EX-99.B(p)gscode
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.
As Revised: February 9, 2000
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 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.
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 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).
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 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.
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.
(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.
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 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) 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.
(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 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 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.
Reporting by Access Persons
(a) Each Access Person, except a Non-Affiliated Director or a member of
his or her Immediate Family, shall require a broker-dealer or bank
effecting a transaction in any security in which such Access Person
has, or by reason of such transaction acquires, any direct or indirect
Beneficial Ownership in the security to timely send duplicate copies
of each confirmation for each securities transaction and periodic
account statement for each brokerage account in which such Access
Person has a beneficial interest to Waddell & Reed, Inc., Attention:
Legal Department.
(b) Each Access Person, except a Non-Affiliated Director or a member of
his or her Immediate Family, shall report to the Legal Department no
later than 10 days after the end of each calendar quarter the
information described below with respect to transactions during the
quarter in any security in which such Access Person has, or by reason
of such transaction acquired, any direct or indirect Beneficial
Ownership in the security and with respect to any account established
by the Access Person in which securities were held during the quarter
for the direct or indirect benefit of the Access Person; provided,
however, that an Access Person shall not be required to make a report
with respect to transactions effected for or securities held in any
account over which such Access Person does not have any direct or
indirect influence or control:
(i) The date of the transaction, the name, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of the security;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected and, with respect to an account
described above in this paragraph, with whom the Access Person
established the account;
(v) The date the account was established; and
(vi) The date the report is submitted.
(c) Upon commencement of employment, or, if later, at the time he or she
becomes an Access Person each such Access Person, except a Non-
Affiliated Director or a member of his or her Immediate Family, shall
provide the Legal Department with a report that discloses:
(i) The name, number of shares and principal amount of each security
in which the Access Person had any direct or indirect Beneficial
Ownership when he or she became an Access Person;
(ii) The name of any broker, dealer or bank with which the Access
Person maintained an account in which securities were held for
the direct or indirect benefit of the Access Person as of the
date he or she became an Access Person; and
(iii) The date of the report.
Annually thereafter, each Access Person, except a Non-Affiliated
Director or a member of his or her Immediate Family, shall provide the
Legal Department with a report that discloses the following
information (current as of a date no more than 30 days before the
report is submitted):
(i) The name, number of shares and principal amount of each security
in which the Access Person had any direct or indirect Beneficial
Ownership;
(ii) The name of any broker, dealer or bank with which the Access
Person maintains an account in which securities were held for the
direct or indirect benefit of the Access Person; and
(iii) The date the report is submitted.
However, an Access Person shall not be required to make a report with
respect to securities held in any account over which such Access
Person does not have any direct or indirect influence or control.
In addition, each Access Person, except a Non-Affiliated Director or a
member of his or her Immediate Family, shall annually certify in
writing that all transactions in any security in which such Access
Person has, or by reason of such transaction has acquired, any direct
or indirect Beneficial Ownership have been reported to the Legal
Department. If an Access Person had no transactions during the year,
such Access Person shall so advise the Legal Department.
(d) A Non-Affiliated Director or a member of his or her Immediate Family
need only report a transaction in a security if such director, at the
time of that transaction, knew or, in the ordinary course of
fulfilling his or her official duties as a director, should have known
that, during the 15-day period immediately preceding the date of the
transaction by the director, such security was purchased or sold by an
Advisory Client or was being considered for purchase or sale by an
Advisory Client.
(e) In connection with a report, recommendation or decision of an Access
Person to purchase or sell a security, the Companies may, in their
discretion, require such Access Person to disclose his or her direct
or indirect Beneficial Ownership of such security. Any such report
may contain a statement that the report shall not be construed as an
admission by the person making such report that he or she has any
direct or indirect Beneficial Ownership in the security to which the
report relates.
(f) The Legal Department shall identify all Access Persons who are
required to make reports under this section and shall notify those
persons of their reporting obligations hereunder. The Legal
Department shall review, or determine other appropriate personnel to
review, the reports submitted under this section.
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 Fund with respect to whose securities the violation
occurred.
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.
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.
Certification of Compliance
Each Access Person, except a Non-Affiliated Director and members of his or
her Immediate Family, shall annually certify that he or she has read and
understands this Code and recognizes that he or she is subject hereto.
Appendix A to the Code of Ethics
"Beneficial Ownership"
For purposes of this Code, "Beneficial Ownership" is interpreted in the
same manner as it would be under Rule 16a-1(a)(2) of the Securities
Exchange Act of 1934 in determining whether a person is the beneficial
owner of a security for purposes of Section 16 of the Securities Exchange
Act of 1934. In general, a "beneficial owner" of a security is any person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares any direct or
indirect pecuniary interest in the security. The Companies will interpret
Beneficial Ownership in a broad sense.
