume), all individual trade requests will be aggregated and participate pro-rata, based on original order request sizes, in each execution. However, once an order exceeds its pre-specified price and volume limits, it will no longer participate in an aggregated order. For orders that are changed or entered after the market opens, Numeric will evaluate the firm wide shares requested at that point (any residual unfilled order plus new shares requested) against the Numeric Trading Threshold (applied against the remaining expected market volume in the security that day) in order to determine whether the residual unfilled order and the new order should be aggregated provided, however, that Numeric may also take into consideration the current day's trading volume in deciding whether to aggregate. However, in all cases, the Numeric Trading Threshold shall remain constant. Any exceptions to this aggregation of orders must be recorded by the Head of Trading and reviewed periodically by the Chief Compliance Officer. 2. For all cases where the Numeric-wide requested trade size in a given equity is equal to or less than the Numeric Trading Threshold, individual trade requests may or may not be aggregated. Typically, the firm will not aggregate these orders. The decision to aggregate such orders rests with the Head of Trading. Numeric does not require documentation regarding aggregation decisions of these orders. 3. The Numeric Trading Threshold level will initially be set to 15% of the historical twenty-day median daily trading volume. The Threshold will be reviewed from time to time by the Investment Committee, and may be changed if deemed appropriate given market conditions. The firm believes that below this Threshold trade completion rates are high and trade price impact is relatively low. The Chief Compliance Officer will record any modifications of the Numeric Trading Threshold in writing. ALLOCATION OF TRADED SHARES: 1. Numeric will allocate executed shares to each allocation group (composed of several client accounts) based on their relative order request sizes. 26 2. Shares are allocated pro-rata, based on account size, to all participating accounts in the allocation group. However, if for any reason an account is under-weight or over-weight in a particular security relative to its peers (accounts with the same investment objective), such accounts will receive allocations first until their weight is brought in line with the weightings of the peer accounts. 3. All client accounts within an allocation group participating in the trade will receive the same average price per share. 4. The desire to hold round lots may result in situations where client account level allocations are not exactly pro-rata. EXCEPTIONS/OTHER POINTS: 1. Limit orders and price bands on algorithmic trades can result in some clients not participating in aggregated trades. 2. Situations involving (i) new inflows from the initial investment of new client accounts and additional investments in existing accounts, (ii) the partial or full liquidation of a client account due to termination of the account or otherwise, or (iii) the need to rebalance an individual client account to conform to its peers in the strategy or otherwise are valid exceptions to the aggregation policy. 3. Client investment or trading restrictions may require that their accounts not participate in certain trades. Other situations may arise whereby Numeric may choose not to aggregate particular orders. For instance, in the case of an invest or divest program, orders for that client will generally be permitted to operate outside of the normal daily trade list, and will not be subject to aggregation in the event of any trade overlap. Additionally, circumstances may arise whereby Numeric's traders may be required to make judgments regarding whether to aggregate some orders. For example, if an order was placed for one strategy prior to the market open and a volume weighted average price execution approach was selected for that strategy, traders will analyze any subsequent intra-day orders placed for other strategies for liquidity requirements and other factors when making the decision as to whether aggregation should occur. As with all matters, the fiduciary duty to treat all clients in a fair and equitable manner will govern these decisions. Exceptions will be recorded in a log, as determined by the Head of Trading (or his designee) and reviewed periodically by the Chief Compliance Officer, provided, however, that no such record will be kept with respect to the most common types of exceptions, such as in paragraphs 1 through 3 above. 27 B. CONSISTENCY WITH CLIENT OBJECTIVES AND RESTRICTIONS AND LEGAL MANDATES It is essential that each client's portfolio conform with the client's investment objectives as well as with any specific investment restrictions or limitations imposed by the client. The portfolio manager in charge of the client account has primary responsibility for ensuring consistency between the portfolio and the applicable objectives, guidelines and restrictions. Portfolio managers should use software tools, if possible, to assist in tracking and monitoring portfolios, and should work with Employee traders to put in place procedures to prevent violation of such investment restrictions or limitations (such as automatically blocking a short order for an account that does not permit short selling). A portfolio manager must review each account under its management no less frequently than quarterly for consistency with the applicable objectives, guidelines and restrictions; in some cases more frequent reviews may be appropriate. Portfolio managers should also familiarize themselves with applicable regulations for short sales, margin and the use of commodities, and should review portfolios which utilize such techniques for compliance with any such regulations as part of the quarterly review. C. PROXY VOTING Numeric has a written proxy voting policy, which is the most current policy of Institutional Shareholder Services ("ISS"), and related procedures which are intended to assure that client securities are voted in the best interests of the client, and which address material conflicts of interest that may arise between the investment adviser and its clients. All Employees involved in portfolio management and/or the voting of client proxies must familiarize themselves with and adhere to this policy. A summary of the policy prepared by ISS, including ISS's most recent annual updates, is set forth as EXHIBIT D, and is available on Numeric's website www.numeric.com. In addition, a summary of Numeric's proxy voting policies and procedures is set forth in Numeric's Form ADV Part II, along with information about how each client may learn of Numeric's specific votes of proxies with respect to the client's securities. Numeric will furnish a copy of the full policies and procedures to clients upon request. D. TRADING ERRORS Any trading errors must be reported immediately to Numeric's Compliance Officer who will determine whether it is possible and appropriate for the trade to be unwound. If the trade cannot be unwound, the Compliance Officer will review the error and determine whether any clients have been harmed. If they have, Numeric will reimburse the affected clients in full. If a client benefits from a trading error, that client will generally be entitled to keep such benefit. The Compliance Officer will review any trading errors to determine if new policies and procedures should be adopted to prevent a similar error from occurring in the future. E. CROSS TRADES In certain cases, it may make sense for two or more client accounts to engage in a trade directly. Such cross trades can result in lower commission expenses and impact costs for each client. Cross trades require the prior written approval of both the Compliance Officer and each 28 client. This is accomplished only after Numeric's Compliance Officer has agreement on the approach from the relevant Portfolio Manager(s). Numeric does not charge any commission or other fee in connection with facilitating a cross trade (although a fee may be charged by the executing broker), and any such trade should be conducted at the then current market price or another mutually beneficial price, such as the close or the volume weighted average price ("vwap"). Cross trades may not be conducted with any ERISA accounts. If the cross trade involves a mutual fund, the Compliance Officer will also determine whether the cross trade complies with Rule 17a-7 of the Investment Company Act. The Portfolio Manager(s) has (jointly have (if more than one strategy is impacted)) final responsibility to ensure that cross trades are executed in accordance with the client's written approval. IV. BROKERS, FUTURES COMMISSION MERCHANTS, DERIVATIVE COUNTERPARTIES AND PRIME BROKERS A. BROKERAGE POLICY When placing trades on behalf of a client, Numeric has a fiduciary duty to seek to obtain the best execution possible for the client. While a primary criterion for all transactions in portfolio securities is the execution of orders at the most favorable net price, numerous additional factors may be considered when arranging for the purchase and sale of clients' portfolio securities. These include restrictions imposed by the federal securities laws and the allocation of brokerage in return for certain services and materials described below. Selection of the appropriate execution venue for a particular trade is one of the most important determinants of best execution. To that end, Numeric shall endeavor to ensure that it maintains access to a variety of options for trade execution. These include traditional brokers, Electronic Communication Networks (ECN), Alternative Trading Systems (ATS), algorithmic trading venues, and any new technologies that may be developed. In order to ensure best execution for its clients, Numeric maintains a list of approved brokers from which its portfolio managers and traders may choose to execute client transactions (the "Approved Broker List"), which will be reviewed and updated at least quarterly by Numeric's Investment Committee. The primary determinant for inclusion on the Approved Broker List shall be counter-party risk, but Numeric will also evaluate each broker on ancillary factors, including the following, many of which will be a subjective determination on the part of the members of the Investment Committee: 1) Broker's apparent familiarity with sources from or to whom particular securities might be purchased or sold; 2) Perceived reputation and quality; 3) Qualifications of a particular trader at the firm; 4) Broker's willingness to commit capital when appropriate; 5) Quality of sales trading coverage and level of service provided historically; 6) Ability of the broker to ensure anonymity and confidentiality; 29 7) Quality of past executions, including speed of execution when applicable and continued ability to execute quickly and fully; 8) For brokers, ability to trade in hard to find (thinly traded) securities; 9) Broker's ability to trade in an electronic venue; 10) Broker's commission per share; and 11) Ability to supplement Numeric's management capabilities with research, quotation and consulting services and computer hardware and software materials, as well as any other matters Numeric deems relevant to the selection of a broker-dealer. Numeric will also require that any broker accounting for 5% or more of the trades conducted by Numeric (such percentage subject to the reasonable discretion of the Chief Compliance Officer) to submit a completed questionnaire detailing such information as the broker's professional affiliations (ie. NASD or NFA membership), insurance coverage and capital reserves (a "Risk Questionnaire"). Further, each broker that will also act as a derivative counterparty wishing to be included on the Approved Broker List will be required to submit a Risk Questionnaire to Numeric (or documentation of similar substance, to be accepted at the discretion of the Chief Compliance Officer). The Approved Broker List will be reviewed and updated at least quarterly by the Head Trader, in conjunction with Numeric's portfolio managers, and provided to the Investment Committee. Each Approved Broker that was required to initially submit a Risk Questionnaire will also be required to update that questionnaire at least annually. Numeric portfolio managers shall be responsible for selecting the appropriate Approved Broker to conduct specific transactions, taking into account the factors listed above. Numeric employs a relatively high-turnover approach in most of its strategies. Accordingly, transaction costs are an important determinant of client returns. Numeric has maintained a transaction cost database since 1995 which serves as a tool for evaluating the performance of the trading process. Numeric analyzes many components of a transaction cost in an effort to ensure that the principles of Best Execution are followed. Some of those components include impact, opportunity, commission, and deviation from the volume weighted average price. Transaction cost reports are made available to all portfolio managers and traders on an as-needed basis, or at least quarterly. Primary responsibility for analysis of these reports shall reside with the Director of Trading. However, the Investment Committee will also review these reports at least semi-annually. On a semi-annual basis, the Chief Compliance Officer shall review the Approved Broker List (in a coordinated effort with Numeric's Investment Committee), the commissions paid to such brokers and the soft dollar products and services provided by such brokers to Numeric and assess whether Numeric is achieving best execution and is complying with its brokerage policy. Numeric does not accept client-directed brokerage ("Directed Brokerage). Directed Brokerage may result in a client paying higher commissions than would be the case if Numeric were able to select brokers freely. Directed Brokerage in many cases would limit Numeric's 30 ability to negotiate commissions for all clients and its ability to aggregate orders, resulting in an inability to obtain volume discounts or best execution for the client in some transactions. Numeric's brokerage policy is included in Part II of Form ADV. Numeric may use broker-provided products and services which assist Numeric in carrying out its investment decision making responsibilities. These services may include (but are not limited to): systems consulting (trading and portfolio management), systems hardware (including storage disks/volatile RAM, CPU's, monitors, keyboards, CD ROMs, and other hardware) and software, research consulting, research services (data, periodicals and seminars), data services, trading consulting, telephone equipment, telephone lines (trading and data feeds), proxy research, and trading communication services. Numeric intends to comply with Section 28(e) of the Securities Exchange Act of 1934 in connection with its use of soft dollars. In some cases applicant may acquire a research product or service with soft dollars which also has non-research uses. In these cases Numeric will make a reasonable allocation of the cost of the product or service according to its use. That portion of the product or service which provides administrative or other non-research services will be paid for by Numeric in hard dollars. All research services received from broker-dealers to whom commissions are paid are used collectively. There is no direct relationship between commissions received by a broker-dealer from a particular client's transactions and the use of any or all of that broker-dealer's research material in relation to that client's account. Numeric may pay a broker-dealer a brokerage commission in excess of that which another broker-dealer might have charged for the same transaction in recognition of research and brokerage related services provided by the broker-dealer. B. SELECTION OF FUTURES COMMISSION MERCHANTS Numeric may utilize one or more Futures Commission Merchants ("FCM") in its trading activities. FCMs will be selected from brokers on the Approved Broker List that are authorized to act in such a capacity. C. SELECTION OF DERIVATIVE OR FOREIGN EXCHANGE COUNTERPARTIES Numeric will require any derivative or foreign exchange counterparty that it selects on behalf of, or recommends to, client to first complete a questionnaire regarding potential counterparty risk to the client and submit such supporting documentation as Numeric deems appropriate. The form of such questionnaire shall be review and updated at least annually by Numeric's Investment Committee. In addition, each such derivative counterparty will be required to update such questionnaire at least annually and sooner in the event of a material change in the information presented to Numeric. D. SELECTION OF PRIME BROKERS Numeric will require any prime broker that it selects on behalf of, or recommends to, client to first complete a questionnaire regarding potential counterparty risk to the client and submit such supporting documentation as Numeric deems appropriate. The form of such questionnaire shall be review and updated at least annually by Numeric's Investment Committee. 31 In addition, each such prime broker will be required to update such questionnaire at least annually and sooner in the event of a material change in the information presented to Numeric. Any party approved by Numeric to act as a prime broker shall also be deemed approved to act as a traditional broker, FCM and a derivative, swap or foreign exchange counterparty. V. CLIENT DISCLOSURES AND ADVERTISING A. ACCOUNT STATEMENTS Each client of Numeric has different reporting needs. Numeric attempts to be flexible in providing needed information to each client on a mutually agreeable timetable. The information clients' desire comes from one of three sources, (1) an administrator, (2) a custodian/prime broker, and/or (3) directly from Numeric. Prior to developing a client's reporting, it is important to understand how some of the data is developed. i. TRADE EXECUTION: On a daily basis, domestic executions are verified to each broker using a trade matching system. International trades are completed via an agency list on a daily basis. The executions are sent to Numeric and automatically imported into Numeric's trading system. The information is then reviewed by both the operations and portfolio management staff to ensure accuracy. ii. POSITIONS CHECK: All international and the majority of the domestic accounts are reconciled on a daily basis to the custodian/prime broker to ensure the positions in Numeric's accounting system agree with those of the custodian/prime broker. iii. PORTFOLIO PRICES: The prices used to value the portfolio are reviewed on a daily basis. IDC prices are automatically imported into Numeric's accounting system for domestic portfolios. Reuters prices are automatically imported for the international portfolios. Prices that exceed a moderate tolerance from the previous day are reviewed for company news and corporate actions. iv. PERFORMANCE: Each morning the Marketing and Client Services Group reconciles the performance in the accounting system to the performance in the portfolio management system to ensure that the accounting system, the system of record, is correct. v. MONTHLY RECONCILIATION: Every active account is reconciled to the statement provided by the custodian/prime broker. The reconciliation includes position, shares, price, cash and net assets. The reconciliation is completed for all accounts. The reporting process for each client is somewhat different from this point and is mutually agreed with the client. Some clients desire a copy of the monthly reconciliations, some require monthly summaries, and some only require monthly calculation of performance. The reporting needs are maintained in both the Marketing and Client Services Group and the Operations Group. Often, reporting is sent to clients directly from an administrator or a custodian/prime broker. The only difference between various Numeric clients relates to separate accounts vs. pooled vehicles. Separate accounts may obtain position holdings on a daily basis. 32 Clients invested in pooled vehicles may only request position holdings with a 45 day lag. All other client requests for information are treated the same with no discrimination based on size or fee structure. B. ADVERTISING For Advisers Act purposes, an "advertisement" includes any written communication (including e-mails) addressed to more than one person or any notice or announcement in any publication or by radio or television which offers any analysis, report or publication regarding securities, any graph, chart, formula or other device for making securities decisions, or any other investment advisory services regarding securities. This definition generally includes any materials designed to retain current clients or solicit new clients, any form letter and presentation materials such as PowerPoint presentations. All Employees should note that advertising is heavily regulated by the SEC, and that advertisements must not be fraudulent, manipulative or deceptive. Among other restrictions, the SEC prohibits testimonials by clients and imposes strict limitations on whether and in what form an adviser may advertise its past recommendations. The SEC has also imposed a series of strict guidelines on when and in what format performance advertising (model or actual) may be used. All advertisements must be pre-approved by the Compliance Officer in order to ensure compliance with these regulations. C. UPDATING DISCLOSURE WITH RESPECT TO PRIVACY POLICY, PROXY VOTING POLICY, SOFT DOLLARS AND OTHER MATTERS Numeric's Compliance Officer shall track any changes to the policies and procedures contained herein and consider whether such changes require disclosure to the SEC, other regulatory bodies, or clients, before or after such changes are implemented. In particular, the Compliance Officer will monitor changes in Numeric's Privacy Policy, Proxy Voting Policy and best execution and soft dollar policies, as changes to these policies may require notice to clients. No change may be implemented to this Manual unless Numeric's Chief Compliance Officer has been consulted on the issue of disclosure. VI. SAFEGUARDING OF CLIENT ASSETS All Numeric client assets are maintained with prime brokers, broker-dealers, banks or other qualified custodians. While the custodial/prime broker choice belongs to our client, Numeric will only interact with reputable custodian/prime brokers who are able to provide reporting on a monthly basis. Numeric ensures that each broker, bank or custodian which holds client securities provides a report of such holdings and all transactions in the account directly to Numeric and directly to each client no less frequently than MONTHLY. Numeric performs the following reconciliation on each account: i. POSITIONS CHECK: All international and the majority of the domestic accounts are reconciled on a daily basis to the custodian/prime broker to ensure the positions in Numeric's accounting system agree with those of the custodian/prime broker. ii. PORTFOLIO PRICES: The prices used to value the portfolio are reviewed on a daily basis. IDC prices are automatically imported into Numeric's accounting system for domestic portfolios. Reuters prices are automatically imported for the international 33 portfolios. Prices that exceed a moderate tolerance from the previous day are reviewed for company news and corporate actions. iii. PERFORMANCE: Each morning the Marketing and Client Services Group reconciles the performance in the accounting system to the performance in the portfolio management system to ensure that the accounting system, the system of record, is correct. iv. MONTHLY RECONCILIATION: Every active account is reconciled to the statement provided by the custodian/prime broker. The reconciliation includes position, shares, price, cash and net assets. The reconciliation is completed for all accounts. At no time shall Numeric or any Employee have physical custody of any client asset or security. If Numeric or an Employee inadvertently comes into possession of any client asset or securities, such assets or securities must be returned to the client within 24 hours, and Numeric's Compliance Officer must be informed of any such event. Numeric provides brokers, banks and custodians with a list of Employees authorized to act on behalf of Numeric, and promptly updates such list to reflect any changes when they occur. Any pooled investment vehicle for which Numeric serves as manager, investment advisor or general partner shall be audited annually and copies of the audited financial statements shall be provided to investors within 120 days of the end of the fiscal year. 34 VII. RECORDKEEPING Employees should familiarize themselves with the recordkeeping requirements of the Advisers Act. Among other items, the Advisers Act requires that Numeric maintain the records set forth below. Such records have different preservation requirements for the SEC, IRS or other regulatory bodies. Numeric has chosen on a going forward basis to maintain the following records for at least seven years from the end of the fiscal year in which they were created. Certain items must be preserved from the time they were in effect, or for five years from the date an employee terminates employment. Therefore, payroll records and Numeric financial statements and tax returns are kept for at least ten years. Records for the two most recent years are maintained on-site. Before disposing of any records covered on the list below, an Employee must consult with Numeric's Compliance Officer to confirm that it is appropriate, from both a legal and business perspective, to dispose of the records. If records are maintained in an electronic format, steps are taken to prevent their unauthorized access or use and to protect them from untimely destruction. A. REQUIRED RECORDS 1. a journal (including cash receipts and disbursements) and other records of original entry forming the basis of entries in any ledger; 2. general and auxiliary ledgers reflecting asset, liability, reserve, capital, income and expense accounts; 3. a memorandum of each client order given and instructions received by Numeric for the purchase, sale, delivery, or receipt of securities (showing, among other things, the terms and conditions of the order (including discretionary or non-discretionary), the Portfolio Manager initiating the transaction on behalf of Numeric, the account for which entered, the date of entry, and where appropriate the bank, broker or dealer that executed the order); 4. all checkbooks, bank statements, canceled checks, and cash reconciliations of Numeric; 5. bills or statements relating to Numeric's business; 6. trial balances, financial statements, and appropriate files relating to Numeric's business; 7. originals or copies of certain communications sent to or received by Numeric (including responses to requests for proposals (RFPs)) that detail proposed investment advice, the placing or executing of purchase or sale orders, or the receipt, delivery or disbursement of funds or securities; 8. a list of and documents relating to Numeric's discretionary client accounts (including powers of attorney or grants of authority); 9. copies of all of Numeric's written agreements with clients or relating to Numeric's business; 35 10. copies of performance advertisements and documents necessary to form the basis for such performance information; 11. a copy of Numeric's Code of Ethics, a listing of any violations of the Code and actions taken in response to such violations, and copies of each Employee's written acknowledgment that he or she has reviewed and observed the Code of Ethics. Numeric must also maintain copies of all personal holdings and trading reports, as well as records of decisions approving any purchases of IPOs or private placements by Employees. Since Numeric requires pre-approval of all trades, records of those pre-approvals must also be maintained; 12. Numeric's proxy policy and procedures as required by rule 206(4)-6, proxy statements received by Numeric, a record of the votes cast by Numeric and a copy of each written client request for information about the investment adviser's voting of proxies on behalf of each client and the investment adviser's response to each request. Numeric must also retain any document "created" by Numeric that was material to making the decision how to vote a client's proxies or that records "the basis for that decision". Numeric may rely on a third party to retain a copy of a proxy statement or a record of votes cast if the third party gives an undertaking to supply a copy of each promptly upon request, or may rely on the SEC's EDGAR system for copies of relevant proxy statements; 13. copies of Form ADV, as well as proof of providing ADV Part II to clients upon initial engagement and then annually (in lieu of annual delivery Numeric may elect to offer to provide the ADV in writing free of charge). 