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Exhibit (p)(1)
M.S.D. & T. FUNDS, INC.
CODE OF ETHICS
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I. Legal Requirement.
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Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the
"1940 Act"), makes it unlawful for any director or officer of M.S.D. & T. Funds,
Inc. (the "Company") in connection with the purchase or sale by such person of a
security "held or to be acquired" by the Company:
1. To employ any device, scheme or artifice to defraud the Company;
2. To make to the Company any untrue statement of a material fact or
omit to state to the Company a material fact necessary in order
to make the statements made, in light of the circumstances under
which they are made, not misleading;
3. To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Company;
or
4. To engage in any manipulative practice with respect to the
Company's investment portfolios.
II. Purpose of the Code of Ethics.
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The Company expects that its directors and officers will conduct their
personal investment activities in accordance with (1) the duty at all times to
place the interests of the Company's shareholders first, (2) the requirement
that all personal securities transactions be conducted consistent with this Code
of Ethics and in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility,
and (3) the fundamental standard that investment company personnel should not
take inappropriate advantage of their positions.
In view of the foregoing, the provisions of Section 17(j) of the 1940 Act,
the Securities and Exchange Commission's 1940 Act Release No. 23958 "Personal
Investment Activities of Investment Company Personnel" (August 24, 1999), the
"Report of the Advisory Group on Personal Investing" issued by the Investment
Company Institute on May 9, 1994 and the Securities and Exchange Commission's
September 1994 Report on "Personal Investment Activities of Investment Company
Personnel," the Company has determined to adopt this Code of Ethics on behalf of
the Company to specify a code of conduct for certain types of personal
securities transactions which might involve conflicts of interest or an
appearance of impropriety, and to establish reporting requirements and
enforcement procedures.
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III. Definitions.
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A. An "Access Person" means: (1) each director or officer of the Company;
(2) each employee (if any) of the Company (or of any company in a
control relationship to the Company) who in connection with his or her
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by the Company
or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and (3) any natural person in a
control relationship to the Company who obtains information concerning
recommendations made to the Company with regard to the purchase or sale
of a security.
For purposes of this Code of Ethics, an "Access Person" does not
include any person who is subject to the securities transaction pre-
clearance requirements and securities transaction reporting
requirements of the Code of Ethics adopted by the Company's investment
adviser, any sub-adviser, or principal underwriter in compliance with
Rule 17j-1 of the 1940 Act and Rule 204-2(a)(12) of the Investment
Advisers Act of 1940 or Section 15(f) of the Securities Exchange Act of
1934, as applicable.
B. "Restricted Director" or "Restricted Officer" means each director or
officer of the Company who is not also a director, officer, partner,
employee or controlling person of the Company's investment adviser, any
sub-adviser, administrator, custodian, transfer agent, or distributor.
C. An Access Person's "immediate family" includes a spouse, minor children
and adults living in the same household as the Access Person.
D. A security is "held or to be acquired" if within the most recent 15
days it (1) is or has been held by the Company, or (2) is being or has
been considered by the Company or its investment adviser or any sub-
adviser for purchase by the Company. A purchase or sale includes the
writing of an option to purchase or sell and any security that is
exchangeable for or convertible into, any security that is held or to
be acquired by a fund.
E. An "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 Sections 13 or 15(d) of the Securities Exchange Act of 1934.
F. "Investment Personnel" of the Company means:
(i) Any employee of the Company (or of any company in a control
relationship to the Company) who, in connection with his or her
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regular functions or duties, makes or participates in making
recommendations regarding the purchase or sale of securities by the
Company.
(ii) Any natural person who controls the Company and who obtains
information concerning recommendations made to the Company regarding
the purchase or sale of securities by the Company.
G. 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) or pursuant to Rule 504, Rule 505 or Rule 506 under
the Securities Act of 1933.
H. "Non-Reportable Security" means:
1. Direct obligations of the Government of the United States;
banker's acceptances; bank certificates of deposit; commercial
paper; high quality short-term debt instruments (any instrument
having a maturity at issuance of less than 366 days and that is
rated in one of the two highest rating categories by a nationally
recognized statistical rating organization), including repurchase
agreements; and shares of registered open-end investment
companies.
2. Securities purchased or sold in any account over which the Access
Person has no direct or indirect influence or control.
I. "Exempt Security" means:
1. Securities purchased or sold in a transaction which is non-
volitional on the part of either the Access Person or the Company.
2. Securities acquired as a part of an automatic dividend
reinvestment plan.
3. Securities acquired upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to
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the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
4. Securities which the Company's investment portfolios are not
permitted to purchase under the investment objectives and policies
set forth in the Company's then current prospectus(es) under the
Securities Act of 1933 or the Company's registration statement on
Form N-1A.
