EX-99.B(p)mmmcode
CODE OF ETHICS
Waddell & Reed Financial, Inc.
Waddell & Reed, Inc.
Waddell & Reed Investment Management Company
Austin, Calvert & Flavin, Inc.
Fiduciary Trust Company of New Hampshire
Waddell & Reed Advisors Funds
W & R Funds, Inc.
Target/United Funds, Inc.
As Revised: May 17, 2000
1. Preface
Rule 17j-1 of the Investment Company Act of 1940 (the "Act") requires
registered investment companies and their investment advisers and principal
underwriters to adopt codes of ethics and certain other requirements to
prevent fraudulent, deceptive and manipulative practices. Each investment
company in Waddell & Reed Advisors Funds, W & R Funds, Inc. and Target/United
Funds, Inc. (each a "Fund," and collectively the "Funds") is registered as an
open-end management investment company under the Act. Waddell & Reed, Inc.
("W&R") is the principal underwriter of each of the Funds. Waddell & Reed
Investment Management Company ("WRIMCO") is the investment adviser of the
Funds and may also serve as investment adviser to institutional clients other
than the Funds. Austin, Calvert & Flavin, Inc. ("ACF") is a subsidiary of
WRIMCO and serves as investment adviser to individuals and institutional
clients other than the Funds. Fiduciary Trust Company of New Hampshire
("FTC"), is a trust company and a subsidiary of W&R; Waddell & Reed Financial,
Inc. ("WDR") is the public holding company. Except as otherwise specified
herein, this Code applies to all employees, officers and directors of W&R,
WRIMCO, ACF and the Funds, (collectively, the "Companies").
This Code of Ethics (the "Code") is based on the principle that the officers,
directors and employees of the Companies have a fiduciary duty to place the
interests of their respective advisory clients first, to conduct all personal
securities transactions consistently with this Code and in such a manner as to
avoid any actual or potential conflict of interest or any abuse of their
position of trust and responsibility, and to conduct their personal securities
transactions in a manner which does not interfere with the portfolio
transactions of any advisory client or otherwise take unfair advantage of
their relationship to any advisory client. Persons covered by this Code must
adhere to this general principle as well as comply with the specific
provisions of this Code. Technical compliance with this Code will not
insulate from scrutiny trades which indicate an abuse of an individual's
fiduciary duties to any advisory client.
This Code has been approved, and any material change to it must be approved,
by each Fund's board of directors, including a majority of the Fund's
Disinterested directors.
2. Definitions
"Access Person" means (i) any employee, director, officer or general partner
of a Fund, W&R, WRIMCO or ACF, (ii) any director or officer of FTC or WDR or
any employee of any company in a control relationship to the Companies who, in
the ordinary course of his or her business, makes, participates in or obtains
information regarding the purchase or sale of securities for an advisory
client or whose principal function or duties relate to the making of any
recommendation to an advisory client regarding the purchase or sale of
securities and (iii) any natural person in a control relationship to the
Companies who obtains information concerning recommendations made to an
advisory client with regard to the purchase or sale of a security. A natural
person in a control relationship or an employee of a company in a control
relationship does not become an "Access Person" simply by virtue of the
following: normally assisting in the preparation of public reports, but not
receiving information about current recommendations or trading; or a single
instance of obtaining knowledge of current recommendations or trading
activity, or infrequently and inadvertently obtaining such knowledge. The
Legal Department, in cooperation with department heads, is responsible for
determining who are Access Persons.
"Advisory Client" means any client (including both investment companies and
managed accounts) for which WRIMCO or ACF serves as an investment adviser,
renders investment advice or makes investment decisions.
A security is "being considered for purchase or sale" when the order to
purchase or sell such security has been given to the trading room, or prior
thereto when, in the opinion of the portfolio manager or division head, a
decision, whether or not conditional, has been made (even though not yet
implemented) to make the purchase or sale, or when the decision-making process
has reached a point where such a decision is imminent.
"Beneficial Ownership" shall be interpreted in the same manner as it would be
under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in
determining whether a person is the beneficial owner of a security for
purposes of Section 16 of the Securities Exchange Act of 1934. (See Appendix
A for a more complete description.)
"Control" shall have the same meaning as that set forth in Section 2(a)(9) of
the Act.