14. copies of any written agreements with solicitors and copies of the written acknowledgments from referred clients they received the required disclosure statement from the solicitor; 15. copies of any customer complaints and the response thereto; 16. copies of Numeric's privacy policy and any written requests received from clients to opt out of disclosures. Numeric shall also retain copies of its annual privacy notice mailings including proof of mailing; and 17. copies of any trade allocation and aggregation plans and any deviations from such plans including the reasons for such deviations. 18. copies of emails containing any of the above records (as provided in the Computer Usage Policy of Numeric) 36 VIII. VALUATION Numeric portfolios are designed to primarily include publicly traded equity securities, and as such, Numeric has adopted the following valuation policy. Securities that are listed on a securities exchange will be valued at their last sales prices on the date of determination or, if no sales occurred on such day, at the mean between the bid and asked prices on such day. Securities that are not listed on a securities exchange will be valued at their last sales prices on the date of determination, or, if no sales occurred on such day, at their last closing bid prices if owned and held in a long position by the client and their last closing asked prices if held as a short position by the client. Securities that are in the form of put or call options, warrants or convertible bonds will be valued at their last closing bid prices if owned and held in a long position by the client and at their last closing asked prices if held as a short position by the client. Numeric only uses widely known pricing sources. Individual price movements over 9% are cross referenced to another pricing source to ensure that an accurate price has been captured and that a capital transaction was not missed and reflected in the portfolio. Equity positions and cash are reconciled to the custodian/prime broker on a regular basis in order to ensure an accurate valuation. In any situation where there is not a reliable publicly available price for a security in one of Numeric's strategies due to suspended trading, a corporate action, or other reasons, Numeric's Compliance Officer is responsible for convening a Fair Value Pricing Committee meeting to establish and document a price for that security. The Portfolio Manager for the strategy of the relevant security will gather as much public information as possible and will meet with an independent Portfolio Manager in another strategy and Numeric's Compliance Officer; all such public information will be reviewed to establish a "Fair Value Price" for the security. The established Fair Value Price shall remain in place until further public information becomes available requiring the Fair Value Pricing Committee to reconvene or when trading commences and the public markets establish a price. If the security requiring a "Fair Value Price" is held by any of Numeric's n/i family of mutual funds, a formal communication is sent to the Chairman of the Board of the n/i family of mutual funds for written concurrence with the decision. IX. PRIVACY POLICY Numeric has adopted a policy to protect the confidentiality of client information, a copy of which is set forth as EXHIBIT E. Numeric also has a memorandum, in question and answer format, which has been supplied by counsel to Numeric and which explains the privacy regulations. A copy of this memorandum should be reviewed by all Employees to ensure their familiarity with the applicable regulations. While the applicable regulations only apply to personally identifiable financial information gathered from natural persons (and in some cases, even if such persons are only potential clients), Employees should be sensitive to protect all client information that may be confidential and Numeric will generally adhere to its privacy policy with respect to all clients or potential clients. Numeric discloses the contents of its privacy policy to each client upon initiation of the client relationship and a summary thereof annually thereafter. 37 X. REGULATORY FILINGS Numeric's Compliance Officer shall be responsible for updating Numeric's Form ADV as required by the Advisers Act as well as any other regulatory filings for other regulatory bodies. The Compliance Officer shall also be responsible for filing any Forms 13F, 13D or 13G which may be required. In order to facilitate compliance with Section 13, Numeric has established a software program which provides the Compliance Officer with a daily report listing all 5% or greater and 10% or greater positions held on behalf of Numeric clients. XI. BUSINESS CONTINUITY PLAN The SEC has made clear that business continuity planning is now considered part of an advisor's fiduciary duty to its clients. Numeric can continue to function and service clients in the face of natural disasters such as fire, earthquake, local area power outages and terrorism. This is accomplished through a combination of (1) a Disaster Recovery site maintained by Numeric located in Waltham, Massachusetts, 15 miles west of Numeric's primary office facility, and (2) through the use of (home) remote access which is in place for all key Employees. In terms of succession risk, Numeric is adequately staffed at all levels such that the immediate departure of even a key Employee would not pose an undue burden on Numeric's fiduciary duty to continue to serve its clients. DISASTER RECOVERY SITE IN WALTHAM, MASSACHUSETTS In the case of an emergency where Numeric's primary office facility at One Memorial Drive in Cambridge, Massachusetts is unable to function as a working office, the following has been planned. Numeric's landlord, Equity Office Properties, shall notify Numeric's main contacts, Horace Henderson, Director of Information Technology, Ray Joumas, Managing Director and Chief Financial Officer (and Numeric's Compliance Officer), or Lang Wheeler, President. The first of these Employees contacted will notify the others. If a problem is localized to just Numeric's office, the first employee to recognize the situation should report it to Mr. Henderson, Mr. Joumas or Mr. Wheeler. Mr. Wheeler will notify all department heads from a master Employee phone list, which each Employee keeps. The Portfolio Management heads, Director of Trading, and Director of Operations will direct their staff to log into the Disaster Recovery Site from home or to proceed to the Disaster Recovery Site (which has sufficient work space for at least 15 Employees). Mr. Henderson or an information technology person designated by him will go out to the Disaster Recovery Site while the rest of the IT group will log in from their home machines and be prepared to offer assistance as needed. 38 The address of the Disaster Recovery Site is 260 Bear Hill Road, Suite 103, Waltham Massachusetts and the phone number is (781) 487-7390. Employees who log in from home have done so during live tests and are aware how to accomplish this. Employees are also required to test this connection once a month to ensure continued connectivity. The Disaster Recovery Site is only for crucial day to day operations. Employees with research, marketing and other non-critical positions will not work there. Instead, they will work from home with remote access (for short duration emergencies) and/or focus on helping put together a new office if One Memorial Drive is no longer a usable space. Finally, duplicate lists of important business partners are maintained at the Disaster Recovery Site including brokers, prime brokers and custodians, administrators and any other crucial third party service providers. XI. ANTI-MONEY LAUNDERING POLICY Numeric is committed to full compliance with all applicable laws designed to prevent and detect money laundering and the financing of criminal activities and terrorism. In order to ensure such compliance and to promote the detection of criminal activity involving clients, Numeric has therefore created this Anti-Money Laundering ("AML") Program. In order to ensure such compliance and to promote the detection of potential criminal activity or suspicious acts involving investors in Numeric funds and/or separate accounts, the following policies and procedures have been established: 1. COMPLIANCE OFFICER. Raymond Joumas will serve as Numeric's "AML Compliance Officer," whose responsibilities include overseeing the implementation of, and employee compliance with: (A) the AML Program; (B) monitoring legal and regulatory developments with respect to AML; (C) educating employees and agents of Numeric about Numeric's AML Program (including offshore administrators Goldman Sachs and Hemisphere as well as n/i family of funds administrator PFPC); (D) screening prospective investors and checking their identities against government lists of known terrorists; and (5) investigating suspicious transactions and reporting such transactions to the appropriate authorities. 2. INVESTOR DUE DILIGENCE CONCERNING PROSPECTIVE INVESTORS. All prospective investors in Numeric funds and/or separate accounts will be required to provide sufficient information to enable the AML Compliance Officer to determine the investors' identities, or in the case of investors which are entities, the identities of such investors' officers, directors and beneficial owners. The identity of each investor or underlying beneficial owner will be checked against the lists of Specially Designated Nationals, Blocked Persons and terrorists maintained by the United States Office of Foreign Assets Control, or similar lists maintained by other U.S. governmental agencies ("Blacklists"). In the event a proposed investment is to be made in the name of a nominee, the AML Compliance Officer will confirm that the nominee is a regulated institution in a Financial Action Task Force on Money Laundering ("FATF")-compliant jurisdiction, that the nominee has verified the identity of each person for whom such institution is acting as nominee, that the person is not listed on any Blacklist, and that, based on reasonable investigation by the nominee, the person is not engaged in money laundering or the financing of criminal activities or terrorism. 39 The Numeric AML Compliance Officer may rely on any investors' own AML program if: (1) Investor is domiciled in a FATF compliant jurisdiction; (2) Investor's AML program meets the requirements of the US Patriot Act or future enacted legislation; and (3) Investor provides a certification that appropriate procedures have been carried out on behalf of the underlying officers, directors and beneficial owners of the entity investing in the Numeric fund/separate account. The AML Compliance Officer will perform the due diligence described in this Section 2 with respect to all existing investors commencing with the implementation of this AML Program. In addition, at the time of any distribution to, or redemption or transfer of a separate account or fund interest by an investor in a Numeric strategy, the AML Compliance Officer will check the identity of the investor or proposed transferee (or follow the procedure described above with respect to a nominee) against all Blacklists if such transferee or recipient is different from the original investor. Specific client certification procedures are set forth in EXHIBIT F and an example of a client certificate letter is set forth in EXHIBIT G attached to this memorandum. All written materials documenting the performance of AML Program due diligence and the identity of each investor in a Numeric separate account/fund will be retained until seven years after the earlier of (a) the withdrawal of such investor from the Numeric separate account/fund and (b) the dissolution of the strategy/fund. 3. GOVERNMENTAL REPORTING. The AML Compliance Officer will investigate all suspicious activity involving the Fund or its investors and promptly report any bona fide suspicious behavior or transaction to the appropriate authorities. The Compliance Officer will report all cash transactions of $10,000 or greater to the U.S. Department of the Treasury in accordance with existing law. 4. EMPLOYEE RESPONSIBILITY AND TRAINING. All Numeric employees will be made familiar with this AML Program and will agree, as a condition of employment, to report suspicious activity to the AML Compliance Officer. All employees of Numeric will be required to attend an initial AML Training Seminar (including new employees upon commencement of employment) and follow-up seminars on a regular basis thereafter. All employees are required to sign an Employee Certification Anti-Money Laundering Program-Patriot Act in the form attached to this Memorandum as EXHIBIT H. The AML Compliance Officer may also circulate written updates, organize ad hoc educational classes, and require employees to attend external seminars and/or receive technical training (e.g., computer and financial analysis). 5. REVIEW OF AML PROGRAM. The AML Compliance Officer will be responsible for a formal internal review of Numeric's AML Program and its compliance efforts on a semi-annual basis. In addition, an independent review of the AML Program will be conducted by our independent accountants, Wolf & Company, on an annual basis. RELEVANT SOURCES OF INFORMATION: 40 US OFAC "Blacklist" is available at HTTP://WWW.TREAS.GOV/OFAC FATF compliant countries available at HTTP://WWW.OECD.ORG/FATF/MEMBERS_EN.HTM 41 EXHIBIT A NUMERIC INVESTORS LLC EMPLOYEE QUARTERLY TRADING REPORT It is Company policy to provide Numeric's Compliance Officer with a report on all activity in the purchase and sale of securities by its employees and their family members residing in their household and persons or entities over which they exert control (collectively the "Related Persons"). Such a report is required as evidence that all employees and their Related Persons do not benefit from information readily available in Numeric's office in advance of its clients. Please describe all transactions in securities that you and any Related Persons have undertaken in the last calendar quarter. You should describe the purchase or sale, number of units, title and type of issue, price, and broker for each transaction in the report. If there are no transactions that should be reported, please state so. REPORTS MUST BE SIGNED AND DATED AND RETURNED TO THE COMPLIANCE OFFICER FOR REVIEW AND FILING WITHIN 10 DAYS AFTER THE END OF EACH CALENDAR QUARTER. In addition, you and your Related Persons may not purchase or sell any security without prior approval from Numeric's Compliance Officer.
- ------------------------------------------------------------------------------------------------------------ DATE BUY/SELL OR # OF SECURITY INTEREST RATE UNIT BROKER, ---- ----------- ---- -------- ------------- ---- ------- OTHER UNITS/PRINCIPAL (TITLE, TYPE AND AND MATURITY PRICE DEALER OR ----- --------------- ---------------- ------------ ----- --------- (DESCRIBE) AMOUNT TICKER SYMBOL OR DATE BANK ---------- ------ ---------------- ---- ---- CUSIP NUMBER) EFFECTING ------------- --------- TRADE ----- - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
- ------------------------------------ -------------------------------- Signature Date Receipt acknowledged/Date: Quarter ended: - ------------------------------------ -------------------------------- [ADD PRINTED NAME] 42 EXHIBIT B NUMERIC INVESTORS LLC INITIAL/ANNUAL HOLDINGS REPORT HOLDINGS REPORT FOR YEAR ENDED ________ - -------------------------------------------------------------------------------- TITLE AND TYPE TICKER OR CUSIP NUMBER OF SHARES PRINCIPAL AMOUNT -------------- --------------- ---------------- ---------------- NUMBER ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please list all brokers, dealers and banks with whom you maintain accounts in which securities are held: ------------------------------------ ------------------------------------ ------------------------------------ - ------------------------------------ ---------------------------- Signature Date Receipt Acknowledged: - ------------------------------------ ---------------------------- Date 43 EXHIBIT C NUMERIC INVESTORS LLC COMPLIANCE CERTIFICATE The undersigned employee of Numeric Investors LLC ("Numeric"), hereby certifies that he or she has read and understood Numeric's current memorandum entitled "Numeric Investors LLC Compliance Manual and Code of Ethical Standards Written Policies and Procedures Under Rule 206(4)-7" and AIMR's "The Code of Ethics and The Standards of Professional Conduct" and that he or she will conduct himself or herself professionally in complete accordance with the requirements and standards described therein and will comply with all applicable federal and state securities and other laws and regulations regulating his or her conduct as an employee of Numeric. The undersigned employee has had the opportunity to ask questions of and receive answers from Numeric's Compliance Officer and other persons acting on behalf of Numeric's Compliance Officer with respect to the Investment Advisers Act of 1940 and other laws and regulations applicable to the undersigned in connection with his or her employment with Numeric, and the undersigned employee acknowledges that such questions have been answered to his or her full satisfaction. The undersigned employee acknowledges that: (i) he or she is responsible for his or her actions under the law and is required to be sufficiently familiar with the Investment Advisers Act of 1940 and other laws and regulations that may govern his or her conduct as an employee of Numeric; (ii) Numeric is relying upon the undersigned employee's certification and acknowledgments contained herein and that the failure to comply with the policy set forth in the above-referenced memorandum and with applicable federal and state securities and other laws and regulations may subject Numeric and the undersigned to substantial liabilities including imprisonment and fines; and (iii) Numeric may dismiss the undersigned employee from his or her employment for failure to comply with the policies set forth in the above-referenced policies and practices and applicable federal and state securities and other laws and regulations governing the undersigned's conduct as an employee of Numeric. ------------------------------------- Signature and Date. Name. Please Print. 44 EXHIBIT D [SEE ATTACHED SUMMARIES OF DOMESTIC AND INTERNATIONAL PROXY VOTING POLICIES] 45 EXHIBIT E NUMERIC INVESTORS LLC PRIVACY POLICIES AND PRACTICES AS OF MARCH 24, 2006 Maintaining the confidentiality of the personal information of our current and prospective customers is one of our highest priorities. This policy sets forth the type of personal information we collect, how that information is used by us, and how we protect personal information of clients. HOW AND WHY WE COLLECT PERSONAL INFORMATION 1. COLLECTION Personal information may be collected from clients in order to offer or provide products or services, process transactions on their behalf and comply with legal and regulatory requirements. Information may be collected from any of the following sources: a. FROM CLIENTS: We collect information from clients when such clients request information or services from us or enter into an investment management agreement with us or a subscription agreement with a fund we manage. We may also collect information from investor questionnaires, W-9's and other applications or forms completed by clients when requesting information or services from us. This information may include items such as name, address, e-mail address, social security number, birth date, annual income, net worth, marital status, investment goals and investment risk tolerance. If a client indicates that he or she has a spouse or partner, that spouse's personal and financial account information may also be requested. b. FROM TRANSACTIONS: If a client obtains advice or services from us, we keep records of the advice or service provided. We keep records relating to items such as each client's account balance, payment history, securities positions and securities purchases and sales. This enables us to provide each client with a history of their transactions with us and service such client's account. c. FROM OUR WEB SITE: When clients visit our website, we may use a so-called cookie to track the amount of time such clients spend on our site, the parts of our site visited and other technical information. We use this information to improve the functionality of our web site. 2. USE OF PERSONAL INFORMATION Personal information of clients is collected and maintained by us so that we may develop, offer and deliver products and services to clients, process transactions and fulfill our legal and regulatory requirements. 46 DISCLOSURE OF PERSONAL INFORMATION We do not, and do not intend to, sell or distribute personal information about current or former customers to nonaffiliated third parties except as set forth below. If in the future this policy changes you will be notified and provided with an opportunity to opt out of such disclosure. We may share your personal information as follows: a. We will reveal or share your personal information where the law requires it, such as for tax reporting purposes or pursuant to a court order. b. We may reveal or share your personal information with our affiliates. Our affiliates include, for example, investment funds that we manage and over which we have control. c. We may reveal or share your personal information with unaffiliated service providers such as brokers, fund administrators and transfer agents in connection with processing transactions for your account. Your personal information may also be provided to attorneys, accountants or auditors in order to enable us to provide requested services to you and to comply with legal and regulatory requirements. PROTECTION OF YOUR PERSONAL INFORMATION Our employees may, from time to time, have access to your personal information in order to provide services to you. We restrict access to nonpublic personal financial information to those employees who need to know that information in order to provide you with products and services. All employees are subject to the terms of our Company's compliance manual, which advises employees as to the confidential nature of all client information and requires employees to protect the confidentiality of all information obtained from or about you or your account. Numeric maintains physical, electronic and procedural safeguards designed to protect nonpublic personal financial information. Client information provided through our website and other personal financial information that is stored electronically is protected by firewalls and data encryption security and may be accessed only by authorized personnel via password entry. Hard copies of files containing confidential client information are maintained in our offices under the supervision of qualified personnel and secured under lock and key during non-business hours. In addition, backup or archival copies of all files containing confidential client information are maintained by Numeric in the event of accidental loss or destruction the primary files. Numeric's Information Security Officer, Raymond J. Joumas, conducts periodic reviews of the compliance with and effectiveness of the above described safeguards. 47 Additional description of safeguards employed by Numeric to protect client information may be found in Section B, "Confidential Information," and Section H, "Workplace Communications and Computer Usage Policy," of Numeric's Code of Ethics. 48 EXHIBIT F - -------------------------------------------------------------------------------- NUMERIC INVESTORS LLC ANTI-MONEY LAUNDERING PROGRAM - PATRIOT ACT CLIENT CERTIFICATION PROCEDURES - -------------------------------------------------------------------------------- INVESTORS IN NUMERIC OFFSHORE FUNDS/LIMITED PARTNERSHIPS OR N/I NUMERIC INVESTORS FAMILY OF FUNDS: o AML procedures on behalf of clients investing in Numeric offshore funds or in n/i numeric family of funds are the responsibility of the respective administrator of the fund. Numeric can rely completely on the administrator's procedures to comply with the US legislation regarding money laundering known as the Patriot Act. Copies of each administrator's policies and procedures are kept on file by the Numeric AML Compliance Officer. FOR ALL OTHER INVESTORS, NUMERIC STAFF TO PERFORM THE FOLLOWING: o All individuals - Confirm they are not on the "Blacklist" of restricted persons updated on the WWW.TREAS.GOV/OFAC website. If other blacklists become available, they must be checked as well. o Determine if client is (a) an individual or entity and (b) U.S. or non-U.S. o US Individuals - Obtain full legal name, address and social security number. o Non-US Individuals - Obtain full legal name, address, passport number and a photocopy of their passport. o US Public Company or Pension Plan - Document official name of company, state of incorporation, ticker symbol and stock exchange where shares are traded. No other research is required as we can rely on that entity to perform its own AML procedures. o US Privately Held Company, Limited Partnership, Trust, Fund-of-funds, Nominee entity, or some other entity form - Obtain photo copy of state incorporation or registration information. Perform the steps above under individuals for all officers, partners, directors or beneficial owners of the entity. Investor may perform these procedures on their own as long as they provide a copy of their AML program and certify that they have complied with their program. o Non-US Public Company of Pension Plan - Confirm that company is domiciled in a FATF compliant jurisdiction by looking on the FATF website which is kept current and is located at: HTTP://WWW.OECD.ORG/FATF/MEMBERS_EN.HTM. Document official name 49 of company, country of incorporation or registry, ticker symbol and stock exchange where shares are traded. No other research is required as we can rely on that entity to perform its own AML procedures since they are in an FATF compliant jurisdiction. o Non-US Privately Held Company, Trust, Fund-of-funds, Nominee entity, or some other entity form - Confirm that company is domiciled in a FATF compliant jurisdiction by looking on the FATF website which is kept current and is located at: HTTP://WWW.OECD.ORG/FATF/MEMBERS_EN.HTM. Document official name of company, country of incorporation or registry. Obtain photocopy of incorporation or registration information. Perform the steps above under individuals for all officers, partners, directors or beneficial owners of the entity. Investor may perform these procedures on their own as long as they provide a copy of their AML program and certify that they have complied with their program. o Investors that are domiciled in an non-compliant FATF jurisdiction pose special problems and should be handled on a case-by-case basis by the Numeric AML Compliance Officer in conjunction with legal counsel prior to finalizing the investment relationship with Numeric. 