CROFT FUNDS CORPORATION
CODE OF ETHICS
While affirming its confidence in the integrity and good faith of all of its employees, officers and directors, Croft Funds Corporation (the "Corporation") recognizes that the knowledge of present or future portfolio transactions and, in certain instances, the power to influence portfolio transactions which may be possessed by the Corporation’s employees, officers and directors of the Corporation and Croft-Leo-Minster (the “Adviser”) could place such individuals, if they engage in personal transactions in securities which are eligible for investment by the Corporation in a position where their personal interest may conflict with that of the Corporation.
In view of the foregoing and of the provisions of Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act"), the Corporation has determined to adopt this Code of Ethics to specify and prohibit certain types of transactions deemed to create conflicts of interest (or at least the potential for or the appearance of such a conflict), and to establish reporting requirements and enforcement procedures.
I.
STATEMENT OF GENERAL PRINCIPLES
In recognition of the trust and confidence placed in the Corporation by the Fund and its shareholders, and to give effect to the Corporation's belief that its operations should be directed to the benefit of its shareholders, the Corporation hereby adopts the following general principles to guide the actions of its officers and directors:
A.
The interests of the Corporation’s shareholders are paramount, and all of the Corporation's personnel must conduct themselves and their operations to give maximum effect to this tenet by assiduously placing the interests of the shareholders before their own.
B.
All personal transactions in securities by the Corporation's personnel must be accomplished so as to avoid even the appearance of a conflict of interest on the part of such personnel with the interests of the Corporation and its shareholders.
C.
All of the Corporation's personnel must avoid actions or activities that allow (or appear to allow) a person to profit or benefit from his or her position with respect to the Corporation, or that otherwise bring into question the person's independence or judgment.
II.
DEFINITIONS
A.
"Access Person" shall mean (i) each director or officer of the Corporation, or the Adviser (or any company in a control relationship to the Corporation or the Adviser) and (ii) any employee of the Corporation or the Adviser who, in connection with is or her regular functions or duties, makes, participates in, or obtains information regarding the purchase and sale of Securities by the Corporation or whose function relates to the making of any recommendations with respect to such purchases or sales; and (iii) any natural person in a control relationship to the Corporation or the Adviser who obtains information concerning recommendations made to the Corporation regarding the purchase and sale of Securities by the Corporation.
B.
"Beneficial ownership" of a Security is to be determined in the same manner as it is for purposes of Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1(a)(2) thereunder. This means that a person should generally consider himself the beneficial owner of any securities in which he has a direct or indirect pecuniary interest. In addition, a person should consider himself the beneficial owner of securities held by his spouse, his minor children, a relative who shares his home, or other persons by reason of any contract, arrangement, understanding or relationship that provides him with sole or shared voting or investment power.
C.
"Control" shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides that "control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. Ownership of more than 25% of a company's outstanding voting securities is presumed to give the holder of such securities control over the company. The facts and circumstances of a given situation may counter this presumption.
D.
“High quality short-term debt instrument” means any instrument that has a maturity at issuance of less than 366 days and that is rated in one of the two highest ratings categories by a nationally recognized statistical rating organization.
E.
"Independent Director" means a Director of the Corporation who is not an "interested person" of the Corporation within the meaning of Section 2(a)(19) of the 1940 Act.
F.
"Purchase or sale of a Security" includes, among other things, the writing of an option to purchase or sell a Security.
G.
“Review Officer” means person responsible for review of all transactions.
H.
"Security" shall have the same meaning as that set forth in Section 2(a)(36) of the 1940 Act, except that it shall not include direct obligations of the U.S. government; bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments, including repurchase agreements; and shares of unaffiliated registered, open-end mutual funds.
I.
"Security held or to be acquired" by the Corporation (or any portfolio) means: (i) any Security which, within the most recent 15 days, (a) is or has been held by the Corporation or any portfolio thereof; or (b) is being or has been considered by the Adviser for purchase by the Corporation; and (ii) any option to purchase or sell, and any Security convertible into or exchangeable for, a Security described in (i) of this definition.
J.
A Security is "being purchased or sold" by the Corporation from the time when a purchase or sale program has been communicated to the person who places the buy and sell orders for the Corporation until the time when such program has been fully completed or terminated.
III.