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IV. Policies of the Company Regarding Personal Securities Transactions.
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A. General Policy.
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No Access Person of the Company shall engage in any act, practice
or course of business that would violate the provisions of Rule
17j-1(b) set forth above, or in connection with any personal
investment activity, engage in conduct inconsistent with this Code
of Ethics.
B. Specific Policies.
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1. Restrictions on Personal Securities Transactions By Access
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Persons Other Than Restricted Directors and Restricted
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Officers.
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a. No Access Person who is not a Restricted Director or
Restricted Officer may buy or sell securities other than
Non-Reportable Securities and Exempt Securities for his or
her personal portfolio or the portfolio of a member of his
or her immediate family without obtaining oral
authorization from the Compliance Officer of the Company's
investment adviser prior to effecting such security
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transaction.
A written authorization for such security transaction will
be provided by the investment adviser's Compliance Officer
to the person receiving the authorization (if granted) and
to the Company's administrator to memorialize the oral
authorization that was granted.
Note: If an Access Person has questions as to
whether purchasing or selling a security for his
or her personal portfolio or the portfolio of a
member of his or her immediate family requires
prior oral authorization, the Access Person should
consult the investment adviser's Compliance
Officer for clearance or denial of clearance to
trade prior to effecting any securities
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transactions.
b. Pre-clearance approval under paragraph (a) will expire at
the close of business on the trading day after the date on
which oral authorization is received, and the Access
Person is required to renew clearance for the transaction
if the trade is not completed before the authority
expires.
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c. No clearance will be given to an Access Person other than
a Restricted Director or Restricted Officer to purchase or
sell any security (1) on a day when any portfolio of the
Company has a pending "buy" or "sell" order in that same
security until that order is executed or withdrawn or (2)
when the Compliance Officer has been advised by the
investment adviser that the same security is being
considered for purchase or sale for any portfolio of the
Company.
d. The pre-clearance requirement contained in paragraph
IV.B.1.a above shall apply to all purchases of a
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beneficial interest in any security through an Initial
Public Offering or a Limited Offering by any Access Person
who is also classified as Investment Personnel. A record
of any decision and the reason supporting such decision to
approve the acquisition by Investment Personnel of Initial
Public Offerings or Limited Offerings shall be made by the
Compliance Officer.
2. Restrictions on Personal Securities Transactions by Restricted
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Directors and Restricted Officers.
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The Company recognizes that a Restricted Director and a
Restricted Officer do not have on-going, day-to-day
involvement with the operations of the Company. In addition,
it has been the practice of the Company to give information
about securities purchased or sold by the Company or
considered for purchase or sale by the Company to Restricted
Directors and Restricted Officers in materials circulated more
than 15 days after such securities are purchased or sold by
the Company or are considered for purchase or sale by the
Company. Accordingly, the Company believes that less stringent
controls are appropriate for Restricted Directors and
Restricted Officers, as follows:
a. The securities pre-clearance requirement contained in
paragraph IV.B.1.a. above shall apply to a Restricted
Director or Restricted Officer only if he or she knew or,
in the ordinary course of fulfilling his or her official
duties as a director or officer, should have known, that
during the fifteen day period before the transaction in a
security (other than a Non-Reportable Security or an
Exempt Security) or at the time of the transaction that
the security purchased or sold by him or her (other than a
Non-Reportable Security or an Exempt Security) was also
purchased or sold by the Company or considered for
purchase or sale by the Company.
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b. If the pre-clearance provisions of the preceding paragraph
apply, no clearance will be given to a Restricted Director
or Restricted Officer to purchase or sell any security (1)
on a day when any portfolio of the Company has a pending
"buy" or "sell" order in that same security until that
order is executed or withdrawn or (2) when the Compliance
Officer has been advised by the investment adviser that
the same security is being considered for purchase or sale
for any portfolio of the Company.
V. Procedures.
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A. In order to provide the Company with information to enable it to
determine with reasonable assurance whether the provisions of this
Code are being observed by its Access Persons:
1. Each Access Person of the Company other than a director who is
not an "interested person" of the Company (as defined in the
1940 Act) will submit to the Company's administrator an Initial
Holdings Report in the form attached hereto as Exhibit A that
lists all securities other than Non-Reportable Securities
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beneficially owned/1/ by the Access Person. This report must be
submitted within ten days of becoming an Access Person (or for
persons already designated as Access Persons, by January 30,
2001), and must include the title of each security, the number
of shares held, and the principal amount of the security. The
Report must also include a list of any securities accounts
maintained with any broker, dealer or bank.