50 EXHIBIT G - -------------------------------------------------------------------------------- NUMERIC INVESTORS LLC ANTI-MONEY LAUNDERING PROGRAM - PATRIOT ACT EXAMPLE OF CLIENT CERTIFICATION - -------------------------------------------------------------------------------- Date Numeric Investors LLC One Memorial Drive Cambridge, MA 02142 Dear AML Compliance Officer; This Certification of Compliance is being provided to you pursuant to your request. (Investor) represents to you the following: o We have adopted and implemented anti-money laundering policies, procedures and controls that comply and will continue to comply with the rules and regulations promulgated under the U.S. Patriot Act; o We have applied the aforementioned procedures to the investment account we have open with Numeric Investors LLC as investment advisor; o The aforementioned procedures resulted in acceptable investors as described under the U.S. Patriot Act; and o We will continue to adhere our anti-money laundering policies, procedures and controls during the course of our relationship with Numeric Investors LLC. Sincerely, Client Official 51 EXHIBIT H - -------------------------------------------------------------------------------- NUMERIC INVESTORS LLC ANTI-MONEY LAUNDERING PROGRAM - PATRIOT ACT EMPLOYEE CERTIFICATION - -------------------------------------------------------------------------------- I confirm to the best of my knowledge and belief, the following: o I am familiar with the Numeric Investors LLC Anti-Money Laundering Program - Patriot Act ("Numeric AML"); o I commit to uphold the Numeric AML and report any suspicious activity of which I become aware to the Numeric AML Compliance officer; o I understand that failure to comply with US federal laws surrounding Anti-Money Laundering may result in prosecution by US federal authorities; and o I understand that failure to uphold the Numeric AML is cause for my immediate dismissal as an employee of Numeric Investors LLC. - ---------------------------------- Signed - ---------------------------------- Name - ---------------------------------- Date 52 EX-99.P(4) 17 g34307_exp4.txt EXHIBIT (P)(4) - CODE OF ETHICS SCHNEIDERCAPMGMT Exhibit (p)(4) CODE OF ETHICS OF SCHNEIDER CAPITAL MANAGEMENT I. PREAMBLE This Code of Ethics ("Code") is being adopted in compliance with the requirements of Sections 204A and 206 of the Investment Advisers Act of 1940 (the "Advisers Act") and Rules 204-2 and 204A-1 under the Advisers Act and Section 17(j) of the Investment Company Act of 1940 (the "Investment Company Act") and Rule 17j-1 under the Investment Company Act, to effectuate the purposes and objectives of those provisions of the Advisers Act, the Investment Company Act and the rules promulgated thereunder. Section 204A of the Advisers Act requires the establishment and enforcement of policies and procedures reasonably designed to prevent the misuse of material, nonpublic information by investment advisers. Rule 204A-1 requires advisers to establish, maintain and enforce a written code of ethics. Rule 204-2 imposes record keeping requirements with respect to personal securities transactions of access persons (defined below). Section 206 of the Advisers Act makes it unlawful for certain persons including Schneider Capital Management (the "Firm"): 1. To employ any device, scheme or artifice to defraud any client or prospective client; 2. To engage in any transaction, practice or course of business which operates as a fraud or deceit upon any client or prospective client; 3. Acting as principal for his own account, knowingly to sell any security to or purchase any security from a client; or acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of such transaction, the capacity in which he is acting and obtaining the consent of the client to such transaction. The prohibitions of this paragraph (3) shall not apply to any transaction with a customer of a broker or dealer if such broker or dealer is not acting as an investment adviser in relation to such transaction; or 4. To engage in any act, practice, or course of business which is fraudulent, deceptive or manipulative. Similarly, Rule 17j-1(b) of the Investment Company Act makes it unlawful for any affiliated person of the investment adviser of an investment company in connection with the purchase or sale, directly or indirectly, by such person of a Security Held or to be Acquired by the investment company: (1) to employ any device, scheme or artifice to defraud the investment company; (2) to make any untrue statement of a material fact to the investment company or to omit to state a material fact necessary in order to make the statements made to the investment company, in light of the circumstances under which they are made, not misleading; (3) to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the investment company; or (4) to engage in any manipulative practice with respect to the investment company. This Code contains provisions reasonably necessary to prevent persons from engaging in acts in violation of the above standards and contains procedures reasonably necessary to prevent violations of the Code. A. STANDARD OF CONDUCT The Firm is committed to ethical conduct and integrity in all aspects of the conduct of our business. The fulfillment of our fiduciary duties to our clients is paramount, and will not be compromised for financial or other goals. All employees are required to comply with the federal securities laws, other applicable laws and regulations, and the Firm's compliance policies and procedures. Employees who fail to meet these requirements are subject to disciplinary action by the Firm. The Firm and its employees have a duty of loyalty to our clients. This duty requires that we: act for the benefit of clients; avoid conflicts of interest, or if unavoidable, disclose the conflict and obtain client consent; deal honestly, fairly and in good faith with clients; avoid intentional misconduct; and refrain from competing with or seizing opportunities of our clients. In furtherance of our duty to our clients, it is our goal to provide disinterested, impartial advice. The Firm and its employees also have a duty of care to our clients. This duty requires that we use care to manage investments prudently, reflecting the high level of skills possessed by the employees of the Firm, and consider suitability in light of the respective client's investment purpose and restrictions, among other relevant considerations. Each employee of the Firm has a duty to prevent the misuse of material nonpublic information, which includes a complete prohibition against the misuse of material nonpublic information about the Firm's securities recommendations and client securities holdings and transactions. This Code of Ethics is adopted by the Board of Directors of the Firm. In summary, this Code is based upon the principle that the directors and officers of the Firm, and - 2 - certain affiliated persons of the Firm, owe a fiduciary duty to, among others, the clients of the Firm to conduct their affairs, including their personal securities transactions, in such manner to avoid (i) serving their own personal interests ahead of clients; (ii) taking inappropriate advantage of their position with the Firm; and (iii) engaging in any actual or potential conflicts of interest or any abuses of their position of trust and responsibility. This fiduciary duty includes the duty of the Personal Trading Compliance officer and Chief Compliance Officer of the Firm to report violations of this Code of Ethics to the Firm's Board of Directors. ALL VIOLATIONS OF THIS CODE OF ETHICS ARE REQUIRED TO BE REPORTED PROMPTLY TO THE CHIEF COMPLIANCE OFFICER OF THE FIRM. II. POLICY STATEMENT ON INSIDER TRADING The Firm forbids any officer, director or employee from trading, either personally or on behalf of others, including accounts managed by the Firm, on material nonpublic information or communicating material nonpublic information to others in violation of the law. This conduct is frequently referred to as "insider trading." The Firm's policy applies to every officer, director and employee and extends to activities within and outside their duties at the Firm. Any questions regarding the Firm's policy and procedures should be referred to the Chief Compliance Officer. The Term "insider trading" is not defined in the federal securities laws, but generally is used to refer to the use of material nonpublic information to trade in securities (whether or not one is an "insider") or to communications of material nonpublic information to others. The "manipulative and deceptive devices" prohibited by Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, include the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information. While the law concerning insider trading is not static, it is generally understood that the law prohibits: 1. trading by an insider, while in possession of material nonpublic information, or 2. trading by a non-insider, while in possession of material nonpublic information, where the information either was disclosed to the non-insider in violation of an insider's duty to keep it confidential or was misappropriated, or 3. communicating material nonpublic information to others. The concept of "insider" is broad. It includes officers, directors and employees of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company's affairs and as a result is given access to information solely for the company's purposes. A temporary insider can include, among others, a company's attorneys, accountants, consultants, bank lending officers, and the employees of - 3 - such organizations. In addition, an employee of the Firm may become a temporary insider of a company he or she advises or for which he or she performs other services. For that to occur, the company must expect the Firm employee to keep the disclosed nonpublic information confidential and the relationship must at least imply such a duty before the Firm employee will be considered an insider. Trading on inside information is not a basis for liability unless the information is material. "Material information" generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of a company's securities. Information that officers, directors and employees should consider material includes, but is not limited to, dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments. Information is nonpublic until it has been effectively communicated to the market place. 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 SEC, or appearing in Dow Jones, REUTERS ECONOMIC SERVICES, THE WALL STREET JOURNAL or other publications of general circulation would be considered public. Penalties for trading on or communicating material nonpublic information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. The penalties include: o civil damages o treble damages o jail sentences o fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited: and fines for the employers or other controlling persons of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided. Any violation of this Insider Trading Policy can be expected to result in serious sanctions by the Firm, including dismissal of the persons involved. Before trading for yourself or others in the securities of a company about which you may have potential inside information, ask yourself the following questions: 1. Is the information material? Is this information that an investor would consider important in making his or her investment decisions? Is this information that would substantially effect the market price of the securities if generally disclosed? - 4 - 2. Is the information nonpublic? To whom has this information been provided? Has the information been effectively communicated to the marketplace? If, after consideration of the above, you believe that the information is material and nonpublic, or if you have questions as to whether the information is material and nonpublic, you should take the following steps. 1. Report the matter immediately to the Chief Compliance Officer. 2. Do not purchase or sell the securities on behalf of yourself or others. 3. Do not communicate the information inside or outside the Firm, other than to the Chief Compliance Officer. 4. Upon a determination by the Chief Compliance Officer that the information is material and nonpublic, instructions will be issued promptly to: (a) halt temporarily all trading by the Firm in the security or securities of the pertinent issuer and all recommendations of such security or securities; (b) ascertain the validity and non-public nature of the information with the issuer of the securities; (c) request the issuer or other appropriate parties to disseminate the information promptly to the public, if the information is valid and non-public; or (d) in the event the information is not publicly disseminated, consult counsel and request advice as to what further steps should be taken, including possible publication by the Firm of the information, before transactions or recommendations in the securities are resumed. 5. Upon a determination by the Firm's Chief Compliance Officer that the information is public or not material, you will be allowed to trade and communicate the information. No set of rules can possibly anticipate all the potential trading conflicts of interest between clients and personnel. Any situation subject to interpretation should be decided in favor of the protection of the best interests of the clients. For instance, it would be unethical to execute a personal trade in a security if the person knew or had reason to know that a substantial order in the security in question was likely to be implemented for a client in the foreseeable future, even though to execute the personal trade would be within the letter of the law. - 5 - Information in your possession that you identify as material and nonpublic may not be communicated to anyone, including persons within the Firm, except as provided above. In addition, care should be taken so that such information is secure. For example, files containing material nonpublic information should be sealed; access to computer files containing material nonpublic information should be restricted. Investment decisions made by the Firm may not be disclosed to anyone other than Firm clients, including a spouse or other relative or a social or business acquaintance. The role of the Chief Compliance Officer and the Personal Trading Compliance Officer is critical to the implementation and maintenance of the Firm's policy and procedures against insider trading. The Firms' Supervisory Procedures can be divided into two classifications - prevention of insider trading and detection of insider trading. To prevent insider trading, the Firm will: 1. provide, on a regular basis, an education program to familiarize officers, directors and employees with the Firm's policy and procedures, and 2. when it has been determined that an officer, director or employee of the Firm has material nonpublic information, a) implement measures to prevent dissemination of such information, and b) if necessary, restrict officers, directors and employees from trading the securities. To detect insider trading, the Personal Trading Compliance Officer and the Chief Compliance Officer will: 1. review the trading activity reports filed by each officer, director and employee, and 2. review the trading activity of accounts managed by the Firm. III. DEFINITIONS A. "Access Person" means any of the Firm's supervised persons who has access to nonpublic information regarding any client's purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any "reportable fund", or who is involved in making securities recommendations to clients, or who has access to recommendations that are nonpublic. A "reportable fund" is any fund for which the Firm serves as investment adviser, or any fund whose investment adviser or principal underwriter controls the Firm, is controlled by the Firm, or is under common control with the Firm. All of the Firm's directors and officers are access persons. - 6 - B. "Advisory Person" means (a) any employee of the Firm (or any company in a control relationship to the Firm) who, in connection with his or her regular functions or duties, normally makes, participates in, or obtains information regarding the purchase or sale of Covered Securities (as defined below) by the Firm on behalf of its Clients (as defined below), or whose function relates to making of any recommendations with respect to such purchases or sales; and (b) any natural person in a control relationship to the Firm who obtains information concerning recommendations made to a Client with regard to the purchase or sale of a security by the Firm on behalf of its Clients. C. "Automatic investment plan" means a program in which regular periodic purchases ( or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An automatic investment plan includes a dividend reinvestment plan. D. A security is "being considered for purchase or sale" or is "being purchased or sold" when a recommendation to purchase or sell the security has been made and communicated, which includes when the Firm has a pending "buy" or "sell" order with respect to a security, and, with respect to the person making the recommendation, when such person is seriously considering making such a recommendation. "Purchase or sale of a Covered Security" includes the writing of an option to purchase or sell a Covered Security. E. "Beneficial ownership" shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) of the Securities Exchange Act of 1934 (the "Exchange Act") in determining whether a person is the beneficial owner of a security for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder. Generally speaking, beneficial ownership encompasses those situations where the beneficial owner has the right to enjoy some economic benefit from the ownership of the security. A person is normally regarded as the beneficial owner of securities held in the name of his or her spouse or minor children living in his or her household. Reports required by this Code may contain a statement that the report will not be construed as an admission that the person making the report has any direct or indirect beneficial ownership in the security to which the report relates. F. "Client" includes both private accounts managed by the Firm and Investment Companies as defined below. G. "Control" shall have the same meaning as that set forth in Section 202(a) (12) of the Advisers Act and 2(a)(9) of the Investment Company Act. These sections generally provide 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. H. "Covered Security" means a security as defined in Section 2(a)(36) of the Investment Company Act and Section 202(a)(18) of the Advisers Act, except that it - 7 - shall not include direct obligations of the Government of the United States, bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments (any instrument that has a maturity at issuance of less than 366 days and is rated in one of the two highest categories by a nationally recognized statistical rating organization) including repurchase agreements, shares issued by money market funds, and shares issued by open-end investment companies other than reportable funds, and shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, UNLESS THE ADVISER OR A CONTROL AFFILIATE ACTS AS THE INVESTMENT ADVISER OR PRINCIPAL UNDERWRITER FOR THE FUND. I. "Federal securities laws" means the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach-Bliley Act, any rules adopted by the Securities and Exchange Commission ("SEC") under any of these statues, the Bank Secrecy Act as it applies to investment companies and investment advisers, and any rules adopted thereunder by the SEC or the Department of the Treasury. J. "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act. K. "Investment Company" means a company registered as such under the Investment Company Act or any series thereof for which the Firm is the adviser or sub-adviser. L. "Investment Personnel" means (a) any Portfolio Manager of the firm as defined below; or (b) any employee of the Firm (or any company in a control relationship to the Firm) who in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Firm on behalf of its Clients; or (c) any natural person who controls the Firm and who obtains information concerning recommendations made by the Firm on behalf of its Clients regarding the purchase or sale of securities by the Firm on behalf of its Clients. M. "Limited Offering" means an offering that is exempt from registration under the Securities Act of 1933 (the "Securities Act") pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 under the Securities Act. N. "Portfolio Manager" means an employee of the Firm entrusted with the direct responsibility and authority to make investment decisions. O. A "Security Held or to be Acquired" by the Firm on behalf of a Client means: (i) any Covered Security which within the most recent 15 days: (a) is or has been held by a Client; or (b) is being or has been considered by the Firm for purchase by the - 8 - Firm on behalf of a Client; and (ii) any option to purchase or sell and any security convertible into or exchangeable for a Covered Security described above. IV. PROHIBITED TRANSACTIONS The prohibitions set forth below shall apply to Access Persons, Investment Personnel and Portfolio Managers. 1. No person shall engage in any act, practice or course of conduct, which would violate the provisions of Section 206 and Rule 17j-1 set forth above. 2. No person shall: a) purchase or sell, directly or indirectly, any Covered Security in which he or she has or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his or her actual knowledge at the time of such purchase or sale: (1) is being considered for purchase or sale by the Firm on behalf of any Client, or (2) is being purchased or sold by the Firm on behalf of any Client. b) No person shall reveal to any other person (except in the normal course of his or her duties on behalf of a Client) any information regarding securities transactions by a Client or consideration by a Client or the Adviser of any such securities transaction. c) No person shall, in the absence of prior approval by the Compliance Officer, sell any Covered Security that was purchased, or purchase a Covered Security that was sold, within the prior 60 calendar days. A form for pre-approval is attached hereto as Exhibit D. d) No person shall acquire any securities in an Initial Public Offering; e) No person shall purchase any securities in a Limited Offering, without prior approval of the Chief Compliance Officer of the Firm or other officer designated by the Board of Directors. Any person authorized to purchase securities in a private placement shall disclose that investment when they play a part in any subsequent consideration by the Firm of an investment in the issuer. In such circumstances, the Firm's decision to purchase securities of the issuer shall be subject to the independent review by Investment - 9 - Personnel with no personal interest in the issuer. A record of any decision and the reason supporting the decision to approve the acquisition by Access Persons of a Limited Offering shall be maintained as described below. f) No person shall accept any gift or other thing of more than de minimis value ($250 or more) from any person or entity that does business with or on behalf of the Firm; g) No person shall serve on the board of directors of any publicly traded company or membership in an investment organization without prior authorization of the President or other duly authorized officer of the Firm. Any such authorization shall be based upon a determination that the board service would be consistent with the interests of the Firm's Clients. Authorization of board service shall be subject to the implementation by the Firm of "Chinese Wall" or other procedures to isolate such Investment Personnel from the Investment Personnel making decision about trading in that company's securities. h) No person shall buy or sell a Covered Security within seven (7) calendar days before and after any Client of the Firm trades in that security. Any trades made within the proscribed period shall be unwound, if possible. Otherwise, any profits realized on trades within the proscribed period shall be disgorged to the appropriate Client portfolio(s). The Personal Trading Compliance Officer of the Firm shall identify all persons who are considered to be Access Persons, Investment Personnel and Portfolio Managers and shall notify and inform such persons of their respective obligations under this Code, and shall deliver a copy of this Code of Ethics and any amendments to each such person. EACH PERSON SHALL ACKNOWLEDGE, IN WRITING, HIS OR HER RECEIPT OF THE CODE AND ANY AMENDMENTS. V. EXEMPTED TRANSACTIONS A. The prohibitions of Section IV shall not apply to: 1. purchases or sales effected for, or held in, in any account over which the Access Person has no direct or indirect influence or control; 2. purchases or sales which are non-volitional on the part of either the Access Person or the Firm; 3. purchases which are part of an automatic investment plan, including an automatic dividend reinvestment plan; - 10 - 4. purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; 5. purchases or sales of securities which are not related economically to securities purchased, sold or held by the Firm; 6. transactions which appear upon reasonable inquiry and investigation to present no reasonable likelihood of harm to the Firm's Clients and which are otherwise in accordance with this Code, Section 206 of the Advisers Act and Rule 17j-1 of the Investment Company Act; for example, such transactions would normally include o purchases or sales of up to 1,000 shares of a security which is being considered for purchase or sale by a Client (but not then being purchased or sold) if the issuer has a market capitalization of over $1 billion; o or if the proposed acquisition or disposition by the Firm is less than one percent of the class outstanding as shown by the most recent report or statement published by the issuer, or less than one percent of the average weekly reported volume of trading in such securities on all national securities exchanges and/or reported through the automated quotation system of a registered securities association, during the four calendar weeks prior to the individual's personal securities transaction; and o or the purchase or sale by the Firm is less than 1000 shares or less than $25,000 of an issuer with a market capitalization of over $1 billion (generally following portfolio rebalancing from cashflows) and all client orders have been executed or withdrawn. VI. COMPLIANCE PROCEDURES A. Pre-clearance 1. All Access Persons shall receive prior written approval from the Personal Trading Compliance Officer of the Firm, or other officer designated by the Board of Directors before purchasing or selling Covered Securities (See Exhibit E). Any approval is valid only for one day after authorization is received. If an Access Person is unable to effect the securities transaction during such period, he or she must re-obtain approval prior to effecting the securities transaction. The Personal Trading Compliance Officer shall receive pre-approval from the Chief Compliance Officer or Senior Trader before purchasing or selling Covered Securities. The Personal Trading Compliance Officer will decide whether to approve a personal securities transaction for an Access Person after considering the - 11 - specific restrictions and limitations set forth in, and the spirit of, this Code of Ethics, including whether the security at issue is being considered for purchase or sale for a Client. The Personal Trading Compliance Officer is not required to give any explanation for refusing to approve a securities transaction. 