THE PRIMARY TREND FUND, INC.
THE PRIMARY INCOME FUNDS, INC.,
and
ARNOLD INVESTMENT COUNSEL INCORPORATED
Code of Ethics
Amended effective as of December 9, 1999
I. DEFINITIONS
A. "Access person" means any director, officer or advisory person of the
Fund or of the Adviser.
B. "Act" means the Investment Company Act of 1940, as amended.
C. "Adviser" means Arnold Investment Counsel Incorporated.
D. "Advisory person" means: (i) any employee of the Fund or Adviser or of
any company in a control relationship to the Fund or Adviser, who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of Covered Securities by the Fund, or whose functions relate to the
making of any recommendations with respect to such purchases or sales;
and (ii) any natural person in a control relationship to the Fund or
Adviser who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of Covered Securities by the
Fund.
E. A Covered Security is "being considered for purchase or sale" when a
recommendation to purchase or sell the Covered Security has been made
and communicated and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
F. "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 as such Act and the rules and regulations
promulgated thereunder.
G. "Control" has the same meaning as that set forth in Section 2(a)(9) of
the Act.
H. "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, except that it does not include:
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(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
(iii) Shares issued by open-end registered investment companies.
I. "Disinterested director" means a director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19)
of the Act and the rules and regulations promulgated thereunder.
J. "Fund" means The Primary Trend Fund, Inc., The Primary Income Funds,
Inc. or any series of The Primary Income Funds, Inc.
K. "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately
before the registration, was not subject to the reporting requirements
of Section 13 or Section 15(d) of the Securities Exchange Act of 1934.
L. "Investment personnel" means: (i) any employee of the Fund or Adviser
or of any company in a control relationship to the Fund or Adviser
who, in connection with his or her regular functions or duties, makes
or participates in making recommendations regarding the purchase or
sale of securities by the Fund; and (ii) any natural person who
controls the Fund or Adviser and who obtains information concerning
recommendations made to the Fund regarding the purchase or sale of
securities by the Fund.
M. A "Limited Offering" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2)
or Section 4(6) thereof or pursuant to Rule 504, Rule 505 or Rule 506
thereunder.
N. "Purchase or sale of a Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security.
II. APPROVAL OF CODE OF ETHICS
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A. The Board of Directors of the Fund, including a majority of the
Disinterested directors, shall approve this Code of Ethics and any
material changes thereto. Prior to approving this Code of Ethics and
any material changes thereto, the Board of Directors must determine
that this Code of Ethics contains provisions reasonably necessary to
prevent access persons from violating Rule 17j-1(b) of the Act and
shall receive a certification from the Adviser that it has adopted
such procedures as are reasonably necessary to prevent access persons
of the Adviser from violating this Code of Ethics.
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B. No less frequently than annually, the officers of the Fund and the
officers of the Adviser shall furnish a report to the Board of
Directors of the Fund:
1. Describing issues arising under the Code of Ethics since the last
report to the Board of Directors, including, but not limited to,
information about material violations of the Code of Ethics and
sanctions imposed in response to such material violations. Such
report shall also include a list of access persons under the Code
of Ethics.
2. Certifying that the Fund and Adviser have adopted such procedures
as are reasonably necessary to prevent access persons from
violating the Code of Ethics.
C. This Code of Ethics, the certifications required by Sections II.A. and
II.B.(2), and the reports required by Section II.B.(1) shall be
maintained by the Fund's Administrator. The reports required by
Section V shall be maintained by the Fund's President or designee.
III. EXEMPTED TRANSACTIONS
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The prohibitions of Section IV of this Code of Ethics shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases or sales of Covered Securities which are not eligible
for purchase or sale by any Fund; provided, however, that the
prohibitions of Section IV.B of this Code of Ethics shall apply
to such purchases and sales.
(c) Purchases or sales which are non-volitional on the part of either
the access person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) 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.
(f) Purchases or sales which receive the prior approval of the Board
of Directors of the Fund because they are only remotely
potentially harmful to the Fund because they would be very
unlikely to affect a highly institutional market, or because they
clearly are not related economically to the securities to be
purchased, sold or held by the Fund.
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IV. PROHIBITED PURCHASES AND SALES
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A. Except in a transaction exempted by Section III of this Code, no
access person shall purchase or sell, directly or indirectly, any
Covered Security in which he has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
and which to his actual knowledge at the time of such purchase or
sale is being considered for purchase or sale by the Fund or is
being purchased or sold by the Fund.