2. Each Access Person of the Company other than a director who is
not an "interested person" of the Company (as defined in the
1940 Act) will also submit to the Company's administrator an
Annual
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1. You will be treated as the "beneficial owner" of a security under this
policy only if you have a direct or indirect pecuniary interest in the
security.
(a) A direct pecuniary interest is the opportunity, directly or
indirectly, to profit, or to share the profit, from the
transaction.
(b) An indirect pecuniary interest is any nondirect financial
interest, but is specifically defined in the rules to include
securities held by members of your immediate family sharing the
same household; securities held by a partnership of which you are
a general partner; securities held by a trust of which you are the
settlor if you can revoke the trust without the consent of another
person, or a beneficiary if you have or share investment control
with the trustee; and equity securities which may be acquired upon
exercise of an option or other right, or through conversion.
For interpretive guidance on this test, you should consult
counsel.
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Holdings Report attached hereto as Exhibit A no later than
thirty days after the end of the calendar year. The Annual
Holdings Report must list all securities other than Non-
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Reportable Securities beneficially owned by the Access
Person, the title of each security, the number of shares held,
and the principal amount of the security, as well as a list of
any securities accounts maintained with any broker, dealer or
bank.
3. Each Access Person of the Company other than a Restricted
Director or Restricted Officer shall direct his or her broker
to supply to the Company's administrator, on a timely basis,
duplicate copies of confirmations of all securities
transactions in which the person has, or by reason of such
transaction acquires any direct or indirect beneficial
ownership and copies of periodic statements for all securities
accounts.
4. Each Access Person of the Company, other than a director who is
not an "interested person" (as defined in the 1940 Act), shall
submit reports in the form attached hereto as Exhibit B to the
Company's administrator, showing all transactions in securities
other than Non-Reportable Securities in which the person has,
or by reason of such transaction acquires, any direct or
indirect beneficial ownership, as well as all accounts
established with brokers, dealers or banks during the quarter
in which any securities were held for the direct or indirect
beneficial interest of the Access Person./2/ Such reports shall
be filed no later than 10 days after the end of each calendar
quarter. An Access Person of the Company need not make a
quarterly transaction report under this paragraph if all of the
information required by this paragraph 4 is contained in the
brokerage confirmations or account statements required to be
submitted under paragraph 3.
5. Each director who is not an "interested person" of the Company
need not make an initial or annual holdings report but shall
submit the same quarterly report as required under paragraph 4
to the Company's administrator, but only for a transaction in a
security other than a Non-Reportable Security where he or she
knew at the time of the transaction 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
or after the date of the transaction, such security is or was
purchased or sold, or considered for purchase or sale, by the
Company.
___________________
/2./ See footnote 1 above.
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6. The administrator of the Company shall notify each Access
Person of the Company who may be subject to the pre-clearance
requirement or required to make reports pursuant to this Code
that such person is subject to the pre-clearance or reporting
requirements and shall deliver a copy of this Code to each
such person.
7. The administrator of the Company shall review the initial
holdings reports, annual holdings reports, and quarterly
transaction reports received and, as appropriate, compare the
reports with the pre-clearance authorization received, and
report to the Company's Board of Directors:
a. with respect to any transaction that appears to evidence a
possible violation of this Code; and
b. apparent violations of the reporting requirement stated
herein.
8. The Board shall consider reports made to it hereunder and
shall determine whether the policies established in Sections
IV and V of this Code of Ethics have been violated, and what
sanctions, if any, should be imposed on the violator,
including but not limited to a letter of censure, suspension
or termination of the employment of the violator, or the
unwinding of the transaction and the disgorgement of any
profits to the Company. The Board shall review the operation
of this Code of Ethics at least once a year.
9. The Company's investment adviser and each sub-adviser shall
adopt, maintain and enforce separate codes of ethics with
respect to their personnel in compliance with Rule 17j-1 and
Rule 204-2(a)(12) of the Investment Advisers Act of 1940 and
shall forward to the Company's administrator and the Company's
counsel copies of such codes and all future amendments and
modifications thereto. The Board shall review and approve such
codes at least once a year. Furthermore, any material changes
to an investment adviser's or any sub-adviser's code will be
approved by the Board at the next scheduled quarterly board
meeting and in no case more than six months after such change.
10. At each quarterly Board of Directors' meeting, the
administrator, investment adviser and any sub-adviser of the
Company shall provide a written report to the Company's Board
of Directors stating:
a. any reported securities transaction that occurred during
the prior quarter that may have been materially
inconsistent
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with the provisions of the codes of ethics adopted by the
Company's investment adviser and any sub-adviser; and
b. all disciplinary actions/3/ taken in response to such
violations.