2. Purchases or sales of Covered Securities which are not eligible for purchase or sale by the Firm or any Client of the Firm that serves as the basis of the individual's "Access Person" status shall be entitled to clearance automatically from the Personal Trading Compliance Officer. B. Disclosure of Personal Holdings 1. Within 10 days after initially becoming an Access Person and between January 1 and January 30 of each calendar year, all Access Persons shall disclose to the Personal Trading Compliance Officer of the Firm (a) the title and type of Security, the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security in which the Access Person has any direct or indirect beneficial ownership (b) the name of any broker, dealer or bank with whom the Access Person maintains an account in which any securities were held for the direct or indirect benefit of the Access Person; and (c) the date the Access Person submits the report. Information must be current as of a date no more than 45 days before the report is submitted. The initial holdings report shall be made on the form attached as Exhibit A and the annual holdings report shall be made on the form attached as Exhibit B. Such reports shall be delivered to the Personal Trading Compliance Officer of the Firm. An Access Person shall not be required to make a report with respect to transactions effected for, and Covered Securities held in, any account over which such person does not have any direct or indirect influence. C. Certification of Compliance with Code of Ethics 1. Every Access Person shall certify annually that: a) they have read and understand the Code of Ethics; and b) they have complied with the requirements of the Code of Ethics; and c) they have reported all personal securities transactions and beneficial holdings in Covered Securities required to be reported pursuant to the requirements of the Code of Ethics. 2. The annual report shall be made on the form attached as Exhibit B and delivered to the Personal Trading Compliance Officers of the Firm. - 12 - D. Quarterly Reporting Requirements 1. Every Access Person shall report to the Personal Trading Compliance Officer of the Firm the information described in Sub-paragraph (D)(2) of this Section with respect to transactions in any security in which such person has, or by reason of such transaction acquires or disposes of, any direct or indirect beneficial ownership in a Covered Security; provided, however, that an Access Person shall not be required to make a report with respect to transitions effected for, and Covered Securities held in, any account over which such person does not have any direct or indirect influence. 2. Reports required to be made under this Paragraph (D) shall be made not later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected. Every Access Person shall be required to submit a report for all periods, including those periods in which no securities transactions were effected. A report shall be made on the form attached hereto as Exhibit C or on any other form containing the following information: a) the date of the transaction, the title, the exchange ticker symbol or CUSIP number, the interest rate and maturity date (if applicable), class and the number of shares, and the principal amount of each Covered Security involved; b) the nature of the transaction (i.e., purchases, sales or any other type of acquisition or disposition); c) the price of the Covered Security at which the transaction was effected; d) the name of the broker, dealer or bank with or through whom the transaction was effected; e) the date that the report was submitted by the Access Person; and f) with respect to any account established by an Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person: (i) the name of the broker, dealer or bank with whom the Access Person established the account; (ii) the date the account was established; and (iii) the date that the report was submitted by the Access Person. 3. Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he or she - 13 - has any direct or indirect beneficial ownership in the security to which the report relates. 4. Every Access Person shall direct their brokers to supply to the Personal Trading Compliance Officer of the Firm, on a timely basis, duplicate copies of the confirmation of all personal securities transactions and copies of all periodic statements for all securities transactions that were effected. Every Access Person shall submit the report referred to in Section VI(D)(2). Notwithstanding Section VI(D)(2) of the Code an Access Person need not make a quarterly transaction report where the report would duplicate information contained in broker trade confirmations or account statements received by the Firm in the time period required herein if all of the information required by Section VI(D)(2) is contained in such confirmation or account statements. E. Miscellaneous 1. Reports submitted to the Personal Compliance Officer of the Firm pursuant to this Code of Ethics shall be confidential and shall be provided only to the Chief Compliance Officer, and directors of the Firm, counsel or regulatory authorities upon appropriate request. 2. These reporting requirements shall apply whether or not one of the exemptions listed in Section V applies except that an Access Person shall not be required to make a report with respect to securities transactions effected for, and any Covered Securities held in, any account over which such Access Person does not have any direct or indirect influence or control, or transactions effected pursuant to an automatic investment plan. F. Conflict of Interest 1. Every Access Person shall notify the Chief Compliance Officer of the Firm of any personal conflict of interest relationship which may involve the Firm's Clients such as the existence of any economic relationship between their transactions and securities held or to be acquired by any Client of the Firm. Such notification shall occur in the pre-clearance process. VII. REPORTING OF VIOLATIONS TO THE BOARD OF DIRECTORS A. The Personal Trading Compliance Officer and the Chief Compliance Officer shall be responsible for the review of the quarterly transaction reports, the initial holdings reports and annual holdings reports required under Section VI of this Code of Ethics. In connection with the review of these reports, the Personal Trading Compliance Officer and the Chief Compliance Officer shall take appropriate measures to determine whether each Access Person has complied with the provisions of this Code of Ethics. The Chief Compliance Officer of the Firm shall prepare an annual report relating to this Code of Ethics to the Board of - 14 - Directors of the Firm and each Investment Company as requested. Such annual report shall: 1. describe any issues arising under the Code since the last report including, but not limited to information about material violations of the Code and sanctions imposed in response to material violations; 2. summarize existing procedures concerning personal investing and any changes in the procedures made during the past year; 3. identify any recommended changes in the existing restrictions or procedures based upon the Firm's experience under its Code of Ethics, evolving industry practices or developments in applicable laws or regulations; and 4. certify to the Board of Trustees/Directors that the Firm has adopted procedures that are reasonably necessary to prevent Access Persons from violating this Code of Ethics. VIII. SANCTIONS A. Upon discovering a violation of this Code, the Board of Directors may impose such sanctions as they deem appropriate, including, among other things, a letter of censure or suspension or termination of the employment of the violator. In addition, as part of any sanction, the Firm may require the Access Person or other individual involved to reverse the trade(s) at issue and forfeit any profit or absorb any loss from the trade. IX. RETENTION OF RECORDS A. This Code of Ethics, a record of all persons, currently or within the past five years, who are or were required to make reports, a record of all persons, currently or within the past five years, who are or were responsible for reviewing reports, a copy of each initial holdings, annual holdings and quarterly transaction report (including any brokerage confirmation or account statements provided in lieu of the reports) made by an Access Person hereunder, a copy of each board report made pursuant to Section VII, a record of any decision and the reason supporting the decision to approve the acquisition by Investment Personnel of Limited Offerings; each memorandum made by the Personal Trading Compliance Officer or Chief Compliance Officer of the Firm hereunder and a record of any violation hereof and any action taken as a result of such violation, shall be maintained by the Firm as required by the Advisers and the Investment Company Act, including as required by Rules 204-2(a)(12) and 204-2(a)(13) under the Advisers Act. - 15 - X. EXCEPTIONS TO THE CODE Although exceptions to the Code will rarely, if ever, be granted, the Chief Compliance Officer may make exceptions on a case by case basis, from any of the provisions of this Code, upon a determination that the conduct at issue involves a negligible opportunity for abuse or otherwise merits an exception from the Code. NO WAIVER OF COMPLIANCE WITH ANY CODE PROVISION REQUIRED BY RULE 204A-1 UNDER THE ADVISERS ACT WILL BE GRANTED. All such exceptions must be received in writing by the person requesting the exception before becoming effective. The Chief Compliance Officer shall report any exception to the board of directors/trustees of any Investment Company with respect to which the exception applies at its next regularly scheduled Board meetings. XI. APPROVAL OF CODE OF ETHICS AND AMENDMENTS TO THE CODE OF ETHICS The board of trustees/directors of each Investment Company shall approve this Code of Ethics. Any material amendments to this Code of Ethics must be approved by the board of trustees/directors of each Investment Company no later than six months after the adoption of the material change. Before their approval of this Code of Ethics and any material amendments hereto, the Firm shall provide a certification to the board of trustees/directors of each such Investment Company that the Firm has adopted procedures reasonably necessary to prevent Access Persons from violating the Code of Ethics. Dated: February 1, 2005 - 16 - EXHIBIT A 1 OF 2 SCHNEIDER CAPITAL MANAGEMENT CODE OF ETHICS INITIAL REPORT To the Personal Trading Compliance Officer of Schneider Capital Management: 1. I hereby acknowledge receipt of a copy of the Code of Ethics for Schneider Capital Management, Corporation, the ("Firm"). 2. I have read and understand the Code and recognize that I am subject thereto in the capacity of an "Access Person." 3. Except as noted below, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship which may involve Firm Clients, such as any economic relationship between my transactions and securities held or to be acquired by the Firm Clients or any related portfolios. 4. As of the date below, I have a direct or indirect beneficial ownership in the following Covered Securities which are required to be reported under the Firm's Code of Ethics (SEE ATTACHED FORM): -------------------------------------------------------------------- TITLE AND TYPE NUMBER PRINCIPAL EXCHANGE TICKER OF SECURITY OF SHARES AMOUNT SYMBOL OR CUSIP ----------- --------- ------ --------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- The name of any broker, dealer or bank with whom I maintain an account in which my Covered Securities are held for my direct or indirect benefit are as follows: -------------------------------------------------------------------- NAME OF BROKER DATE ESTABLISHED BROKER/BANK BANK/ADDRESS -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- THIS REPORT (I) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I HAD NO DIRECT OR INDIRECT INFLUENCE OR CONTROL, (II) EXCLUDES OTHER TRANSACTIONS NOT REQUIRED TO BE REPORTED, AND (III) IS NOT AN ADMISSION THAT I HAVE OR HAD ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE. Date: Signature: ----------------- ------------------------------- Print Name: ------------------------------ EXHIBIT A 2 OF 2 SCHNEIDER CAPITAL MANAGEMENT CODE OF ETHICS INITIAL REPORT - -------------------------------------------------------------------------------- TITLE AND TYPE NUMBER PRINCIPAL EXCHANGE TICKER OF SECURITY OF SHARES AMOUNT SYMBOL OR CUSIP - ----------- --------- ------ --------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT B 1 OF 2 SCHNEIDER CAPITAL MANAGEMENT CODE OF ETHICS ANNUAL REPORT To the Personal Trading Compliance Officer of Schneider Capital Management: 1. I have read and understand the Code and recognize that I am subject thereto in the capacity of an "Access Person." 2. I hereby certify that, during the year ended ____________, 200__, I have complied with the requirements of the Code and I have reported all securities transactions and beneficial holdings, required to be reported pursuant to the Code. 3. Except as noted below, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship which may involve Firm Clients, such as any economic relationship between my transactions and securities held or to be acquired by Firm Clients or any related portfolios. 4. As of the date below, I have a direct or indirect beneficial ownership in the following Covered Securities which are required to be reported under the Firm's Code of Ethics (SEE ATTACHED FORM): -------------------------------------------------------------------- TITLE AND TYPE NUMBER PRINCIPAL EXCHANGE TICKER OF SECURITY OF SHARES AMOUNT SYMBOL OR CUSIP ----------- --------- ------ --------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- The name of any broker, dealer or bank with whom I maintain an account in which my securities are held for my direct or indirect benefit are as follows: ------------------------------------------------------------------- NAME OF BROKER DATE ESTABLISHED BROKER/BANK BANK/ADDRESS ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- THIS REPORT (I) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I HAD NO DIRECT OR INDIRECT INFLUENCE OR CONTROL, (II) EXCLUDES OTHER TRANSACTIONS NOT REQUIRED TO BE REPORTED, AND (III) IS NOT AN ADMISSION THAT I HAVE OR HAD ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE. Date: Signature: ----------------- --------------------------------- Print Name: -------------------------------- EXHIBIT B 2 OF 2 SCHNEIDER CAPITAL MANAGEMENT CODE OF ETHICS ANNUAL REPORT - -------------------------------------------------------------------------------- TITLE AND TYPE NUMBER PRINCIPAL EXCHANGE TICKER OF SECURITY OF SHARES AMOUNT SYMBOL OR CUSIP - ----------- --------- ------ --------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT C 1 OF 2 SCHNEIDER CAPITAL MANAGEMENT Securities Transactions Report for the Calendar Quarter Ended:__________________ To the Personal Trading Compliance Officer of Schneider Capital Management, Inc. (the "Firm"): During the quarter referred to above, the following transactions were effected in securities of which I had, or by reason of such transaction acquired, direct or indirect beneficial ownership, and which are required to be reported pursuant to the Code of Ethics adopted by the Firm (SEE ATTACHED FORM).
- ------------------------------------------------------------------------------------------------------------------------------------ INTEREST RATE NATURE OF BROKER/DEALER AND MATURITY TRANSACTION OR BANK DATE OF NUMBER OF PRINCIPAL DATE (PURCHASE, THROUGH WHOM EXCHANGE TICKER SECURITY TRANSACTION SHARES AMOUNT (IF APPLICABLE) SALE, OTHER) PRICE EFFECTED SYMBOL OR CUSIP - -------- ----------- ------ ------ --------------- ------------ ----- -------- --------------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
During the quarter referred to above, I established the following accounts in which securities were held during the quarter for my direct or indirect benefit:
--------------------------------------------------------------------------------------------- NAME OF BROKER/BANK BROKER BANK/ADDRESS DATE ESTABLISHED --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------
This report (i) excludes transaction with respect to which I had no direct or indirect influence or control, (ii) excludes other transactions not required to be reported, and (iii) is not admission that I have or had any direct or indirect beneficial ownership in the securities listed above. Except as noted on the reverse side of this report, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship between my transactions and securities held or to be acquired by Firm Clients or any related portfolios. NOTE: Do not report transactions in direct obligations of the U.S. Government, bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments and shares issued by open-end investment companies. DATE:______________________ SIGNATURE__________________________ PRINT NAME_________________________ TITLE:______________________________
- ------------------------------------------------------------------------------------------------------------------------------------ INTEREST RATE AND NATURE OF BROKER/DEALER MATURITY TRANSACTION OR BANK DATE OF NUMBER OF PRINCIPAL DATE (IF (PURCHASE, THROUGH WHOM EXCHANGE TICKER SECURITY TRANSACTION SHARES AMOUNT APPLICABLE SALE, OTHER) PRICE EFFECTED SYMBOL OR CUSIP -------- ----------- ------ ------ ---------- ------------ ----- -------- --------------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT D 1 OF 3 SCHNEIDER CAPITAL MANAGEMENT Securities Transactions Report Relating to Short Term Trading For the Sixty Day Period from __________________ to ________________________ To the Personal Trading Compliance Officer of Schneider Capital Management, (the "Firm"): During the 60 calendar day period referred to above, the following purchases and sales, or sales and purchases, of the same (or equivalent) securities are proposed to be effected in securities of which I have, or by reason of such transaction acquired, direct or indirect beneficial ownership (SEE ATTACHED FORM).
- ---------------------------------------------------------------------------------------------------------------------------- INTEREST RATE NUMBER OF PRINCIPAL AND MATURITY NATURE OF TRANSACTION EXCHANGE TICKER SECURITY SHARES AMOUNT DATE (IF APPLICABLE) (PURCHASE, SALE, OTHER) SYMBOL OR CUSIP - -------- ------ ------ -------------------- ----------------------- --------------- - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------
This report (1) excludes transactions with respect to which I had no direct or indirect influence or control, (2) excludes other transactions not required to be reported, and (3) is not admission that I have or had any direct or indirect beneficial ownership in the securities listed above. With respect to (1) portfolios of the Firm's Clients that serve as the basis for my "investment personnel" status with the Firm; and (2) transactions in the securities set forth in the table above, I hereby certify that: a) I have no knowledge of the existence of any personal conflict of interest relationship which may involve Firm Clients, such as frontrunning transactions or the existence of any economic relationship between my transactions and securities held or to be acquired by Firm Clients; b) such securities, including securities that are economically related to such securities, involved in the transaction are not (i) being considered for purchase or sale by Firm Clients, or (ii) being purchased or sold by Firm Clients; and c) the transactions are in compliance with the Code of Ethics of the Firm. EXHIBIT D 2 OF 3 DATE:______________________ SIGNATURE_________________________ PRINT NAME________________________ TITLE:____________________________ In accordance with the provisions of Section IV.A.2(c) of the Code of Ethics of the Firm, the transaction proposed to be effected as set for in this Report is: Authorized: [ ] Unauthorized: [ ] Date:__________________________ Signature:___________________________ Compliance Officer EXHIBIT D 3 OF 3 SCHNEIDER CAPITAL MANAGEMENT
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EXHIBIT E 1 OF 1 SCHNEIDER CAPITAL MANAGEMENT PRE-CLEARANCE NOTIFICATION Date:________ To the Personal Trading Compliance Officer of Schneider Capital Management: I intend to transact the following: BUY/SELL SECURITY: ----------------------------------------------------------------------- SHARES/AMOUNT: ------------------------------------------------------------------ APPROXIMATE PRICE: -------------------------------------------------------------- - ----------------------------------- (name) - ----------------------------------- Signature ---------------------------------------------- Approved - Personal Trading Compliance Officer ONE NOTIFICATION FORM REQUIRED ON EACH SEPARATE TRANSACTION FOR FILES. EX-99.P(5) 18 g34307_exp5.txt EXHIBIT (P)(5) - CODE OF ETHICS BOGLE INV MGMT Exhibit (p)(5) BOGLE INVESTMENT MANAGEMENT, L.P. CODE OF ETHICS EFFECTIVE JANUARY 31, 2006 PURPOSE The purpose of this document is to specify the responsibilities of all employees of Bogle Investment Management, L.P. (BIM or the "Firm") to comply with applicable Federal and State securities laws and regulations, to adhere to standards of conduct that recognize their fiduciary obligations to the Firm's clients, and to observe certain requirements when trading securities for client accounts or for their own accounts. GENERAL CONCEPT All employees of Bogle Investment Management L.P. shall conduct themselves in full compliance with all applicable Federal and State securities laws and regulations, in particular but not limited to, those laws and regulations governing "insider trading" and fiduciary responsibilities. Further, all employees shall conduct themselves in compliance with the requirements set forth in this document. It shall be the responsibility of every employee to know said requirements as well as the applicable Federal and State securities laws and regulations. Bogle Investment Management wishes to achieve a reputation for the highest integrity. This requires that all employees adhere to a set of principles that 1) place the interests of our clients and mutual fund shareholders first; 2) require any personal securities transactions to be accomplished in a way that avoids any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility; and 3) reflect a fundamental standard that Bogle Investment Management employees must not take inappropriate advantage of their positions. Employees should be highly sensitive to the potential for real and perceived conflicts of interest and should understand that full disclosure of any possible conflict is critical in all mutual fund shareholder and client relationships. VIOLATIONS OF ANY OF THE LAWS OR REGULATIONS REFERENCED ABOVE OR REQUIREMENTS OF THIS CODE, OUTLINED BELOW, WILL NOT BE TOLERATED. Personal trading exposes the Firm and its employees to serious risks. Failure to comply with all applicable laws and regulations and the requirements of this Code may, depending on the circumstance, result in immediate dismissal from Bogle Investment Management L.P. For this reason, Bogle Investment Management personnel are strongly encouraged to minimize the amount of trading of securities, including mutual funds, derivatives, or other investments, for their personal accounts, or of non-Bogle Investment Management accounts over which they exercise any degree of control or in which they have an economic interest, including accounts of family members. Family members include a person's immediate family sharing the same household, in accordance with Rule 16a-1(a)(2) of the Securities Exchange Act of 1934. 1 TOPICS IN THE CODE OF ETHICS 1. MATERIAL NON-PUBLIC INFORMATION AND INSIDER TRADING 2. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES INITIAL PUBLIC OFFERINGS PRIVATE PLACEMENTS BLACKOUT PERIODS AND TRADING PROCEDURES MUTUAL FUND TRADING BAN ON SHORT-TERM TRADING PROFITS 3. GIFTS 4. SERVICE AS A DIRECTOR 5. OTHER RESPONSIBILITIES TIMELY REPORTING OF TRADES EMPLOYEE'S RESPONSIBILITY TO KNOW THE RULES EMPLOYEE'S RESPONSIBILITY TO REPORT VIOLATIONS CHIEF COMPLIANCE OFFICER RESPONSIBILITIES 6. FUTURES AND OPTION TRADING 7. PROMOTIONAL MATERIAL RELATED TO FUTURES AND OPTIONS 8. CLIENT COMPLAINTS 9. PRIVACY POLICY 10. BOGLE INVESTMENT MANAGEMENT NEW EMPLOYEE COMPLIANCE CHECKLIST 11. DISCLOSURE OF PERSONAL HOLDINGS 12. OTHER FORMS AVAILABLE FROM THE CHIEF COMPLIANCE OFFICER 2 MATERIAL NON-PUBLIC INFORMATION AND INSIDER TRADING Employees are reminded that they must safeguard all material non-public information concerning BIM's securities recommendations and the securities holdings and transactions of client's of the Firm. Employees are prohibited from misusing such material non-public information, whether in connection with trading or otherwise. All employees are responsible for ensuring that trades they execute for their own accounts, or on behalf of others, including client accounts, are not made on the basis of "insider information." Bogle Investment Management as a firm is liable for damages and may be prosecuted for the actions of its employees. Congress has never precisely defined insider information and recent court cases are expanding the scope of actions that can be construed as "insider trading." Accordingly, all employees are expected to err on the side of caution and take no action that could be so construed. "Insider trading" occurs when someone in a fiduciary relationship with a firm breaches their fiduciary responsibilities and reveals material non-public information about the firm to someone who then takes investment action with this non-public information. Information is deemed material when it is of sufficient importance to have caused an informed investor to take investment action. Anyone taking action with such information can be found guilty of insider trading even if they have not received such information directly from the fiduciary. It is the policy of BIM that all employees are prohibited from trading in securities of any issuer if they are in possession of material non-public information related to such issuer. Employees in such circumstances are also prohibited from engaging in any other action that might serve to take advantage of or to pass on to others that information. In the event that an employee of BIM believes that he or she has received sensitive information, which may be material and non-public, he/she should report the matter immediately to the Chief Compliance Officer ("CCO"). The CCO will consider the situation and determine an appropriate course of action. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES Although Bogle Investment Management strongly discourages personal trading of Covered Securities (defined below) or derivatives, employees may come to own or wish to trade Covered Securities from time to time. Employees must seek approval from the Chief Compliance Officer to trade such Covered Securities. With the exception of investments in the firm's hedge funds, employees must complete a Trade Authorization Request for all personal investing activities covered in this section. With respect to investing in the firm's hedge funds, employees must follow the procedures, including subscription documentation and qualified purchaser confirmation, specific to the hedge fund investing. 