<PAGE> 1
1933 ACT REGISTRATION NO. 002-22542
1940 ACT REGISTRATION NO. 811-1273
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933................................... x
Pre-Effective Amendment No................................. _____
Post-Effective Amendment No. 38............................ x
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940............................... x
Amendment No. 38........................................... x
-----------------------
M.S.B. FUND, INC.
(Exact Name of Registrant as Specified in Charter)
26 Broadway
New York, New York 10004
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code (212) 837-7898
James H. Bluck, Esq.
Hughes Hubbard & Reed
One Battery Park Plaza
New York, New York 10004
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
x on May 1, 1996 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new
effective date for a previously filed
post-effective amendment.
Registrant has registered an indefinite number of securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940 and filed a notice under
such Rule with respect to its most recent fiscal year on February 23, 1996.
==============================================================================
<PAGE> 2
M.S.B. FUND, INC.
-----------------------
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- --------
PART A
<S> <C> <C>
Item 1. Cover Page.......................... Cover Page of the Prospectus
Item 2. Synopsis............................ Annual Fund Operating Expenses; Prospectus Summary
Item 3. Condensed Financial Information..... Financial Highlights (Table); Performance Information
Item 4. General Description of Registrant... The Fund; Investment Policy and Objectives; Investment
Restrictions Regarding Portfolio Securities; Risk Factors
Item 5. Management of the Fund.............. Officers and Directors of the Fund; Investment Advisory
and Other Services; Financial Highlights;
Item 5A. Management's Discussion of Fund
Performance......................... Not Applicable
Item 6. Capital Stock and Other Securities.. Purchase of Fund Shares; Description of Securities;
Ownership and Transfer of Shares; Additional
Information--Shareholder Inquiries; Dividends,
Distributions and Federal Income Tax Status
Item 7. Purchase of Securities Being Offered. Investment Advisory and Other Services; Summary of Share
Purchase Options; Price on Purchase and Redemption of
Shares--No Load; Net Asset Value; Purchase of Fund Shares
Item 8. Redemption or Repurchase.............. Redemption of Fund Shares
Item 9. Legal Proceedings..................... Not Applicable
PART B
Item 10. Cover Page............................ Cover Page of the Statement of Additional Information
Item 11. Table of Contents..................... Contents
Item 12. General Information and History....... Not Applicable
Item 13. Investment Objectives and Policies.... Investment Policy and Objectives
Item 14. Management of the Fund................ Officers and Directors of the Fund
Item 15. Control Persons and Principal Holders
of Securities......................... Officers and Directors of the Fund
Item 16. Investment Advisory and Other
Services.............................. Investment Advisory and Other Services; Independent Auditors
Item 17. Brokerage Allocation and Other
Practices............................. Purchase and Sale of Portfolio Securities
Item 18. Capital Stock and Other Securities.... Description of Capital Stock
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption of Shares
Item 20. Tax Status............................ Dividends, Distributions and Tax Status
Item 21. Underwriters.......................... Not Applicable
Item 22. Calculation of Performance Data....... Performance Information
Item 23. Financial Statements.................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE> 3
PRIMARY OBJECTIVE:
CAPITAL APPRECIATION
--------------------
SECONDARY OBJECTIVE:
INCOME
THESE SECURITIES ARE NOT DEPOSITS
OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK AND
ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Investors should read this Prospectus
and retain it for future reference.
------------------------------------
M.S.B.
FUND, INC.
------------------------------------
PROSPECTUS
-------------------
May 1, 1996
This Prospectus sets forth concisely
the information about the Fund that a
prospective investor ought to know
before investing. Additional information
about the Fund has been filed with the
Securities and Exchange Commission
in a Statement of Additional
Information, dated May 1, 1996, which
information is incorporated herein by
reference, and is available without
charge upon written request to M.S.B.
Fund, Inc., c/o Shay Financial Services Co.,
111 East Wacker Drive, Chicago,
Illinois 60601 or by calling 800-661-3938.
This Prospectus does not constitute
an offer in any state or jurisdiction in which,
or to any person to whom, such offering
may not lawfully be made.
<PAGE> 4
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Annual Fund Operating Expenses.......... 2
Prospectus Summary...................... 3
Financial Highlights.................... 4
The Fund................................ 5
Investment Policy and Objectives........ 5
Investment Restrictions Regarding
Portfolio Securities.................. 6
Risk Factors............................ 6
Price on Purchase and Redemption of
Shares--No Load....................... 6
Summary of Share Purchase Options....... 7
Purchase of Fund Shares................. 8
<CAPTION>
PAGE
<S> <C>
Net Asset Value......................... 9
Performance Information................. 10
Redemption of Fund Shares............... 10
Dividends, Distributions and Federal
Income Tax Status..................... 13
Officers and Directors of the Fund...... 14
Investment Advisory and Other
Services.............................. 14
Description of Securities............... 16
Additional Information.................. 16
Account Application..................... 17
Automatic Investment
Plan -- Instructions.................. 20
Automatic Investment Plan Application... 21
</TABLE>
------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fees (after adjustment for fee reduction).............................. 0.47%
Other Expenses.................................................................... 1.22%
Administration, Transfer Agent and Custodian Fees (after adjustment for
fee reduction)......................................................... 0.35%
Professional and Directors' Expenses.................................... 0.59%
Insurance, Printing and Miscellaneous Expenses.......................... 0.28%
----
Total Fund Operating Expenses.............................................. 1.69%
</TABLE>
EXAMPLE*
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption
at the end of each time period............................... $ 17 $53 $92 $200
</TABLE>
The foregoing table is provided to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The table is based on expenses incurred during the fiscal year ended
December 31, 1995, except that the information has been restated to reflect the
fees payable to the Fund's current investment adviser, administrator, transfer
agent and custodian, assuming such fees were in effect beginning January 1,
1995. Absent the expense limitations and fee reductions applicable under the
investment advisory agreement and the administration, transfer agency and
custody agreements, the Management Fees and the Administration, Transfer Agent
and Custodian Fees in the foregoing table would have been 0.75% and 0.41%,
respectively, and Total Fund Operating Expenses would be 2.03% on a pro forma
basis. THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. See "Investment Advisory and Other Services" in this Prospectus and
"Expenses of the Fund" in the Statement of Additional Information for additional
information about the expenses described in the foregoing table.
- ------------------
* Assumes: (i) the percentage amounts listed under Annual Fund Operating
Expenses and the Fund's average net assets remain constant throughout the
applicable periods and (ii) reinvestment of all dividends and distributions.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information.
This Prospectus does not constitute an offer in any state or jurisdiction in
which, or to any person to whom, such offering may not lawfully be made.
TYPE OF FUND: M.S.B. Fund, Inc. (the "Fund") is a diversified open-end
management investment company. See "The Fund."
INVESTMENT OBJECTIVES: The Fund's primary investment objective is to achieve
capital appreciation by investing in a diversified portfolio of equity
securities, primarily common stocks, of companies believed to have growth
potential. The objective of income is secondary. There is no assurance that
the Fund will in fact achieve these objectives. See "The Fund" and
"Investment Policy and Objectives."
PRICE ON PURCHASE AND REDEMPTION OF SHARES: Shares are purchased and redeemed at
their next determined net asset value. The Fund is a no-load fund; there is
no sales or redemption charge. See "Price on Purchase and Redemption of
Shares--No Load."
RISK FACTORS: The value of the Fund's shares will fluctuate in accordance with
the value of the securities held in its portfolio. Accordingly, the value
of an investment in the Fund will fluctuate with changing market conditions
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. The Fund invests primarily in companies with a market
capitalization in excess of $500 million. However, the Fund may invest up
to 15% of its assets in the securities of smaller companies which may be
less liquid and more volatile than the securities of larger companies. In
addition, the Fund may write (sell) covered call options on up to 15% of
the Fund's assets. See "The Fund" and "Investment Policy and Objectives."
MINIMUM INVESTMENT: The minimum initial investment in the Fund is $50.
Subsequent purchases may be made in amounts of $25 or more. See "Purchase
of Fund Shares."
OFFERED SECURITIES: The shares of the Fund offered for sale are shares of its
Class A stock, par value $.001 per share. See "Description of Securities."
INVESTMENT ADVISER, ADMINISTRATOR, TRANSFER AGENT, SHAREHOLDER SERVICING AGENT
AND CUSTODIAN: The Fund's investment adviser is Shay Assets Management Co.
PFPC Inc. serves as the administrator, transfer agent, registrar, dividend
paying agent and shareholder servicing agent for the Fund, and its
affiliate, PNC Bank, N.A., serves as custodian. The appointment of Shay
Assets Management Co., PFPC Inc. and PNC Bank, N.A. in these capacities
became effective on May 19, 1995.
3
<PAGE> 6
M.S.B. FUND, INC.
FINANCIAL HIGHLIGHTS
The financial information set forth below for the years 1991 through 1995 has
been audited by KPMG Peat Marwick LLP, independent auditors, whose reports
thereon expressed unqualified opinions. This information should be read in
conjunction with the financial statements, the notes thereto and the report of
KPMG Peat Marwick LLP, which are included in the Fund's 1995 Annual Report to
Shareholders and incorporated by reference in the Statement of Additional
Information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of year.......................... $ 21.97 $ 20.60 $ 17.23 $ 16.40 $ 17.82 $ 14.54 $ 14.62 $ 15.67
======= ======= ======= ======= ======= ======= ======= =======
Income from investment operations:
Net investment income............ .48 .32 .38 .26 .39 .22 .22 .18
Net realized and unrealized gain
(loss) on investments.......... 2.33 .52 1.27 4.27 (1.69) 2.18 1.33 3.04
------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations... 2.81 .84 1.65 4.53 (1.30) 2.40 1.55 3.22
Less distributions:
From net investment income....... (.48) (.33) (.37) (.25) (.40) (.21) (.28) (.17)
From net realized gains.......... (3.70) (3.88) (2.11) (2.86) (1.58) (2.11) (.22) (1.93)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions................ (4.18) (4.21) (2.48) (3.11) (1.98) (2.32) (0.50) (2.10)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value at end of year..... $ 20.60 $ 17.23 $ 16.40 $ 17.82 $ 14.54 $ 14.62 $ 15.67 $ 16.79
======= ======= ======= ======= ======= ======= ======= =======
Total return....................... 12.76% 4.70% 9.78% 28.06% (7.40)% 16.97% 10.66% 20.64%
Ratios/Supplemental Data
Net assets end of year (in
thousands)....................... $49,948 $48,797 $49,076 $51,771 $42,109 $41,346 $40,790 $45,205
Ratio of expenses to average net
assets........................... 0.94% 0.98% 1.19% 1.20% 1.39% 1.86% 1.13% 1.12%
Ratio of net income to average net
assets........................... 2.08% 1.32% 2.06% 1.30% 2.38% 1.36% 1.43% 1.01%
Portfolio turnover rate............ 8% 37% 19% 29% 31% 17% 13% 26%
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Net asset value at beginning
of year.......................... $ 16.79 $ 13.39
======= =======
Income from investment operations:
Net investment income............ .16 .08
Net realized and unrealized gain
(loss) on investments.......... (.44) 3.17
------- -------
Total from investment operations... (.28) 3.25
Less distributions:
From net investment income....... (.18) (.08)
From net realized gains.......... (2.94) (2.93)
------- -------
Total distributions................ (3.12) (3.01)
------- -------
Net asset value at end of year..... $ 13.39 $ 13.63
======= =======
Total return....................... (1.70)% 24.97%
Ratios/Supplemental Data
Net assets end of year (in
thousands)....................... $35,022 $32,509
Ratio of expenses to average net
assets........................... 1.28%(2) 1.69%(2)
Ratio of net income to average net
assets........................... 0.97% 0.57%
Portfolio turnover rate............ 62% 68%
</TABLE>
- ------------------
(1) Effective May 19, 1995, the Fund engaged Shay Assets Management Co. as its
investment adviser.
(2) Without the fee waivers for the years ended December 31, 1995 and 1994, the
ratio of expenses to average net assets would have been 1.86% and 1.39%,
respectively.
Total return is discussed below under "Performance Information." Additional
information regarding the performance of the Fund is contained in the 1995
Annual Report to Shareholders which is available without charge upon request to
the Fund.
4
<PAGE> 7
THE FUND
M.S.B. Fund, Inc. is a diversified open-end management investment company
incorporated under the laws of the State of New York on June 8, 1964. The Fund
is designed as an investment vehicle for value-oriented investors who want to
see their capital grow over the longer term and who are willing to take moderate
risks to achieve that goal.
The Fund invests its assets primarily in large and medium size companies,
i.e., companies with a market capitalization in excess of $500 million, whose
equity securities are believed to have potential for capital appreciation. The
Fund may also invest up to 15% of its assets in equity securities of smaller
companies which may be less liquid and more volatile than the securities of
larger companies. The equity securities in which the Fund invests consist
primarily of dividend-paying common stocks, but may also include other common
stocks and securities convertible into common stock. Specific securities are
selected on the basis of companies' cash flow, growth, earnings and dividend
prospects in relation to the price of the securities.
All investments, including shares of the Fund, have intrinsic market risks. It
is the purpose of the Fund, however, to provide professional management of a
diversified portfolio to attempt to minimize these risks. Each investor should
note that the value of shares of the Fund fluctuates in accordance with the
value of the securities held in its portfolio. Accordingly, the value of an
investment in the Fund will fluctuate with changing market conditions so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
A shareholder may at any time require the Fund to redeem his shares at their
net asset value next determined after receipt of a written order for redemption,
together with an appropriate signature guarantee and other required
documentation. This right to redeem shares is subject to certain limited
exceptions. See "Redemption of Fund Shares."