"De Minimis Transaction" means a transaction in an equity security (or an
equivalent security) which is equal to or less than 300 shares, or is a fixed-
income security (or an equivalent security) which is equal to or less than
$15,000 principal amount. Purchases and sales, as the case may be, in the
same security or an equivalent security within 30 days will be aggregated for
purposes of determining if the transaction meets the definition of a De
Minimis Transaction.
"Disinterested Director" means a director who is not an "interested person"
within the meaning of Section 2(a)(19) of the Act.
"Equivalent Security" means any security issued by the same entity as the
issuer of a subject security, including options, rights, warrants, preferred
stock, restricted stock, phantom stock, bonds and other obligations of that
company, or security convertible into another security.
"Immediate Family" of an individual means any of the following persons who
reside in the same household as the individual:
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
stepparent father-in-law
Immediate Family includes adoptive relationships and any other relationship
(whether or not recognized by law) which the Legal Department determines could
lead to possible conflicts of interest, diversions of corporate opportunity,
or appearances of impropriety which this Code is intended to prevent.
"Investment Personnel" means those employees who provide information and
advice to a portfolio manager or who help execute the portfolio manager's
decisions.
"Large Cap Transaction" means a purchase or sale of securities issued by (or
equivalent securities with respect to) companies with market capitalization of
at least $2.5 billion.
"Non-Affiliated Director" is a Director that is not an affiliated person of
W&R.
"Portfolio Manager" means those employees entrusted with the direct
responsibility and authority to make investment decisions affecting an
Advisory Client.
"Purchase or sale of a security" includes, without limitation, the writing,
purchase or exercise of an option to purchase or sell a security, conversions
of convertible securities and short sales.
"Security" shall have the meaning set forth in Section 2(a)(36) of the Act,
except that it shall not include shares of registered open-end investment
companies, securities issued by the Government of the United States, short-
term debt securities which are "government securities" within the meaning of
Section 2(a)(16) of the Act, bankers' acceptances, bank certificates of
deposit, commercial paper, high quality short-term debt instruments, including
repurchase agreements, and such other money market instruments as are
designated by the boards of directors of the Companies.
Security does not include futures contracts or options on futures contracts
(provided these instruments are not used to indirectly acquire an interest
which would be prohibited under this Code), but the purchase and sale of such
instruments are nevertheless subject to the reporting requirements of this
Code.
"Security held or to be acquired" by an Advisory Client means (a) any security
which, within the most recent 15 days, (i) is or has been held by an Advisory
Client or (ii) is being or has been considered for purchase by an Advisory
Client, and (b) any option to purchase or sell, and any security convertible
into or exchangeable into, a security described in the preceding clause (a).
3. Pre-Clearance Requirements
Except as otherwise specified in this Code, all Access Persons, except a Non-
Affiliated Director or a member of his or her Immediate Family, shall clear in
advance through the Legal Department any purchase or sale, direct or indirect,
of any Security in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership; provided,
however, that an Access Person shall not be required to clear transactions
effected for securities held in any account over which such Access Person does
not have any direct or indirect influence or control.
For accounts affiliated with Waddell & Reed, Inc. or any of its affiliates or
related companies ("affiliated accounts"), WRIMCO must clear in advance
purchases of equity securities in initial public offerings only.
Except as otherwise provided in Section 5, the Legal Department will not grant
clearance for any purchase by an Access Person if the Security is currently
being considered for purchase or being purchased by any Advisory Client or for
sale by an Access Person if currently being considered for sale or being sold
by any Advisory Client. If the Security proposed to be purchased or sold by
the Access Person is an option, clearance will not be granted if the
securities subject to the option are being considered for purchase or sale as
indicated above. If the Security proposed to be purchased or sold is a
convertible security, clearance will not be granted if either that security or
the securities into which it is convertible are being considered for purchase
or sale as indicated above. The Legal Department will not grant clearance for
any purchase by an affiliated account of any security in an initial public
offering if an Advisory Client is considering the purchase or has submitted an
indication of interest in purchasing shares in such initial public offering.
For all other purchases and sales of securities for affiliated accounts, no
clearance is necessary, but such transactions are subject to WRIMCO's
Procedures for Aggregation of Orders for Advisory Clients, as amended from
time to time.