3 Covered Securities: any stock, bond, future, or investment contract or any other instrument that is considered a security under the Investment Advisers Act. The term "covered security" is very broad and includes items such as: - options on securities, on indexes, and on currencies; - all kinds of limited partnerships; - foreign unit trusts and foreign mutual funds (this does not mean U.S. mutual funds that invest in foreign securities); - private investment funds, hedge funds, and investment clubs; - ETFs organized as unit investment trusts; - ETFs organized as open-end investment companies. Exceptions to the term Covered Security include: - transactions and holdings in direct obligations of the Government of the United States; - money market instruments - bankers' acceptances, bank certificates of deposit, commercial paper, repurchase agreements and other high quality short-term debt instruments - shares of money market funds; - transactions and holdings in shares of other types of mutual funds, unless the adviser or a control affiliate acts as the Investment Adviser or principal underwriter for the fund; Further under the new regulations, quarterly transaction reports need not be submitted with respect to transactions effected pursuant to an automatic investment plan. If approval is given, the employee may trade the security as long as it falls within the following guidelines: INITIAL PUBLIC OFFERINGS. In order to preclude any possibility of an employee profiting from their position on behalf of the Firm, all personnel are prohibited from acquiring, for their own accounts, the account of a family member, or any non-client account, beneficial ownership in any securities in an initial public offering. Exceptions to this policy may be granted by the Firm if a company's shares are offered directly to the investing public without the use of an intermediary or underwriter, and the employee purchases the shares in the offering directly from the issuing company. PRIVATE PLACEMENTS. Any employee interested in acquiring any security in a private placement must obtain express prior approval from the Chief Compliance Officer. In determining whether to grant approval the Firm will take into account the potential purchase of the security by the portfolio management staff for client portfolios and whether the investment opportunity is being offered to an individual by virtue of his or her position with the Firm. BLACKOUT PERIODS AND TRADING PROCEDURES. In concept, blackout periods and trading procedures ensure that any employee trading activity be entirely segregated from and have no impact on the investment services and process Bogle Investment Management performs for its clients. These rules are intended to avoid actual or perceived conflicts of interest and front 4 running, as well as to limit personal trading activity which might provide a distraction from managing client assets. Bogle Investment Management L.P. has a fiduciary responsibility to its clients to take action on the clients' behalf before taking action in the interest of its employees or BIM as a firm. Accordingly, this requires that any trade which a Bogle Investment Management employee undertakes for his or her own account, or for the account of any non-Bogle Investment Management client, must be done so as not to disadvantage any Bogle Investment Management client or to interfere with client portfolios in any way. Any Bogle Investment Management employee considering the sale or purchase of any Covered Security or derivative is required to ask the Chief Investment Officer and Chief Compliance Officer if that Covered Security or derivative is currently being bought or sold for clients' accounts, if it is currently held in clients' accounts, or if it is being contemplated for purchase or sale for clients' accounts. If so, the employee is prohibited from trading the Covered Security or derivative until explicit authorization is given by the Chief Compliance Officer or the Chief Investment Officer, who will generally require that five full trading days have elapsed after all client portfolios have eliminated all holdings of the Covered Security or derivative. If Bogle Investment Management's clients do not hold the Covered Security or derivative and if no trade is planned, the employee may be given a special authorization to trade. The trade must be completed on the day of the request, otherwise the request must be resubmitted. If the Portfolio Management staff decides that it wishes to trade in the same direction (i.e., buy/buy or sell/sell) as the BIM employee in that Covered Security or derivative within the subsequent five trading days (not including the day the security was initially traded by the employee), it may, in its sole discretion, and if the employee trade was at a more favorable price, either require the employee to break the trade, or require the employee to donate an amount equal to the difference between the trade at its actual price and the price if it were traded at the clients' price to a charitable organization of Bogle Investment Management's choosing. If the requested security is held in Bogle Investment Management's clients' portfolios, authorization will generally not be given to trade the security. These rules do not apply to trade requests relating to investments in mutual funds or limited partnerships managed by Bogle Investment Management. MUTUAL FUND TRADING. In addition, all employees are required to notify the Chief Compliance Officer, in writing, prior making a purchase or sale or transfer of any mutual fund managed or sub-advised by Bogle. In order to avoid any actual or perceived conflicts of interest and front running, employees are prohibited from making Bogle mutual fund transactions on the basis of information available to the employee, but not the general public, based on his or her position at the Firm. With respect to Bogle mutual funds, Bogle Investment Management prohibits all investment personnel from frequent trading, market timing and "late-trading." No transactions may be done within ten days of the opposite type of transaction. All trade requests must be submitted to the transfer agent, broker, or wiring institution prior to 12:00 noon on trade date. Under no circumstances will trades be allowed to take place after the market has closed for the day. The 5 Chief Compliance Officer may make an exception to the holding period requirement for severe and extenuating circumstances, when it is clear there is no intent to market time. BAN ON SHORT-TERM TRADING PROFITS. In addition to the blackout periods described above, Bogle Investment Management prohibits all investment personnel from profiting in the purchase and sale, or sale and purchase, of securities or their equivalent, within 60 calendar days (excluding Bogle mutual funds, where a ten day holding period is required, and hedge funds, where a one-month holding period is required). Any profits realized on such short-term trades will be required to be disgorged to a charitable organization of Bogle Investment Management's choosing. The Chief Compliance Officer may make an exception for severe and extenuating circumstances. GIFTS All personnel are prohibited from receiving any gift, service or other thing of more than $100 value from any person or entity that does business with Bogle Investment Management, or has in the past or may in the future do business with Bogle Investment Management. This policy does NOT apply to meals or other forms of entertainment at which the donor is present. SERVICE AS A DIRECTOR Investment personnel are prohibited from serving on boards of directors of any publicly traded companies, absent prior authorization from the Chief Compliance Officer, based on a determination that the board service would be consistent with the interests of the Firm and its clients. Any personnel serving on a board will be isolated from the investment decision-making process by a "Chinese Wall." OTHER RESPONSIBILITIES TIMELY REPORTING OF TRADES Bogle Investment Management employees trading any Covered Security for their own account must provide written confirmation of all trades to Bogle Investment Management's Chief Compliance Officer within five business days of the trade. A Covered Security means a security as defined in Section 2(a)(36) of the Investment Company Act, as outlined above; generally, it includes all securities except for government obligations, cash and cash instruments, and non-BIM mutual funds (BIM mutual funds are not excluded and must be reported as part of all personal trading compliance). Employees are also required to report employee transactions in securities in which Bogle Investment Management has any direct or indirect beneficial ownership. 6 Employees must also provide the Chief Compliance Officer with quarterly summaries showing all trades of Covered Securities executed during the preceding quarter in the form provided by the Chief Compliance Officer, within ten days of the end of the preceding quarter. In addition, employees must certify within ten calendar days of the end of each calendar quarter, that all trades made by the employee were disclosed to the Firm and conformed with all compliance procedures as specified in this Code of Ethics. In the quarterly trade report, employees must also identify any broker, dealer, or bank with which they maintain a trading account. Further, employees must provide the Chief Compliance Officer with a statement of all Covered Securities holdings both at the commencement of employment at Bogle Investment Management, and annually thereafter, in the form provided by the Chief Compliance Officer. Employees must also sign an annual certification that they have read and complied with the Firm's Code of Ethics for the year. Finally, employees must keep a written log documenting the time and date of each trade, together with a brief description of the investment rationale for the trade. EMPLOYEE RESPONSIBILITY TO KNOW THE RULES Bogle Investment Management employees are responsible for their actions under the law and therefore required to be sufficiently familiar with the law to avoid infringing it. Employees who have any doubt about the reporting, timing, feasibility or any other question regarding a personal securities transaction must seek clarification from the Chief Compliance Officer before transacting in the security. Misinterpretation of the rules will not be tolerated as an excuse for mistakenly transacting in a security. Any uncertainty about the rules and regulations will require that the individual not transact in the security. Within thirty days of receiving the book, Bogle Investment Management employees must have read and become familiar with this Code of Ethics and with the CFA Code of Ethics and Standards of Practice Handbook. Employees must certify, in writing, that they have read and understood these two publications and that they will conduct themselves professionally in complete accordance with the requirements and standards therein. EMPLOYEE RESPONSIBILITY TO REPORT KNOWLEDGE OF ANY VIOLATIONS TO CHIEF COMPLIANCE OFFICER Bogle Investment Management employees have an obligation to report to the Chief Compliance Officer any knowledge they have of violations of this Code of Ethics or violations of any other applicable law, rule, or regulation of any government, governmental agency, or regulatory organization governing Bogle Investment Management's professional, financial, or business activities. Failure to report knowledge of any violation will be considered a violation and will 7 subject the employee to immediate dismissal. It is each employee's responsibility to know the laws and rules governing personal trading activity and the Firm's business activities. If for any reason an employee feels uncomfortable reporting an issue to the Chief Compliance Officer, the employee should report to the Firm's President, John C. Bogle Jr. CHIEF COMPLIANCE OFFICER RESPONSIBILITIES It shall be the responsibility of the Chief Compliance Officer to enforce the provisions of this document and to educate employees to their responsibilities herein. The Chief Compliance Officer will provide new employees with a copy of this Code of Ethics and of the CFA Code of Ethics and Standards of Conduct as soon as possible after they join the Firm. The Chief Compliance Officer is responsible for staying current with significant new legal developments in the area of financial advisory services, fiduciary responsibilities, and insider trading, and to convey such developments to Bogle Investment Management's employees. The Chief Compliance Officer will review all employee-trading documents in a timely manner and take such action, as this Code of Ethics requires in regards to employee trading and conduct. The Chief Compliance Officer will maintain a set of records certifying that he has conducted the tasks required in this Code of Ethics. FUTURES AND OPTIONS TRADING A partner, officer or director of Bogle Investment Management L.P. must review all futures and options trades on behalf of clients. This review must be documented. PROMOTIONAL MATERIAL RELATED TO FUTURES AND OPTIONS All promotional material that describes Bogle Investment Management L.P.'s use of futures and options must be reviewed and approved by an officer, general partner, or other supervisory employee other than the individual who prepared such material. This review must be documented and filed. CLIENT COMPLAINTS Customer complaints must be promptly reported to the Chief Compliance Officer or the Firm's President, John C. Bogle, Jr. The Chief Compliance Officer is responsible for recording, investigating, and responding to all complaints. All complaints will be recorded in Bogle Investment Management L.P.'s complaint file. 8 PRIVACY POLICY In conjunction with Regulation S-P, the Firm has adopted the following privacy policy in order to safeguard the personal/proprietary information of the Firm's clients, customers and consumers ("Clients") in accordance with Regulation S-P as promulgated by the Securities and Exchange Commission. 1) The Firm is committed to protecting the confidentiality and security of the information it collects and will handle personal/proprietary Client information only in accordance with Regulation S-P and any other applicable laws, rules and regulations. The Fund will ensure: (a) the security and confidentiality of Client records and information; (b) that these records and information are protected from any anticipated threats and hazards; and (c) that these records and information are protected from unauthorized access or use. 2) The Firm conducts its business affairs through its employees and third parties that provide services pursuant to agreements with the Firm. Only employees who need to have access to Client information as part of the Firm's effort to carry out its duties on behalf of the Client, will have access to Client records and information. This access should only be used in the employees' performance of their responsibilities for the Firm on behalf of the Client. 3) In a case where a third party service provider needs to have access to Client information as part of the Firm's effort to carry out it duties on behalf of the Client, the Firm will determine that the policies and procedures of its service providers are reasonably designed to safeguard Client information and only permit appropriate and authorized access to and use of Client information through the application of appropriate administrative, technical and physical protections. 4) The Firm may share Client information with affiliated and unaffiliated third parties only in accordance with the requirements of Regulation S-P. Pursuant to this policy, the Firm will not share Client information with unaffiliated third parties other than as permitted by law without (i) providing an opt out right to the Client or (ii) providing the required disclosure and contractual provision in the case of information sharing conducted pursuant to a marketing agreement. A determination that an entity is an affiliate for purposes of information sharing pursuant to Regulation S-P shall not be deemed to mean that such entity or its parent "controls" the Firm as defined pursuant to other laws, rules or regulations. 5) This privacy policy will be attached as an addendum to the Firm's Code of Ethics. All current and future employees of the Firm have been and will be made aware of the Firm's Privacy Policy. 6) The Firm will protect and handle internally any personal Client information it receives from third parties in the same manner as the personal Client information it collects and will only share such information with third parties as permitted by Regulation S-P. 9 7) Privacy notices will be sent out to all Clients on an annual basis along with the annual mailing of the Firm's Form ADV. ANY VIOLATION OF THE ABOVE POLICIES WILL SUBJECT THE VIOLATING EMPLOYEE TO DISCIPLINARY ACTION, INCLUDING BUT NOT LIMITED TO MONETARY PENALTIES AND/OR TERMINATION OF THEIR EMPLOYMENT AT BOGLE INVESTMENT MANAGEMENT. BOGLE INVESTMENT MANAGEMENT EMPLOYEE COMPLIANCE CHECKLIST EMPLOYEE NAME: DATE OF HIRE: I certify that I introduced this employee to the concept of compliance and provided him/her with a copy of the Bogle Investment Management Code of Ethics and the CFA Code of Ethics and Standards of Practice Handbook. CHIEF COMPLIANCE OFFICER: DATE: I certify that I have read and understood the Bogle Investment Management Code of Ethics and that I will conduct myself in accordance with the rules, laws, and standards therein. I further certify that I will always act as a responsible fiduciary for Bogle Investment Management' clients and that I will not utilize material non-public information in any investment decision I make on my own behalf or on behalf of Bogle Investment Management's clients. I further certify that I have read and understood the CFA Code of Ethics and Standards of Practice Handbook. EMPLOYEE: DATE: 10 DISCLOSURE OF PERSONAL HOLDINGS This form is to be submitted by all employees upon commencement of employment and annually thereafter. I hereby certify that the following is a complete list of the Covered Securities in which I have a direct or indirect beneficial ownership: Security List Number of Total Ticker Security Shares Value If any holdings are in fixed income securities, please also report interest rate, maturity date, and principal amount. Please also identify any broker, dealer, or bank with which you maintain a trading account: EMPLOYEE: DATE: 11 OTHER FORMS AVAILABLE FROM THE CHIEF COMPLIANCE OFFICER Trade Authorization Request Quarterly Report of Covered Securities Transactions Annual Certification Note that trade confirms and monthly brokerage reports and/or account statements should also be submitted to the Chief Compliance Officer per the guidelines set forth above. 12 EX-99.P(6) 19 g34307_exp6.txt EXHIBIT (P)(6) - CODE OF ETHICS PFPC DISTR Exhibit (p)(6) PFPC DISTRIBUTORS, INC. CODE OF CONDUCT APRIL 20, 2001 This Code of Conduct has been adopted by the Firm's Board of Directors for the purpose of avoiding and preventing certain actions constituting conflicts of interest with the investment activities of a Fund or Funds for which the Firm acts as distributor. This Code of Conduct applies to all officers, directors, employees or associated persons of the Firm. The terms and conditions of this Code shall supersede those of the PFPC Worldwide, Inc. Code of Conduct (the "PFPC Code") to the extent that any term or condition of this Code is inconsistent with the PFPC Code. I. DEFINITIONS The following definitions shall apply herein: 1. "Access Person" shall mean any Firm director or officer who, in the ordinary course of business, makes, participates in or obtains information regarding the purchase or sale of Covered Securities by a Fund for which the Firm acts as distributor, or whose functions or duties as part of the ordinary course of his or her business relate to the making of any recommendation to such Fund regarding the purchase or sale of Covered Securities. An individual shall be considered as Access Person only with respect to the Fund to which the foregoing definition applies. A list of the current Access Persons is attached to this Code as Appendix A. 2. "Beneficial Ownership" shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. Application of this definition is explained in more detail in Appendix B hereto. 3. "Code" shall mean this Code of Conduct. 4. "Covered Security" (in the plural, "Covered Securities") shall mean any security or securities referred to in Section 2(a)(36) of the Investment Company Act of 1940 (the "1940 Act") (including any option, contract, warrant or exercisable right to purchase or sell any security) with the following exceptions: direct obligations issued or guaranteed by the United States; short-term securities issued or guaranteed by an agency or instrumentality of the United States; commercial paper; bankers' acceptances; bank certificates of deposit; commercial paper and high quality short-term debt instruments, including repurchase agreements; shares of open-end registered investment companies; and any other securities excepted by Rule 17j-1 under the 1940 Act. 5. "Firm" shall mean PFPC Distributors, Inc. 6. "Designated Person" shall mean any person designated by the Firm to be authorized to take actions to carry out policies and procedures set forth in the Code. As of the date of this Code, the President and Chief Compliance Officer for the Firm has been named the Designated Persons. 7. "Employee" (in the plural, "Employees") shall mean each person registered as a representative of the Firm with the National Association of Securities Dealers, Inc. 8. "Fund" (in the plural, "Funds") shall mean any registered investment company or investment portfolio for which the Firm acts as distributor. 9. "Material Information" shall mean information (i) which can reasonably be expected to have a material impact on the financial condition or operations of a Firm or (ii) which an investor would consider important in determining whether to buy or sell securities of an issuer. 10. "Personal Account" shall mean any account used for the purchase and sale of securities in which an Employee has a direct or indirect Beneficial Ownership. 11. "Purchase or Sale of a Covered Security" includes, among other things, the writing of an option to purchase or sell a Covered Security. 12. "Security Held or to be Acquired by the Fund" shall mean any Covered Security, which, within the most recent 15 days: (a) is being held by the Fund; or (b) is being or has been considered by the Fund or its investment adviser for purchase by the Fund, and any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security. II. REPORTING REQUIREMENTS A. INITIAL HOLDINGS REPORTS No later than 10 days after a person becomes an Access Person, every Access Person must file with the Chief Compliance Officer an initial holdings report which shall set forth the following information: (a) the title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the person became an Access Person; (b) the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and (c) the date that the report is submitted by the Access Person. A sample of the form of report is attached to this Code as Appendix C. B. QUARTERLY TRANSACTION REPORTS Every Access Person must file with the Chief Compliance Officer not later than 10 days after the end of each calendar quarter a confidential personal securities transaction report for such quarter setting forth for every transaction in a Covered Security in the Access Person's Personal Account the following information: (a) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Covered Security involved; (b) the nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition including gifts, exercise of conversion rights, exercise or sale of subscription rights, reinvestment of dividends and receipt of stock splits or stock dividends); (c) the price at which the transaction was effected; (d) the name of the broker, dealer, bank, other corporation, or person with or through whom the transaction was effected; and (e) the date the report is submitted by the Access Person. A sample of the form of report is attached to this Code as Appendix D. An Access Person need not make a quarterly transaction report if the report would duplicate information contained in the broker trade confirmations or account statements received by the Firm with respect to the Access Person, if all of the information required is contained in the broker trade confirmations or accounts statements or the records of the Firm. C. ANNUAL HOLDINGS REPORTS Annually every Access Person must file with the Chief Compliance Officer a confidential personal securities transaction report (which must be current as of a date no more than 30 days before the report is submitted) setting forth for every transaction in a Covered Security in the Access Person's Personal Account the following information: (a) the title, number of shares and principal amount of each Covered Security in which the Access person had an direct or indirect beneficial ownership; (b) the name of any broker, dealer or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and (c) the date the report is submitted by the Access Person. A sample of the form of report is attached to this Code as Appendix E. D. STATEMENT REGARDING BENEFICIAL OWNERSHIP Any such report may contain a statement to the effect that such report shall not be construed as an admission by the reporting person as to any direct or indirect beneficial ownership of the Security or Securities to which the report relates. E. EXCEPTION TO REPORTING REQUIREMENTS No Access Person shall be required to make the foregoing report where the Firm (i) is not an affiliated person of any Fund or any investment adviser of any Fund and (ii) has no officers, directors or general partners who serve as officers, directors or general partners of such Fund or any such investment adviser. As of the date of this Code, the foregoing exception to reporting applies to all Access Persons. The Designated Supervisory Person shall notify all Access Persons immediately in the event that the exception to the reporting requirement is no longer applicable. III. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS BY EMPLOYEES A. UNLAWFUL ACTIONS It is unlawful for any Employee, Firm director or Firm officer, in connection with the purchase or sale, directly or indirectly, by the person of a Security Held or to be Acquired by the Fund: (a) to employ any device scheme or artifice to defraud the Fund; (b) to make any untrue statement of a material fact to the Fund or to omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances in which they are made, not misleading; (c) to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or (d) to engage in any manipulative practice with respect to the Fund. B. TRADING RESTRICTIONS DURING CERTAIN PERIODS No Employee, Firm director or Firm officer may, directly or indirectly, purchase or sell a Covered Security for his or her Personal Account if such individual knows or, in the ordinary course of fulfilling his or her duties as an Employee, Firm director or Firm officer, should know that (i) a purchase or sale of such Covered Security by a Fund is being considered by the Fund or its investment adviser, or (ii) during the five (5) business day period immediately preceding the date of the transaction in a Covered Security by the Employee, Firm director or Firm officer, such Security was purchased or sold by a Fund. C. TRADING RESTRICTIONS WHILE IN POSSESSION OF NON-PUBLIC MATERIAL INFORMATION No Employee, Firm director or Firm officer may, directly or indirectly, purchase or sell a Covered Security for his or her Personal Account while such individual possesses non-public Material Information relating to that Covered Security or its issuer. The most common examples of information that is "non-public" are: (i) information that has neither been published by any news agency nor filed with the Securities and Exchange Commission as part of a publicly available filing and (ii) information that has been discussed only within the confines of a board meeting. D. VIOLATIONS Any Employee, Firm officer or Firm director who has violated Sections III (A), (B) or (C) of the Code or who knows of such a violation by another Employee, Firm director or Firm officer shall immediately notify the Designated Person, in writing, of such violation. E. GENERAL Apart from the specific restrictions set forth in Sections II and III of the Code, purchases and sales should be arranged in such a way as to avoid transactions contrary to the intent of this Code. Any attempt by an Employee, Firm director or Firm officer to do indirectly what this Code is meant to prohibit will be deemed a direct violation hereof. If there is any doubt whether your transactions may be in conflict with the intent of this Code you should check before buying or selling with the Designated Person. F. REGISTERED INVESTMENT ADVISER EMPLOYEES Certain associated persons of the Firm may also be employees of a registered investment adviser and, accordingly, subject to codes of conduct, including restrictions on personal securities transactions, more stringent than those set forth in this Code. The Firm will rely on the registered investment advisers to enforce their codes of conduct. G. SANCTIONS If the Designated Person determines that a violation of the Code has occurred, she shall so advise the Firm's Board of Directors for referral to the Executive Management Committee of PFPC Worldwide, Inc., the parent of the Firm (the "Committee"). The Committee may impose such sanctions as it deems appropriate, including, INTER ALIA, a letter of censure or suspension or termination of the employment of the violator. In any event, (i) any Employee, Firm director or Firm officer who violates Section III (A) or (B) of the Code shall be subject to disciplinary action which may include termination of registration with the Firm and (ii) any profit realized from a securities transaction that violates Section III (A) or (B) of the Code shall be disgorged as directed by the Committee. IV. ANNUAL CERTIFICATION On an annual basis, each Employee, Firm director and Firm officer shall certify in writing that such individual has read and understands the Code and has complied with all of its provisions during the preceding year in which the Code was in effect. The annual certification is attached to the Code. (Upon employment, each employee will receive the Code and sign an initial "Certification of Receipt.") V. MISCELLANEOUS A. ADMINISTRATION OF THE CODE 1. The Firm shall use reasonable diligence and institute procedures reasonably necessary to prevent violations of this Code. 2. No less frequently than annually, the Firm shall furnish to the Fund's board of directors a written report that (a) describes any issues arising under the Code since the last report to the board of directors, including, but not limited to, information about material violations of the Code and sanctions imposed in response to material violations; and (b) certifies that the Firm has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. B. RECORDS 1. The Firm shall maintain records in the manner and to the extent set forth below, which records may be maintained in any manner described in Rule 31a-2(f)(1) under the 1940 Act, as follows: (a) a copy of the Code and any other code which is, or at any time within the past five years has been in effect, shall be preserved in an easily accessible place; (b) a record of any violation of the Code, and of any action taken as a result of such violation, shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (c) a copy of each certification made by an Employee, Firm director or Firm officer pursuant to the Code (including any information provided in lieu of reports under Section II(B) of the Code) shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, for the first two years in an easily accessible place; (d) a record of all persons, currently or within the last five years, who are or were required to make reports under Section II of the Code, or who are or were responsible for reviewing these reports, shall be preserved in an easily accessible place; and (e) a copy of each report required by Section V(A)(2) shall be maintained for at least five years after the end of the fiscal year in which it is made, the first two years in an easily accessible place. 2. The Firm shall make such records available for examination at the Firm headquarters by representatives of the Securities and Exchange Commission at such time as said representatives may reasonably request. 3. Except as may be required pursuant to Section III (E) and Section V (A)(2) of the Code, all reports and any other information of a personal nature shall be treated as confidential by the Designated Supervisory Person. C. INTERPRETATION OF CODE The Designated Person in consultation with the Firm's Chief Legal Officer shall determine how the provisions of the Code shall be interpreted, and may from time to time establish administrative procedures to assist in carrying out the intent of the Code. APPENDIX A LIST OF ACCESS PERSONS NAME TITLE ACCESS PERSON? ---- ----- -------------- Brian Burns Director, President, Chief No* Executive Officer & Chairman Michael DeNofrio Director No* Nicholas Marsini Director No* Rita Adler Chief Compliance Officer No* Christine Ritch Chief Legal Officer, Assistant No* Secretary & Assistant Clerk Craig Stokarski Treasurer and Financial and No* Operations Principal John Munera Anti-Money Laundering Officer No* Bradley Stearns Assistant Secretary & Assistant Clerk No* Maria Schaeffer Controller & Assistant Treasurer No* Julie Bartos Assistant Secretary & Assistant Clerk No* Amy Brennan Assistant Secretary & Assistant Clerk No* *Not an Access Person because (1) such person does not in the ordinary course of his/her business make, participate in or obtain information regarding the purchase or sale of securities for a Fund; and (2) such person's duties as part of the ordinary course of his/her business do not relate to the making of any recommendation to such Fund regarding the purchase or sale of securities. APPENDIX B This Code of Conduct relates to the purchase or sale of securities of which a person has a direct or indirect "beneficial ownership" except for purchases or sales in accounts over which the person has no direct or indirect influence or control as described below. BENEFICIAL OWNERSHIP "Beneficial ownership" means that one directly or indirectly, by written or unwritten understanding, has a (or shares a direct or indirect) financial interest regardless of who is the owner of record. Financial interest means the opportunity, directly or indirectly, to participate in the risks and rewards of a transaction. Securities owned by a person or by a trust of which one has a beneficial ownership or a similar arrangement include, but are not limited to: (1) Securities owned by your spouse, your minor children and relatives of you and your spouse who live in your home, including trusts of which such persons are beneficiaries (other than interests in a trust over which neither you nor such person has any direct or indirect influence or control over investments); (2) A proportionate interest in securities held by a partnership of which you are a general partner; (3) Securities in which you have a right to dividends that is separated or separable from the underlying securities; (4) Securities that you have a right to acquire through the exercise or conversion of another security, whether or not presently exercisable; and (5) Securities held in accounts from which you receive a performance related fee based on less than one year's performance. You do not have a financial interest in securities held by a corporation of which you are not a controlling shareholder and do not have or share investment control over its portfolio. NO INFLUENCE OR CONTROL The Code does not apply to purchases and sales of securities effected in any account over which you do not have "any direct or indirect influence or control". However, this "no direct or indirect influence or control" exception is limited to few situations. The principal one is that described in paragraph (1) above, where securities are held in a trust, in which you have a beneficial interest, but where you are not the Trustee and have no control or influence over the Trustee. EX-99.P(9) 20 g34307_exp9.txt EXHIBIT (P)(9) - CODE OF ETHICS OF BEAR STEARNS BEAR STEARNS ASSET MANAGEMENT INC. CODE OF ETHICS WHEREAS, Bear Stearns Asset Management Inc. ("BSAM") is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and provides investment advisory services to investment companies (each a "Fund" and collectively, the "Funds") and other clients; WHEREAS, the investment advisory business involves decisions and information which may have at least a temporary impact on the market price of securities, thus creating a potential for conflicts of interest between investment advisers, underwriters and their clients; and WHEREAS, BSAM has a duty with respect to each portfolio under management and the interests of the Managed Accounts and of the shareholders of the Funds must take precedence over the interests of BSAM, its officers and employees, thus requiring adherence to the highest standards of conduct by the officers and employees of BSAM; and WHEREAS, practical steps must be taken to ensure that no action is taken by an Access Person of BSAM which is, or appears to be, adverse to the interests of BSAM or any of its Managed Accounts, including the definition of standards of conduct for such employees, while at the same time avoiding unnecessary restrictions on the actions of such persons; and NOW, THEREFORE, BSAM hereby adopts the following Code of Ethics (the "Code") pursuant to the provisions of Rule 17j-1 under the Investment Company Act of 1940, as amended (the "1940 Act") and Section 204A of the Advisers Act. A. LEGAL REQUIREMENTS. Rule 17j-1(b) under the 1940 Act makes it unlawful for "any affiliated person" of BSAM (as investment sub-adviser of the Funds), in connection with the purchase or sale by such person of a security "held or to be acquired" by a Fund: 1. To employ any device, scheme or artifice to defraud any Fund; 2. To make any untrue statement of a material fact to any Fund or to omit to state a material fact necessary in order to make the statements made to any Fund, in light of the circumstances under which they are made, not misleading; 3. To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any Fund; or 4. To engage in any manipulative practice with respect to any Fund. Under Section 204A, each Access Person (as defined below) has the duty to know, understand and comply with federal securities law and other legal obligations applicable to their duties and responsibilities. In addition, the Advisers Act requires that investment advisers establish, maintain and enforce written policies and procedures reasonably designed, taking into A-1 consideration of the nature of such investment adviser's business, to prevent the misuse, in violation of the Advisers Act or the Exchange Act, or the rules or regulations thereunder, of material nonpublic information by such investment adviser or any person associated with the investment adviser. B. DEFINITIONS. 1. "Access Person" means: a) all directors, partners, officers and employees of BSAM. b) all Investment Personnel; and c) any other person designated by a Compliance Officer to be an Access Person. 2. "Beneficial Ownership" means: a) the receipt of benefits substantially equivalent to those of ownership through relationship, understanding, agreement, contract or other arrangements; or b) the power to vest benefits substantially equivalent to those of ownership in oneself at once or at some future time. Note: Generally, a person will be regarded as having a direct or indirect Beneficial Ownership in securities held in his/her name, as well as in the name of a spouse, minor children who live with such person, any member of the person's immediate family(1), any other relative (parents, adult children, brothers, sisters, in-laws, etc.) whose investments the person directs or controls, whether they live together or not, and securities held by a trust or estate for the person's benefit. The definition of "Beneficial Ownership" will be interpreted with reference to the definition contained in the provisions of Section 16 of the Exchange Act, and the rules and regulations thereunder, as such provisions may be interpreted by the Securities and Exchange Commission, except that the determination of direct or indirect Beneficial Ownership will apply to all securities which an Access Person has or acquires. 3. "Compliance Officer" means a person designated by BSAM as a compliance officer with respect to Managed Accounts. "Chief Compliance Officer" means the person designated as such by BSAM pursuant to Rule 206(4)-7 of the Advisers Act. - ---------- (1) A person's "immediate family" includes a spouse, child, mother, father, brother, sister, in-law or any other relative who lives in the same household as the person and is financially dependent upon the person. A-2 4. "Control" has the meaning set forth in Section 2(a)(9) of the 1940 Act. 5. "Covered Security" means a security as defined in Section 2(a)(36) of the 1940 Act, including all related securities, commodity or futures contracts, except that it does not include (a) direct obligations of the government of the United States or commodity or futures contracts related to such obligations; (b) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements or commodity or futures contracts related to such securities; and (c) shares issued by registered open-end investment companies; except that, shares issued by registered investment companies for which BSAM or an affiliated company acts as investment adviser, sub-adviser or distributor ("Reportable Fund" shares) are included as "Covered Securities." 6. "DE MINIMUS Transaction" means a transaction or series of transactions(2) involving (i) no more than 500 shares of an equity security (x) with an average monthly trading volume of 100 million shares or more or (y) issued by an issuer with a market capitalization (outstanding shares multiplied by current share price) of $2 billion or more or (ii) no more than the greater of $25,000 principal amount or 0.1% of the outstanding principal amount of any issue of any corporate, municipal or international fixed-income security. The exception provided in this Section B.7. is not available to (x) Investment Personnel who make or participate in making recommendations regarding the purchase or sale of the security or related securities, and (y) a Portfolio Manager who buys or sells the same security or a related security for one or more Managed Account during a period commencing seven days prior to and ending seven days after the transaction by the Managed Account. 7. "Employee Account" means securities trading accounts and privately placed securities owned by Access Persons and any other securities trading accounts in which the Access Person has direct or indirect Beneficial Ownership. EMPLOYEE ACCOUNTS INCLUDE ACCOUNTS OF YOUR IMMEDIATE FAMILY MEMBERS AND OTHERS. SEE THE DEFINITION OF "BENEFICIAL OWNERSHIP." 8. "Employee Central" means the online system maintained by Bear, Stearns & Co. Inc. ("BSC") that records various information relating to employees of BSC and BSAM. 9. "Ethics Committee" shall have the same meaning as given in paragraph E. 10. "Exempt Transaction(3)" means any of the following: - ---------- (2) For purposes of this definition, "series of transactions" means transactions in a security or related securities within a rolling five business day period. (3) Note that Exempt Transactions are not exempt from this Code of Ethics in general. Some Exempt Transactions are exempted only from designated reporting requirements under this Code of Ethics and may A-3 a) a transaction in a security that is non-volitional on the part of either the Access Person or a Managed Account; b) a purchase of a security that is part of an automatic dividend reinvestment plan; c) a purchase of a security effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; d) a sale of a security that is effected pursuant to a tender offer or similar transaction involving an offer to acquire all or a significant portion of a class of securities; or e) any other transaction otherwise prohibited by this Code, as such transaction is exempted as provided for in Section E below. 11. "Gift" means cash or any item of value received by an Access Person or given to a Client or Public/Government Official or Employee 12. "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, as amended (the "Securities Act"), the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act. 13. "Investment Personnel" means (a) any employee of a Managed Account or BSAM (or any company in a control relationship to the Managed Account or BSAM) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Managed Account, and (b) any natural person who controls the Managed Account or BSAM and who obtains information concerning recommendations to the Managed Account regarding the purchase or sale of securities by the Managed Account, including, but not limited to, analysts and traders who provide information and advice to a Portfolio Manager or who help execute a Portfolio Manager's decisions. If an Access Person becomes aware of information or activities that are normally within the function and responsibilities of Investment Personnel, then such Access Person shall be treated as Investment Personnel for the purpose of complying with this Code of Ethics with respect to such information or activities. 14. "Legal Officer" means an officer within the joint BSAM/BSC Legal Department. - ---------- be exempt from provisions under the Procedures, as amended from time to time (including, for example, preclearance, minimum holding periods and blackout periods). A-4 15. "Limited Offering" means an offering that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 under the Securities Act. 16. "Managed Account" means each Fund and each separate account (including limited partnerships, limited liability corporations and other entities that are exempt from registration under the 1940 Act) that has entered into an investment management, administrative and/or advisory or sub-advisory agreement with BSAM. 17. "Model-Driven Managed Account" means the management of any Fund or separate account (including limited partnerships, limited liability corporations and other entities that are exempt from registration under the 1940 Act) pursuant to a quantitative model that screens securities on the basis of prescribed criteria and automatically purchases all conforming securities, or sells non-conforming securities upon the six-month or one-year rebalancing periods, for the Managed Account. 18. "Portfolio Manager" means any employee entrusted with direct responsibility and authority to make investment decisions affecting a Managed Account. 19. "Related Security" means any option or futures contract to purchase or sell, and any security convertible into or exchangeable for, a security. 20. "Reportable Fund: means: a) Any fund for which BSAM serves as an investment adviser or sub-adviser as defined in section 2(a)(20) of the 1940 Act, or b) Any fund whose investment adviser or principal underwriter controls BSAM, is controlled by BSAM, or is under common control with BSAM. 21. "Security held or to be acquired by a Managed Account" means: a) Any Covered Security that, within the most recent 15 days, (i) is or has been held by a Managed Account, or (ii) is being or has been considered by a Managed Account or BSAM for purchase by the Managed Account(4), and b) Any option or futures contract to purchase or sell, and any security convertible into or exchangeable for, a Covered Security. 22. "Transaction" means buying or selling, or taking a long or short position in, a security, futures contract, or any other financial instrument. - ---------- (4) A security is "being considered for purchase or sale" when a recommendation to purchase such security has been made and communicated and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. A-5 23. "Small cap" means a capitalization of $2 billion or less. C. POLICIES. 1. RULE 17J-1. No Access Person will engage in any act, practice or course of conduct that would violate the provisions of Rule 17j-1(b). 2. DUTIES OF ACCESS PERSONS. The following general policies will govern personal investment activities of Access Persons: a) It is the duty of all Access Persons to place the interests of Managed Accounts first; b) All Access Persons will conduct personal securities transactions in a manner that: (1) avoids any actual or potential conflict of interest or any abuse of a position of trust and responsibility; and (2) is consistent with this Code of Ethics and any policy regarding allocation of trades as may be adopted by BSAM.; c) No Access Person will take inappropriate advantage of his or her position with a Managed Account. 3. PERSONAL TRADING PROCEDURES. Access Persons shall comply with the Code of Ethics Procedures established by BSAM from time to time. 4. INITIAL PUBLIC OFFERINGS: Access Persons may not acquire direct or indirect Beneficial Ownership of any Covered Security in an Initial Public Offering. 5. LIMITED OFFERINGS. Access Persons, generally, may not acquire direct or indirect Beneficial Ownership of any Limited Offering (other than those managed by BSAM) without the prior written approval of the Access Person's direct supervisor and a Legal Officer or the Chief Compliance Officer. Such written approval will be sought and documented in Employee Central. Investment Personnel participating in the management of funds of funds making investments in Limited Offerings must, in addition, secure the approval of the Ethics Committee to make such investments. Approval of Limited Offerings should take into account, among other factors, whether the investment opportunity should be reserved for the Managed Accounts, and whether the opportunity is being offered to an individual by virtue of his or her position with BSAM. Any authorized investment in a Limited Offering must be disclosed to a Compliance Officer by such Investment Personnel when he or she plays any part in a Managed Account's subsequent consideration of an investment in securities of the issuer, and any decision by the Fund to purchase securities of the issuer will be subject to an independent review by the Ethics Committee. A-6 6. TRANSACTIONS IN SECURITIES ON THE RESTRICTED LIST. From time to time, Access Persons may obtain material, non-public information or establish special or "insider" relationships with one or more issuers of securities (i.e., the employee may become an officer or director of an issuer, a member of a creditor committee that engages in material negotiations with an issuer, etc.). In such cases, Access Persons should keep in mind that they are subject to the requirements and restrictions set forth in Exhibit A, the Policy Statement on Insider Trading. 7. INSIDER TRADING. BSAM has adopted a Policy Statement on Insider Trading (the "Policy Statement"), a copy of which is attached hereto as Exhibit A. All Access Persons are required by this Code of Ethics to read and familiarize themselves with their responsibilities under this Code of Ethics and the Policy Statement. All Access Persons shall certify at the end of each calendar year that they have read and understand this Code of Ethics and the Policy Statement, and that they have complied with the requirements thereof, and a Compliance Officer shall maintain a copy of each executed Acknowledgment. D. REPORTING REQUIREMENTS. 1. REPORTS BY ACCESS PERSONS. a) Initial Reports by Access Persons. (1) All Access Persons shall submit to a Compliance Officer a complete report on the Initial Asset Certification Form (see Exhibit B). (2) CONTENTS OF INITIAL ASSET CERTIFICATION FORM. The Initial Asset Certification Form must list each Covered Security held as of the end of the previous calendar quarter, in each Employee Account. This report must include book entry shares held at companies, broker/dealers, investment advisers or other institutions, and physically issued certificates held in a safe deposit box, at one's home, or in the trust department of a bank or trust company. (3) DEADLINE. Access Persons must submit this initial listing of Covered Securities within 10 days after becoming an Access Person. In the event that the Access Person held no Covered Securities as of the above reporting dates, the report should so specify. b) QUARTERLY REPORTS BY ACCESS PERSONS. (1) All Access Persons shall submit to a Compliance Officer a Security Transaction Report each quarter (See Exhibit C). (2) CONTENTS OF REPORT. The Quarterly Security Transaction Report shall list all transactions in Covered Securities held in any A-7 Employee Account. Access Persons need not report transactions in securities purchased or sold in Exempt Transactions. (3) DEADLINE. Access Persons must submit the Quarterly Security Transaction Report no later than 30 days after the end of each calendar quarter. c) ANNUAL HOLDINGS REPORTS BY ACCESS PERSONS. (1) All Access Persons shall submit to a Compliance Officer annually (as of each December 31) an Annual Asset Certification (See Exhibit D). (2) CONTENTS OF CERTIFICATION. The Annual Asset Certification shall list all holdings of Covered Securities in each Employee Account as of December 31 of each year. (3) DEADLINE. Access Persons must submit the Annual Asset Certification no later than January 30 of each year. d) EXCEPTIONS FROM REPORTING REQUIREMENTS. (1) Access Persons need not make a report under this Section D with respect to transactions in: o a non-Covered Security; o shares purchased or sold pursuant to dividend reinvestment plans; or o shares held in accounts over which an Access Person has no direct or indirect influence or control. (2) Access Persons need not make a quarterly transaction report under paragraph (1)(b) of this Section D if the report would duplicate information contained in broker trade confirmations or account statements received by a Compliance Officer in the time period required by paragraph (1)(b) of this Section D, if all of the information required by that paragraph is contained in the broker trade confirmations or account statements, unless the Access Person established a new account during the quarter. 2. NOTIFICATION BY COMPLIANCE OFFICER. A Compliance Officer shall notify each Access Person required to make reports pursuant to this Code of Ethics that such person is subject to this reporting requirement and shall deliver a copy of this Code of Ethics to such person. 3. PRESERVATION OF RECORDS. This Code of Ethics, a copy of each Securities Transaction Report, any written report issued hereunder by a Compliance Officer, and lists of all persons required to make reports hereunder shall be A-8 preserved with BSAM's records for the period required by Rule 17j-1(f) and Rule 204-2(a)(12) & (13). E. ETHICS COMMITTEE. 1. A committee ("the Ethics Committee") composed of, at a minimum, BSAM's General Counsel, Chief Financial Officer, head Equity Trader, Chief Investment Officer, and Chief Compliance Officer shall oversee, interpret and revise the rules of this Code of Ethics. 