INVESTMENT POLICY AND OBJECTIVES
The primary investment objective of the Fund is to achieve capital
appreciation for its shareholders. The objective of income is secondary. The
Fund seeks to achieve these objectives by investing primarily in equity
securities of companies whose cash flow, growth, earnings and dividend prospects
are promising and whose securities are reasonably priced, in the opinion of its
Investment Adviser. There is no assurance that the Fund will, in fact, achieve
these objectives. Changes in these investment objectives may be made by the
Board of Directors without shareholder approval whenever in its judgment
economic or market conditions warrant.
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets in equity securities, primarily common stocks.
The Fund also may invest in corporate debt securities convertible into common
stock, but it is not expected that the Fund's holdings of convertible debt
securities would ordinarily exceed 5% of the Fund's assets. The Fund is not
restricted, however, in the proportion of its assets which may be invested in
non-equity securities, such as investment grade corporate bonds, commercial
paper and government securities during abnormal market conditions. When deemed
beneficial in the opinion of the Fund's Investment Adviser for defensive
purposes during abnormal market conditions, a substantial proportion of the
assets of the Fund may be invested temporarily in such securities.
The Fund invests its non-committed cash primarily in commercial paper. The
Fund's investments in commercial paper ordinarily consist of commercial paper
rated "Prime-2" or better by Moody's Investors Services, Inc. or rated "A-2" or
better by Standard & Poor's Corporation. The Fund's investments in commercial
paper typically mature overnight.
The Fund also may write (sell) covered call options listed on national
securities exchanges with respect to shares held in the Fund's portfolio. The
Fund may write only "covered" options,
5
<PAGE> 8
meaning that options may be written only on
securities owned by the Fund. All options written by the Fund must be covered so
long as the Fund remains obligated as the option writer. It is not expected that
more than 5% of the Fund's total assets will be subject to options at any time.
INVESTMENT RESTRICTIONS REGARDING PORTFOLIO SECURITIES
As a matter of fundamental policy, the Fund may not:
--Purchase securities of an issuer (other than obligations of the United
States and its instrumentalities) if such purchase would cause more than 5% of
the Fund's total assets, taken at market value, to be invested in the securities
of such issuer.
--Purchase securities of an issuer if such purchase would cause more than 10%
of any class of securities of such issuer to be held by the Fund.
--Purchase or retain securities of an issuer if, to the knowledge of the Fund,
the officers and directors of the Fund together own more than 5% of any class of
securities of such issuer or an officer, director or employee of, or counsel
for, the Fund is an officer or employee of the issuer.
--Invest more than 25% of its assets in any one industry.
--Invest in securities whose sale by the Fund would be restricted under the
Securities Act of 1933 (letter stock).
--Invest in companies for the purpose of exercising control or management.
--Purchase securities issued by another registered investment company.
--Buy or sell real estate, commodities or commodity contracts unless acquired
as a result of ownership of securities.
--Make loans other than by the purchase of a portion of publicly distributed
debt securities.
--Underwrite securities issued by others.
--Make short sales of securities.
--Buy securities on margin.
--Buy or sell put options.
--Borrow money except for temporary administrative or liquidity (but not
leveraging) purposes, and then only from banks up to an amount not in excess of
5% of the value of total assets at the time of the loan, repayable in not more
than 60 days.
--Pledge, mortgage or hypothecate its assets except as may be necessary to
enable it to borrow funds temporarily for administrative or liquidity (but not
leveraging) purposes or to engage in writing covered call options.
The foregoing investment restrictions may be changed only upon affirmative
vote of a majority of the voting securities of the Fund.
RISK FACTORS
The value of the Fund's shares will fluctuate in accordance with the value of
the securities held in its portfolio. Accordingly, the value of an investment in
the Fund will fluctuate with changing market conditions so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Fund invests primarily in companies with a market capitalization in excess of
$500 million. However, the Fund may invest up to 15% of its assets in the
securities of smaller companies which may be less liquid and more volatile than
the securities of larger companies. In addition, the Fund may write (sell)
covered call options on up to 15% of the Fund's assets. See "The Fund" and
"Investment Policy and Objectives."
PRICE ON PURCHASE AND REDEMPTION OF SHARES--NO LOAD
Shares of M.S.B. Fund are purchased and redeemed at net asset value per share
of the Fund next determined after receipt of orders for purchases and
redemptions by the Fund and, in the case of purchase orders, payment. There is
no sales or redemption charge of any kind.
6
<PAGE> 9
SUMMARY OF SHARE PURCHASE OPTIONS
<TABLE>
<CAPTION>
INITIAL PURCHASE SUBSEQUENT INVESTMENT
--------------------------------------- ---------------------------------------
<S> <C> <C>
BY MAIL Complete and sign the application. Make Make your check payable to M.S.B. Fund,
your check payable to M.S.B. Fund, Inc. Inc. and mail it to the address at the
and send to: left. Put your account name, address
M.S.B. Fund, Inc. and M.S.B. Fund account number on your
c/o PFPC Inc. check. Subsequent investment forms will
P.O. Box 8905 be included with each shareholder
Wilmington, DE 19899-8905 statement for your convenience.
Alternatively, include a note giving
your M.S.B. Fund account number, your
name and your address.
BY OVERNIGHT COURIER M.S.B. Fund, Inc. Follow the directions above and forward
c/o PFPC Inc. to address at left.
400 Bellevue Parkway
Wilmington, DE 19809
BY TELEPHONE Telephone transactions may not be used All subsequent investments made by
for initial purchases. If you want to telephone must be paid by wire
make subsequent telephone transactions transfer.
select this feature on your application
or call 800-661-3938 to request an
authorization form to set up your
account for this feature. Purchases
must be paid by wire transfer.
WIRE INSTRUCTIONS First, call 800-661-3938 to notify the Please carefully follow instructions at
Fund that you intend to purchase shares left and include the following
by wire and to verify wire information:
instructions. Then, wire funds care of Shareholder Account #
PNC Bank, N.A., Philadelphia, PA Shareholder Name/Registration
ABA#: 031000053 Taxpayer Identification Number.
Credit: BNF M.S.B. Fund DDA#8610301463
Further credit: (Shareholder Name and
Account Number)
AUTOMATIC INVESTMENT See the description of the Automatic This feature must be set up by you in
PROGRAM Investment Program below. advance.
</TABLE>
7
<PAGE> 10
PURCHASE OF FUND SHARES
The purchase price of M.S.B. Fund shares is net asset value per share next
determined after receipt of the order to purchase. All orders must be
accompanied by a check or other form of payment and will not be accepted by the
Fund without such payment. Upon acceptance of a purchase order by the Fund, the
number of shares and fractional share credits determined by dividing the amount
tendered by the net asset value at which the purchase is to be made will be
issued. Subscriptions for shares are not binding until accepted by the Fund. The
Fund reserves the right to reject any purchase order. Purchasers receive a
Confirmation Notice from the Fund which sets forth the amount invested, the
purchase price per share, the number of shares and fractional share credits
purchased and held in the shareholder's account both before and after the
transaction and the identifying number of the account. It is important for
purchasers to retain Confirmation Notices as a record of shares held.
Orders to purchase shares of the Fund should be directed to M.S.B. Fund, Inc.,
c/o PFPC Inc., P.O. Box 8905, Wilmington, DE 19899-8905. Applications sent by
overnight courier and all other correspondence should be sent to M.S.B. Fund,
Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
INITIAL PURCHASES
The minimum initial investment in the Fund is $50. The minimum initial
investment for IRAs is also $50.00. There is a $25.00 minimum for subsequent
investments. Persons who desire to make an initial investment in the Fund should
fill out the Account Application which appears at the back of this Prospectus
and mail it to the Fund together with a check payable to M.S.B. Fund, Inc.
Orders are subject to acceptance by the Fund and are not accepted unless
accompanied by payment. Telephone transactions may not be used for initial
purchases.
Shares of the Fund may also be purchased through authorized broker/dealers or
other institutions who may charge investors a fee for their services. Such sales
agents have the responsibility of transmitting purchase orders and funds, and of
crediting their customers' accounts following redemptions in a timely manner and
in accordance with their customer agreements and this Prospectus.
OPEN ACCOUNT
Upon an initial purchase of shares, an open account is established in the
names of the persons named in the Initial Purchase Order Form. The Fund's
transfer agent and registrar acts as the agent of the shareholder in the
establishment and maintenance of this open account. Full shares held in open
account entitle the shareholder to all benefits of share ownership. Fractional
share credits entitle the holders thereof to dividends and distributions but no
voting rights. Certificates representing the Fund's shares will not be issued
unless requested in writing directly to the Fund's Administrator or to an
account representative of an eligible broker-dealer or bank. Wire and telephone
redemptions of shares held in certificate form are not permitted and the shares
represented thereby will not be reported on brokerage or bank statements sent to
clients. See "Redemption of Fund Shares" below. Open account ownership
simplifies record keeping, prevents loss of certificates, facilitates
redemptions, and costs less for the Fund to administer, thereby lowering
expenses.
SUBSEQUENT PURCHASES
Each Confirmation Notice includes a detachable order form which may be used to
make additional purchases of shares in amounts of $25 or more. Orders are
subject to acceptance by the Fund and are not accepted unless accompanied by
payment. All such purchases are made at net asset value next determined after
receipt by the Fund of the order form and payment.
8
<PAGE> 11
Subsequent investments may also be made by telephone with payment made by bank
wire transfer from a bank account. The transfer must specify account name,
address and M.S.B. Fund account number. This feature must be set up in advance
according to the following instructions.
If you want to make telephone transactions for subsequent investments, select
this feature on your application or call 800-661-3938 to request an
authorization form to set up your account for this feature. See "Redemption of
Fund Shares -- Telephone Redemptions" for a discussion of liability for
telephone errors.
Shareholders should contact the Fund at 800-661-3938 to obtain the latest wire
instructions for wiring funds to PFPC Inc. for the purchase of Fund shares and
to notify PFPC Inc. that a wire transfer is coming.
AUTOMATIC INVESTMENT PLAN
Investments in shares of the Fund may be made automatically by authorizing the
Fund's transfer agent to withdraw funds from your bank account. An initial
minimum investment of $50 is required to open an account. Subsequent investments
of at least $25 are required. Investors desiring to participate in the automatic
investment plan should complete the Automatic Investment Plan Application which
appears at the back of this Prospectus and mail it to the Fund.
PAYROLL DEDUCTION PLANS
A number of financial institutions make purchases of M.S.B. Fund shares
available to their employees by means of payroll deductions. Those companies
making payroll deduction plans available forward funds for purchase of shares to
the Fund at least monthly (unless deductions are made less frequently) on behalf
of the shareholder and make appropriate forms available to their employees.
Confirmation Notices of purchases made by payroll deduction are sent directly to
employees. Shareholders participating in payroll deduction plans may also
purchase shares by means of direct orders.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers certain tax-sheltered retirement plans through which shares
may be purchased, including IRAs (and "rollover" from existing retirement plans)
for individuals and their spouses and SEP-IRAs. Shares of the Fund may also be
purchased by Qualified Retirement Plans such as profit-sharing, 401(k) Plans and
other defined contribution plans, and by defined benefit plans.
Investors should call the Fund at 800-661-3938 to obtain the appropriate
forms.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Shareholders may elect to have dividends and capital gains distributions of
the Fund, when paid, reinvested in shares of the Fund at the net asset value per
share determined at the close of business on the ex-dividend date. Dividends and
capital gains distributions will be so reinvested unless a contrary intention is
stated in the space provided for that purpose in the Account Application. An
election may be changed by the shareholder at any time prior to a record date
for a dividend or distribution by notice in writing to the Fund.
NET ASSET VALUE
Net asset value per share of the Fund is determined as of 4:00 P.M., New York
time. The Fund computes its net asset value once daily on days the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem shares have been received by the Fund. The New York
Stock Exchange is closed on the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Purchase orders received prior to 4:00 P.M., New York
9
<PAGE> 12
time, on a trading day are executed at the net
asset value per share computed as of 4:00 P.M., New York time, on such day.
Orders received after 4:00 P.M., New York time, on a trading day or on a day
which is not a trading day are executed at the net asset value per share
computed as of 4:00 P.M., New York time, on the next trading day.
The net asset value per share of the Fund is computed by dividing the value of
all securities and other assets of the Fund, less liabilities, by the total
number of shares and fractional share credits of the Fund outstanding. For
purposes of such computation, a security listed on a national securities
exchange or on the NASDAQ National Market System is valued at the last reported
sale price thereof on the exchange or system where the security is principally
traded. If no trade occurs on such exchange or system on the date of
computation, such security will be valued at the mean of the last bid and asked
prices on such day on such exchange or system. Securities not listed on a
national securities exchange or on the NASDAQ National Market System but traded
in an over-the-counter market are valued at the average of the last bid and
asked prices prior to the computation. Short term interest-bearing investments
for which market quotations are not available are valued at cost plus discount
earned, which the Board of Directors has determined to be fair value. Other
securities are valued at their fair value, as determined in good faith by the
Board of Directors of the Fund.
Securities underlying outstanding call options written by the Fund are valued
at their market price as determined above. Premiums received on the sale of call
options are included in the net asset value; however, the current market value
of outstanding options written by the Fund are deducted in computing net asset
value. The current market value of an option listed on an organized securities
exchange is based on the last sales price on such exchange prior to 4:00 P.M.,
New York time, or, if none, the mean of the last bid and asked prices as of 4:00
P.M., New York time.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise the total return and the average
annual total return of the Fund over specified periods. Such information is
based on historical results and is not intended to indicate future performance
of the Fund. Total return shows the change in the value of an investment in the
Fund over a specified period of time (such as one, five or ten years), assuming
reinvestment of all dividends and distributions and after deduction of all
applicable charges and expenses. The Fund's average annual total return
represents the annual compounded growth rate that would produce the total return
achieved over the period. The performance information reported by the Fund does
not take into account any federal or state income taxes that may be payable by
an investor. Comparative performance information may be included in advertising
or marketing the Fund's shares.
Additional information regarding the performance of the Fund is contained in
the Annual Report to Shareholders for the year ended December 31, 1995, which is
available without charge upon request to the Fund.