The Legal Department may refuse to preclear a transaction if it deems the
transaction to involve a conflict of interest, possible diversion of corporate
opportunity, or an appearance of impropriety.
Clearance is effective, unless earlier revoked, until the earlier of (1) the
close of business on the fifth trading day, beginning on and including the day
on which such clearance was granted, or (2) such time as the Access Person
learns that the information provided to the Legal Department in such Access
Person's request for clearance is not accurate. If an Access Person places an
order for a transaction within the five trading days but such order is not
executed within the five trading days (e.g., a limit order), clearance need
not be reobtained unless the person who placed the original order amends such
order in any way. Clearance may be revoked at any time and is deemed revoked
if, subsequent to receipt of clearance, the Access Person has knowledge that a
Security to which the clearance relates is being considered for purchase or
sale by an Advisory Client
4. Exempted Transactions
The pre-clearance requirements in Section 3 and the prohibited actions and
transactions in Section 5 of this Code shall not apply to:
(a) Purchases or sales which are non-volitional on the part of either the
Access Person or the Advisory Client. This exemption includes accounts
managed by WRIMCO, on a discretionary basis, that are deemed to be
beneficially owned by an Access Person.
(b) Purchases which are part of an automatic dividend reinvestment plan.
(c) 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.
(d) Transactions in securities of WDR; however, individuals subject to the
Insider Trading Policy remain subject to such policy. (See Appendix B).
(e) Purchases or sales by a Non-Affiliated Director or a member of his or her
Immediate Family.
5. Prohibited Actions and Transactions
Clearance will not be granted under Section 3 with respect to the following
prohibited actions and transactions. Engaging in any such actions or
transactions by Access Persons will result in sanctions, including, but not
limited to, the sanctions expressly provided for in this Section.
(a) Except with respect to Large Cap Transactions, Investment Personnel and
Portfolio Managers shall not acquire any security for any account in
which such Investment Personnel or Portfolio Manager has a beneficial
interest, excluding the Funds, in an initial public offering of that
security.
(b) Except with respect to Large Cap Transactions, Access Persons shall not
execute a securities transaction on a day during which an Advisory Client
has a pending buy or sell order in that same security or an equivalent
security until that order is executed or withdrawn. An Access Person
shall disgorge any profits realized on trades within such period.
(c) Except for De Minimis Transactions and Large Cap Transactions, a
Portfolio Manager shall not buy or sell a Security within seven (7)
trading days before or after an Advisory Client that the Portfolio
Manager manages trades in that Security or an equivalent security. A
Portfolio Manager shall disgorge any profits realized on such trades
within such period.
(d) Except for De Minimis Transactions and Large Cap Transactions, Investment
Personnel and Portfolio Managers shall not profit in the purchase or
sale, or sale and purchase, of the same (or equivalent) securities within
sixty (60) calendar days. The Legal Department will review all such
short-term trading by Investment Personnel and Portfolio Managers and
may, in its sole discretion, allow exceptions when it has determined that
an exception would be equitable and that no abuse is involved.
Investment Personnel and Portfolio Managers profiting from a transaction
shall disgorge any profits realized on such transaction. This section
shall not apply to options on securities used for hedging purposes for
securities held longer than sixty (60) days.
(e) Except with respect to Large Cap Transactions, Investment Personnel and
Portfolio Managers shall not acquire a security in a private placement,
absent prior authorization from the Legal Department. The Legal
Department will not grant clearance for the acquisition of a security in
a private placement if it is determined that the investment opportunity
should be reserved for an Advisory Client or that the opportunity to
acquire the security is being offered to the individual requesting
clearance by virtue of such individual's position with the Companies. An
individual who has been granted clearance to acquire securities in a
private placement shall disclose such investment when participating in an
Advisory Client's subsequent consideration of an investment in the
issuer. A subsequent decision by an Advisory Client to purchase such a
security shall be subject to independent review by Investment Personnel
with no personal interest in the issuer.
(f) An Access Person shall not execute a securities transaction while in
possession of material non-public information regarding the security or
its issuer.
(g) An Access Person shall not execute a securities transaction which is
intended to result in market manipulation, including but not limited to,
a transaction intended to raise, lower, or maintain the price of any
security or to create a false appearance(s) of active trading.