2. The Ethics Committee has the power to exempt transactions in Employee Accounts from the rules of this Code of Ethics or related procedures when there is reasonable ground to believe that the Access Person has acted in good faith and the Employee Account has not improperly benefited from the transaction that has occurred in or is being considered for a Managed Account, and that the Managed Account has not been improperly disadvantaged thereby. The Ethics Committee may delegate this power to a Compliance Officer, provided (i) the Compliance Officer shall notify the Ethics Committee, in writing on the same business day, that an exception has been granted; and (ii) any individual member of the Ethics Committee may, within two business days, challenge this grant of exception. In this event, the Ethics Committee shall convene to make a final determination. The Chief Compliance Officer or his/her designee shall make a report to the Ethics Committee on all exceptions granted at the next quarterly meeting of the Ethics Committee. 3. Only the Ethics Committee or its delegate has the power to exempt a transaction in an Employee Account from the rules of this Code of Ethics. 4. Any three members of the Ethics Committee acting together may take any action authorized to be taken under this Code of Ethics. F. TRAINING AND EDUCATION The Chief Compliance Officer shall oversee the training and education of all Access Persons about this Code. Training regarding this Code will occur periodically. All Access Persons are required to attend the training sessions and read any applicable materials. G. ANNUAL REVIEW The Chief Compliance Officer will review the adequacy of the Code and the effectiveness of its implementation at least annually and make recommendations for updating as a result of any changes in the regulations or changes in procedures. The Chief Compliance Officer, or his/her designee, will provide a written report, at least annually, to the Ethics Committee summarizing: o Compliance with the Code for the period under review; A-9 o Violations of the Code for the period under review; o Sanctions imposed under the Code during the period under review; o Changes in policies and procedures recommended for the Code; and o Any other information requested by the Ethics Committee H. REPORTS Access Persons must report "apparent" or "suspected" violations in addition to actual or known violations of the Code to a Compliance Officer, and must cooperate in any investigation relating to breaches of the Code. Access Persons are encouraged to seek advice from a Compliance Officer with respect to any action or transaction which may violate this Code and to refrain from any action or transaction which might lead to the appearance of a violation. The types of reporting by Access Persons required under this Code includes: (i) noncompliance with applicable laws, rules, and regulations; (ii) fraud or illegal acts involving any aspect of BSAM's business; (iii) material misstatements in regulatory filings, internal books and records, client records or reports; (iv) activity that is harmful to clients, including fund investors; and (v) deviations from required controls and procedures that safeguard clients and BSAM. A member of the BSAM Ethics Committee, who is not a Compliance Officer, will serve as an alternate person to whom employees may report violations in case a Compliance Officer is involved in the violation or is unreachable. Reports will be treated confidentially to the extent permitted by law and investigated promptly and appropriately. F. ADMINISTRATION. 1. All Access Persons must be presented with a copy of this Code of Ethics and any amendments thereto. 2. All Access Persons are required to read this Code of Ethics and to acknowledge in writing that they have read, understood and agreed to abide by this Code of Ethics. In addition, Access Persons are required to read and understand any amendments thereto. 3. All Access Persons are required to provide a list of all of his or her Employee Accounts. 4. Access Persons who violate the rules of this Code of Ethics are subject to sanctions, which may include censure, suspension or termination of employment. 5. Any information obtained from an Access Person shall be kept in strict confidence, except that reports of securities transactions pursuant hereto will be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization to the extent required by law or regulation. A-10 6. Nothing contained in this Code of Ethics shall be interpreted as relieving any Employee Account from acting in accordance with the provisions of any applicable law, rule or regulation or any other statement of policy or procedure governing the conduct of Access Persons. 7. If any Access Person has any question with regard to the applicability of the provisions of this Code of Ethics generally or with regard to any securities transaction, he or she should consult with the Chief Compliance Officer or his/her designee. G. RECORD KEEPING. BSAM shall maintain at its principal places of business the following records: 1. A copy of this Code of Ethics and any Code of Ethics that has been in effect within the previous five years. 2. Any record of any violation of this Code of Ethics and any action taken as a result of the violation. These records shall be maintained in an easily accessible place for at least five years after the end of the fiscal year in which the violation occurs. 3. A copy of each report made by an Access Person as required by this Code of Ethics, including any information provided in lieu of the monthly reports. These records shall be maintained for at least five years after the end of the fiscal year in which the report is made or the information provided, the first two years in an easily accessible place. 4. A record of all persons, currently or within the past five years, who are or were required to make reports under this Code of Ethics, or who are or were responsible for reviewing these reports. These records shall be maintained in an easily accessible place. 5. A copy of each decision to approve an acquisition by an Access Person of any Limited Offerings; such decision will be housed in Employee Central. These records must be maintained for at least five years after the end of the fiscal year in which the approval is granted. A-11 Adopted: November 12, 1998 Revised: June 25, 1999 March 6, 2002 February 25, 2005 February 7, 2000 September 5, 2002 August 3, 2000 February 12, 2003 November 3, 2000 March 26, 2003 February 5, 2001 November 17, 2003 July 10, 2001 January 13, 2004 October 1, 2001 May 11, 2004 November 28, 2001 August 2, 2004 February 28, 2002 October 1, 2004 A-12 EXHIBIT A BEAR STEARNS ASSET MANAGEMENT INC. POLICY STATEMENT ON INSIDER TRADING POLICIES AND PROCEDURES DESIGNED TO PREVENT INSIDER TRADING I. INTRODUCTION: SCOPE AND COVERAGE The following policies and procedures have been established to aid employees and other persons associated with BSAM Inc. to avoid "insider trading" and to aid BSAM in preventing, detecting and imposing sanctions on those who engage in "insider trading." As a matter of corporate policy, BSAM strives to prevent its Portfolio Managers, officers, Access Persons, Investment Personnel and employees ("Associated Persons") from unlawfully: > trading while in possession of material, non-public information ("inside information"), > communicating inside information to others for their use in trading ("tipping"), or > recommending securities based on inside information. Insider trading is not only unethical; it is also illegal. To promote this policy against illegal insider trading and tipping, we have adopted these policies and procedures concerning the use of material, non-public information and trading of securities. These policies and procedures apply to the conduct of all Associated Persons, whether they are permanent or temporary employees, whether they are employees or independent contractors, and whether or not their conduct is within the scope of their responsibilities for BSAM. Associated Persons who participate in or have access to inside information concerning the investment decisions for any Fund are subject to additional restrictions, which are described in the Code of Ethics. Nothing contained in these policies and procedures changes your responsibilities and obligations under the Code of Ethics if you are covered by it. YOU MUST READ AND UNDERSTAND THESE POLICIES AND PROCEDURES. IF YOU FAIL TO COMPLY WITH THESE POLICIES AND PROCEDURES, YOU RISK SERIOUS PENALTIES. THAT IS, WE MAY TERMINATE YOUR EMPLOYMENT, AND YOU COULD FACE SUBSTANTIAL PERSONAL CIVIL OR CRIMINAL LIABILITY. If you have any questions regarding these policies and procedures, please call the Compliance Department at 212-272-8095 or 212-272-3146. A-13 II. SUMMARY OF THE LAW OF INSIDER TRADING The following general discussion is intended as a guide to help you understand how to avoid insider trading. Whether or not the law would view a particular action as insider trading may require a detailed analysis of the specific facts involved in your particular case. BEFORE YOU TAKE ANY ACTION THAT YOU BELIEVE MAY BE CONSIDERED INSIDER TRADING UNDER THE LAW, YOU SHOULD CONSULT WITH THE COMPLIANCE DEPARTMENT. The law concerning insider trading is continuously evolving. Generally, the law prohibits > Trading by any person, whether or not the person is an "insider" in the technical, legal sense, while in possession of insider information(5); and > Communicating inside information to other persons in violation of a duty to keep it confidential. Below we discuss some of the key concepts of insider trading. For purposes of the discussion, we use the term "tipping" to include both communicating material, nonpublic information to others directly and indirectly through recommendations. A. WHAT IS INSIDE INFORMATION? For information to be considered "inside" information, and therefore subject to the insider trading laws, it need not originate from within a company or even relate to its internal operations. For example, in the CARPENTER case, a court found a reporter from THE WALL STREET JOURNAL to be criminally liable for tipping others about newspaper column stories that were about to be published on various companies. The reporter disclosed to others the dates on which reports on various companies would appear in THE WALL STREET JOURNAL and whether those reports would be favorable or not, knowing that it was likely that they would trade on the basis of that information. The court found that the information belonged to the newspaper and therefore the reporter and those he told misappropriated the information(6). Similarly, information about a third party's plans to launch a hostile tender offer for a company's shares or a Federal Reserve Board decision to alter interest rates may be - ---------- (5) The term "insider" includes persons who, by virtue of their position or relationship with a company, owe a duty of loyalty and confidentiality. Examples of insiders include such classic insiders as officers and directors, as well as "quasi-insiders," such as outside lawyers and accountants whose duty of loyalty and confidentiality results from their employment relationship with the company. See Section II.C.1 of this Policy Statement, "Corporate Insiders," below. (6) CARPENTER V. U.S., 108 S.Ct. 316 (1987). A-14 considered "inside" information. To come within the law, the information must be "material" and "non-public." B. WHEN IS INFORMATION MATERIAL? To be liable for trading on or tipping inside information, the information must be "material." Material information generally refers to as information that a reasonable investor would be reasonably likely to consider important in making an investment decision. Information that is likely to affect the price of a company's securities is material. Whether information is material depends on all the facts and circumstances. You could consider material information to include, among other things, information concerning dividend decisions, earnings estimates, changes in previously released earnings estimates, merger acquisition proposals or agreements, the sale of a division, developments concerning litigation, liquidity problems, bankruptcy filings, important inventions or discoveries, and extraordinary management developments, such as the firing of a Chief Executive Officer. Information can be material even if it does not relate to a company's business. C. WHO IS UNDER A DUTY TO AVOID TRADING OR TIPPING? The issue of who has a duty is complex. Generally speaking, you should assume that ANYONE who has material, non-public information has a duty not to trade on it or tip it to others for trading. Keep in mind that "tipping" includes not only directly communicating information, but also making recommendations to others based on it (even if the information is not directly disclosed). If you believe that you may be entitled to use material, non-public information that has come into your possession, either for yourself, a client, the firm, or some other person, you must seek guidance from the Legal Department before you take any action. 1. CORPORATE INSIDERS Corporate insiders are always under a duty to refrain from trading in the shares of their company while in possession of inside information or tipping such information to others for their trading purposes. The concept of "insider" is broad. It includes officers, directors, and employees of the issuer of the security being traded. It also includes "temporary insiders." A person can become a "temporary insider" of a company if he or she enters into a special confidential relationship with the issuer and, as a result, is given access to information solely for the issuer's purposes. Temporary insiders can include, among others, attorneys, accountants, consultants, investment bankers, and bank lending officers as well as employees of a company's major vendors or material business partners. For example, BSAM could become a temporary insider of a company it invested in if the company was in bankruptcy and BSAM was awarded a seat on its creditor's committee. 2. TIPPEES People who receive inside information from others should consider themselves "tippees." "Tippees" of corporate insiders have a duty to refrain from trading on or tipping inside information if they are aware or should have been aware that their insider sources violated A-15 a fiduciary duty in communicating the information to them.(7) This means that if you receive inside information from a person at a company, you cannot trade securities of that company or tip the inside information to a third party. In the "tippee" situation, the law deems an insider to have violated a fiduciary duty only if the insider personally benefits, directly or indirectly, from the disclosure. However, the concept of a personal benefit is broad. The tippee could be liable if the prosecution shows that the insider has received or will receive some direct compensation, or if the relationship between the insider and tippee that suggests a QUID PRO QUO or a pure gift to the tippee with no expectation of receiving anything in return. Recently, in the WARDE case, the Second Circuit Court of Appeals upheld tippee liability based upon the gift theory.(8) In this case, A, the defendant, was a good friend of B, and Director of Company X. B told A that Company X was discussing various options concerning its future. A large conglomerate ultimately acquired Company X. Both A and B profited from warrants they purchased when Company X was in negotiations to be acquired. The court found that A was liable for insider trading based on the theory that he was a "tippee" of B. A appealed, claiming, among other things, that B, the "tipper", had not received any "benefit" in giving A the information. The court disagreed, holding that a tip to a friend resembles trading by the insider followed by a gift of the profits to the recipient. Therefore, the tipper indirectly benefited. There is no distinction between receiving inside information in a personal relationship as opposed to a professional relationship. The SEC takes the position that if you receive inside information in a confidential personal relationship, when the person confiding the information has a reasonable expectation that you will keep the information private, then if you tip that information or trade securities that is the subject of the inside information, then you have violated insider trading laws.(9) The SEC has proposed new Rule 10b5-2, which would codify this position. 3. OTHER OUTSIDERS There are two other ways that non-insiders can acquire a duty to avoid trading or tipping non-public information. The first is under the so-called "misappropriation" theory. Under this theory, a person commits fraud in violation of federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5) by "misappropriating" material nonpublic information for securities trading purposes, in breach of a duty of loyalty and confidence. Under the misappropriation theory, prosecutors can reach a wide variety of individuals who have no connection with the issuer of the securities being traded. - ---------- (7) DIRKS V. SEC, 463 U.S. 646 (1983) (8) SEC V. WARDE, 151 F.3d 42 (2nd Cir. 1998) (9) SEC V. MCDERMOTT, No. 99 Civ. 12256 (S.D.N.Y. filed December 21, 1999). A-16 For example, in the O'HAGAN case, a partner of a law firm who represented a company that was planning a takeover was convicted for purchasing options on the shares of the target.(10) Similarly, in the CARPENTER case, which we discuss above, the Supreme Court upheld a conviction of a newspaper columnist under the misappropriation theory. The court held that the columnist defrauded THE WALL STREET JOURNAL when he used the mails and the telephone to communicate information about upcoming stories about public companies to trade in the stock of those companies. The court considered the information to be the property of the newspaper. The second basis for outsider liability involves trading on inside information in connection with a tender offer.(11) That is, even if you are not an insider or a tippee and do not possess "misappropriated" information, you may be prohibited from trading while in possession of the information (or tipping the information) if the information relates to a tender offer. The rule generally makes it unlawful for anyone who learns about a tender offer before its announcement to trade or tip others about the tender offer. 4. POSSESSION V. USE Unless you have been provided with guidance from the Compliance Department to the contrary, you should assume that you may not trade while in possession of material, non-public information even if you believe that the information has not influenced your decision (in other words, even if you would have traded without having the information). The SEC has long argued that it is illegal for someone to trade while in possession of such information even if the trade is not made "on the basis of" the information (i.e., the information was not "used" for trading). Thus, for example, under the SEC's theory, if you have obtained inside information about a company after you already made a decision to buy its shares, you cannot trade. In fact, you must immediately cancel any unexecuted purchase order that was placed before you acquired the information. In several recent cases, the courts have rejected the SEC's theory that it is not necessary to prove that information was "used" in order to prove insider trading but only that the defendant was in possession of the information. In the ADLER case, for example, the court required the SEC to show that the individual based his decision to trade on the information in question.(12) Similarly, in the SMITH case, the court held that the government must prove that "use" of the information was a "significant factor" in the decision to buy or sell to establish insider trading in a criminal case.(13) It would be very risky to rely on these cases, because courts are willing to find that a "strong inference" of actual use of the material non-public information arises when an insider trades while in possession of this information. Even if you had proof of a pre-existing - ---------- (10) U.S. V. O'HAGAN, 521 U.S. 642 (1997). (11) Rule 14e-3 under the Exchange Act. (12) SEC V. ADLER, 137 F.3d 1325 (11th Cir. 1998). (13) U.S. V. SMITH, 155 F.3d 1051 (9th Cir. 1998). A-17 plan to trade, the government could still attempt to show that material, non-public information was a "significant factor" as to the amount ultimately traded or the timing of the trade. In an effort to remove ambiguity in this area, the SEC has adopted new Rule 10b5-1, which states the general principal that insider trading liability arises when a person trades while "aware" of material non-public information, with certain narrow exceptions.(14) For example, the exceptions cover situations when you entered into a binding contract to trade before coming into possession of inside information, or when you previously instructed another person execute a trade for your account, or if you had adopted, and had previously adhered to, a written plan specifying certain purchases or sales of particular securities. The rule also provides an affirmative defense for purchases or sales that result from a written plan for trading securities that is designed to track or correspond to a market index, market segment or group of securities. III. PENALTIES AND REMEDIES The penalties for unlawful trading while in possession of or communicating material, non-public information to others are severe, both for the individuals involved in such conduct, their employers, and "controlling persons" (i.e., persons who have the right to exercise control over the activities of others). A person can be subject to some or all of the penalties listed below even if he or she does not personally benefit from the violation. First time penalties include: o Civil injunctions; o Disgorgement of profits; o Civil penalties for the persons' who committed the violation of up to $1 million or three times the amount of profit gained or loss avoided, whether or not the person actually benefited; o Civil penalties for the employer or other "controlling persons" of up to the greater of $2,500,000 or three times the amount of the profit gained or loss avoided; and o Criminal fines and jail sentences. BSAM will not tolerate any illegal conduct by its Associated Persons. Moreover, if you violate these policies and procedures, you may be subject internal disciplinary action, up to and including, for example, censure, fine, suspension, restriction on activities, and immediate termination of your employment. - ---------- (14) SELECTIVE DISCLOSURE AND INSIDER TRADING, Securities Act Release No. 7881, Securities Exchange Act Release No. 43154, Investment Company Act Release No. 24599 (August 15, 2000). A-18 IV. IDENTIFYING INSIDE INFORMATION Before you buy or sell securities of a company about which you have potential inside information, either in connection with your duties at BSAM or for your own account, you must resolve the following issues: > IS THE INFORMATION MATERIAL? Is this information that an investor would consider important in making his/her investment decisions? Is this information that would substantially affect the market price of the securities if generally disclosed? > IS THE INFORMATION NON-PUBLIC? To whom has this information been provided? Has the company released this information to shareholders? Has the information been effectively communicated to the marketplace by filings with regulatory bodies, or publications of Dow Jones, Reuters, The Wall Street Journal or other financial media. If, after consideration of these factors, you believe that the information is material and non-public, or if you have any questions as to whether the information is material and non-public, you must: o report the matter immediately to the Chief Compliance Officer (or designee); o refrain from purchasing or selling the securities in a personal securities transaction or on behalf of others, including BSAM managed accounts; o refrain from communicating the information inside or outside BSAM, other than to the Chief Compliance Officer (or designee); and o after the Chief Compliance Officer (or designee) has reviewed the issue, you will be instructed to continue the prohibitions against trading and communications, or will be allowed to trade on and/or communicate the information. The above restrictions do not apply to insightful analyses of available data or filings, observations or insights of economic trends or sales that are available but have been overlooked or misinterpreted by analysts. V. RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION Associated Persons may not communicate inside information to anyone, including persons within BSAM, except as provided above. In addition, care should be taken so that such information is secure. For example, files containing inside information should be sealed and access to computer files containing inside information should be restricted. A-19 VI. RESOLVING ISSUES CONCERNING INSIDER TRADING If, after consideration of the items set forth above, you have any doubt as to whether information is material or non-public, or if there is any unresolved question as to the applicability or interpretation of the foregoing procedures or as to the propriety of any action, you must discuss the issue with the Chief Compliance Officer (or designee) before trading on or communicating the information to anyone. VII. CONTROL PROCEDURES The role of the Chief Compliance Officer (or designee) of BSAM is critical to the implementation and maintenance of BSAM's policies and procedures against "insider trading." To prevent "insider trading", the Chief Compliance Officer (or designee) should: o provide orientation to new Associated Persons regarding policies and procedures with respect to "insider trading"; o answer questions regarding these policies and procedures; o resolve issues of whether information received by an Associated Person is material and non-public; o review on a regular basis and update as necessary the Code of Ethics and related procedures; o promptly review and either approve or disapprove, in writing, each request of an employee for clearance to trade in securities covered by the Code of Ethics; and o when it has been determined that an Associated Person has material non-public information: o implement measures to prevent dissemination of such information; and o restrict Associated Persons from trading the securities. VIII. SPECIAL REPORTS TO MANAGEMENT Promptly upon learning of an actual or potential violation of this Policy Statement, the Chief Compliance Officer (or designee) shall prepare and maintain in BSAM's records a written report providing full details of the situation and any remedial action taken. A-20 EXHIBIT B BEAR STEARNS ASSET MANAGEMENT INC. INITIAL ASSET CERTIFICATION OF ACCESS PERSONS AS OF __________ INSTRUCTIONS 1. List each Covered Security in each Employee Account (that is, each account in which you may be deemed to have Beneficial Ownership) that you held at the end of the date indicated above. YOU ARE DEEMED TO HAVE BENEFICIAL OWNERSHIP OF ACCOUNTS OF YOUR IMMEDIATE FAMILY MEMBERS. YOU MAY EXCLUDE ANY OF SUCH ACCOUNTS FROM THIS REPORT, HOWEVER, IF YOU HAVE NO DIRECT OR INDIRECT INFLUENCE OR CONTROL OVER THOSE ACCOUNTS. 2. You submit this form within 10 days after you become an Access Person (or January 30, ____, whichever is earlier). The information provided below must be current, within 45 days of your becoming an Access Person. 3. YOU MUST COMPLETE AND SIGN THIS CERTIFICATION WHETHER OR NOT YOU OR YOUR BROKER SENDS STATEMENTS DIRECTLY TO A COMPLIANCE OFFICER.