REDEMPTION OF FUND SHARES
A shareholder may require the Fund to redeem his shares at any time (subject
to the conditions and limited exceptions described below). Redemption requests
may be made in writing or by telephone if the shareholder has elected the
telephone redemption option. If share certificates were issued to the
shareholder for the shares to be redeemed, the redemption request must be
accompanied by the share certificates. Procedures for redeeming shares are
described below.
10
<PAGE> 13
WRITTEN REDEMPTION REQUESTS. To be in good order, written redemption requests
must be signed exactly as the account is registered by all persons in whose
names the account is held and must include the following information: the
account number from which shares are to be redeemed, the dollar value or number
of shares to be redeemed, the address the redemption proceeds should be mailed
to and the shareholder's daytime phone number. The signature(s) on the
redemption request must be guaranteed by a bank, broker-dealer, credit union,
national securities exchange or a savings association. Guarantee by a notary
public is not acceptable. The authorized officer who guarantees the signature(s)
must sign in official capacity to bind the guarantor, and the words "Signature
Guaranteed" must appear with the required stamp. A signature guarantee is
designed to protect you and the Fund against fraudulent transactions by
unauthorized persons. If share certificates were issued to the shareholder for
the shares to be redeemed, the redemption request must be accompanied by the
share certificates. In the event of the death or incapacity of a shareholder,
the Fund may require additional documentation.
Redemption requests should be directed to M.S.B. Fund, Inc., c/o PFPC Inc.,
P.O. Box 8905, Wilmington, DE 19899-8905. Redemption requests sent by overnight
courier should be sent to M.S.B. Fund, Inc., c/o PFPC Inc., 400 Bellevue
Parkway, Wilmington, DE 19899.
TELEPHONE REDEMPTIONS. The Fund permits individual shareholders (once within a
thirty day period) or a representative of record for an account to redeem shares
by telephone in amounts up to $10,000 by calling the Fund at 800-661-3938. In
order to use this service, the shareholder must have elected to do so in his or
her application or complete an authorization form supplied by the Fund.
Telephone redemptions must be in amounts of $500 or more. Instructions must
include the shareholder's account number. Checks issued must be made payable to
the owner of record and may be mailed only to the address of record. The request
cannot be honored if an address change has been made for the account within 60
days of the telephone redemption request.
If there are multiple account owners, the Fund may rely on the instructions of
only one owner. This account option is not available for retirement account
shares or shares purchased within 15 days prior to the redemption request. The
Fund may record all calls.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include, among other
things, requiring some form of personal identification prior to acting upon
telephone instructions. The Fund reserves the right to refuse a telephone
redemption if it believes it advisable to do so. Assuming the Fund's security
procedures are followed, neither the Fund nor PFPC Inc. will be responsible for
the authenticity of redemption instructions received by telephone and believed
to be genuine and any loss therefrom will be borne by the investor. During
periods of substantial economic or market change, telephone redemptions may be
difficult to complete. Shares may be redeemed by mail if a shareholder is unable
to contact the Fund by telephone.
Shares for which share certificates were issued to the shareholder cannot be
redeemed by telephone. See "-- Written Redemption Requests" for instructions for
redeeming shares represented by certificates.
ADDITIONAL INFORMATION CONCERNING REDEMPTIONS. A shareholder who holds Fund
shares in non-certificate form may elect to have redemption proceeds of $5,000
or more wired to the
11
<PAGE> 14
shareholder's brokerage account or a
commercial bank account designated by the shareholder. The bank wire charge for
this service is $7.50.
Shareholders who have an IRA or other retirement plan must indicate on their
redemption request whether or not to withhold Federal income tax. Redemption
requests failing to indicate an election not to have Federal tax withheld will
be subject to withholding.
Shareholders may also redeem Fund shares through broker-dealers holding such
shares who have made arrangements with the Fund permitting redemptions by
telephone or facsimile transmission. These broker-dealers may charge a fee for
this service.
REDEMPTION PRICE. Shares are redeemed at their net asset value per share next
determined after receipt of the request for redemption by the Fund and all other
necessary documentation.
TIME OF PAYMENT. Payment for shares redeemed will be made to the redeeming
shareholder within seven days of receipt by the Fund of the request for
redemption and all other necessary documentation.
EXCEPTIONS TO OBLIGATION TO REDEEM.
Redemptions may be suspended, and the date of payment postponed, in the event
that trading on the New York Stock Exchange is suspended or restricted, in the
event that an emergency makes determination of net asset value or disposition of
portfolio securities not reasonably practicable, both as determined under the
rules of the Securities and Exchange Commission, or in the event the Securities
and Exchange Commission by order permits suspension for the protection of
shareholders. Requests for redemption received during a period when the right to
redeem is suspended may be withdrawn at any time until redemptions are
recommenced.
REDEMPTION IN KIND
The Fund has filed a Notification under Rule 18f-1 under the Investment
Company Act, pursuant to which it has undertaken to pay in cash all requests for
redemption by any shareholder of record, limited in amount with respect to each
shareholder during any 90-day period to the lesser of (i) $250,000, or (ii) 1%
of the net asset value of the Fund at the beginning of such period. The Fund
reserves the right to pay redemption proceeds in excess of such amount in kind
if it is deemed to be in the best interest of the Fund to do so. In making a
redemption in kind, the Fund reserves the right to select from each portfolio
holding a number of shares which will reflect the portfolio make-up and the
value of which will approximate the value of the Fund shares being redeemed or
to select from one or more portfolio investments shares approximately equal in
value to the total value of the Fund shares being redeemed. Any shortfall will
be made up in cash. Investors receiving an in kind distribution are advised that
they will likely incur a brokerage charge on the disposition of such securities
through a broker. The values of portfolio securities distributed in kind will be
the values used for the purpose of calculating the per share net asset value
used in valuing the Fund shares tendered for redemption.
AUTOMATIC WITHDRAWAL PLAN
An Automatic Withdrawal Plan is available for those shareholders who wish to
withdraw cash systematically from their investment in the Fund without the
necessity of submitting a redemption order each time a redemption of shares is
to be made. A shareholder should recognize that the redemption of shares to make
payments under the Automatic Withdrawal Plan will reduce and may eventually
eliminate all shares held in the shareholder's account.
Under the Automatic Withdrawal Plan, a shareholder may have payments made to
him either monthly or quarterly. In addition, the
12
<PAGE> 15
shareholder may request either payment of a fixed dollar amount (through the
redemption of sufficient shares on the redemption date) or the redemption of a
specified number of shares. If a shareholder designates the redemption of a
specified number of shares and not a fixed dollar amount, the actual cash
payments received will vary according to the net asset value of Fund shares on
the redemption date.
Only shares held in open account may be redeemed under the Automatic
Withdrawal Plan. All income dividends and capital gain distributions payable to
a shareholder who maintains an Automatic Withdrawal Plan will be reinvested in
Fund shares regardless of previous instructions which may have been given to the
Fund by the shareholder.
A shareholder will receive a confirmation notice of each transaction under the
Automatic Withdrawal Plan which sets forth the dollar amount and number of
shares redeemed, the redemption price per share and the number of shares
remaining in the shareholder's open account. The Automatic Withdrawal Plan may
be terminated by a shareholder or the Fund by written notice not less than 30
days prior to the date upon which a payment is to be made to the shareholder
under the Automatic Withdrawal Plan.
Additional information regarding the Automatic Withdrawal Plan and
applications are available from the Fund upon request.
REDEMPTION AT THE OPTION OF THE FUND
If the value of the shares in a shareholder's account is less than $25, the
Fund may notify the shareholder that, unless the account is brought up to $25 in
value, it will redeem all the shareholder's shares and close the account by
paying the shareholder the redemption price and dividends and distributions
declared and unpaid at the date of redemption. The Fund will give the
shareholder forty-five days after it sends the notice to bring the account up to
$25 before any action is taken. This minimum balance requirement does not apply
to IRAs and other tax-sheltered investment accounts. This right of redemption
will not apply if the value of a shareholder's account drops below $25 as the
result of market action.
The Fund reserves the right to do this because of the expense to the Fund, in
relation to the size of the investment, of maintaining small accounts.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX STATUS
The Fund has elected to qualify and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code. The Fund
intends to distribute all of its net investment income and capital gains to
shareholders in order to avoid the imposition of federal income and excise tax.
All dividends from net investment income and short-term capital gains will be
taxable as ordinary income to shareholders whether or not reinvested. Any net
long-term capital gains distributed to shareholders will be taxable as long-term
capital gains to shareholders, whether or not reinvested and regardless of the
length of time a shareholder has owned his shares. A portion of dividends paid
from net investment income may qualify for the dividends-received deduction for
corporate shareholders. Dividends or capital gains distributions declared in
October, November or December with a record date in such a month and paid during
the following January will be taxable as if received by shareholders on December
31 of the calendar year in which such dividends or distributions are declared.
Shareholders that are tax-exempt entities will not be taxed on amounts
distributed to them by the Fund.
The Fund will notify shareholders after the close of its fiscal year of the
dollar amount and
13
<PAGE> 16
the tax status of that year's dividends and distributions.
Any gain or loss realized upon a sale or redemption of Fund shares held as
capital assets by a shareholder will generally be treated as long-term capital
gain or loss if the shares have been held for more than one year, and otherwise
as short-term capital gain or loss. However, any loss realized on the sale or
redemption of Fund shares that have been held for six months or less will be
treated as long-term capital loss to the extent of the amount of any capital
gains dividend received by the shareholder with respect to such shares.
To avoid withholding tax on any dividends, capital gain distributions and
redemption proceeds, a shareholder must certify that the social security number
or taxpayer identification number provided to the Fund is correct and that the
shareholder is not currently subject to backup withholding or is exempt from
backup withholding.
Shareholders are urged to consult their own tax advisers with specific
questions about the federal, state or local income tax implications of an
investment in the Fund.
OFFICERS AND DIRECTORS OF THE FUND
The directors of the Fund, in addition to reviewing the actions of the Fund's
Investment Adviser, as described below, decide upon matters of general policy at
their regular meetings. The Fund's officers supervise the business operations of
the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
The Board of Directors of the Fund have appointed, effective May 19, 1995,
Shay Assets Management Co. as its investment adviser, PFPC Inc. as its
administrator, transfer agent, dividend paying agent and shareholder servicing
agent and PNC Bank, N.A. as the custodian for the Fund.
INVESTMENT ADVISER
Investment decisions for the Fund are made by Shay Assets Management Co. (the
"Investment Adviser"), which was appointed as the Fund's investment adviser
effective May 19, 1995. The Investment Adviser is responsible for placing
purchase and sale orders for portfolio securities and other investments. For its
investment management services, the Investment Adviser receives a fee from the
Fund computed at the annual rate of 0.75% of the first $100,000,000 of the
Fund's average daily net assets and 0.50% of the Fund's average daily net assets
in excess of $100,000,000. The fee payable to the Investment Adviser is reduced
(but not below zero) to the extent the expenses of the Fund (exclusive of
professional fees, such as legal and audit fees, directors' fees and expenses
and distribution expenses, if any, payable under Rule 12b-1) exceed 1.10% of the
Fund's average daily net assets during any fiscal year during the term of the
Fund's agreement with the Investment Adviser. The total amount paid by the Fund
in 1995 in respect of investment advisory services (including amounts paid to
Shay Assets Management Co. and amounts paid to the Fund's prior investment
adviser, Nationar) was 0.61% of the Funds average net assets. See "Annual Fund
Operating Expenses" for an illustration of the advisory fees that would have
been payable to the Investment Adviser in 1995 under the agreement with the
current Investment Adviser.
The Investment Adviser is a general partnership that consists of two general
partners, Shay Assets Management, Inc. and ACB Assets Management, Inc., each of
which holds a fifty-percent interest in the Investment Adviser. Shay Assets
Management, Inc., which is the managing partner of the Investment Adviser, is
controlled by Rodger D. Shay, who is a Vice
14
<PAGE> 17
President of the Fund. ACB Assets Management, Inc. is an indirect wholly-owned
subsidiary of America's Community Bankers ("ACB"), the trade association
representing savings institutions in the United States. The Investment Adviser,
with its principal office located at 111 East Wacker Drive, Chicago, Illinois
60601, is a registered investment adviser under the Investment Advisers Act of
1940 and serves as investment adviser to Asset Management Fund, Inc., a
registered investment company comprising five fixed-income portfolios with
aggregate net assets of approximately $1.49 billion at March 31, 1996. Since May
19, 1995, the Investment Adviser has also served as investment adviser to
Institutional Investors Capital Appreciation Fund, Inc., which had net assets at
March 31, 1996, of approximately $64.4 million.
ADMINISTRATOR, TRANSFER AGENT, DIVIDEND PAYING AGENT AND CUSTODIAN
Administrator, Transfer Agent and Dividend Paying Agent. PFPC Inc. ("PFPC"),
P.O. Box 8905, Wilmington, Delaware 19899-8905, which was appointed as the
Fund's administrator effective May 19, 1995, performs various administrative
services for the Fund. These services include maintenance of books and records,
preparation of governmental filings and stockholder reports, and computation of
net asset value. Subject to the fee waiver described below, the Fund pays PFPC a
fee for its services as administrator computed at the annual rate of 0.10% of
the first $200 million of the Fund's average net assets, 0.075% of the next $200
million of average net assets, with further reductions in the applicable rate
for net assets in excess of $400 million, subject to a minimum annual charge of
$80,400. PFPC also serves as the transfer agent, registrar and dividend paying
agent for the Fund's shares and receives additional compensation in such
capacities.
Custodian. PNC Bank, N.A. ("PNC Bank"), Philadelphia, Pennsylvania, is the
custodian of the Fund's investments. PNC Bank and PFPC are affiliates of PNC
Bank Corp.