B. Except in a transaction exempted by Section III of this Code of
Ethics, Investment Personnel (other than the Fund's President)
must obtain approval from the Fund's President before directly or
indirectly acquiring beneficial ownership in any securities in an
Initial Public Offering or in a Limited Offering. The Fund's
President must obtain approval from a majority of the
Disinterested directors before directly or indirectly acquiring
beneficial ownership in any securities in an Initial Public
Offering or in a Limited Offering. Prior approval shall not be
given if the Fund's President or the Disinterested directors, as
applicable, believe(s) that the investment opportunity should be
reserved for the Fund or is being offered to the individual by
reason of his or her position with the Fund.
V. REPORTING
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A. Except as provided in Section V.B. of this Code of Ethics, every
access person shall report to the Fund the information described
in Section V.C., Section V.D. and Section V.E. of this Code of
Ethics. All reports shall be filed with the Fund's President or
designee.
B. 1. A Disinterested director of the Fund need not make a report
pursuant to Section V.C. and V.E. of this Code of Ethics and
need only report a transaction in a Covered Security
pursuant to Section V.D. of this Code of Ethics if such
Disinterested director, at the time of such transaction,
knew or, in the ordinary course of fulfilling his official
duties as a director of the Fund, should have known that,
during the 15-day period immediately preceding the date of
the transaction by the director, such Covered Security was
purchased or sold by the Fund or was being considered by the
Fund or the Adviser for purchase or sale by the Fund.
2. An access person need not make a report with respect to
transactions effected for, and Covered Securities held in,
any account over which the person has no direct or indirect
influence or control.
3. An access person need not make a quarterly transaction
report pursuant to Section V.D. of this Code of Ethics if
the report would duplicate information contained in broker
trade confirmations or account statements received by the
Fund's President with respect to the access
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person in the time period required by Section V.D., provided
that all of the information required by Section V.D. is
contained in the broker trade confirmations or account
statements or in the records of the Fund.
C. Every access person shall, no later than ten (10) days after the
person becomes an access person, file an initial holdings report
containing the following information:
1. The title, number of shares and principal amount of each
Covered Security in which the access person had any direct
or indirect beneficial ownership when the person becomes an
access person;
2. The name of any broker, dealer or bank with whom the access
person maintained an account in which any securities were
held for the direct or indirect benefit of the access
person; and
3. The date that the report is submitted by the access person.
D. Every access person shall, no later than ten (10) days after the
end of a calendar quarter, file a quarterly transaction report
containing the following information:
1. With respect to any transaction during the quarter in a
Covered Security in which the access person had any direct
or indirect beneficial ownership:
(a) The date of the transaction, the title and the number
of shares, and the principal amount of each security
involved;
(b) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(c) The price of the Covered Security at which the
transaction was effected;
(d) The name of the broker, dealer or bank with or through
whom the transaction was effected; and
(e) The date that the report is submitted by the access
person.
2. With respect to any account established by the access person
in which any securities were held during the quarter for the
direct or indirect benefit of the access person:
(a) The name of the broker, dealer or bank with whom the
access person established the account;
(b) The date the account was established; and
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(c) The date that the report is submitted by the access
person.
E. Every access person shall, no later than January 30 each year, file an
annual holdings report containing the following information as of the
preceding December 31:
1. The title, number of shares and principal amount of each Covered
Security in which the access person had any direct or indirect
beneficial ownership;
2. The name of any broker, dealer or bank with whom the access
person maintains an account in which any securities are held for
the direct or indirect benefit of the access person; and
3. The date that the report is submitted by the access person.
F. Any report filed pursuant to Section V.C., Section V.D. or Section
V.E. of this Code of Ethics may contain a statement that the report
shall not be construed as an admission by the person making such
report that he has any direct or indirect beneficial ownership in the
security to which the report relates.
G. The Fund's President or designee shall review all reports filed
pursuant to Section V.C., Section V.D. or Section V.E. of this Code of
Ethics. The Fund's President or designee shall identify all access
persons who are required to file reports pursuant to this Section V of
this Code of Ethics and must inform such access persons of their
reporting obligation.
III. SANCTIONS
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Upon discovering a violation of this Code of Ethics, the Board of Directors of
the Fund or the Adviser, as applicable, may impose such sanctions as it deems
appropriate.
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