EX-99.B(p)wracode
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
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.
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 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
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.
[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 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.
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 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.
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.
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.