The existence of Beneficial Ownership is clear in certain situations, such
as: securities held in street name by brokers for an Access Person's
account, bearer securities held by an Access Person, securities held by
custodians, pledged securities, and securities held by relatives or others
for an Access Person. An Access Person is also considered the beneficial
owner of securities held by certain family members. The SEC has indicated
that an individual is considered the beneficial owner of securities owned
by such individual's Immediate Family. The relative's ownership of the
securities may be direct (i.e., in the name of the relative) or indirect.
An Access Person is deemed to have Beneficial Ownership of securities owned
by a trust of which the Access Person is the settlor, trustee or
beneficiary, securities owned by an estate of which the Access Person is
the executor or administrator, legatee or beneficiary, securities owned by
a partnership of which the Access Person is a partner, and securities of a
corporation of which the Access Person is a director, officer or
shareholder.
An Access Person must comply with the provisions of this Code with respect
to all securities in which such Access Person has a Beneficial Ownership.
If an Access Person is in doubt as to whether she or he has a Beneficial
Ownership interest in a security, the Access Person should report the
ownership interest to the Legal Department. An Access Person may disclaim
Beneficial Ownership as to any security on required reports.
APPENDIX B
POLICY STATEMENT ON INSIDER TRADING
December 8, 1994
I. Prohibition on Insider Trading
All employees, officers, directors and other persons associated with
the Companies as a term of their employment or association are forbidden to
misuse in violation of Federal securities laws or other applicable laws
material nonpublic information.
This prohibition covers transactions for one's own benefit and also
for the benefit of or on behalf of others, including the investment
companies in the United Group of Mutual Funds, Waddell & Reed Funds,
Inc. and Target/United Funds, Inc. (the "Funds") or other investment
Advisory Clients. The prohibition also covers the unlawful
dissemination of such information to others. Such conduct is
frequently referred to as "insider trading". The policy of the
Companies applies to every officer, director, employee and associated
person of the Companies and extends to activities within and outside
their duties at the Companies. The prohibition is in addition to the
other policies and requirements under the Companies' Code of Ethics
and other policies issued from time to time. It applies to
transactions in any securities, including publicly traded securities
of affiliated companies (e.g., Waddell & Reed Financial, Inc. 1)
This Policy Statement is intended to inform personnel of the issues so
as to enable them to avoid taking action that may be unlawful or to
seek clearance and guidance from the Legal Department when in doubt.
It is not the purpose of this Policy Statement to give precise and
definitive rules which will relate to every situation, but rather to
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.
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.
The term "insider trading" is not defined in the Federal securities
laws, but generally is used to refer to the use of material nonpublic
information to trade in securities (whether or not one is an
"insider") or to communications of material nonpublic information to
others. In addition, there is no definitive and precise law as to
what constitutes material nonpublic information or its unlawful use.
The law in these areas has been developed through court decisions
primarily interpreting basic anti-fraud provisions of the Federal
securities laws. There is no statutory definition, only statutory
sanctions and procedural requirements.
While the law concerning insider trading is not static, it is
generally understood that the law is as follows:
(a) It is unlawful for any person, directly or indirectly, to
purchase, sell or cause the purchase or sale of any security,
either personally or on behalf of or for the benefit of others,
while in the possession of material, nonpublic information
relating thereto, if such person knows or recklessly disregards
that such information has been obtained wrongfully, or that such
purchase or sale would constitute a wrongful use of such
information. The law relates to trading by an insider while in
possession of material nonpublic information or trading by a non-
insider while in possession of material nonpublic information,
where the information either was disclosed to the non-insider in
violation of an insider's duty to keep it confidential or was
misappropriated.
(b) It is unlawful for any person involved in any transaction which
would violate the foregoing to communicate material nonpublic
information to others (or initiate a chain of communication to
others) who purchase or sell the subject security if such sale or
purchase is reasonably foreseeable.
The major elements of insider trading and the penalties for such
unlawful conduct are discussed below. If, after reviewing this Policy
Statement, you have any questions, you should consult the Legal
Department.
1. Who is an Insider? The concept of "insider" is broad. It
includes officers, directors and employees of the company in
possession of nonpublic information. In addition, a person can
be a "temporary insider" if he or she enters into a special
confidential relationship in the conduct of the company's affairs
and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among
others, a company's attorneys, accountants, consultants, bank
lending officers, and certain of the employees of such
organizations. In addition, the Companies may become a temporary
insider of a company it advises or for which it performs
services.
2. What is Material Information? Trading on inside information is
not a basis for liability unless the information is material.