Fee Waiver. PFPC and PNC Bank have agreed to waive a portion of their fees
during the first year (which ends May 18, 1996) of their respective agreements
with the Fund so that the aggregate fees payable by the Fund for their services
will not exceed 0.25% of the Fund's average daily net assets, plus certain
transaction charges and out-of-pocket costs. PFPC and PNC Bank have agreed to
waive 25% of any applicable minimum charges during the second year of the
agreements, which year ends May 18, 1997.
DISTRIBUTOR
Shay Financial Services Co. (the "Distributor") acts as the distributor of the
Fund. The Distributor is a general partnership that consists of two general
partners, Shay Financial Services, Inc. and ACB Securities, Inc., each of which
holds a fifty-percent interest in the Distributor. Shay Financial Services, Inc.
is controlled by Rodger D. Shay, a Vice President of the Fund. ACB Securities,
Inc. is an indirect wholly-owned subsidiary of ACB.
The Distributor is authorized to undertake certain activities in connection
with the sales of shares of the Fund, including informing potential investors
about the Fund through written materials, seminars and personal contacts. The
Distributor does not receive any compensation from the Fund in connection with
such services.
PORTFOLIO MANAGERS
The individuals with primary responsibility for the management of the Fund's
portfolio are John J. McCabe and Mark Trautman. Messrs. McCabe and Trautman have
been primarily responsible for the Fund's investments since August 1991, in the
case of Mr. McCabe, and March 1993, in the case of Mr. Trautman, initially as
employees of the Fund's prior investment adviser, Nationar, and currently as
Portfolio Managers of Shay Assets Management Co.
15
<PAGE> 18
Mr. McCabe is Senior Vice President of Shay Assets Management Inc., the
managing partner of the Investment Adviser. Mr. McCabe previously served as
Senior Vice President and Chief Investment Officer of Nationar, the Fund's
former investment adviser, from August 1991 through May 1995 and in that
capacity had responsibility for the Fund's investments. Prior to joining
Nationar he served as Managing Director and Portfolio Manager at Sterling
Manhattan Corporation, an investment banking firm, for approximately three
years. Prior to that Mr. McCabe served in various positions at Bankers Trust
Company, including Director of Investment Research and Managing Director of the
Investment Management Group. Mr. McCabe is a director and past President of the
New York Society of Security Analysts, a past director of the Financial Analysts
Federation and a member and founding Governor of The Association for Investment
Management and Research.
Mr. Trautman is Vice President of Shay Assets Management Inc. Prior to May 20,
1995, Mr. Trautman served as Director of Mutual Funds Investment for the Fund's
former investment adviser, Nationar, and in that capacity had responsibility for
the Fund's investments. He also has served as Portfolio Manager for
Institutional Investors Capital Appreciation Fund, Inc. since March 1993. From
January 1992 through March 1993 he served as Senior Equity Analyst for the two
funds. From December 1988 through December 1991 Mr. Trautman was a Senior
Associate with Sterling Manhattan Corporation.
DESCRIPTION OF SECURITIES
The Fund is authorized to issue five classes of shares, par value $.001 each.
At present, shares of only one class are outstanding ("Class A"), and only Class
A shares are currently available for purchase. Each Class A share represents a
proportionate interest in the Fund's existing investment portfolio. Shares of
other classes, if and when issued, would represent interests in other portfolios
of investments. Each Class A share has one vote on all matters submitted to a
vote of the shareholders, except that, if additional investment portfolios are
created, holders of Class A shares would not be entitled to vote on matters
which affect only the interests of other portfolios. The Board of Directors may
create additional investment portfolios at any time. Fractional share credits
entitle the holders thereof to dividends and distributions but no voting rights.
ADDITIONAL INFORMATION
PERIODIC REPORTS. The Fund issues semi-
annual reports to its shareholders containing financial statements; the Fund
also issues year end annual reports containing financial statements audited by
the Fund's independent auditors.
SHAREHOLDER INQUIRIES. Shareholder inquiries should be directed to M.S.B.
Fund, Inc., c/o Shay Financial Services Co., 111 East Wacker Drive, Chicago,
Illinois 60601 or by calling 800-661-3938.
16
<PAGE> 19
<TABLE>
<S><C>
M.S.B. FUND, INC. Mail check and completed application to:
ACCOUNT APPLICATION M.S.B. Fund, Inc.
DO NOT USE FOR IRA ACCOUNTS. c/o PFPC Inc.
IF YOU NEED ASSISTANCE IN COMPLETING P.O. Box 8905
THIS APPLICATION, PLEASE CALL Wilmington, DE 19899-8905
800-661-3938.
- ----------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (PLEASE PRINT) COMPLETE APPLICABLE
SECTION ONLY.
- ----------------------------------------------------------------------------------
(Check only one box here to indicate type of registration.)
/ / Individual(1)
-----------------------------------------------------------------
First Name Initial Last Name
and (if any)
-----------------------------------------------------
Social Security Number
Joint
/ / Tenant(2)
--------------------------------------------------------------------
First Name Initial Last Name
(1) Only one Social Security Number is needed for tax reporting.
(2) The account registration will be joint tenants with right of survivorship and
not tenants in common unless tenants in common or community
property registrations are requested.
- ----------------------------------------------------------------------------------
Gift to
/ / Minor as custodian for
---------------------------------------------------
Custodian's Name (Only One Permitted)
--------------------------------------------------- ----------------
Minor's Name (Only One Permitted) State
-------------------------------
Under the Uniform Gifts to Minors Act Minor's Social Security Number
- ----------------------------------------------------------------------------------
/ / A Trust as trustee for
-----------------------------------------------------
Name of Trustee
---------------------------------------------------------------------
Name of Trust
-------------------------------- ----------------------------------
Date of Trust Agreement Taxpayer Identification Number
- ----------------------------------------------------------------------------------
A Corporation,
Partnership or
/ / other Entity
---------------------------------------------------------------
Name of corporation or other entity
----------------------------------
Taxpayer Identification Number
- ----------------------------------------------------------------------------------
2. YOUR MAILING ADDRESS (PLEASE PRINT)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Street Address
- ----------------------------------------------------------------------------------
City State Zip
- ----------------------- -------------------------------------------------------
Home Phone Business Phone
Citizen of / / U.S. / / Other
----------
---------------------------------------
IMPORTANT! PLEASE COMPLETE REVERSE SIDE
---------------------------------------
</TABLE>
<PAGE> 20
<TABLE>
<S><C>
- --------------------------------------------------------------------------------
3. YOUR INVESTMENT (MINIMUM $50; AUTOMATIC INVESTMENT PLAN MINIMUM $50)
- --------------------------------------------------------------------------------
BY MAIL: Enclosed is a check payable to M.S.B. FUND, INC. in the amount
of $
--------------------
BY WIRE: Call 800-661-3938 to obtain account number and wiring
instructions. $
--------------------
- --------------------------------------------------------------------------------
4. AUTOMATIC INVESTMENT PLAN (MINIMUM INITIAL INVESTMENT $50)
- --------------------------------------------------------------------------------
Please start an Automatic Investment Plan for me and invest $ ($25
monthly or more) in the shares of the M.S.B. Fund. PLEASE COMPLETE SEPARATE
AUTOMATIC INVESTMENT PLAN APPLICATION.
- --------------------------------------------------------------------------------
5. AUTOMATIC WITHDRAWAL PLAN
- --------------------------------------------------------------------------------
For information on this option and an application please call 800-661-3938.
- --------------------------------------------------------------------------------
6. REDEEMING YOUR SHARES
- --------------------------------------------------------------------------------
/ / Yes / / No BY TELEPHONE: The Fund is hereby authorized to honor telephone
redemptions provided that proceeds are mailed or bank wired to
the registered account holder(s) only.
(See page 10 of the Prospectus.)
/ / Yes / / No BY BANK WIRE: The Fund is hereby authorized to honor
redemptions by bank wire for any and all Fund shares,
provided that the proceeds are transmitted to the bank listed
below, for credit to your account only.
- -------------------------------------------------- ---------------------------
Name of Bank Account No.
- --------------------------------------------------------------------------------
Address of Bank City State Zip
- --------------------------- --------------------------------------------------
Bank Routing ID No. Name of account holder
- --------------------------------------------------------------------------------
7. YOUR SIGNATURE
- --------------------------------------------------------------------------------
The undersigned warrants that he/she has full authority and is of legal age to
purchase shares of the Fund. I have received and read a current Prospectus of
the Fund and agree to its terms. The Fund's Transfer Agent will not be liable
for acting upon instructions it believes are genuine. Under penalties of
perjury, the undersigned whose Social Security (Tax I.D.) number is shown above
certifies that (i) the number is my correct taxpayer identification number and
(ii) currently I am not under IRS notification that I am subject to backup
withholding. If no such number is shown, the undersigned further certifies,
under penalties of perjury, that either (a) no such number has been issued, and
a number has been or soon will be applied for and, if a number is not provided
to you within sixty days, the undersigned understands that all payments
(including redemptions) are subject to 31% withholding under Federal tax law,
until a number is provided; or (b) that the undersigned is not a citizen or
resident of the U.S. and either does not expect to be in the U.S. for 183 days
during each calendar year and does not conduct a business in the U.S. which
would receive any gain from the Fund, or is exempt under an income tax treaty.
X X
- ---------------------------------------------- ---------------------------------------------- ---------------------
Individual (or Custodian) Joint Registrant, if any Date
X X
- ---------------------------------------------- ---------------------------------------------- ---------------------
Corporate Officer, Trustee, etc. Title Date
- --------------------------------------------------------------------------------
Reinvest all income dividends and capital gains in additional Fund shares unless
this box is checked. / / Pay dividends and capital gains distribution in cash.
If any dividend or capital gains distribution check addressed and sent to
(me)(us) is returned to you, you are hereby authorized to invest the proceeds of
that check in Fund shares at the net asset value next determined after receipt
by you of these returned checks. (I)(We) understand and agree that all
subsequent dividend and capital gains distributions automatically will be
reinvested in Fund shares unless (I)(we) have signed and filed with you a new
request to receive dividends and capital gains distributions in cash.
</TABLE>
<PAGE> 21
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<PAGE> 22
M.S.B. FUND, INC.
AUTOMATIC INVESTMENT PLAN -- INSTRUCTIONS
- --------------------------------------------------------------------------------
HOW DOES IT WORK?
1. PFPC Inc. through our bank, PNC Bank, NA, draws an Automated Clearing
House (ACH) debit electronically against your personal checking
account each month, according to your instructions.
2. Choose any amount ($25 or more) that you would like to invest
regularly and your debit for this amount will be processed by PFPC
Inc. as if you had written a check yourself.
3. Shares will be purchased and a confirmation sent to you.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW DO I SET IT UP?
1. Complete this form AND THE FUND APPLICATION FORM if you do not
already have an existing account. The minimum initial investment is
$50 for those who do not have an existing account.
2. MARK ONE OF YOUR PERSONAL CHECKS VOID, ATTACH IT TO THE FORM and mail
to M.S.B. Fund, Inc., c/o PFPC Inc., P.O. Box 8905, Wilmington, DE
19899-8905.
3. As soon as your bank accepts your authorization, debits will be
generated and your Automatic Investment Plan started. In order for
you to have ACH debits from your account, your bank must be able to
accept ACH transactions and/or be a member of an ACH association.
Your branch manager should be able to tell you your bank's
capabilities. We cannot guarantee acceptance by your bank.
4. Please allow one month for processing of your Automatic Investment
Plan before the first debit occurs.
- --------------------------------------------------------------------------------
<PAGE> 23
<TABLE>
<S><C>
M.S.B. FUND, INC. Mail check and completed application to:
AUTOMATIC INVESTMENT
PLAN APPLICATION M.S.B. Fund, Inc.
c/o PFPC Inc.
P.O. Box 8905
Wilmington, DE 19899-8905
- --------------------------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT $50
- --------------------------------------------------------------------------------------------------
I authorize M.S.B. Fund, Inc. to establish an Automatic Investment Plan for
me and draw on my
/ / Checking Account / / Savings Account
In the amount of / / $25 / / $50 / / $100 / / $250 / / other ($25 monthly or more)
------------------------------
on the 20th day of each month to invest in the shares of M.S.B. Fund, Inc.
- ---------------------------------------------------------------------------------------------------
/ / I am in the process of establishing an account (Regular or IRA Account Application must be completed)
or
/ / My M.S.B. account number is
------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Name as account is registered
- ---------------------------------------------------------------------------------------------------
Street Address
- ---------------------------------------------------------------------------------------------------
City State Zip
- ------------------------------------------------ ------------------------------------------------
Home Telephone Business Telephone
- ---------------------------------------------------------------------------------------------------
BANK INFORMATION: Please fill in the following information and attach a void
check.
Please have the ACH drawn on the following account:
- ---------------------------------------------------- ---------------------------------------
Name of Bank Account No.
- --------------------------------------------------------------------------------
Address of Bank City State Zip
- ---------------------------------------------------- ---------------------------------------
Bank Routing ID No. Name of account holder
(9 digit number located on lower left side of your check)
NOTE: YOUR BANK MUST BE ABLE TO ACCEPT ACH TRANSACTIONS AND/OR BE A MEMBER OF AN
ACH ASSOCIATION IN ORDER FOR YOU TO USE THIS SERVICE.
IMPORTANT! PLEASE COMPLETE REVERSE SIDE
</TABLE>
<PAGE> 24
I understand that my ACH debit will be dated on or about the 20th day of each
month as indicated above. I agree that if such debit is not honored upon
presentation, PFPC Inc. may discontinue this service and any share purchase made
upon deposit of such debit may be cancelled. I further agree that if the net
asset value of the shares purchased with such debit is less when said purchase
is cancelled than when the purchase was made, PFPC Inc. shall be authorized to
liquidate other shares or fractions thereof held in my account to make up the
deficiency. This Automatic Investment Plan may be discontinued by PFPC Inc. upon
30-days written notice or at any time by the investor by written notice to PFPC
Inc. which is received not later than 5 business days prior to the above
designated investment date.