(h) Except with respect to Large Cap Transactions, an Access Person shall not
execute a securities transaction involving the purchase or sale of a
security at a time when such Access Person intends, or knows of another's
intention, to purchase or sell that security (or an equivalent security)
on behalf of an Advisory Client. This prohibition would apply whether
the transaction is in the same (e.g., two purchases) or the opposite (a
purchase and sale) direction as the transaction of the Advisory Client.
(i) An Access Person shall not cause or attempt to cause any Advisory Client
to purchase, sell, or hold any security in a manner calculated to create
any personal benefit to such Access Person or his or her Immediate
Family. If an Access Person or his or her Immediate Family stands to
materially benefit from an investment decision for an Advisory Client
that the Access Person is recommending or in which the Access Person is
participating, the Access Person shall disclose to the persons with
authority to make investment decisions for the Advisory Client, any
beneficial interest that the Access Person or his or her Immediate Family
has in such security or an equivalent security, or in the issuer thereof,
where the decision could create a material benefit to the Access Person
or his or her Immediate Family or result in the appearance of
impropriety.
(j) Investment Personnel and Portfolio Managers shall not accept from any
person or entity that does or proposes to do business with or on behalf
of an Advisory Client a gift or other thing of more than de minimis value
or any other form of advantage. The solicitation or giving of such gifts
by Investment Personnel and Portfolio Managers is also prohibited. For
purposes of this subparagraph, "de minimis" means $75 or less if received
in the ordinary course of business.
(k) Investment Personnel and Portfolio Managers shall not serve on the board
of directors of publicly traded companies, absent prior authorization
from the Legal Department. The Legal Department will grant authorization
only if it is determined that the board service would be consistent with
the interests of any Advisory Client. In the event board service is
authorized, such individuals serving as directors shall be isolated from
those making investment decisions through procedures designed to
safeguard against potential conflicts of interest, such as a Chinese Wall
policy or investment restrictions.
6. Reporting by Access Persons
(a) Each Access Person, except a Non-Affiliated Director or a member of his
or her Immediate Family, shall require a broker-dealer or bank effecting
a transaction in any security in which such Access Person has, or by
reason of such transaction acquires, any direct or indirect Beneficial
Ownership in the security to timely send duplicate copies of each
confirmation for each securities transaction and periodic account
statement for each brokerage account in which such Access Person has a
beneficial interest to Waddell & Reed, Inc., Attention: Legal Department.
(b) Each Access Person, except a Non-Affiliated Director or a member of his
or her Immediate Family, shall report to the Legal Department no later
than 10 days after the end of each calendar quarter the information
described below with respect to transactions during the quarter in any
security in which such Access Person has, or by reason of such
transaction acquired, any direct or indirect Beneficial Ownership in the
security and with respect to any account established by the Access Person
in which securities were held during the quarter for the direct or
indirect benefit of the Access Person; provided, however, that an Access
Person shall not be required to make a report with respect to
transactions effected for or securities held in any account over which
such Access Person does not have any direct or indirect influence or
control:
(i) The date of the transaction, the name, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of the security;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected and, with respect to an account described
above in this paragraph, with whom the Access Person established the
account;
(v) The date the account was established; and
(vi) The date the report is submitted.
(c) Upon commencement of employment, or, if later, at the time he or she
becomes an Access Person each such Access Person, except a Non-Affiliated
Director or a member of his or her Immediate Family, shall provide the
Legal Department with a report that discloses:
(i) The name, number of shares and principal amount of each security in
which the Access Person had any direct or indirect Beneficial
Ownership when he or she became an Access Person;
(ii) The name of any broker, dealer or bank with which the Access Person
maintained an account in which securities were held for the direct
or indirect benefit of the Access Person as of the date he or she
became an Access Person; and
(iii) The date of the report.
Annually thereafter, each Access Person, except a Non-Affiliated Director
or a member of his or her Immediate Family, shall provide the Legal
Department with a report that discloses the following information
(current as of a date no more than 30 days before the report is
submitted):
(i) The name, number of shares and principal amount of each security in
which the Access Person had any direct or indirect Beneficial
Ownership;
(ii) The name of any broker, dealer or bank with which the Access Person
maintains an account in which securities were held for the direct or
indirect benefit of the Access Person; and
(iii) The date the report is submitted.
