<PAGE>
Exhibit (p)(2)
Mercantile-Safe Deposit and Trust Company
as Investment Adviser to the
M.S.D.& T. Funds, Inc.
REVISED CODE OF ETHICS
I. PREAMBLE AND PURPOSE.
---------------------
Certain officers of Mercantile-Safe Deposit and Trust Company ("Merc-Safe"
or "Adviser") may in varying degrees participate in or be aware of
decisions made to implement the investment policies of M.S.D.& T Funds,
Inc., a registered investment company, and the mutual funds it offers
(collectively the "Funds"). The Adviser's relationship to the Funds
mandates adherence to the highest standards of conduct and integrity.
This Code of Ethics (the "Code") contains provisions reasonably necessary
to ensure adherence to such standards, and compliance with the provisions
of Rule 17j-1 under the Investment Company Act of 1940 relating to the
personal securities transactions of Advisory Persons which might involve
conflicts of interest or an appearance of impropriety and to establish
reporting requirements and enforcement procedures.
II. APPLICABILITY.
-------------
The provisions of this Code apply to all Access Persons (as defined below)
of the Adviser.
III. DEFINITIONS.
-----------
A. For purposes of Merc-Safe, "Access Person" means any director, officer
or Advisory Person of the Adviser who, with respect to any Fund, makes
any recommendation, participates in the determination of which
recommendation will be made, or whose principal function or duties
relate to the determination of which recommendation will be made, or
who, in connection with his or her duties, obtains any information
concerning recommendations on Covered Securities being made by the
Adviser to any Fund. Dennis Kreiner, or Merc-Safe officers designated
by him, shall have the responsibility to identify Access Persons and to
notify such persons of their status as such and their obligations under
this Code of Ethics.
B. "Act" means the Investment Company Act of 1940.
<PAGE>
C. "Advisory Person" of the Adviser means:
1. Any employee of the Adviser (or of any company in a control
relationship to the 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
a Fund, or whose functions relate to the making of any
recommendations with respect to the purchase or sales, and
2. Any natural person in a control relationship to the Adviser who
obtains information concerning recommendations made to a Fund with
regard to the purchase or sale of Covered Securities by a Fund.
D. "Beneficial Ownership" of a security means a direct or indirect
pecuniary interest in a Security.
1. A direct pecuniary interest is the opportunity, directly or
indirectly to profit, or to share the profit, from the transaction.
2. An indirect pecuniary interest is any non-direct financial
interest, but is specifically defined in the SEC rules to include
securities held by members of your Immediate Family who share the
same household; securities held by a partnership of which you are a
general partner; securities by a trust of which you are a settlor
if you can revoke the trust without the consent of another person,
or a beneficary if you have or share investment control with the
trustee; and equity securities which may be acquired on an exercise
of an option or other right, or through conversion. "Immediate
Family" includes a spouse, minor children and adults living in the
same household as the Access Person.
E. "Investment Personnel" means Access Persons who, in connection with
their regular functions or duties, make or participate in making
recommendations regarding the purchase or sale of Securities by a Fund.
F. "Purchase or sale of a security" includes, among other things, the
writing of an option to purchase or sell a security.
G. "SEC" means the Securities and Exchange Commission.
H. "Security" means all registered and unregistered securities, including
options to buy or sell Securities. For employees of Merc-Safe, this
includes option grants and exercises under the Mercantile Bankshares
Corporation Omnibus Stock Plans, or any successor to, or replacement
of, those Plans.
1. "Covered Security" means any Security that is not an Exempt Security
or a Non-Reportable Security.
-2-
<PAGE>
2. "Exempt Security" means a Security purchased or sold in a
transaction over which the Access Person has no control, Securities
acquired under an automatic dividend plan, and Securities which a
Fund is not permitted to purchase under the investment objectives
set forth in that Fund's then current prospectus. Access Persons are
deemed to have control over trusts which they may revoke, and
brokerage and investment advisory or brokerage accounts owned by
them or their Immediate Family, even if the trustee, investment
advisor or broker of those accounts does not consult the Access
Person with respect to transactions.
3. "Non-Reportable Security" means direct obligations of the United
States Government, bankers 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.
4. 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 Section 13 or 15(d) of the Securities
Exchange Act of 1934.
5. 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.
6. A Security is "Held or to be Acquired" by a Fund if, within the most
recent 15 days it (a) is or has been held by the Fund, or (2) is
being or has been considered by the Fund, the Adviser or any sub-
adviser for purchase by the Fund. A purchase or sale includes the
writing of an option to purchase or sell, as well as any Security
that is exchangeable for or convertible into any Security that is
held or to be acquired by a Fund.