Signature(s)
------------------------------- ---------------------------------
- --------------------------------------------------------------------------------
IMPORTANT! MARK ONE OF YOUR PERSONAL CHECKS VOID AND ATTACH IT TO THE FORM.
- --------------------------------------------------------------------------------
<PAGE> 25
------------------------------------
M.S.B.
FUND, INC.
-------------------------------------
M.S.B. Fund, Inc.
c/o Shay Financial Services Co.
111 East Wacker Drive
Chicago, Illinois 60601
Telephone 800-661-3938
<TABLE>
<S> <C> <C>
OFFICERS
President
DAVID FREER, JR.
First Vice President Second Vice President
JOSEPH R. FICALORA IAN D. SMITH
Vice President and Assistant Vice President and Secretary
Secretary EDWARD E. SAMMONS, JR.
RODGER D. SHAY
Vice President
Vice President MARK F. TRAUTMAN
JOHN J. McCABE
Treasurer
JAY F. NUSBLATT
DIRECTORS
Malcolm J. Delaney George J. Kelly
Harry P. Doherty William A. McKenna, Jr.
Joseph R. Ficalora Gilbert O. Robert
David Freer, Jr. Norman W. Sinclair
Michael J. Gagliardi Ian D. Smith
</TABLE>
<PAGE> 26
------------------------------------
M.S.B.
FUND, INC.
------------------------------------
M.S.B. Fund, Inc.
c/o Shay Financial Services Co.
111 East Wacker Drive
Chicago, Illinois 60601
Telephone 800-661-3938
INVESTMENT ADVISER
Shay Assets Management Co.
111 East Wacker Drive
Chicago, Illinois 60601
DISTRIBUTOR
Shay Financial Services Co.
111 East Wacker Drive
Chicago, Illinois 60601
ADMINISTRATOR, TRANSFER AGENT,
SHAREHOLDER SERVICING AGENT
AND DIVIDEND PAYING AGENT
PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
CUSTODIAN
PNC Bank
17th & Chestnut Streets
Philadelphia, Pennsylvania 19101
LEGAL COUNSEL
Hughes Hubbard & Reed
One Battery Park Plaza
New York, New York 10004
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
1600 Market Street
Philadelphia, Pennsylvania 19103-7222
------------------------------------
M.S.B.
FUND, INC.
------------------------------------
PROSPECTUS
-------------------
May 1, 1996
A NO-LOAD FUND
-------------------
PRIMARY OBJECTIVE:
CAPITAL APPRECIATION
-------------------
SECONDARY OBJECTIVE:
INCOME
<PAGE> 27
<TABLE>
<S> <C>
M.S.B.
FUND, INC.
PRIMARY OBJECTIVE: M.S.B. Fund, Inc.
CAPITAL APPRECIATION c/o Shay Financial Services Co.
111 East Wacker Drive
Chicago, Illinois 60601
800-661-3938
SECONDARY OBJECTIVE:
INCOME
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
This Statement of Additional Information is not a
prospectus. It should be read in conjunction with
the Prospectus of the Fund, dated May 1, 1996. A
copy of the Prospectus may be obtained from the
Fund at the address set forth above or by calling
800-661-3938.
</TABLE>
<PAGE> 28
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Investment Policy and Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Writing Covered Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Issuance of Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Voting of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dividends, Distributions and Income Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Officers and Directors of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Administrator, Transfer Agent, Shareholder Servicing Agent, Dividend Paying
Agent and Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Purchase and Sale of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Expenses of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
(i)
<PAGE> 29
INVESTMENT POLICY AND OBJECTIVES
The primary investment objective of the Fund is to achieve capital
appreciation for its shareholders. The objective of income is secondary to
this objective. In seeking to achieve these objectives the Fund invests
primarily in equity securities of large and medium size companies, i.e.
companies with a market capitalization in excess of $500 million, whose growth,
earnings and dividend prospects are promising and whose securities are
reasonably priced, in the opinion of its Investment Adviser. Such equity
securities consist primarily of common stocks but may also include debt
securities convertible into common stock. It is not expected that the Fund's
holdings of convertible debt securities would ordinarily exceed 5% of the
Fund's assets. The Fund may also invest up to 15% of its assets in equity
securities of smaller companies which may be less liquid and more volatile than
the securities of larger companies. Although the Fund invests primarily in
common stocks, the Fund is not restricted in the proportion of its assets that
may be invested in non-equity securities, such as investment grade corporate
bonds, commercial paper and government securities, during abnormal market
conditions; and, when deemed beneficial in the opinion of the Fund's Investment
Adviser for defensive purposes during abnormal market conditions, a substantial
proportion of the assets of the Fund may be invested temporarily in such
securities. The Fund does not have any present intention of investing in
nonconvertible debt securities of the lowest investment grade, which securities
have some speculative characteristics. The Fund may not invest more than 5% of
its total assets in the securities of issuers which, together with any
predecessors, have a record of less than three years of continuous operation.
The Fund may not purchase securities which the Fund is restricted from selling
to the public without registration under the Securities Act of 1933, as
amended, and may not invest more than 10% of its total assets in securities
which are otherwise restricted as to disposition. The Fund may not purchase or
retain the securities of any issuer if the officers or directors of the Fund,
its advisors or managers owning beneficially more than one-half of one percent
of the securities of that issuer together own beneficially more than five
percent of the securities of the issuer.
The Fund invests its non-committed cash primarily in commercial
paper. The Fund's investments in commercial paper ordinarily consist of
commercial paper rated "Prime-2" or better by Moody's Investors Services, Inc.
or rated "A-2" or better by Standard & Poor's Corporation. The Fund's
investments in commercial paper typically mature overnight.
WRITING COVERED OPTIONS
The Fund may engage in writing (i.e., selling) call options listed on
organized securities exchanges with respect to securities owned by the Fund
(called "covered" options). Except in the circumstances described below, the
Fund will not sell any security subject to a call option written by the Fund so
long as that option is outstanding. Call options are currently listed on the
Chicago Board Options Exchange and the New York, American, Midwest and Pacific
Stock Exchanges.
A call option gives the purchaser the right to buy a security from
the Fund at a fixed price (the "exercise price") at any time prior to the
expiration of the option contract
<PAGE> 30
regardless of the market price of the security at that time. In return for
such right, the purchaser pays the Fund a premium which the Fund retains
whether or not the option is exercised. The premium represents consideration
to the Fund for undertaking the option obligation and thereby foregoing (during
the period of the option) the opportunity to profit from an increase in the
market price of the underlying security above the exercise price. For example,
assume the Fund owns 100 shares of XYZ and that, at a time when the market
price of XYZ was $50 per share, the Fund wrote a six month call option on those
shares at an exercise price of $50 for a premium of $500 (less transaction
costs). If the price of XYZ declined to $40 per share the call would not
likely be exercised. The 100 XYZ shares would have declined $1,000 in value
and the Fund would have received income in the amount of $500. On the other
hand, should the price of XYZ rise to $60 per share the call would likely be
exercised with the result that, in exchange for the $500 premium, the Fund
would have foregone the $1,000 appreciation on the underlying shares.
When an option is written the securities subject to the option will
be segregated or otherwise held for delivery in accordance with the
requirements of any applicable securities exchange. The Fund may purchase call
options only to close out a previous option commitment (called a "closing
purchase transaction"). A closing purchase transaction is made by buying an
option with identical terms as an option previously written resulting in the
cancellation of the Fund's previous option obligation. If the Fund wishes to
sell securities on which it has options outstanding it would execute a closing
purchase transaction prior to selling the securities. A profit or loss may be
realized on a closing purchase transaction if the amount paid to purchase a
call option previously written is less or more than the amount received from
its sale.
The writing of covered call options involves certain risks. An
option position may be closed out only on an exchange which provides a market
for an option of the same series. Although the Fund will generally write only
those call options for which there appears to be an active market, there is no
assurance that an active market on an exchange will exist for any particular
option at any particular time. If the Fund as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it
would, as a result, be subject to any price decline in the underlying security.
If such a situation were to arise, the Fund's Investment Adviser would
determine whether to hold the underlying securities and risk depreciation in
their market value or to sell the securities and substitute cash or other
securities as collateral for the option obligation.
In general, premiums received on options which are not exercised and
gains or losses realized on closing purchase transactions are treated as
short-term capital gains or losses. When an option is exercised the premium is
added to the exercise price and the resulting gain or loss is characterized as
a short- or long-term capital gain or loss depending on the holding period of
the underlying securities. In general, brokerage commissions associated with
buying and selling call options are higher than those associated with other
securities transactions.
The Board of Directors has directed the Fund's Investment Adviser to
write options only in situations where the exercise price plus the premium
(less transaction costs) would, at the time the option is written, equal a
price at which the Investment Adviser would recommend selling the underlying
securities because of fundamental investment considerations.
2
<PAGE> 31
Consequently, the Fund does not believe that option writing has a material
effect on the Fund's portfolio turnover rate and it is believed that option
writing may contribute both to the capital appreciation and income objectives
of the Fund. In addition, the Board of Directors has directed the Investment
Adviser to restrict option writing so that no more than 5% of the Fund's total
assets may be subject to outstanding options at any time. These restrictions
may be changed by the Board of Directors whenever such changes appear to be in
the best interest of the Fund.
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
Such qualification requires, among other things, that the Fund derive less than
30% of its gross income from realized gains on securities (including options)
held less than three months. See "Dividends, Distributions and Income Tax
Status" in this Statement of Additional Information. For the effect of options
on the computation of net asset value see "Net Asset Value" in the Prospectus.
ISSUANCE OF SENIOR SECURITIES
The Fund does not issue senior securities, except that it may borrow
money for temporary administrative or liquidity (but not leveraging) purposes,
and then only from banks up to an amount not in excess of 5% of the value of
the Fund's total assets at the time of the loan, repayable in not more than 60
days.
VOTING OF PORTFOLIO SECURITIES
In general, subject to rare exceptions when deemed appropriate, the
Fund votes portfolio securities in favor of management proposals and nominees.
This policy is based upon the fact that the Investment Adviser's evaluation of
the quality of management is an important factor in investment decisions made
by the Fund.
PORTFOLIO TURNOVER
The Fund's annual portfolio turnover rate was 26%, 62% and 68% in
1993, 1994 and 1995, respectively. The portfolio turnover rate is determined
by dividing the amount of the lesser of the purchases or sales during the year
by the average value of the Fund's portfolio securities during such year. The
portfolio turnover rate of the Fund is not normally expected to exceed 75% but
may do so if investment objectives in the light of market conditions require
more frequent trades. The increase in turnover rate from 1993 to 1994 reflects
primarily additional purchases and sales resulting from an increase in the
number of security holdings to improve diversification, sales of securities to
enable investment in securities which in the opinion of the Fund's investment
adviser at the time, offered more attractive fundamentals and sales of
securities to satisfy redemptions.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund may be purchased or redeemed at the Fund's net
asset value per share next determined after receipt of an order for purchase or
redemption as described in the Prospectus, accompanied by, in the case of
purchase orders, payment.
3
<PAGE> 32
The following computation demonstrates by way of example the manner
in which the net asset value of the Fund was determined as of 4:00 P.M., New
York time, on December 31, 1995.
M.S.B. FUND INC.
DECEMBER 31, 1995 VALUATION SHEET
<TABLE>
<S> <C>
Market value of securities held . . . . . . . . . . . . . . . $33,073,563
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Receivable for securities sold . . . . . . . . . . . . . . . 340,703
Receivable for fund shares sold . . . . . . . . . . . . . . . 5,926
Receivable for dividends and interest . . . . . . . . . . . . 58,072
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 13,432
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,491,930
------------
Less:
Dividend payable . . . . . . . . . . . . . . . . . . . . . . 875,006
Payable for fund shares redeemed . . . . . . . . . . . . . . 5,351
Accrued expenses payable . . . . . . . . . . . . . . . . . . 86,660
Investment advisory fees payable . . . . . . . . . . . . . . 15,779
------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . $32,509,134
============
Number of shares outstanding . . . . . . . . . . . . . . . . 2,385,057
Net asset value, offering and redemption price per share . . $13.63
============
</TABLE>
PERFORMANCE INFORMATION
The following table sets forth the total return on an investment in
the Fund for the one-, three-, five-, and ten-year periods ended December 31,
1995, and the average annual total return for such periods:
M.S.B. FUND, INC. TOTAL RETURN DATA
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1995
----------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Total Return 24.97% 48.23% 91.86% 195.07%
Average Annual Total Return 24.97% 14.02% 13.92% 11.43%
</TABLE>
Total return shows the percentage change in the value of an
investment in the Fund over the specified periods, assuming (i) a hypothetical
investment of $1,000 at the beginning of the period, (ii) reinvestment of all
dividends and distributions and (iii) deduction of all applicable charges and
expenses. The Fund's average annual total return represents the annual
compounded growth rate that would produce the total return achieved over the
applicable
4
<PAGE> 33
period. For example, as indicated in the table above, a 13.92% average annual
rate of return would produce a total return of 91.86% over a five-year period.
The performance information reported above does not take into account any
federal or state income taxes that may be payable by an investor.
The foregoing information is a statement of the past record of the
Fund and should not be construed as a representation or prediction of future
results. The investment return and principal value of an investment in the
Fund will fluctuate with changing market conditions so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Comparisons of total returns on a year-to-year basis may facilitate an
understanding of how the Fund is affected by changing market conditions. The
average annual total return permits an investor to identify the overall rate of
return achieved by the Fund during a multi-year period without regard to
year-to-year variations.
