EX-99.B(p)cmcode
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
United Group of Mutual Funds
Waddell & Reed Funds, Inc.
Target/United Funds, Inc.
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As Revised: February 9, 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 the United Group of Mutual Funds,
Waddell & Reed Funds, Inc. and Target/United Funds, Inc.
(each a "Fund," and collectively the "Funds") is registered
as an open-end management investment company under the Act.
Waddell & Reed, Inc. ("W&R") is the principal underwriter of
each of the Funds. Waddell & Reed Investment Management
Company ("WRIMCO") is the investment adviser of the Funds
and may also serve as investment adviser to institutional
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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
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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, WRIMCO or ACF, (ii) any director
or officer of W&R, 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
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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.)
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"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:
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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.
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"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.
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"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).
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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 or securities held in any account over which such Access
Person does not have any direct or indirect influence or
control. The Legal Department shall retain written records
of such clearance requests. 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
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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
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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.
(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.
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(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 hereof 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
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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
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used for hedging purposes for securities held longer
than sixty (60) days.
(e) 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.
(f) 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.
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(g) 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.
(h) An Access Person shall not execute a securities
transaction while in possession of material non-public
information regarding the security or its issuer.
(i) An Access Person shall not execute a securities
transaction which is intended to result in market
manipulation, including but not limited to, a
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transaction intended to raise, lower, or maintain the
price of any security or to create a false
appearance(s) of active trading.
(j) 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.
(k) 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
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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.
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
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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;
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(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
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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
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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
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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,
has 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
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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,
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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.
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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
December 8, 1994
I. Prohibition on Insider Trading
All employees, officers, directors and other persons
associated with the Companies as a term of their employment
or association are forbidden to misuse in violation of
Federal securities laws or other applicable laws material
nonpublic information.
This prohibition covers transactions for one's own
benefit and also for the benefit of or on behalf of
others, including the investment companies in the
United Group of Mutual Funds, Waddell & Reed Funds,
Inc. and Target/United Funds, Inc. (the "Funds") or
other investment Advisory Clients. The prohibition
also covers the unlawful dissemination of such
information to others. Such conduct is frequently
referred to as "insider trading". The policy of the
Companies applies to every officer, director, employee
and associated person of the Companies and extends to
activities within and outside their duties at the
Companies. The prohibition is in addition to the other
policies and requirements under the Companies' Code of
Ethics and other policies issued from time to time. It
applies to transactions in any securities, including
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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.
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.
1Reporting 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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The term "insider trading" is not defined in the
Federal securities laws, but generally is used to refer
to the use of material nonpublic information to trade
in securities (whether or not one is an "insider") or
to communications of material nonpublic information to
others. In addition, there is no definitive and
precise law as to what constitutes material nonpublic
information or its unlawful use. The law in these
areas has been developed through court decisions
primarily interpreting basic anti-fraud provisions of
the Federal securities laws. There is no statutory
definition, only statutory sanctions and procedural
requirements.
While the law concerning insider trading is not static,
it is generally understood that the law is as follows:
(a) It is unlawful for any person, directly or
indirectly, to purchase, sell or cause the
purchase or sale of any security, either
personally or on behalf of or for the benefit of
others, while in the possession of material,
nonpublic information relating thereto, if such
person knows or recklessly disregards that such
information has been obtained wrongfully, or that
such purchase or sale would constitute a wrongful
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use of such information. The law relates to
trading by an insider while in possession of
material nonpublic information or trading by a
non-insider while in possession of material
nonpublic information, where the information
either was disclosed to the non-insider in
violation of an insider's duty to keep it
confidential or was misappropriated.
(b) It is unlawful for any person involved in any
transaction which would violate the foregoing to
communicate material nonpublic information to
others (or initiate a chain of communication to
others) who purchase or sell the subject security
if such sale or purchase is reasonably
foreseeable.
The major elements of insider trading and the penalties
for such unlawful conduct are discussed below. If,
after reviewing this Policy Statement, you have any
questions, you should consult the Legal Department.
1. Who is an Insider? The concept of "insider" is
broad. It includes officers, directors and
employees of the company in possession of
nonpublic information. In addition, a person can
be a "temporary insider" if he or she enters into
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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
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litigation, liquidation problems, new products or
discoveries and extraordinary management
developments. Material information is not just
information that emanates from the issuer of the
security, but includes market information such as
the intent of someone to commence a tender offer
for the securities, a favorable or critical
article in an important financial publication or
information relating to a Fund's buying program.
3. What is Nonpublic Information? Information is
nonpublic until it has been effectively
communicated to the marketplace and is available
to investors generally. One must be able to point
to some fact to show that the information is
generally public. For example, information found
in a report filed with the SEC, or appearing in
The Wall Street Journal or other publications of
general circulation would be considered public.
4. When is a Person in Possession of Information?
Once a person has possession of material nonpublic
information, he or she may not buy or sell the
subject security, even though the person is
prompted by entirely different reasons to make the
transaction, if such person knows or recklessly
disregards that such information was wrongfully
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obtained or will be wrongfully used. Advisory
personnel's normal analytical conclusions, no
matter how thorough and convincing, can
temporarily be of no use if the analyst has
material nonpublic information, which he knows or
recklessly disregards is information which was
wrongfully obtained or would be wrongfully used.
5. When Is Information Wrongfully Obtained or
Wrongfully Used? Wrongfully obtained connotes the
idea of gaining the information from some unlawful
activity such as theft, bribery or industrial
espionage. It is not necessary that the subject
person gained the information through his or her
own actions. Wrongfully obtained includes
information gained from another person with
knowledge that the information was so obtained or
with reckless disregard that the information was
so obtained. Wrongful use of information concerns
circumstances where the person gained the
information properly, often to be used properly,
but instead using it in violation of some express
or implied duty of confidentiality. An example
would be the personal use of information
concerning Funds' trades. The employee may need
to know a Fund's pending transaction and may even
have directed it, but it would be unlawful to use
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this information in his or her own transaction or
to reveal it to someone he or she believes may
personally use it.
6. When Is Communicating Information (Tipping)
Unlawful? It is unlawful for a person who,
although not trading himself or herself,
communicates material nonpublic information to
those who make an unlawful transaction if the
transaction is reasonably foreseeable. The reason
for tipping the information is not relevant. The
tipper's motivation is not of concern, but it is
relevant whether the tipper knew the information
was unlawfully obtained or was being unlawfully
used. For example, if an employee tips a friend
about a large pending trade of a Fund, why he or
she did so is not relevant, but it is relevant
that he or she had a duty not to communicate such
information. It is unlawful for a tippee to trade
while in possession of material nonpublic
information if he or she knew or recklessly
ignored that the information was wrongfully
obtained or wrongfully communicated to him or her
directly or through a chain of communicators.
II. Penalties for Insider Trading
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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
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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.
As Revised September 1, 1999,
and
As Revised February 9, 2000
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