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EX-99.B(p)mbcode
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.
W&R Target Funds, Inc.
As Revised: November 15, 2000
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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 W&R Target 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.
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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.
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"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.
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"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
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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
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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.
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(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
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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
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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;
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(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):
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(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.
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(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.
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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.
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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.
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APPENDIX B
POLICY STATEMENT ON INSIDER TRADING
November 15, 2000
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 Waddell & Reed Advisors Group of Mutual Funds, W&R
Funds, Inc. and W&R Target 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.
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(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.
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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 aware 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 aware of material, nonpublic information or trading by a
non-insider while aware 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.
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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
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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 AWARE OF INFORMATION? A person is "aware"
of material nonpublic information if he or she has
knowledge or is conscious or cognizant of such information.
Once a person is aware 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 or she 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 used 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.
Similarly, it would be unlawful for a person to use
information obtained from a family member if the person has
agreed to keep the information confidential or knows (or
reasonably should know) that the family member expected the
information to be kept confidential.
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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 aware 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.
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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.
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