However, an Access Person shall not be required to make a report with
respect to securities held in any account over which such Access Person
does not have any direct or indirect influence or control.
In addition, each Access Person, except a Non-Affiliated Director or a
member of his or her Immediate Family, shall annually certify in writing
that all transactions in any security in which such Access Person has, or
by reason of such transaction has acquired, any direct or indirect
Beneficial Ownership have been reported to the Legal Department. If an
Access Person had no transactions during the year, such Access Person
shall so advise the Legal Department.
(d) A Non-Affiliated Director or a member of his or her Immediate Family need
only report a transaction in a security if such director, at the time of
that transaction, knew 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 the date of the transaction by the
director, such security was purchased or sold by an Advisory Client or
was being considered for purchase or sale by an Advisory Client.
(e) In connection with a report, recommendation or decision of an Access
Person to purchase or sell a security, the Companies may, in their
discretion, require such Access Person to disclose his or her direct or
indirect Beneficial Ownership of such security. 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 has any direct
or indirect Beneficial Ownership in the security to which the report
relates.
(f) The Legal Department shall identify all Access Persons who are required
to make reports under this section and shall notify those persons of
their reporting obligations hereunder. The Legal Department shall
review, or determine other appropriate personnel to review, the reports
submitted under this section.
7. Reports to Board
At least annually, each Fund, WRIMCO and W&R shall provide the Fund's board of
directors, and the board of directors shall consider, a written report that:
(a) Describes any issues arising under this Code or the related procedures
instituted to prevent violation of this Code since the last report to the
board of directors, including, but not limited to, information about
material violations of this Code or such procedures and sanctions imposed
in response to such violations; and
(b) Certifies that the Fund, WRIMCO and W&R, as applicable, have adopted
procedures reasonably necessary to prevent Access Persons from violating
this Code.
In addition to the written report otherwise required by this section, all
material violations of this Code and any sanctions imposed with respect
thereto shall be periodically reported to the board of directors of the
Fund with respect to whose securities the violation occurred.
8. Confidentiality of Transactions and Information
Every Access Person shall treat as confidential information the fact that a
security is being considered for purchase or sale by an Advisory Client, the
contents of any research report, recommendation or decision, whether at the
preliminary or final level, and the holdings of an Advisory Client and shall
not disclose any such confidential information without prior consent from the
Legal Department. Notwithstanding the foregoing, with respect to a Fund, the
holdings of the Fund shall not be considered confidential after such holdings
by the Fund have been disclosed in a public report to shareholders or to the
Securities and Exchange Commission.
Access Persons shall not disclose any such confidential information to any
person except those employees and directors who need such information to carry
out the duties of their position with the Companies.
9. Sanctions
Upon discovering a violation of this Code, the Companies may impose such
sanctions as it deems appropriate, including, without limitation, a letter of
censure or suspension or termination of the employment of the violator.
10. Certification of Compliance
Each Access Person, except a Non-Affiliated Director and members of his or her
Immediate Family, shall annually certify that he or she has read and
understands this Code and recognizes that he or she is subject hereto.
Appendix A to the Code of Ethics
"Beneficial Ownership"
For purposes of this Code, "Beneficial Ownership" is interpreted in the same
manner as it would be under Rule 16a-1(a)(2) of the Securities Exchange Act of
1934 in determining whether a person is the beneficial owner of a security for
purposes of Section 16 of the Securities Exchange Act of 1934. In general, a
"beneficial owner" of a security is any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise,
has or shares any direct or indirect pecuniary interest in the security. The
Companies will interpret Beneficial Ownership in a broad sense.
The existence of Beneficial Ownership is clear in certain situations, such as:
securities held in street name by brokers for an Access Person's account,
bearer securities held by an Access Person, securities held by custodians,
pledged securities, and securities held by relatives or others for an Access
Person. An Access Person is also considered the beneficial owner of
securities held by certain family members. The SEC has indicated that an
individual is considered the beneficial owner of securities owned by such
individual's Immediate Family. The relative's ownership of the securities may
be direct (i.e., in the name of the relative) or indirect.