- -------------------------------------------------------------------------------------------------------- Name of Broker, No. of Shares or Registration on Name of Security(1) Dealer or Bank Principal Amount Account Nature of Interest - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------
CERTIFICATIONS: I hereby certify that: 1. The securities listed above, or listed in the brokerage statements that I have provided, reflect all the Covered Securities in which I may be deemed to have Beneficial Ownership as of the date listed above. 2. I have identified all other Employee Accounts (that may hold Covered Securities) of which I have Beneficial Ownership. 3. I have read the Code of Ethics, the Policy Statement on Insider Trading and Code of Ethics Procedures, collectively the "Codes" and understand their requirements. I further certify that I am subject to the Codes, will comply with their requirements in every respect and will not engage in conduct prohibited by the Codes. 4. This report excludes holdings with respect to which I had no direct or indirect influence or control. Date: __________________ Signature: ____________________ Name: _________________________ - ---------- (1) Including interest rate and maturity, if applicable. EXHIBIT C BEAR STEARNS ASSET MANAGEMENT INC. SECURITY TRANSACTION REPORT OF ACCESS PERSONS For The Calendar Quarter Ended __________ INSTRUCTIONS 1. List transactions in Covered Securities held in any Employee Account (that is, each account in which you may be deemed to have Beneficial Ownership) as of the date indicated above. YOU ARE DEEMED TO HAVE BENEFICIAL OWNERSHIP OF ACCOUNTS OF YOUR IMMEDIATE FAMILY MEMBERS. YOU MAY EXCLUDE ANY OF SUCH ACCOUNTS FROM THIS REPORT, HOWEVER, IF YOU HAVE NO DIRECT OR INDIRECT INFLUENCE OR CONTROL OVER THOSE ACCOUNTS. 2. Write "none" if you had no transactions in Covered Securities during the quarter. 3. You must submit this form within 30 days after the end of the calendar quarter. 4. If you submit copies of your monthly brokerage statements to a Compliance Officer, and those monthly brokerage statements disclose the required information with respect to all Covered Securities in which you may deemed to have Beneficial Ownership, you need not file this form unless you established a new account during the quarter. 5. For each Employee Account that you established during the previous quarter that is permitted to hold Covered Securities for your direct or indirect benefit, state the name of the broker, dealer or bank with whom you established the account, the account number and the date you established the account.
================================================================================================================ No. of Shares or Broker, Dealer or Other Party Date of Purchase/ Principal Through Whom Transaction Name of Security(2) Transaction Sale Amount Price Was Made - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- ================================================================================================================
During the previous quarter, I established the following accounts with a broker, dealer or bank:
- ---------------------------------------------------------------------------------------------------------------- Broker, Dealer or Bank Account Number Date Established - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
CERTIFICATIONS: I hereby certify that: 1. The information provided above is correct. 2. This report excludes transactions with respect to which I had no direct or indirect influence or control. Date: ___________________ Signature: __________________ Name: _______________________ - ---------- (2) Including interest rate and maturity, if applicable. 2 EXHIBIT D BEAR STEARNS ASSET MANAGEMENT INC. ANNUAL ASSET CERTIFICATION OF ACCESS PERSONS For the Year Ended __________ INSTRUCTIONS 1. List each Covered Security held in any Employee Account (that is, each account in which you may be deemed to have Beneficial Ownership) as of the date indicated above. YOU ARE DEEMED TO HAVE BENEFICIAL OWNERSHIP OF ACCOUNTS OF YOUR IMMEDIATE FAMILY MEMBERS. YOU MAY EXCLUDE ANY OF SUCH ACCOUNTS FROM THIS REPORT, HOWEVER, IF YOU HAVE NO DIRECT OR INDIRECT INFLUENCE OR CONTROL OVER THOSE ACCOUNTS. 2. Write "none" if you did not hold any Covered Securities at year end. 3. You must submit this form no later than January 30, _____. 4. YOU MUST COMPLETE AND SIGN THIS FORM FOR ANNUAL CERTIFICATION WHETHER OR NOT YOU OR YOUR BROKER SENDS STATEMENTS DIRECTLY TO A COMPLIANCE OFFICER.
- -------------------------------------------------------------------------------------------------------- No. of Shares Registration on or Principal Security or Nature of Broker, Dealer or Name of Security(3) Amount Account Interest Bank - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------
CERTIFICATIONS: I hereby certify that: 1. The securities listed above, or listed in the brokerage statements that I have provided, reflect all the Covered Securities in which I may be deemed to have Beneficial Ownership at the end of the period. 2. I have read the Code of Ethics, the Policy Statement on Insider Trading and the Code of Ethics Procedures and certify that I am in compliance with them. 3. This report excludes holdings with respect to which I had no direct or indirect influence or control. Date: ____________________ Signature: _____________________ Name:___________________________ - ---------- (3) Including interest rate and maturity, if applicable. 3 BEAR STEARNS ASSET MANAGEMENT INC. CODE OF ETHICS PROCEDURES I. INTRODUCTION Bear Stearns Asset Management Inc. hereby adopts the following Procedures to apply to all Access Persons covered by the Code of Ethics: II. PROCEDURES A. PROHIBITED ACTIVITIES 1. DISCLOSURE OF ACTIVITIES OF MANAGED ACCOUNTS. Investment Personnel may not reveal to any other person (except in the normal course of his or her duties on behalf of BSAM) any information regarding securities transactions by a Managed Account or consideration by a Managed Account or BSAM of any such securities transaction. 2. REPRESENTATIONS CONCERNING SECURITIES. No Access Person may make any misrepresentation or omit to state any material fact known to him or her in connection with the purchase or sale of any securities by any Employee Account or Managed Account. 3. TRANSACTIONS IN SECURITIES ON THE RESTRICTED LIST. From time to time, Access Persons may obtain material, non-public information or establish special or "insider" relationships with one or more issuers of securities (i.e., the employee may become an officer or director of an issuer, a member of a creditor committee that engages in material negotiations with an issuer, etc.). In such cases, Access Persons should keep in mind that they are subject to the requirements and restrictions set forth in Exhibit A, the Policy Statement on Insider Trading. 4. DEPRIVING MANAGED ACCOUNTS OF INVESTMENT OPPORTUNITIES. The failure of a Portfolio Manager to recommend an investment opportunity to, or to purchase an investment opportunity for, a Managed Account in order to obtain a personal benefit will be considered a course of conduct that deprives the Managed Account of an investment opportunity. An example of this type of prohibited conduct is to effect a personal transaction in a security and to intentionally fail to recommend, or to fail to effect, a suitable Managed Account transaction in such security in order to avoid the appearance of a conflict of interest or violate a provision of this Code of Ethics. 5. "SCALPING" OR "FRONT-RUNNING." Access Persons may not acquire or dispose of Beneficial Ownership of a security if such acquisition or disposition is based upon the employee's knowledge of actions being taken or being considered by BSAM on behalf of any Managed Account. Examples of this type of prohibited conduct include: 4 a) for personal gain, an Access Person uses knowledge of a future purchase of a security by a Managed Account and buys the security or acquires direct or indirect Beneficial Ownership of the security before the Managed Account buys the security; or b) for personal gain, an Access Person uses knowledge of a future sale (long or short) of a security by a Managed Account and sells the security for any account with respect to which the Access Person is the direct or indirect Beneficial Owner before the Managed Account sells the security. 6. "MARKET TIMING." Access Persons are prohibited from attempting to gain advantageous net asset values for Fund Shares by purchasing or redeeming such Fund Shares at times when they believe subsequent valuations will be made to their own advantage; e.g., the purchase of Fund Shares of a fund comprised of securities traded on markets which close earlier than the net asset value calculation time for the Fund Shares, when a significant event effecting the value of the securities has occurred subsequent to close of their markets but prior to the calculation of the net asset value of the Fund Shares. 7. MINIMUM HOLDING PERIOD. Access Persons are prohibited from effecting a purchase and voluntary sale, or sale and voluntary purchase, of the same (or equivalent) securities, including options that will expire, WITHIN 60 CALENDAR DAYS of a trade in any Employee Account ("short-term trades"). a) HOLDING PERIOD EXCEPTIONS. The minimum holding period does not apply to Fund Shares which are valued at a constant net asset value (e.g., money marker fund shares), non-Covered Securities, Exempt Transactions and transactions, including futures contracts, in exchange-traded funds that track a broad-based securities index. In addition, the minimum holding period shall not apply to municipal securities, except with respect to Investment Personnel who, in connection with his or her regular functions or duties, makes or participates in making recommendations (or obtains information about such recommendations) regarding the purchase or sale of municipal securities by a Managed Account. b) A holding period exception will also be granted for: (1) a limit order placed at the time of purchase; (2) options purchased or sold in an underlying stock for the purpose of protecting a position in an Employee Account; and (3) hardship exceptions upon application on a case-by case basis. c) RETROACTIVE CANCELLATION. BSAM may cancel retroactively any transaction that does not satisfy the minimum holding period, and any 5 profits realized may be subject to disgorgement and any losses realized are for the relevant Employee Account. 8. BLACKOUT PERIODS. a) SAME DAY RESTRICTION. Access Persons may not execute a transaction in any security on any day during which: (1) a Managed Account has a pending "buy" or "sell" order in the same (or related) security, until that order is fully executed or withdrawn; and (2) the same (or related) security is being considered for purchase or sale by a Managed Account, provided that the Access Person is aware of such consideration. b) SEVEN DAY RESTRICTION. Unless otherwise restricted by paragraph c. below, no Investment Person may purchase or sell any security or related security for an Employee Account for a period commencing seven days prior and ending seven days after the purchase or sale (or entry of an order for the purchase or sale) of that security or any related security for a Managed Account. For purposes of calculating the Seven Day Restriction, the trade date is not included. c) FOURTEEN DAY RESTRICTION. No Investment Person who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities issued by small cap issuers by a Managed Account may purchase or sell any security or related security issued by a small cap issuer for an Employee Account for a period commencing 14 days prior to and ending 14 days after the purchase or sale (or entry of an order for the purchase or sale of that security or any related security for a Managed Account. Note: For purposes of calculating the Fourteen Day Restriction, the trade date is not included. d) BLACKOUT PERIOD EXCEPTIONS. The blackout periods described in this Paragraph A.8. (the "blackout periods") shall not apply to Fund Shares, non-Covered Securities, Exempt Transactions, DE MINIMUS Transactions(4) and transactions, including - ---------- (1) The DE MINIMUS Transaction exception to the Same Day Restriction and the Seven Day Restriction is not available to: (a) Portfolio Managers who buy or sell the same security (or a related security) for any Employee Account during a period commencing seven days prior to and ending seven days after the transaction by the Managed Account; and (b) Investment Personnel who cover an issuer and who buy or sell the same security of that issuer (or a related security) for any Employee Account during a 6 futures contracts, in exchange-traded funds that track a broad-based securities index. In addition, the blackout periods shall not apply to (i) municipal securities, except with respect to Investment Personnel who, in connection with his or her regular functions or duties, makes or participates in making recommendations (or obtains information about such recommendations) regarding the purchase or sale of municipal securities by a Managed Account, and (ii) model-driven managed account transactions, with respect to Investment Personnel, who in connection with his or her regular functions or duties, does not participate in making recommendations (or does not obtain information about such recommendations) for model-driven Managed Accounts. e) RETROACTIVE CANCELLATION. BSAM may cancel retroactively all non-Exempt Transactions in Employee Accounts in a security that was traded in violation of the Same Day Restriction or the Seven Day Restriction, and any profits realized may be subject to disgorgement and any losses realized are for the relevant Employee Account. f) REPORTING. Any Access Person who discovers that a securities transaction in his or her Employee Account violates the Same Day or Seven Day Blackout Period restrictions shall promptly submit to a Compliance Officer a report describing the transaction. The report must contain the date and nature of the transaction, the identity and amount of the securities involved, the price at which the transaction was effected and the names of any other financial institutions involved in the transaction. 9. SERVICE AS A DIRECTOR. Access Persons shall not serve on the board of directors of any for-profit company without the prior approval of the Access Person's direct supervisor or the Chief Compliance Officer. Such approval will be documented in Employee Central. Investment Personnel serving as directors shall be isolated from those making investment decisions with respect to the securities of the issuer through "Chinese Wall" or other procedures specified by the Chief Compliance Officer absent a determination by the Chief Compliance Officer to the contrary for good cause shown. B. PROCEDURES FOR EMPLOYEE ACCOUNTS. 1. EMPLOYEE ACCOUNTS MAINTAINED AT BSC. Access Persons must maintain all Employee Accounts relating to Covered Securities at BSC, unless given permission, upon a written request and a showing of extraordinary circumstances, by the procedures followed by Employee Central; such procedures include endorsement by the employee's supervising Senior Managing Director and notification of either by a Legal Officer in consultation with a Compliance Officer or of a Compliance Officer. Accounts maintained outside of - ---------- period commencing seven days prior to and ending seven days after the transaction by the Managed Account. See Section B.7. of the Code of Ethics ("DE MINIMUS Transactions"). 7 BSC are subject to all preclearance and reporting requirements of the Code. 2. PRECLEARANCE. a) GENERAL. Prior to effecting a purchase or sale for an Employee Account, each Access Person must obtain written approval of the trade by a member of BSAM's Legal or Compliance Department. b) TIMING OF APPROVED TRADE. Written approval of personal securities transactions will be valid for 24 hours. c) TRADING BY COMPLIANCE OFFICER. All trading for Employee Accounts of the Chief Compliance Officer must be approved by another member of BSAM's Legal or Compliance Department. d) GIFTS AND GRATUITIES. Access Persons may not give or receive any gift or gratuity valued in excess of $100 per person, per year (i.e. from same giver, or to same recipient). Access Persons in receipt of gifts less than $100 value, are required to disclose such gift or gratuity to the Compliance Department of Bear, Stearns & Co. ("BSC"). Such disclosure must include, (i) name of gift-giver or receiver; (ii) employee's department; (iii) date gift received or given; and (iv) value of gift, or estimated value if received. Gifts to Clients or any Public/State/Federal Official or Employee have to be precleared by the Compliance Department of BSC in conjunction with BSAM Legal/Compliance to determine legality of the gift(s) in accordance with applicable rules and restrictions. e) PRECLEARANCE REQUIREMENT EXCEPTIONS. The preclearance requirement described in this Paragraph B.2. (the "preclearance requirement") shall not apply to Fund Shares, which are valued at a constant net asset value, except with respect to shares issued by registered investment companies for which BSAM or an affiliated company acts as investment adviser, sub-adviser or distributor, non-Covered Securities, Exempt Transactions, transactions, including futures contracts, in exchange-traded funds that track a broad-based securities index, and municipal securities, except with respect to Investment Personnel who, in connection with his or her regular functions or duties, makes or participates in making recommendations (or obtains information about such recommendations) regarding the purchase or sale of municipal securities by a Managed Account. In addition, the preclearance requirement will not apply to requests to sell Bear Stearns stock in connection with compensation payout, provided that such request is made to BSC by completing the required form to participate in the BSC's sale of the stock at some date in the near future and a copy of such request is forwarded to BSAM Compliance. 8 C. EXEMPTION FOR CERTAIN EMPLOYEE ACCOUNTS The following provisions shall not apply to Employee Accounts in which an Access Person may be deemed to have a direct or indirect Beneficial Interest when the Access Person does not directly or indirectly control the investment of that Employee Account, including Employee Accounts when the Access Person has entered into an agreement in which a third party, such as an investment adviser, has been given full discretion to effect transactions for the Employee Account and a copy of such agreement is provided to BSAM Compliance: 1. Minimum holding periods (paragraph A.7.) 2. Blackout periods (paragraph A.8.) 3. Employee Accounts maintained at BSC (paragraph B.1.) 4. Preclearance (paragraph B.2.) ACCESS PERSONS SHOULD BE AWARE THAT TRADING OF SECURITIES IN EMPLOYEE ACCOUNTS NOT SUBJECT TO BLACKOUT PERIODS MAY CREATE THE APPEARANCE OF IMPROPRIETY AND THE BURDEN SHALL BE ON THE ACCESS PERSON TO DEMONSTRATE THAT THE ACCESS PERSON (I) HAD NO DIRECT OR INDIRECT CONTROL OVER SUCH EMPLOYEE ACCOUNT, AND (II) DID NOT IMPROPERLY BENEFIT FROM INFORMATION RECEIVED IN CONNECTION WITH THE INVESTMENT OF SUCH EMPLOYEE ACCOUNT. D. LIMITED ACCESS PERSONS. 1. DESIGNATION OF LIMITED ACCESS PERSONS. From time to time, the Ethics Committee may designate one or more persons who would otherwise be considered Access Persons as Limited Access Persons on Schedule I of the Code of Ethics Procedures. 2. CONSIDERATIONS USED TO DETERMINE STATUS AS LIMITED ACCESS PERSON. In determining whether to designate any officer, director or employee as a Limited Access Person, the Ethics Committee may consider: > the nature and extent of the person's involvement with day-to-day investment decision making with respect to Managed Accounts; > the nature of the person's interaction with Investment Personnel; > the nature and frequency of the person's personal trading activity; > the likelihood that the person would benefit improperly from his or her knowledge of BSAM's operations and investment decision-making process; and > other factors deemed relevant. 3. STATUS AS A LIMITED ACCESS PERSON. Limited Access Persons shall be exempt from such of the following provisions of this Code as is determined to be appropriate by the Ethics Committee: (i) Minimum Holding Periods (A.7.); (ii) 9 Blackout Periods (A.8.) and (iii) Preclearance (B.2.). Personal trades of New York-based Limited Access Persons shall be reviewed on a T+1 or T+2 basis, as appropriate. 4. TERMINATION OF STATUS OF LIMITED ACCESS PERSON. The Ethics Committee, in its sole discretion, may remove any Limited Access Person from Schedule I for good cause, including, but not limited to, any violation of this Code. E. SPECIAL PROCEDURES FOR MANAGED ACCOUNTS IN WHICH ACCESS PERSONS AND INVESTMENT PERSONNEL HAVE A BENEFICIAL OWNERSHIP INTEREST. 1. GENERAL PRINCIPLE. The special procedures described herein are not intended to abrogate the general principle that the client's interest always comes first. If a procedure is not explicit in any respect, that general principle will control. 2. SPECIFIC PROCEDURES. Managed Accounts in which Access Persons have an interest will be permitted to effect transactions in the same or related securities and on the same day as other Managed Accounts, provided that there are no other policies or procedures that would preclude the transaction (e.g., the "Policy Statement on Insider Trading"). Paragraphs A and B of this Code of Ethics will not apply to transactions for Managed Accounts in which Access Persons have a Beneficial Ownership interest, provided that: a) Investment Personnel in the aggregate do not have a Beneficial Ownership interest equal to 5% or more of the Managed Account; and b) Access Persons in the aggregate do not have a Beneficial Ownership interest equal to 25% or more of the Managed Account. For purposes of compliance with this Paragraph E, the term "Beneficial Ownership" includes the receipt of any performance fees and/or performance allocations. Adopted: August 3, 2000 Revised: November 3, 2000 February 12, 2003 February 25, 2005 February 5, 2001 March 26, 2003 July 10, 2001 September 4, 2003 October 1, 2001 November 17, 2003 November 28, 2001 January 13, 2004 February 28, 2002 May 11, 2004 March 6, 2002 August 23, 2004 September 5, 2002 October 1, 2004 10 SCHEDULE I LIMITED ACCESS PERSONS Midori Matsumoto Hiroshi Miyamoto Hiromichi Otsu Employees of Bear Stearns International Ltd. who staff the Lynx New Media Ventures Fund Dated as of February 25, 2005 11 -----END PRIVACY-ENHANCED MESSAGE-----