PROHIBITED PURCHASES AND SALES OF SECURITIES
No Access Person shall, in connection with the purchase or sale, directly or indirectly, by such person of a Security held or to be acquired by any Fund of the Corporation:
1.
employ any device, scheme or artifice to defraud such Fund;
2.
make to such Fund any untrue statement of a material fact or omit to state to such 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.
engage in any act, practice or course of business which would operate as a fraud or deceit upon such Fund; or
4.
engage in any manipulative practice with respect to the Fund.
IV.
INITIAL AND ANNUAL HOLDINGS REPORTS
A.
Each Access Person (other than the Independent Directors) must provide to the Review Officer and the Adviser a complete listing of all such Securities the person beneficially owns and all accounts in which any securities are held for the direct or indirect benefit of the person. The listing need not include transactions effected for, or Securities in, accounts over which the person has no direct or indirect influence or control.
The initial listing must be submitted to the Review Officer within 10 days of the date upon which such person first becomes an Access Person of the Corporation. The information must be current as of a date no more than 45 days prior to the date the person becomes an Access Person. Each update thereafter must be provided no later than 30 days after the start of the subsequent year, and be current as of a date no more than 45 days before the report is submitted. An Initial Holdings Report Form and an Annual Holdings Report Form are attached as Appendix I and Appendix II, respectively.
B.
The report 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.
V.
QUARTERLY REPORTING
A.
Each Access Person (except the Independent Directors, unless required pursuant to paragraph E below) shall report to the Review Officer and the Adviser all transactions in Securities in which the person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership. Each Access Person must also report any securities accounts established during the quarter. The Review Officer shall submit confidential quarterly reports with respect to his or her own personal Securities transactions and accounts established to an officer designated by the President of the Corporation to receive his or her reports, who shall act in all respects in the manner prescribed herein for the Review Officer. The reports need not include transactions effected for, or Securities in, accounts over which the person has no direct or indirect influence or control. The report 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.
B.
Every report shall be submitted to the Review Officer no later than 30 days after the end of each calendar quarter, and shall contain the following information (a Quarterly Report Form is included as Appendix III):
1.
The date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Security involved;
2.
The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
3.
The price of the Security at which the transaction was effected;
4.
The name of the broker, dealer or bank with or through which the transaction was effected;
5.
The date the report is submitted by the Access Person; and
6.
With respect to any account established by the Access Person during the quarter in which any securities are held for the direct or indirect benefit of the Access Person, the broker, dealer or bank with whom the Access Person established the account and the date the account was established.
C.
In the event the Access Person has no reportable items during the quarter, the report should be so noted and returned signed and dated.
D.
An Access Person need not submit a quarterly report if the report would duplicate information in broker trade confirmations or account statements received by the Corporation, provided that all required information is contained in the broker trade confirmations or account statements and is received by the Review Officer no later than 30 days after the end of the calendar quarter. Please see the Review Officer for more information about this reporting mechanism.
E.
An Independent Director shall report transactions in Securities only if the Director 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 following the date of the transaction, such Security was purchased or sold, or was being considered for purchase or sale, by the Fund. The "should have known" standard implies no duty of inquiry, does not presume there should have been any deduction or extrapolation from discussions or memoranda dealing with tactics to be employed meeting the Fund's investment objectives, or that any knowledge is to be imputed because of prior knowledge of the Fund's portfolio holdings, market considerations, or the Fund's investment policies, objectives and restrictions.
VI.
REVIEW AND ENFORCEMENT OF THE CODE
A.
The Review Officer will be appointed by the Corporation’s President to perform the duties described herein.
B.
The Review Officer shall notify each person who becomes an Access Person of the Corporation and who is required under this Code of Ethics of their reporting requirements no later than 10 days before the first quarter in which such person is required to begin reporting. The Review Officer shall create and thereafter maintain a list of all Access Persons of the Fund.
C.
The Review Officer will, on a quarterly basis, compare all reported personal Securities transactions with completed portfolio transactions of the Fund and a list of Securities being considered for purchase or sale by the Fund's investment Corporation(s) to determine whether a violation of this Code may have occurred. Before determining that a person has violated the Code, the Review Officer shall give such person an opportunity to supply explanatory material.
D.
If the Review Officer determines that a violation has occurred, or believes that a Code violation may have occurred, the Review Officer must submit a written report regarding the possible violation, together with any relevant transaction reports and any explanatory material provided by the individual, to the President and legal counsel for the Corporation, who shall make an independent determination as to whether a violation has occurred. Outside counsel may be consulted for assistance in making this determination.