An Access Person is deemed to have Beneficial Ownership of securities owned by
a trust of which the Access Person is the settlor, trustee or beneficiary,
securities owned by an estate of which the Access Person is the executor or
administrator, legatee or beneficiary, securities owned by a partnership of
which the Access Person is a partner, and securities of a corporation of which
the Access Person is a director, officer or shareholder.
An Access Person must comply with the provisions of this Code with respect to
all securities in which such Access Person has a Beneficial Ownership. If an
Access Person is in doubt as to whether she or he has a Beneficial Ownership
interest in a security, the Access Person should report the ownership interest
to the Legal Department. An Access Person may disclaim Beneficial Ownership
as to any security on required reports.
APPENDIX B
POLICY STATEMENT ON INSIDER TRADING
December 8, 1994
I. Prohibition on Insider Trading
All employees, officers, directors and other persons associated with the
Companies as a term of their employment or association are forbidden to misuse
in violation of Federal securities laws or other applicable laws material
nonpublic information.
This prohibition covers transactions for one's own benefit and also for
the benefit of or on behalf of others, including the investment companies
in the United Group of Mutual Funds, Waddell & Reed Funds, Inc. and
Target/United Funds, Inc. (the "Funds") or other investment Advisory
Clients. The prohibition also covers the unlawful dissemination of such
information to others. Such conduct is frequently referred to as
"insider trading". The policy of the Companies applies to every officer,
director, employee and associated person of the Companies and extends to
activities within and outside their duties at the Companies. The
prohibition is in addition to the other policies and requirements under
the Companies' Code of Ethics and other policies issued from time to
time. It applies to transactions in any securities, including publicly
traded securities of affiliated companies (e.g., Waddell & Reed
Financial, Inc. (1))
This Policy Statement is intended to inform personnel of the issues so as
to enable them to avoid taking action that may be unlawful or to seek
clearance and guidance from the Legal Department when in doubt. It is
not the purpose of this Policy Statement to give precise and definitive
rules which will relate to every situation, but rather to furnish enough
information so that subject persons may avoid unintentional violations
and seek guidance when necessary.
(1)Reporting transactions in affiliated corporation securities is in addition to
and does not replace the obligation of certain senior officers to file reports
with the Securities and Exchange Commission.
All employees, officers and directors of the Companies will be furnished
with or have access to a copy of this Policy Statement. Any questions
regarding the policies or procedures described herein should be referred
to the Legal Department. To the extent that inquiry of employees reveals
that this Policy Statement is not self-explanatory or is likely to be
substantively misunderstood, appropriate personnel will conduct
individual or group meetings from time to time to assure that policies
and procedures described herein are understood.
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. In
addition, there is no definitive and precise law as to what constitutes
material nonpublic information or its unlawful use. The law in these
areas has been developed through court decisions primarily interpreting
basic anti-fraud provisions of the Federal securities laws. There is no
statutory definition, only statutory sanctions and procedural
requirements.
While the law concerning insider trading is not static, it is generally
understood that the law is as follows:
(a) It is unlawful for any person, directly or indirectly, to purchase,
sell or cause the purchase or sale of any security, either
personally or on behalf of or for the benefit of others, while in
the possession of material, nonpublic information relating thereto,
if such person knows or recklessly disregards that such information
has been obtained wrongfully, or that such purchase or sale would
constitute a wrongful use of such information. The law relates to
trading by an insider while in possession of material nonpublic
information or 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.
(b) It is unlawful for any person involved in any transaction which
would violate the foregoing to communicate material nonpublic
information to others (or initiate a chain of communication to
others) who purchase or sell the subject security if such sale or
purchase is reasonably foreseeable.
The major elements of insider trading and the penalties for such unlawful
conduct are discussed below. If, after reviewing this Policy Statement,
you have any questions, you should consult the Legal Department.
1. Who is an Insider? The concept of "insider" is broad. It includes
officers, directors and employees of the company in possession of
nonpublic information. In addition, a person can be a "temporary
insider" if he or she enters into a special confidential
relationship in the conduct of the 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 certain of the
employees of such organizations. In addition, the Companies may
become a temporary insider of a company it advises or for which it
performs services.