IV. STANDARDS OF CONDUCT.
---------------------
A. Legal Requirement of Rule 17j-1(b).
It is unlawful for any access person, in connection with the purchase
or sale of a Security Held or to be Acquired by any Fund:
1. To employ any device, scheme or artifice to defraud any Fund;
2. To make to any Fund any untrue statement of a material fact or
omit to state to any Fund a material fact necessary in order to
make the statements made, in light of the circumstances under
which they are made, not misleading;
-3-
<PAGE>
3. To engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon any Fund; or
4. To engage in any manipulative practice with respect to any Fund.
Access Persons shall not engage in any act, practice or course of
business that would violate the provisions of Rule 17j-1(b) set forth
above.
B. Restrictions on personal securities transactions
1. At no time may any Access Person recommend the holding, purchase or
sale of any Security by any Fund without first disc1osing the
existence of any material (in relationship to personal financial
circumstances) position (long or short) in such security held by, or
recent trading in such security by, any such Access Person. Such
disclosure shall be made in writing to Dennis Kreiner or an officer
designated by him. If oral, such disclosure shall be confirmed in
writing.
2. Investment Personnel, as that term is defined in this Code, must
pre-clear in writing with Dennis Kreiner, or an officer designated
by him, all purchases of any Securities issued through an Initial
Public Offering or a Limited Offering.
V. REPORTING REQUIREMENTS.
-----------------------
In order to provide the Advisor with information to enable it to determine
with reasonable assurance that the provisions of this Code are being
observed by its Access Persons, every Access Person shall make Reports as
described in the following paragraphs to Dennis Kreiner or an officer
designated by him with respect to each Covered Security and/or transaction
in a Covered Security in which such Access Person has, or by reason of such
transaction acquires, beneficial ownership. Dennis Kreiner or an officer
designated by him shall identify all Access Persons who are under a duty to
make such Reports and shall inform such persons of such duty.
1. Holdings Reports:
a. Initial Holdings Report: Each Access Person will complete and
file with Dennis Kreiner an Initial Holdings Report in the form
attached hereto as Exhibit A that lists all Covered Securities
beneficially owned by the Access Person. For Access Persons
appointed as such after March 1, 2000, this Report must be
submitted within 10 days of becoming an Access Person. For all
other Access Persons, an Initial Holdings Report must be
completed and filed with Dennis Kreiner by January 30, 2001,
based on
-4-
<PAGE>
information that is current as of a date no more than 30 days
before the Report is submitted.
b. Annual Holdings Report: Each Access Person will complete and file
with Dennis Kreiner an Annual Holdings Report in the form
attached hereto as Exhibit A that lists all Covered Securities
beneficially owned by the Access Person. The Report must be
submitted no later than 30 days after the end of the calendar
year and be based on information that is current as of a date no
more than 30 days before the Report is submitted. For Access
Persons appointed as such after March 1, 2000, the first Annual
Report must be submitted by January 30, 2001. For all other
Access Persons, the first Annual Holdings Report must be
submitted by January 30, 2002.
2. Transaction Reports:
Each Access Person shall complete and file with Dennis Kreiner a
quarterly transaction Report in the form attached hereto as Exhibit
B for all transactions in Covered Securities in which the Access
Person had a beneficial interest, and which lists all accounts
established by the Access Person with brokers, dealers and banks
which held Securities beneficially owned by the Access Person. The
Report must be submitted by the Access Person no later than 10 days
after the end of each calendar quarter, whether or not a reportable
securities transaction occurred during the period covered by the
Report. If all of an Access Person's transactions are submitted to
Dennis Kreiner by a third party (broker, bank, etc.), an Access
Person may file the Report with the following legend: "All of my
reportable security transactions are sent to you directly by my
(broker or bank)".
Exception. No Access Person shall be required to make a Report
---------
with respect to transactions effected in any account over which such
person does not have any direct or indirect influence or control.
Access Persons are deemed to have control over trusts which they may
revoke and brokerage and investment advisory accounts owned by them
or their Immediate Family, even if the trustee or investment advisor
of those accounts does not consult the Access Person with respect to
transactions.
VI. OVERSIGHT AND REPORTING.
-----------------------
Dennis Kreiner is designated as Administrator for purposes of this Code.