11. At least once a year, the Company's investment adviser and any
sub-adviser shall provide to the Board a written report which
contains: (a) a summary of existing procedures concerning
personal investing by advisory persons and any changes in the
procedures during the past year; (b) an evaluation of current
compliance procedures and a report on any recommended changes
in existing restrictions or procedures based upon the Company's
experience under this Code of Ethics, industry practices, or
developments in applicable laws and regulations; (c) describes
any issues arising under the code of ethics or procedures since
the last report, including but not limited to, information
about material violations of the code or procedures and
sanctions imposed in response to material violations; and (d) a
certification that the procedures which have been adopted are
those reasonably necessary to prevent Access Persons from
violating the respective Codes of Ethics.
12. This Code, the codes of the investment adviser and any sub-
adviser, a copy of each report by an Access Person, any record
of any violation of this Code and any action taken as a result
thereof, any written report hereunder by the Company's
administrator, investment adviser and any sub-adviser, records
of approvals relating to Initial Public Offerings and Limited
Offerings, lists of all persons required to make reports and a
list of all persons responsible for reviewing such reports
shall be preserved with the Company's records for the period
required by Rule 17j-1.
VI. Certification.
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Each Access Person will be required to certify annually that he or she has
read and understood this Code of Ethics, and will abide by it. Each Access
Person will further certify that he or she has disclosed or reported all
personal securities transactions required to be disclosed or reported under the
Code of Ethics. A form of such certification is attached hereto as Exhibit C.
The Board of Directors of M.S.D. & T. Funds, Inc.
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/3./ Disciplinary action includes but is not limited to any action that has a
material financial effect upon the employee, such as fining, suspending,
or demoting the employee, imposing a substantial fine or requiring the
disgorgement of profits.
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Exhibit A
M.S.D. & T. FUNDS, INC.
(the "Company")
Holdings Report
For the Year/Period Ended _______________________
(month/day/year)
[_] Check Here if this is an Initial Holdings Report
To: Mercantile-Safe Deposit & Trust Company as Administrator of the Company
As of the calendar year/period referred to above, I have a direct or
indirect beneficial ownership interest in the securities listed below which are
required to be reported pursuant to the Code of Ethics of the Company:
Title of Number Principal
Security of Shares Amount
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The name of any broker, dealer or bank with whom I maintain an account
in which my securities are held for my direct or indirect benefit are as
follows:
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) excludes other transactions not
required to be reported, and (iii) is not an admission that I have or had any
direct or indirect beneficial ownership in the securities listed above.
Date:_________________ Signature:____________________
Print Name:___________________
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Exhibit B
M.S.D. & T. FUNDS, INC.
(the "Company")
Quarterly Transaction Report
For the Calendar Quarter Ended _______________________
(month/day/year)
To: Mercantile-Safe Deposit & Trust Company as Administrator of the Company
A. Securities Transactions. During the quarter referred to above, the
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following transactions were effected in securities of which I had, or by reason
of such transactions acquired, direct or indirect beneficial ownership, and
which are required to be reported pursuant to the Code of Ethics of the Company:
<TABLE>
<CAPTION>
Broker/Dealer
Number of Nature of Or Bank
Interest Rate Shares or Dollar Transaction Through Which
Title of and Maturity Date Date of Principal Amount of (Purchase, Transaction
Security (If Applicable) Transaction Amount Transaction Sale, Other) Price Effected
-------- --------------- ----------- ------ ----------- ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
_________________
* Transactions that are asterisked indicate transactions in a security where I
knew at the time of the transaction or, in the ordinary course of fulfilling my
official duties as a director or officer, should have known that during the 15-
day period immediately preceding or after the date of the transaction, such
security was purchased or sold, or such security was being considered for
purchase or sale, by the Company.
B. New Brokerage Accounts. During the quarter referred to above, I
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established the following accounts in which securities were held during the
quarter for my direct or indirect benefit:
Name of Broker, Dealer or Bank Date Account Was Established
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C. Other Matters. This report (i) excludes transactions with respect to
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which I had no direct or indirect influence or control, (ii) excludes other
transactions not required to be reported, and (iii) is not an admission that I
have or had any direct or indirect beneficial ownership in the securities listed
above.
Date: ____________________ Signature:________________
Print Name:_______________
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Exhibit C
M.S.D. & T. FUNDS, INC.
(the "Company")
ANNUAL CERTIFICATE
Pursuant to the requirements of the Code of Ethics of the Company, the
undersigned hereby certifies as follows:
1. I have read the Company's Code of Ethics.
2. I understand the Code of Ethics and acknowledge that I am subject
to it.
3. Since the date of the last Annual Certificate (if any) given
pursuant to the Code of Ethics, I have reported all personal
securities transactions and provided any securities holding
reports required to be reported under the requirements of the
Code of Ethics.
Date:
___________________________________
Print Name
____________________________________
Signature
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