From time to time the Fund's performance may be compared to the Dow
Jones Industrial Average and the Standard & Poor's 500 Composite Price Index,
which are groups of unmanaged securities, and other published indices and to
the Lipper Growth and Income Fund Average and the Lipper All Equity Funds
Average. The Fund's performance also may be compared to that of other mutual
funds through ratings or rankings or appropriate averages based on specified
factors over specified periods of time reported or published by such entities
as AMG Data, Barron's, Business Week, Chicago Tribune, CDA Investment
Technologies, Inc., Changing Times, Consumer Reports, Crain's Chicago Business,
Crain's New York Business, the Donoghue Organization, The Economist, Financial
Times, Forbes, Fortune, Futures, Income Opportunities, Investment Advisor,
Investment Company Data, Inc., Kiplinger's Personal Finance, Lipper Analytical
Services, Inc., Media General Financial Services, Money, Morningstar, Inc.,
Mutual Fund Market News, Newsweek, The New York Times, No-Load Fund Investor,
Smart Money, Standard & Poor's, Strategic Data, Success, Time, U.S. News and
World Report, USA Today, Value Line, The Wall Street Journal and Worth
Magazine.
DIVIDENDS, DISTRIBUTIONS AND INCOME TAX STATUS
It is the Fund's policy to distribute substantially all of its net
investment income (income from dividends and interest, less expenses) and net
short-term capital gain, if any, as income dividends and to distribute
substantially all net long-term capital gain (net of short-term capital loss)
on sales of portfolio securities as capital gain distributions. In the event
the Fund fails to distribute to shareholders in a calendar year an amount equal
to the sum of (i) 98% of its ordinary income (excluding capital gain), (ii) 98%
of its capital gain net income (determined as of the twelve-month period ending
October 31), and (iii) the amount, if any, of ordinary income and capital gain
not distributed in the preceding calendar year, it would be subject to a
non-deductible 4% excise tax on the amounts not distributed. Because the Fund
expects to distribute all of its net investment income and net capital gain, it
does not expect to incur a liability for this tax.
5
<PAGE> 34
OFFICERS AND DIRECTORS OF THE FUND
The Fund has nine directors who are elected for staggered terms of
three years each. The officers of the Fund are the President, First Vice
President, Second Vice President, Vice President, Treasurer, Secretary and
Assistant Secretary. All directors must be shareholders; the President and
First Vice President must be directors.
The directors and officers of the Fund, together with their ages,
principal occupations for the last five years and the expiration of their terms
as directors, are set forth in the following table.
POSITION(S) HELD WITH
NAME, AGE, ADDRESS AND REGISTRANT AND EXPIRATION
PRINCIPAL OCCUPATIONS LAST 5 YEARS OF TERM AS A DIRECTOR
DAVID FREER, JR. (Age 56)* President and Director (1998)
187 East Market Street
Suite 100
Rhinebeck, NY 12572
Mr. Freer has served as President of the Fund since November of 1990. Mr.
Freer had previously served as Vice President of the Fund from 1985 through
1990. Since January 1, 1990, Mr. Freer has served as President, Treasurer
and a director of Budget Payment Corporation, which engages in the business
of financing insurance premiums.
JOSEPH R. FICALORA (Age 49)* First Vice President and
38-25 Main Street Director (1999)
Flushing, NY 11354
Mr. Ficalora has been Chairman, President and Chief Executive Officer of
Queens County Bancorp, Inc. since its inception in July 1993, and has been
President and Chief Executive Officer of Queens County Savings Bank, its
principal subsidiary, since January 1994. Mr. Ficalora previously served
as President and Chief Operating Officer of Queens County Savings Bank.
Mr. Ficalora also serves as Chairman of the Board of the New York Savings
Bank Life Insurance Fund, President of the Queens Library Foundation Board,
Executive Vice President of Finance and Board member of Queensborough Boy
Scouts and Vice President and a member of the Board of the Queens Chamber
of Commerce. He also serves on the Board of the following organizations:
Queensborough Community College, Queens Museum, Flushing Cemetery and the
Community Bankers Association of New York State. Mr. Ficalora has served
as First Vice President of the Fund since March 1996.
6
<PAGE> 35
IAN D. SMITH (Age 72)* Second Vice President and
69 Pietro Drive Director (1997)
Yonkers, New York 10710
Mr. Smith is retired. Mr. Smith served as Senior Vice President and
Managing Director of Apple Bank for Savings from July 1989 through August
1991. From 1983 to 1987, Mr. Smith served as Executive Vice President of
Seamen's Bank for Savings, F.S.B. He has served as Second Vice President
of the Fund since March 1994 and previously served as President of the Fund
from March 1985 through March 1987.
MALCOLM J. DELANEY (Age 69) Director (1998)
518A Heritage Hills
Somers, NY 10589
Mr. Delaney is retired. From 1986 through 1992, Mr. Delaney served as
President and Chief Executive Officer of Eastchester Savings Bank, which
was acquired by Southold Savings Bank in 1991. Mr. Delaney had served as a
trustee of the bank since 1981. Mr. Delaney also serves as a director of
the North Fork Bancorporation, Inc.
HARRY P. DOHERTY (Age 53) Director (1999)
15 Beach Street
Staten Island, New York 10304
Mr. Doherty has been Chairman and Chief Executive Officer of Staten Island
Savings Bank since 1990. Mr. Doherty also serves as a director and as
President of Institutional Investors Capital Appreciation Fund, Inc., an
investment company registered under the Investment Company Act of 1940 for
which Shay Assets Management Co. also acts as investment adviser.
MICHAEL J. GAGLIARDI (Age 55) Director (1999)
36 Pacific Street
Newark, NJ 07105
Mr. Gagliardi is President and Chief Executive Officer of Ironbound Bank.
From January 1992 through February 1993, he served as Chairman, President
and Chief Executive Officer of Green Point Savings Bank. From 1989 through
1992, Mr. Gagliardi served as President and Chief Executive Officer, and
from 1987 through 1989 he served as Executive Vice President and Chief
Financial Officer, of Green Point Savings Bank. He also serves as a
director of the National Association for the Study of Wilsons Disease.
7
<PAGE> 36
GEORGE J. KELLY (Age 73) Director (1997)
18 West End Avenue R
Old Greenwich, CT 06870
Mr. Kelly is retired. From July 1988 through June 1991, Mr. Kelly served
as a consultant to the Savings Banks Association of New York State. Prior
to June 1988, Mr. Kelly served as a Senior Vice President and Secretary of
the Savings Banks Association of New York State. Mr. Kelly served as
Treasurer of the Fund from 1987 to 1995.
WILLIAM A. McKENNA, JR. (Age 59) Director (1998)
71-02 Forest Avenue
Ridgewood, NY 11385
Since January 1992, Mr. McKenna has served as Chairman, President and Chief
Executive Officer of Ridgewood Savings Bank. From January 1985 to January
1992, Mr. McKenna served as President and Chief Operating Officer of
Ridgewood Savings Bank. Mr. McKenna served as Second Vice President of the
Fund from June 1991 through March 1994. From September 1993 to February
1995, Mr. McKenna served as a director of Nationar, a trust company which
served as the Fund's investment adviser prior to May 1995. Mr. McKenna
also serves as a director of Institutional Investors Capital Appreciation
Fund, Inc.
GILBERT O. ROBERT (Age 70) Director (1999)
Deer Creek
8692 Woodbriar Drive
Sarasota, FL 34238
Mr. Robert currently serves as Chairman of the Executive Committee of the
Board of Directors of Albany Savings Bank F.S.B. From 1983 to 1990, he
served as Chairman of the Board and Chief Executive Officer of Albany
Savings Bank. Mr. Robert served as First Vice President of the Fund from
June 1991 through March 1996 and served as the Second Vice President of the
Fund from 1986 through June 1991.
NORMAN W. SINCLAIR (Age 72) Director (1997)
38 Ambleside Road
Lockport, NY 14094
Mr. Sinclair is retired. Mr. Sinclair served as Chairman of Lockport
Savings Bank from December 1988 to June 1994. Prior to June 1989, Mr.
Sinclair also served as Chief Executive Officer of Lockport Savings Bank.
From 1974 to 1989, Mr. Sinclair served as President of Lockport Savings
Bank. Mr. Sinclair also serves as Treasurer and Secretary of Townline Bowl
Inc.
8
<PAGE> 37
RODGER D. SHAY (Age 59) Vice President and Assistant
9200 South Dadeland Boulevard Secretary
Miami, FL 33156
Mr. Shay has been President, Chief Executive Officer and member of the
Managing Board of Shay Assets Management Co. since 1990 and President and
Director of Shay Assets Management, Inc., the managing partner of Shay
Assets Management Co., since 1990. Mr. Shay also has served as President,
Chief Executive Officer and member of the Managing Board of Shay Financial
Services Co. since 1990 and President and Director of Shay Financial
Services, Inc., the managing partner of Shay Financial Services Co., since
1990. He serves or has previously served in the following capacities:
President and a Director, Asset Management Fund, Inc. and Vice President
and Assistant Secretary of Institutional Investors Capital Appreciation
Fund, Inc., each a registered investment company; Director from 1986 to
1991 and President from 1986 to 1992, U.S. League Securities, Inc.;
Director from 1985 to 1991, and Executive Vice President from 1989 to 1992,
USL Assets Management, Inc. (previously Vice Chairman from 1986 to 1989 and
President, including of a predecessor, from 1981 to 1986); Director, First
Home Savings Bank, S.L.A. since 1990; President of Bolton Shay and Company
and Director and officer of its affiliates from 1981 to 1985. He
previously was employed by certain subsidiaries of Merrill Lynch & Co. from
1955 to 1981, where he served in various executive positions including
Chairman of the Board of Merrill Lynch Government Securities, Inc.,
Chairman of the Board of Merrill Lynch Money Market Securities, Inc. and
Managing Director of the Debt Trading Division of Merrill Lynch, Pierce,
Fenner & Smith Inc. Mr. Shay has served as Vice President and Assistant
Secretary of the Fund since May 1995.
EDWARD E. SAMMONS, JR. (Age 56) Vice President and
111 East Wacker Drive Secretary
Chicago, IL 60601
Mr. Sammons has been Executive Vice President and member of the Managing
Board of Shay Assets Management Co. since 1990 and Executive Vice President
of Shay Assets Management, Inc., the managing partner of Shay Assets
Management Co., since 1990. Mr. Sammons also has served as Executive Vice
President and member of the Managing Board of Shay Financial Services Co.
since 1990 and Executive Vice President of Shay Financial Services, Inc.
since 1990. He also serves or has previously served in the following
capacities: Vice President, Treasurer and Secretary of Asset Management
Fund, Inc. and Vice President and Secretary of Institutional Investors
Capital Appreciation Fund, Inc., each a registered investment company;
President, USL Assets Management, Inc. from 1986 to 1992 (previously Senior
Vice President, including of a predecessor, from 1983 to 1986) and a
Director from 1989 to 1991; Executive Vice President from 1990 to 1992 and
a Director from 1990 to 1991 of U.S. League Securities, Inc.; Vice
President, from 1987 to 1990, Advance America Funds, Inc.; and Senior Vice
President and Manager of Fixed Income Securities, Republic National Bank in
Dallas from 1962 to 1983. Mr. Sammons has served as Vice President and
Secretary of the Fund since May 1995.
9
<PAGE> 38
JOHN J. McCABE (Age 52) Vice President
26 Broadway
New York, New York 10004
Mr. McCabe has been a Senior Vice President of Shay Assets Management Inc.,
the managing partner of Shay Assets Management Co., since June 1995. From
August 1991 to May 1995 Mr. McCabe was Senior Vice President and Chief
Investment Officer of Nationar, a trust company which served as the Fund's
investment adviser prior to May 1995. Prior to joining Nationar he served
as Managing Director and Portfolio Manager at Sterling Manhattan
Corporation, an investment banking firm, for approximately three years and
in various positions at Bankers Trust Company, including Director of
Investment Research and Managing Director of the Investment Management
Group. Mr. McCabe is a director and past President of the New York Society
of Security Analysts, a past director of the Financial Analysts Federation
and a member and founding Governor of The Association for Investment
Management and Research.
MARK F. TRAUTMAN (Age 30) Vice President
26 Broadway
New York, New York 10004
Mr. Trautman has been a Vice President of Shay Assets Management Inc., the
managing partner of Shay Assets Management Co., since June 1995 and has
been Portfolio Manager of the Fund since March 1993. From March 1993
through May 1995, he served as Director of Mutual Funds Investment of
Nationar. He also serves as Portfolio Manager for Institutional Investors
Capital Appreciation Fund, Inc. From January 1992 through March 1993 he
served as Senior Equity Analyst for the two funds. Mr. Trautman previously
served as Portfolio Manager and Senior Equity Analyst for Institutional
Investors Tax-Advantaged Income Fund, Inc. From December 1988 through
December 1991 Mr. Trautman was a Senior Associate with Sterling Manhattan
Corporation, an investment banking firm. From June 1987 through November
1988, Mr. Trautman held the position of Treasury Analyst at Thomson
McKinnon Securities, Inc., a securities brokerage firm.
JAY F. NUSBLATT (Age 35) Treasurer
103 Bellevue Parkway
Wilmington, Delaware 19809
Mr. Nusblatt has been Vice President and Director of Fund Accounting and
Administration of PFPC Inc., since March 1993. He was previously employed
as an Assistant Vice President of Fund/Plan Services, Inc., with
responsibility for financial reporting and fund administration, 1989 to
1993. Mr. Nusblatt also serves as Treasurer of Institutional Investors
Capital Appreciation Fund, Inc.
- ----------------
* These directors are regarded as "interested persons" under the Investment
Company Act of 1940 because they are officers of the Fund.
10
<PAGE> 39
The Fund has an Executive Committee, composed of Messrs. Freer,
Ficalora, McKenna and Smith, which meets from time to time between meetings of
the Board, as necessary, to consider matters concerning the Fund. Subject to
limitations provided by law or the Fund's by-laws, the Executive Committee is
authorized to exercise the power and authority of the Board of Directors as may
be necessary during the intervals between meetings of the Board of Directors.