E.
If the President finds that a violation has occurred, the President shall impose upon the individual such sanctions as he or she deems appropriate and shall report the violation and the sanction imposed to the Board of Directors of the Corporation.
F.
No person shall participate in a determination of whether he has committed a violation of the Code or of the imposition of any sanction against himself. If a securities transaction of the President is under consideration, any Vice President shall act in all respects in the manner prescribed herein for the President.
G.
No Access Person (other than an Independent Director) may purchase securities offered in connection with an Initial Public Offering or a Limited Offering without obtaining prior written approval from the Review Officer.
VII.
INVESTMENT ADVISER’S CODE OF ETHICS
A.
General Principle: Overlapping Responsibilities. A person who is both an Access Person of the Corporation and an Access Person of an investment adviser to the Corporation is only required to report under and otherwise comply with the investment adviser’s or principal underwriter’s code of ethics, provided that such code has been adopted pursuant to and in compliance with Rule 17j-1. These Access Persons, however, remain subject to the principles and prohibitions in Section III.A, hereof.
B.
Procedures. Each such investment adviser of the Corporation must:
1.
Submit to the Board of Directors of the Corporation a copy of its code of ethics adopted pursuant to or in compliance with Rule 17j-1;
2.
Promptly furnish to the Corporation, upon request, copies of any reports made under its code of ethics by any person who is also covered by the Corporation’s Code; and
3.
Promptly report to the Corporation in writing any material amendments to its code of ethics, along with the certification described under Section VIII.B, below.
VIII.
ANNUAL WRITTEN REPORTS TO THE BOARD
At least annually, the Review Officer, on behalf of the Corporation, investment adviser, principal underwriter, and administrator will provide written reports to the Board of Directors as follows:
A.
Issues Arising Under the Code. The reports must describe any issue(s) that arose during the previous year under the codes or procedures thereto, including any material code or procedural violations, and any resulting sanction(s). The Review Officer, investment adviser, principal underwriter, and the administrator may report to the Board more frequently as they deem necessary or appropriate and shall do so as requested by the Board.
B.
Certification. Each report must be accompanied by a certification to the Board that the Corporation, investment adviser, principal underwriter, and administrator have adopted procedures reasonably necessary to prevent their Access Persons from violating their code of ethics.
IX.
RECORDKEEPING
The Corporation will maintain the records set forth below. These records will be maintained in accordance with Rule 31a-2 under the 1940 Act and the following requirements. They will be available for examination by representatives of the Securities and Exchange Commission and other regulatory agencies.
A.
A copy of this Code and any other code adopted by the Corporation, which is, or at any time within the past five years has been, in effect will be preserved in an easily accessible place.
B.
A record of any Code violation and of any sanctions taken will be preserved in an easily accessible place for a period of at least five years following the end of the fiscal year in which the violation occurred.
C.
A copy of each Quarterly Report, Initial Holdings Report, and Annual Holdings Report submitted under this Code, including any information provided in lieu of any such reports made under the Code, will be preserved for a period of at least five years from the end of the fiscal year in which it is made, for the first two years in an easily accessible place.
D.
A record of all persons, currently or within the past five years, who are or were required to submit reports under this Code, or who are or were responsible for reviewing these reports, will be maintained in an easily accessible place.
E.
A copy of each annual report required by Section X of this Code must be maintained for at least five years from the end of the fiscal year in which it is made, for the first two years in any easily accessible place.
F.
A record of any decision, and the reasons supporting the decision, to approve the acquisition of Initial Public Offerings or Limited Offerings for at least five years after the end of the fiscal year in which the approval is granted.
X.
MISCELLANEOUS
A.
Confidentiality. All reports and other information submitted to the Corporation pursuant to this Code shall be treated as confidential, provided such reports and information may be produced to the Securities and Exchange Commission and other regulatory agencies.
B.
Interpretation of Provisions. The Board of Directors may from time to time adopt such interpretations of this Code as it deems appropriate.
C.
Compliance Certification. Within 10 days of becoming an Access Person of the Corporation, and each year thereafter, each such person must complete the Compliance certification, attached as Appendix IV.