"Material information" includes information that a reasonable
investor would be likely to consider important in making an
investment decision, information that is reasonably certain to
have a substantial effect on the price of a company's securities
if publicly known, or information which would significantly alter
the total mix of information available to shareholders of a
company. Information that one may consider material includes
information regarding dividends, earnings, estimates of earnings,
changes in previously released earnings estimates, merger or
acquisition proposals or agreements, major litigation,
liquidation problems, new products or discoveries and
extraordinary management developments. Material information is
not just information that emanates from the issuer of the
security, but includes market information such as the intent of
someone to commence a tender offer for the securities, a
favorable or critical article in an important financial
publication or information relating to a Fund's buying program.
3. What is Nonpublic Information? Information is nonpublic until it
has been effectively communicated to the marketplace and is
available to investors generally. One must be able to point to
some fact to show that the information is generally public. For
example, information found in a report filed with the SEC, or
appearing in The Wall Street Journal or other publications of
general circulation would be considered public.
4. When is a Person in Possession of Information? Once a person has
possession of material nonpublic information, he or she may not
buy or sell the subject security, even though the person is
prompted by entirely different reasons to make the transaction,
if such person knows or recklessly disregards that such
information was wrongfully obtained or will be wrongfully used.
Advisory personnel's normal analytical conclusions, no matter how
thorough and convincing, can temporarily be of no use if the
analyst has material nonpublic information, which he knows or
recklessly disregards is information which was wrongfully
obtained or would be wrongfully used.
5. When Is Information Wrongfully Obtained or Wrongfully Used?
Wrongfully obtained connotes the idea of gaining the information
from some unlawful activity such as theft, bribery or industrial
espionage. It is not necessary that the subject person gained
the information through his or her own actions. Wrongfully
obtained includes information gained from another person with
knowledge that the information was so obtained or with reckless
disregard that the information was so obtained. Wrongful use of
information concerns circumstances where the person gained the
information properly, often to be used properly, but instead
using it in violation of some express or implied duty of
confidentiality. An example would be the personal use of
information concerning Funds' trades. The employee may need to
know a Fund's pending transaction and may even have directed it,
but it would be unlawful to use this information in his or her
own transaction or to reveal it to someone he or she believes may
personally use it.
6. When Is Communicating Information (Tipping) Unlawful? It is
unlawful for a person who, although not trading himself or
herself, communicates material nonpublic information to those who
make an unlawful transaction if the transaction is reasonably
foreseeable. The reason for tipping the information is not
relevant. The tipper's motivation is not of concern, but it is
relevant whether the tipper knew the information was unlawfully
obtained or was being unlawfully used. For example, if an
employee tips a friend about a large pending trade of a Fund, why
he or she did so is not relevant, but it is relevant that he or
she had a duty not to communicate such information. It is
unlawful for a tippee to trade while in possession of material
nonpublic information if he or she knew or recklessly ignored
that the information was wrongfully obtained or wrongfully
communicated to him or her directly or through a chain of
communicators.
II. Penalties for Insider Trading
Penalties for unlawful trading or communication of material nonpublic
information are severe, both for individuals involved in such unlawful
conduct and their employers. A person can be subject to some or all
the penalties below even if he or she does not personally benefit from
the violation. Penalties include civil injunctions, treble damages,
disgorgement of profits, jail sentences, fines for the person who
committed the violation and fines for the employer or other
controlling person. In addition, any violation of this Policy
Statement can be expected to result in serious sanctions by any or all
of the Companies, including, but not limited to, dismissal of the
persons involved.
III. Monitoring of Insider Trading
The following are some of the procedures which have been established
to aid the officers, directors and employees of the Companies in
avoiding insider trading, and to aid the Companies in preventing,
detecting and imposing sanctions against insider trading. Every
officer, director and employee of the Companies must follow these
procedures or risk serious sanctions, including dismissal, substantial
liability and criminal penalties. If you have any questions about
these procedures, you should consult the Legal Department.
A. Identifying Inside Information
Before trading for yourself or others in the securities of a
company about which you may have potential inside information,
ask yourself the following questions:
(1) Is the information material? Is this information that an
investor would consider important in making his or her
investment decisions? Is this information that would
substantially affect the market price of securities if
generally disclosed?
(2) Is the information nonpublic? To whom has this information
been provided? Has the information been effectively
communicated to the marketplace by being published in a
publication of general circulation?
(3) Do you know or have any reason to believe the information
was wrongfully obtained or may be wrongfully used?
If after consideration of the above, you believe that the
information is material and nonpublic and may have been
wrongfully obtained or may be wrongfully used, or if you have
questions as to whether the information is material or nonpublic
or may have been wrongfully obtained or may be wrongfully used,
you should take the following steps:
(1) Report the matter immediately to the Legal Department.
(2) Do not purchase or sell the securities on behalf of yourself
or others.
As Revised September 1, 1999, and
As Revised February 9, 2000