The Fund compensates directors for their services as directors at the
rate of $300 for each board meeting attended. The Board of Directors meets
monthly, and in 1995 the total of such compensation was $30,900. The Fund also
reimburses directors and officers for their reasonable expenses incurred in
attending meetings or otherwise in connection with their attention to the
affairs of the Fund. In 1995 the total of such reimbursed expenses was
$13,305. The Fund does not provide officers with any compensation other than
the compensation they may receive for service as a director, nor does the Fund
provide officers and directors directly or indirectly with any pension or
retirement benefits for their services to the Fund.
The following table sets forth the aggregate compensation received
during 1995 by each director of the Fund from the Fund and any other investment
company having the same investment adviser. Such compensation does not include
reimbursements to the directors for their expenses incurred in connection with
their activities as directors.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate
Compensation Total Compensation from
Name of Director from the Fund the Fund and Fund Complex
------------------------------ ------------- ------------------------
<S> <C> <C>
Malcolm J. Delaney $3,600 $3,600
Joseph R. Ficalora $1,500 $1,500
David Freer, Jr. $4,200 $4,200
Michael J. Gagliardi $3,000 $3,000
George J. Kelly $3,900 $3,900
William A. McKenna, Jr. $3,300 $7,200*
Austin 'S. Murphy, Ph.D $1,800 $1,800**
Gilbert O. Robert $2,100 $2,100
Norman W. Sinclair $3,300 $3,300
Ian D. Smith $4,200 $4,200
</TABLE>
* Includes compensation of $3,900 received by Mr. McKenna as a
director of two other investment companies having the same
investment adviser as the Fund.
** Dr. Murphy's term as a director expired in June 1995.
As of March 31, 1996, all officers and directors of the Fund, as a
group, owned both of record or beneficially an aggregate of 80,348 shares
(approximately 3.2% of the 2,532,718 shares outstanding on such date).
11
<PAGE> 40
INVESTMENT ADVISORY AND OTHER SERVICES
The Board of Directors of the Fund appointed Shay Assets Management
Co. as its investment adviser, PFPC Inc. as its administrator, transfer agent,
dividend paying agent and shareholder servicing agent and PNC Bank, N.A. as the
custodian for the Fund, in each case, effective May 19, 1995. The Fund's
investment advisory agreement with Shay Assets Management Co. was approved by
the shareholders of the Fund on June 6, 1995. Shay Assets Management Co., PFPC
Inc. and PNC Bank, N.A. provide services that were previously provided to the
Fund by Nationar.
INVESTMENT ADVISER
Investment decisions for the Fund are made by the Fund's investment
adviser, Shay Assets Management Co. (the "Investment Adviser"). The Investment
Adviser is responsible for placing purchase and sale orders for portfolio
securities and other investments. Under the investment advisory agreement
between the Investment Adviser and the Fund (the "Investment Advisory
Agreement"), for its investment management services, the Investment Adviser
receives a fee from the Fund computed at the annual rate of 0.75% of the first
$100,000,000 of the Fund's average daily net assets and 0.50% of the Fund's
average daily net assets in excess of $100,000,000. The fee payable to the
Investment Adviser is reduced (but not below zero) to the extent the expenses
of the Fund (exclusive of professional fees, such as legal and audit fees,
directors' fees and expenses and distribution expenses, if any, payable under
Rule 12b-1) exceed 1.10% of the Fund's average daily net assets during any
fiscal year during the term of the Fund's agreement with the Investment
Adviser. The total amount paid by the Fund in 1995 in respect of investment
advisory services (including amounts paid to Shay Assets Management Co. and
amounts paid to the Fund's prior investment adviser, Nationar) was 0.61% of the
Funds average daily net assets (after all fee reductions and expense
limitations). See "Annual Fund Operating Expenses" in the Prospectus for an
illustration of the advisory fees that would have been payable to the
Investment Adviser in 1995 under the agreement with the current Investment
Adviser.
Shay Assets Management Co. is an Illinois general partnership that
consists of two general partners, Shay Assets Management, Inc. and ACB Assets
Management, Inc., each of which holds a fifty-percent interest in the
partnership. Shay Assets Management, Inc., which is the managing partner of
the Investment Adviser, is controlled by Rodger D. Shay, who is a Vice
President of the Fund. ACB Assets Management, Inc. is a wholly-owned
subsidiary of ACB Investment Services, Inc., which is a wholly-owned subsidiary
of Community Bankers Service Corporation, which in turn is a wholly-owned
subsidiary of America's Community Bankers ("ACB"), the trade association
representing savings institutions in the United States. The Investment Adviser
is a registered investment adviser under the Investment Advisers Act of 1940
and serves as investment adviser to Asset Management Fund, Inc., a registered
investment company comprising five fixed-income portfolios with aggregate net
assets of approximately $1.49 billion at March 31, 1996. The Investment
Adviser also serves as investment adviser to
12
<PAGE> 41
Institutional Investors Capital Appreciation Fund, Inc., an investment company
with net assets of $64.4 million as of March 31, 1996. The Investment
Adviser's principal office is located at 111 East Wacker Drive, Chicago,
Illinois 60601.
Under the Investment Advisory Agreement, the Investment Adviser is
not liable to the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless disregard by it of its
obligations and duties under the agreement.
The Investment Advisory Agreement will continue in effect from year
to year, subject to termination by the Fund or the Investment Adviser as
described below, if such continuance is approved at least annually by the vote
of the Fund's Board of Directors and a majority of the directors of the Fund
who are not "interested persons" of the Fund or of the Investment Adviser.
The Investment Adviser may terminate the Investment Advisory
Agreement only after the third anniversary of the date of the Agreement (i.e.,
after May 19, 1998) upon 90 days' written notice to the Fund. The Investment
Advisory Agreement can be terminated at any time without penalty by the Fund
upon 30 days' written notice to the Investment Adviser. The Investment
Advisory Agreement will terminate automatically in the event of its assignment.
Certain directors, officers and employees of the Investment Adviser
and its affiliates also are officers of the Fund. See "Officers and Directors
of the Fund."
ADMINISTRATOR, TRANSFER AGENT, SHAREHOLDER SERVICING AGENT, DIVIDEND
PAYING AGENT AND CUSTODIAN
Administrator, Transfer Agent, Shareholder Servicing Agent and
Dividend Paying Agent. PFPC Inc. ("PFPC"), P.O. Box 8905, Wilmington, Delaware
19899-8905, is the Fund's administrative agent. Pursuant to the terms of the
Administration and Accounting Services Agreement between the Fund and PFPC,
PFPC performs various administrative services for the Fund, including (i)
assisting in supervising all aspects of the Fund's operations other than those
assumed by the Investment Adviser, the Fund's custodian or its transfer and
dividend paying agent, (ii) maintenance of the Fund's books and records, (iii)
preparation of various filings, reports, statements and returns filed with
governmental authorities or distributed to shareholders of the Fund and (iv)
computation of the Fund's net asset value for purposes of sales and redemptions
of shares.
Subject to the fee waiver described below, the Fund pays PFPC for its
services as administrator a fee computed at the annual rate of 0.10% of the
first $200 million of the Fund's average net assets, 0.075% of the next $200
million of average net assets, with further reductions in the applicable rate
for net assets in excess of $400 million, subject to a minimum annual charge of
$80,400. PFPC also serves as the transfer agent, registrar, shareholder
servicing agent
13
<PAGE> 42
and dividend paying agent for the Fund's shares and receives additional
compensation in such capacities.
An officer of PFPC also is an officer of the Fund. See "Officers and
Directors of the Fund."
Custodian. PNC Bank, N.A. ("PNC Bank"), 17th & Chestnut Streets,
Philadelphia, Pennsylvania, is the custodian of the Fund's investments. PNC
Bank and PFPC are affiliates of PNC Bank Corp.
Fee Waiver. PFPC and PNC Bank have agreed to waive a portion of
their fees during the first year (which ends May 18, 1996) of their respective
agreements with the Fund so that the aggregate fees payable by the Fund for
their services will not exceed 0.25% of the Fund's average daily net assets,
plus certain transaction charges and out-of-pocket costs. PFPC and PNC Bank
have agreed to waive 25% of the applicable minimum charges during the second
year of the agreements, which year ends May 18, 1997.
DISTRIBUTOR
Shay Financial Services Co. (the "Distributor") is the distributor of
the Fund. The Distributor is an Illinois general partnership that consists of
two general partners, Shay Financial Services, Inc. and ACB Securities, Inc.,
each of which holds a fifty-percent interest in the partnership. Shay
Financial Services, Inc. is controlled by Rodger D. Shay, who is a Vice
President of the Fund. ACB Securities, Inc. is a wholly-owned subsidiary of
ACB Investment Services, Inc., which is an indirect wholly-owned subsidiary of
ACB.
The Distributor is authorized to undertake certain activities in
connection with the sale of shares of the Fund, including informing potential
investors about the Fund through written materials, seminars and personal
contacts. The Distributor does not receive any compensation from the Fund in
connection with such activities.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 1600 Market Street, Philadelphia,
Pennsylvania, serves as the Fund's independent auditors and in that capacity
audits the Fund's annual financial statements.
PURCHASE AND SALE OF PORTFOLIO SECURITIES
The primary aim of the Fund in the allocation of portfolio
transactions to various brokers is the attainment of best price and execution
consistent with obtaining investment research services and statistical
information at reasonable cost. In keeping with this primary objective,
transactions in portfolio securities were effected during the calendar year
1995 through a total of ten brokers, drawn from a list of brokers selected by
the Investment Adviser and by Nationar, which was the Fund's investment adviser
prior to May 19, 1995, on the basis of their ability to provide efficient
execution of portfolio transactions and investment research and
14
<PAGE> 43
statistical information. A large majority of the Fund's portfolio transactions
are executed on national securities exchanges through member firms. However,
when the Investment Adviser believes that a better price can be obtained for
the Fund, portfolio transactions may be executed in the third market. Portfolio
transactions in unlisted securities are executed in the over-the-counter market
through principal market makers. The brokerage list is reviewed continually in
an effort to obtain maximum advantage from investment research and statistical
information made available by brokers, and allocation among the brokers is made
on the basis of best price and execution consistent with obtaining research and
statistical information at reasonable cost. The Investment Adviser is thus
authorized to pay a brokerage commission in excess of that which another broker
might have charged for effecting the same transaction in recognition of the
value of efficient execution and research and statistical information provided
by the selected broker. In 1995, 100% of the Fund's brokerage (attributable to
purchases of $22,493,254 and proceeds from sales of $33,126,938) was placed
with brokers who provided investment research and statistical information to
the Investment Adviser. The research and statistical information provided to
the Investment Adviser consists primarily of written reports and presentations
analyzing specific companies, industry sectors, the stock market and the
economy. To the extent that such research and information are used by the
Investment Adviser in rendering investment advice to the Fund, they tend to
reduce the Investment Adviser's expenses. Research services furnished by
brokers through which the Fund effects securities transactions may be used by
the Investment Adviser in servicing all of its accounts, and not all such
services may be used by the Investment Adviser in connection with the Fund.
The total amounts of brokerage commissions paid in 1993, 1994 and 1995 were
$57,559, $87,747 and $78,210, respectively. The increased amount of brokerage
commissions paid in 1994 and 1995 resulted from the increased turnover in the
Fund's investment portfolio as evidenced by the increase in the Fund's turnover
rate from 26% in 1993 to 62% in 1994 and 68% in 1995. The Fund has never
directed any broker to give up any portion of any commission on a Fund
portfolio transaction. The Investment Adviser monitors the reasonableness of
commissions paid by the Fund based on its experience in the market, and the
reasonableness of such commissions is reviewed periodically by the Board of
Directors.
Neither the Fund nor any of its officers or directors nor its
Investment Adviser is affiliated with any broker employed by the Fund in
connection with the purchase or sale of portfolio securities or other
investments. The Fund does not maintain joint or several trading accounts in
securities.
EXPENSES OF THE FUND
The Fund is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees payable to the Fund's Investment
Adviser, administrative agent, transfer agent, shareholder servicing agent,
dividend paying agent and custodian, brokerage fees and expenses, filing fees
for the registration or qualification of the Fund's shares under Federal or
state securities laws, taxes, interest, the cost of liability insurance,
fidelity bonds, indemnification expenses, legal and auditing fees and expenses,
any costs, expenses or losses arising out of any liability of, or claim for
damages or other relief asserted against, the Fund for violation of any law,
expenses of preparing and printing prospectuses, proxy materials, reports
15
<PAGE> 44
and notices and of mailing the same to shareholders and regulatory authorities,
the compensation and expenses of the Fund's directors and officers who are not
affiliated with the Fund's Investment Adviser or administrative agent and any
extraordinary expenses incurred by the Fund. A statement of operational
expenses is included in each semi-annual report to shareholders.
DESCRIPTION OF CAPITAL STOCK
The Fund is authorized to issue five classes of shares, par value
$.001 each. At present, shares of only one class are outstanding ("Class A"),
and each Class A share represents a proportionate interest in the Fund's
existing investment portfolio. Shares of other classes, if and when issued,
would represent interests in other portfolios of investments which would be
invested in accordance with the separate investment objectives, policies and
restrictions established for such other portfolios by the Board of Directors.
The investment return and net asset value of shares of each class would be
determined separately from all other classes of shares and would be based upon
the investment results of that class's separate portfolio. Additional
portfolios may be established by the Board of Directors at any time. Each
share has one vote on all matters submitted to a vote of the shareholders,
except that shareholders of a particular portfolio would not be entitled to
vote on matters which affect only the interests of other portfolios.
Shareholders of each portfolio would vote separately as a class on all matters
which affect their portfolio, unless the interests of each portfolio are
substantially identical, in which case shareholders of all portfolios would
vote in the aggregate. In the event of the liquidation or dissolution of the
Fund, the shareholders of each portfolio would have priority over shareholders
of all other portfolios with respect to the assets of their respective
portfolios and would be entitled to receive a pro rata portion of the assets of
that portfolio after provision for the debts and expenses relating to that
portfolio. Fractional share credits entitle the holders thereof to dividends
and distributions but no voting rights. Shareholders do not have any
conversion or pre-emptive rights.