The Administrator shall:
1. Review all Reports required to be made by Access Persons pursuant to
this Code and compare the reported transactions with similar
transactions in the Funds;
2. Promptly investigate any failure to submit Reports as required by
this Code and any reported securities transaction that may have been
inconsistent with the provisions of this Code;
-5-
<PAGE>
3. Submit periodic status reports with respect to each such
investigation to the Executive Vice President of the Trust Division
of Merc-Safe;
4. Provide on a quarterly basis to the Board of Directors of the Fund a
written Report stating:
a. any reported securities transactions that occurred during the
prior quarter that may have been materially inconsistent with
the provisions of the Code, and
b. all disciplinary actions taken in response thereto;
5. Provide on an annual basis to the Board of Directors of the Fund a
written Report stating:
a. a summary of existing procedures concerning personal investing
by Access 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 Advisor's experience under this Code, industry
practices or developments in applicable laws and regulations;
c. any issues arising under the Code 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 Code;
6. Maintain for periods required by applicable law, including Rule 17j-
1 under the Act, copies of this Code (and all amendments hereto),
the names of all persons required to make reports hereunder, each
report submitted by such persons and records of any violation of
this Code and of any action taken as a result of such violation.
VII. SANCTIONS.
----------
Violations of this Code, or any provision hereof shall be grounds for
appropriate sanctions, including dismissal.
VIII. INTERPRETATIONS.
---------------
Any questions regarding the applicability, meaning or administration of
the Code shall be referred by the person concerned in advance of any
contemplated transaction to Dennis Kreiner or to an officer designated by
him.
-6-
<PAGE>
IX. ACCEPTANCE.
----------
Each access person shall receive a copy of this Code and any amendments
thereto. Each officer and employee of the Adviser to whom this Code is
applicable shall sign a statement that he has read this Code and will abide
by it. The signed statement shall be kept in the files of the Adviser. A
form of the statement is attached hereto as Exhibit C.
X. EFFECTIVE DATE.
--------------
The provisions of this Code shall be effective on and after July 28, 2000,
and amendments shall become effective when promulgated.
-7-
<PAGE>
ADDENDUM TO CODE OF ETHICS
FOR ACCESS PERSONS
The purpose of the Code is to prevent abuses that can arise from personal
securities holdings and transactions by persons who make recommendations or
decisions concerning securities held or acquired by the Fund or who in the
regular course of their duties have access to information about Fund holdings
and transactions. Only a few of you will be involved in the recommendation or
decision process. Most have been included as "access persons" only because you
may, from time to time, have information about the composition of the Fund's
portfolio. In considering how to avoid conflicts in your personal holdings and
securities transactions, you should apply judgment and common sense as to
whether particular holdings or transactions could affect the exercise of your
judgment on behalf of the Fund (or impact the value of the Fund's portfolio) at
times when you make Fund recommendations or decisions or when you have
information about Fund holdings or transactions, in light of your particular
degree of responsibility for and knowledge of such holdings or transactions.
Personal transactions which may not be abusive include transactions for your
benefit which you do not control (so-called "nonvolitional" transactions),
transactions where any potential harm to the Fund is remote because the
securities are traded in a "highly institutional" market, or transactions that
are not related economically to the securities to be purchased, sold or held by
the Fund. Company counsel will be available to assist you in these matters and
with the reporting process.
<PAGE>
Exhibit A
Mercantile-Safe Deposit and Trust Company
Holdings Report
For the Year/Period Ended________________________
(month/day/year)
[_] Check Here if this is an Initial Holdings Report
To: Dennis W. Kreiner
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 Mercantile-Safe Deposit and Trust
Company Code of Ethics:
Title of Number Principal
Security of Shares Amount
-------- --------- ------
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:__________________________
<PAGE>
Exhibit B
Mercantile-Safe Deposit and Trust Company
Quarterly Transaction Report
For the Calendar Quarter Ended_____________________
(month/day/year)
To: Dennis W. Kreiner
A. Securities Transactions. During the quarter referred to above, the
-----------------------
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>
<S> <C> <C> <C> <C> <C> <C> <C>
Broker/Dealer
No. of Nature of Or Bank
Interest Rate Shares or Dollar Transaction Through Which
Title of and Maturity Date of Principal Amount of (Purchase, Transaction was
Security (If Applicable) Transaction Amount Transaction Sale, Other) Price Effected
--------
</TABLE>
B. New Brokerage Accounts. During the quarter referred to above, I
----------------------
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
C. Other Matters. 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:________________________
<PAGE>
Exhibit C
STATEMENT REGARDING CODE OF ETHICS
The undersigned hereby certifies that he or she has read and will abide by the
Code of Ethics, and that he or she knows any such failure may constitute a
violation of federal and state securities laws and regulations which may subject
him or her to civil liabilities and criminal penalties. The undersigned
acknowledges that failure to observe the provisions of said Code shall be a
basis for any appropriate sanction, including dismissal.
Date:
Name__________________________________
(printed)
Signature_____________________________
