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EX-99.B(p)hicode
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
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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
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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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