2. What is Material Information? Trading on inside information is not
a basis for liability unless the information is material. "Material
information" includes information that a reasonable investor would
be likely to consider important in making an investment decision,
information that is reasonably certain to have a substantial effect
on the price of a company's securities if publicly known, or
information which would significantly alter the total mix of
information available to shareholders of a company. Information
that one may consider material includes information regarding
dividends, earnings, estimates of earnings, changes in previously
released earnings estimates, merger or acquisition proposals or
agreements, major litigation, liquidation problems, new products or
discoveries and extraordinary management developments. Material
information is not just information that emanates from the issuer of
the security, but includes market information such as the intent of
someone to commence a tender offer for the securities, a favorable
or critical article in an important financial publication or
information relating to a Fund's buying program.
3. What is Nonpublic Information? Information is nonpublic until it
has been effectively communicated to the marketplace and is
available to investors generally. 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
The Wall Street Journal or other publications of general circulation
would be considered public.
4. When is a Person in Possession of Information? Once a person has
possession of material nonpublic information, he or she may not buy
or sell the subject security, even though the person is prompted by
entirely different reasons to make the transaction, if such person
knows or recklessly disregards that such information was wrongfully
obtained or will be wrongfully used. Advisory personnel's normal
analytical conclusions, no matter how thorough and convincing, can
temporarily be of no use if the analyst has material nonpublic
information, which he knows or recklessly disregards is information
which was wrongfully obtained or would be wrongfully used.
5. When Is Information Wrongfully Obtained or Wrongfully Used?
Wrongfully obtained connotes the idea of gaining the information
from some unlawful activity such as theft, bribery or industrial
espionage. It is not necessary that the subject person gained the
information through his or her own actions. Wrongfully obtained
includes information gained from another person with knowledge that
the information was so obtained or with reckless disregard that the
information was so obtained. Wrongful use of information concerns
circumstances where the person gained the information properly,
often to be used properly, but instead using it in violation of some
express or implied duty of confidentiality. An example would be the
personal use of information concerning Funds' trades. The employee
may need to know a Fund's pending transaction and may even have
directed it, but it would be unlawful to use this information in his
or her own transaction or to reveal it to someone he or she believes
may personally use it.
6. When Is Communicating Information (Tipping) Unlawful? It is
unlawful for a person who, although not trading himself or herself,
communicates material nonpublic information to those who make an
unlawful transaction if the transaction is reasonably foreseeable.
The reason for tipping the information is not relevant. The
tipper's motivation is not of concern, but it is relevant whether
the tipper knew the information was unlawfully obtained or was being
unlawfully used. For example, if an employee tips a friend about a
large pending trade of a Fund, why he or she did so is not relevant,
but it is relevant that he or she had a duty not to communicate such
information. It is unlawful for a tippee to trade while in
possession of material nonpublic information if he or she knew or
recklessly ignored that the information was wrongfully obtained or
wrongfully communicated to him or her directly or through a chain of
communicators.
II. Penalties for Insider Trading
Penalties for unlawful trading or communication of 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 the
penalties below even if he or she does not personally benefit from the
violation. Penalties include civil injunctions, treble damages,
disgorgement of profits, jail sentences, fines for the person who
committed the violation and fines for the employer or other controlling
person. In addition, any violation of this Policy Statement can be
expected to result in serious sanctions by any or all of the Companies,
including, but not limited to, dismissal of the persons involved.
III. Monitoring of Insider Trading
The following are some of the procedures which have been established to
aid the officers, directors and employees of the Companies in avoiding
insider trading, and to aid the Companies in preventing, detecting and
imposing sanctions against insider trading. Every officer, director and
employee of the Companies must follow these procedures or risk serious
sanctions, including dismissal, substantial liability and criminal
penalties. If you have any questions about these procedures, you should
consult the Legal Department.
A. Identifying Inside Information
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 affect the market price of securities if
generally disclosed?
(2) Is the information nonpublic? To whom has this information
been provided? Has the information been effectively
communicated to the marketplace by being published in a
publication of general circulation?
(3) Do you know or have any reason to believe the information was
wrongfully obtained or may be wrongfully used?
If after consideration of the above, you believe that the
information is material and nonpublic and may have been wrongfully
obtained or may be wrongfully used, or if you have questions as to
whether the information is material or nonpublic or may have been
wrongfully obtained or may be wrongfully used, you should take the
following steps:
(1) Report the matter immediately to the Legal Department.
(2) Do not purchase or sell the securities on behalf of yourself or
others.