Approved: July 10, 2003
Amended: December 13, 2004
APPENDIX I
INITIAL HOLDINGS REPORT
FOR CROFT FUNDS CORPORATION
Name of Reporting Person:
____________________________
Date Person Became Subject to the
Code’s Reporting Requirements: ________________________
Information in Report Dated as of: ________________________ [Note: Information must be dated no
Date Report Due: _____________________________________
more than 45 days before the person
Date Report Submitted: _______________
became subject to the Code.]
Securities Holdings
Name of Issuer and Title of Security |
No. of Shares (if applicable) |
Principal Amount, Maturity Date and Interest Rate (if applicable) |
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If you have no securities holdings to report, please check here. []
If you do not want this report to be construed as an admission that you have beneficial ownership
of one or more securities reported above, please describe below and indicate which securities are at
issue.
Securities Accounts
Name of Broker, Dealer or Bank |
Name(s) on and Type of Account |
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If you have no securities accounts to report, please check here. []
I certify that I have included on this report all securities holdings and accounts required to be
reported pursuant to the Code of Ethics.
Signature
Date
APPENDIX II
ANNUAL HOLDINGS REPORT
FOR CROFT FUNDS CORPORATION
Name of Reporting Person: ______________________________
Information in Report Dated as of: _______________________
[Note: Information should be dated no
Date Report Due: _____________________________________
more than 45 days before report is
DateReport Submitted: _________________________________
submitted.]
Calendar Year Ended: December 31, ____
Securities Holdings
Name of Issuer and Title of Security |
No. of Shares (if applicable) |
Principal Amount, Maturity Date and Interest Rate (if applicable) |
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If you have no securities holdings to report for the year, please check here. []
If you do not want this report to be construed as an admission that you have beneficial ownership
of one or more securities reported above, please describe below and indicate which securities are
at issue.
Securities Accounts
Name of Broker, Dealer or Bank |
Date Account Was Established |
Name(s) on and Type of Account |
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If you have no securities accounts to report for the year, please check here. []
I certify that I have included on this report all securities transactions and accounts required to
be reported pursuant to the Code of Ethics.
Signature
Date
APPENDIX III
QUARTERLY REPORT
FOR CROFT FUNDS CORPORATION
Name of Reporting Person:
___________________________
Calendar Quarter Ended:
___________________________
Date Report Due:
____________________30, ____
Date Report Submitted:
___________________________
Securities Transactions
Date of Transaction |
Name of Issuer and Security |
No. of Shares (if applicable) |
Principal Amount, Maturity Date and Interest Rate (if applicable) |
Type of Transaction |
Price |
Name of Broker, Dealer or Bank Effecting Transaction |
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If you have no securities transactions to report for the quarter, please check here.
If you do not want this report to be construed as an admission that you have beneficial ownership
of one or more securities reported above, please describe below and indicate which securities are
at issue.
Securities Accounts. If you established a securities account during the quarter, please provide the
following information:
Name of Broker, Dealer or Bank |
Date Account was Established | Name(s) on and Type of Account |
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If you did not establish a securities account during the quarter, please check here. []
I certify that I have included on this report all securities transactions and accounts required to be
reported pursuant to the Code of Ethics.
Signature
Date
APPENDIX IV
COMPLIANCE CERTIFICATION
FOR CROFT FUNDS CORPORATION
Initial Certification
I certify that I:
(i)
have received, read and reviewed the Corporation’s Code of ethics;
(ii)
understand the policies and procedures in the Code;
(iii)
recognize that I am subject to such policies and procedures;
(iv)
understand the penalties for non-compliance;
(v)
will fully comply with the Corporation’s Code of Ethics; and
(vi)
have fully and accurately completed this Certificate.
Signature:
Name:
(Please print)
Date Submitted:
Date Due: _________________________
Annual Certification
I certify that I:
(i)
have received, read and reviewed the Corporation’s Code of Ethics;
(ii)
understand the policies and procedures in the Code;
(iii)
recognize that I am subject to such policies and procedures;
(iv)
understand the penalties for non-compliance;
(v)
have complied with the Corporation’s Code of Ethics and any applicable reporting requirements during this past year;
(vi)
have fully disclosed any exceptions to my compliance with the Code below;
(vii)
will fully comply with the Corporation’s Code of Ethics; and
(vi)
have fully and accurately completed this Certificate.
EXCEPTION(S):
Signature:
Name:
(Please print)
Date Submitted:
Date Due: ________________________________
1-WA/1423230.3