FINANCIAL STATEMENTS
The audited financial statements of the Fund for the fiscal year
ended December 31, 1995, including the notes thereto and the report of KPMG
Peat Marwick LLP, contained in the Fund's Annual Report to stockholders for the
year ended December 31, 1995 (the "Annual Report") are hereby incorporated by
reference to the Annual Report. Except as set forth above, no other portion
of the Annual Report is incorporated herein.
The Fund will provide a copy of the Annual Report without charge to
each person to whom this Statement of Additional Information is delivered.
Requests should be directed to the Fund c/o Shay Financial Services, Co., 111
East Wacker Drive, Suite 2600, Chicago, IL 60601 or by telephone at
800-527-3713.
16
<PAGE> 45
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) The following financial statement is included in the
Prospectus constituting Part A of this Post-Effective
Amendment to the Registration Statement:
(a) Financial Highlights
(2) The following financial statements, including a
report of KPMG Peat Marwick LLP, are included in the
Statement of Additional Information constituting Part
B of this Post-Effective Amendment to the
Registration Statement:
(a) Schedule of Investments as of
December 31, 1995
(b) Statement of Assets and Liabilities
as of December 31, 1995
(c) Statement of Operations for the Year
Ended December 31, 1995
(d) Statements of Changes in Net Assets
for the Years Ended December 31,
1994 and 1995
(e) Financial Highlights, Selected Data
for Each Share of Capital Stock
Outstanding Throughout Each Year for
the years ending December 31, 1991,
1992, 1993, 1994 and 1995
(f) Notes to Financial Statements
(g) Independent Auditors' Report (KPMG
Peat Marwick LLP)
(b) Exhibits
(1) Certificate of Incorporation of the Registrant
(a) Text of the complete Articles of
Incorporation as in effect at April
30, 1984. Previously filed with
Post-Effective Amendment No. 23.
<PAGE> 46
(b) Amendment to Articles FIFTH and
SIXTH adopted January 23, 1986, and
to Article SEVENTH adopted March 27,
1986. Previously filed with
Post-Effective Amendment No. 25.
(c) Amendment to Article FOURTH adopted
March 28, 1987. Previously filed
with Post-Effective Amendment No.
26.
(2) By-Laws of the Registrant (EX-99.B2).
(3) Not Applicable
(4) Instruments defining rights of security holders
(a) Form of Certificate for Common
Stock. Previously filed with
Post-Effective Amendment No. 25.
(b) Articles Fourth and Seventh of
Certificate of Incorporation. (See
Exhibit 1.)
(c) Articles II, VIII, and XIX of
By-Laws. (See Exhibit 2.)
(5) Investment Advisory Agreement dated as of May 19,
1995 between the Registrant and Shay Assets
Management Co. (EX-99.B5).
(6) Not Applicable
(7) Not Applicable
(8) Custody Agreement
(a) Custodian Services Agreement dated
as of May 19, 1995 between the
Registrant and PNC Bank, National
Association (EX-99.B8.A).
(b) Custodian Services Fees Agreement
dated as of May 19, 1995 between the
Registrant and PNC Bank, National
Association (EX-99.B8.B).
(c) Administration and Accounting,
Transfer Agency and Custodian
Services Fee Waivers Agreement dated
as of May 19, 1995 between the
Registrant, PNC Bank, National
Association and PFPC Inc.
(EX-99.B8.C).
(9) Other Material Contracts
C-2
<PAGE> 47
(a) Administration and Accounting
Services Agreement dated as of May
19, 1995 between the Registrant and
PFPC Inc. (EX-99.B9.A)
(b) Transfer Agency Services Agreement
dated as of May 19, 1995 between
the Registrant and PFPC Inc.
(EX-99.B9.B).
(c) Distribution Agreement dated as of
May 19, 1995 between the Registrant
and Shay Financial Services Co.
(EX-99.B9.C).
(10) Opinion and consent of Hughes Hubbard & Reed
(EX-99.B10).
(11) Consent of KPMG Peat Marwick LLP (EX-99.B11).
(12) Not Applicable
(13) Not Applicable
(14) Prototype IRA Plan. Previously filed with
Post-Effective Amendment No. 37.
(15) Not Applicable
(16) Schedule for computation of performance quotations
(Ex-99.B16).
(17) Financial Data Schedule (EX-27.).
(18) Not Applicable
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1996, the number of record holders of each
class of the Registrant's capital stock were as follows:
Class A Stock: 1,801 record holders
Class B Stock: no record holders
Class C Stock: no record holders
Class D Stock: no record holders
Class E Stock: no record holders
C-3
<PAGE> 48
ITEM 27. INDEMNIFICATION
Sections 721-726 of the New York Business Corporation Law
provide that a New York corporation shall have the power and, in certain cases,
the obligation to indemnify officers or directors against certain liabilities.
Article XV of the By-Laws of the Registrant provides that the
Registrant shall indemnify directors or officers to the full extent permitted
by New York law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors and officers of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
In addition, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission, indemnification by the
Registrant of its directors and officers against liabilities arising out of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their respective offices is against public
policy and, therefore, unenforceable. In the event that any questions arise as
to the lawfulness of indemnification under the Investment Company Act of 1940
or the advancement of legal fees or other expenses incurred by its officers and
directors, the Registrant will not advance such expenses or provide such
indemnification unless there has been a determination by a court, by a vote of
a majority of a quorum consisting of disinterested, non-party directors, or by
independent legal counsel in a written opinion or by other reasonable and fair
means that such indemnification or advancement would not violate Section 17 of
the Investment Company Act of 1940 and the rules and regulations thereunder.
In addition, the Registrant has entered into a Directors and
Officers Liability Insurance Policy covering the period August 1, 1995 to July
31, 1996. Such policy insures against loss which any directors or officers of
the Registrant are obligated to pay by reason of claims based on actual or
alleged breach of duty, neglect, error, misstatement, misleading statement,
omission or other act done or wrongfully attempted or any matter claimed
against them solely by reason of their being directors or officers. The policy
does not protect or purport to protect any director or officer against any loss
arising from fines or penalties imposed by law or matters which may be deemed
uninsurable under the law.
C-4
<PAGE> 49
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Incorporated herein by reference from the Statement of
Additional Information are the following: the description of the business of
Shay Assets Management Co. (the "Investment Adviser") contained in the section
entitled "Investment Advisory and Other Services"; the information concerning
the organization and general partners of Shay Financial Services Co. (the
"Distributor") contained in the section entitled "Investment Advisory and Other
Services"; and the biographical information pertaining to Messrs. Shay,
Sammons, McCabe and Trautman contained in the section entitled "Officers and
Directors of the Fund."
From its formation on September 1, 1990 until June 1994, the
Investment Adviser was engaged in business only in connection with rendering
services to Asset Management Fund, Inc., a registered investment company. From
June 1994 to February 1995, the Investment Adviser was the Sub-Adviser
providing portfolio management services for the U.S. Mortgage Securities
Portfolio of Nationar Funds, Inc. Since May 19, 1995, the Investment Adviser
has served as investment adviser to the Fund and Institutional Investors
Capital Appreciation Fund, Inc. The Investment Adviser also acted as
investment adviser to Institutional Investors Tax-Advantaged Income Fund, Inc.
from May 19, 1995 to March 15, 1996. In addition, in late 1995, the Investment
Adviser was selected as the investment adviser to several savings banks located
in New York State on a non-discretionary basis.
The Investment Adviser is a general partnership that consists
of two general partners, Shay Assets Management, Inc. ("S.A.M.") and ACB Assets
Management, Inc. ("ACBAM"), each of which holds a fifty-percent interest in the
partnership. S.A.M. is the managing partner of the Investment Adviser. S.A.M.
is controlled by Rodger D. Shay, who is a Vice President of the Fund. ACB
Assets Management, Inc. is a wholly- owned subsidiary of ACB Investment
Services, Inc., which is a wholly-owned subsidiary of Community Bankers Service
Corporation, which in turn is a wholly-owned subsidiary of America's Community
Bankers ("ACB"), the trade association representing savings institutions in the
United States, formerly Savings & Community Bankers of America. The Investment
Adviser, with its principal office located at 111 East Wacker Drive, Chicago,
Illinois 60601, is a registered investment adviser under the Investment
Advisers Act of 1940. The principal executive office of ACB Assets Management,
Inc. and of its parent companies (other than ACB, which is located in
Washington, D.C.) is located at 111 East Wacker Drive, Chicago, Illinois 60601.
The Managing Board of the Investment Adviser consists of
Rodger D. Shay, Edward E. Sammons, Jr., Brian Patrick Smith and James F.
McKenna. See the Statement of Additional Information for information
concerning the business and professional activities of Messrs. Shay and
Sammons. Brian Patrick Smith and James F. McKenna are affiliates of ACBAM and
are members of the Managing Board of the Investment Adviser and the Managing
Board of the Distributor. Mr. Smith is the President and a Director of
Community Bankers Service Corporation and holds other executive positions with
ACB. Mr. McKenna is a member of the Board of Directors of ACB, Community
Bankers Service Corporation and other ACB affiliates. His principal occupation
is Chief Executive Officer of a federal savings bank, North Shore Bank, F.S.B.,
located at 15700 West Blue Mound Road, Brookfield, Wisconsin.
C-5
<PAGE> 50
Community Bankers Service Corporation owns a majority of the outstanding shares
of First Financial Trust Company, formerly Savings and Community Bankers Trust
Company ("Trust Company").
S.A.M., the managing partner of the Investment Adviser, is
located at 111 E. Wacker Drive, Chicago, Illinois 60601 and at 9200 South
Dadeland Blvd. (Suite 812), Miami, FL 33156. S.A.M. also has offices in New
York City and Summit, New Jersey. S.A.M. is owned by Rodger D. Shay, Arthur M.
Berardelli, Barbara M. Quesep and Rodger D. Shay, Jr. Each such person is also
a shareholder and a Vice President of Shay Financial Services, Inc. ("S.F.S.")
and of Shay Government Securities, Inc. ("S.G.S."). Rodger D. Shay, Jr. is
also a Senior Vice President of S.A.M. Roy R. Hingston and Robert T. Podraza
are also Vice Presidents of S.A.M., S.F.S. and S.G.S.
S.G.S. is the managing partner of Shay Government Securities
Co. ("Shay Government"), a registered government securities dealer with its
principal place of business at 5605 North MacArthur Blvd., Irving, Texas that
is under common control with the Investment Adviser and the Distributor by
virtue of the substantially identical ownership of the general partners.
Rodger D. Shay is President, Chief Executive Officer and a member of the
Managing Board of Shay Government and the controlling shareholder of S.G.S.
Edward E. Sammons, Jr. is Executive Vice President of Shay Government and a
member of its Managing Board and is Executive Vice President of S.G.S.
Rodger D. Shay is a shareholder of First Home Savings Bank,
S.L.A., 48 West Main Street, Pennsville, New Jersey 08070 and has been a member
of its Board of Directors since December 1990. Additionally, Mr. Shay
indirectly owns 24 percent of the outstanding shares of the Trust Co. by virtue
of his status as controlling shareholder of Shay Investment Services, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books and other documents required to be maintained
pursuant to Rule 31a-1(b) (4) and (b) (10) are in the physical possession of
the Fund's Secretary, 111 East Wacker Drive, Chicago, Illinois 60601; accounts,
books and other documents required by Rule 31a-1(b) (5) through (7) and (b)
(11) and Rule 31a-1(f) are in the physical possession of Shay Assets Management
Co., 111 East Wacker Drive, Chicago, Illinois 60601; all other books, accounts
and other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder are in the
physical possession of PFPC Inc., 103 Bellevue Parkway, Wilmington, Delaware
19809.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
C-6
<PAGE> 51
ITEM 32. UNDERTAKINGS
Additional information regarding the investment performance of
the Fund is contained in the Fund's Annual Report to Shareholders for the year
ended December 31, 1995. The Fund will provide a copy of such report to any
recipient of the prospectus upon request and without charge.
C-7
<PAGE> 52
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment pursuant to Rule 485(B)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 38 to Registration Statement No. 2-22542 to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New York,
and State of New York, on April 29, 1996.
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
-----------------------------------
David Freer, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 38 to Registration Statement No. 2-22542 has been
signed below by the following persons in the capacities and on the dates
indicated:
<TABLE>
<S> <C> <C>
DAVID FREER, JR. President and Director April 29, 1996
- ------------------------------------------- (Principal Executive Officer)
(David Freer, Jr.)
JAY F. NUSBLATT Treasurer (Principal Financial April 29, 1996
- ------------------------------------------- Officer)
(Jay F. Nusblatt)
Director April _____, 1996
- -------------------------------------------
(Malcolm J. Delaney)
HARRY P. DOHERTY Director April 29, 1996
- -------------------------------------------
(Harry P. Doherty)
Director April _____, 1996
- -------------------------------------------
(Joseph R. Ficalora)
MICHAEL J. GAGLIARDI Director April 29, 1996
- -------------------------------------------
(Michael J. Gagliardi)
GEORGE J. KELLY Director April 29, 1996
- -------------------------------------------
(George J. Kelly)
WILLIAM A. McKENNA, JR. Director April 29, 1996
- -------------------------------------------
(William A. McKenna, Jr.)
</TABLE>
S-1
<PAGE> 53
<TABLE>
<S> <C> <C>
GILBERT O. ROBERT Director April 29, 1996
- -------------------------------------------
(Gilbert O. Robert)
NORMAN W. SINCLAIR Director April 29, 1996
- -------------------------------------------
(Norman W. Sinclair)
IAN D. SMITH Director April 29, 1996
- -------------------------------------------
(Ian D. Smith)
</TABLE>
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
EX-99.B2 By-Laws of the Registrant
EX-99.B5 Investment Advisory Agreement dated as of May 19, 1995
between the Registrant and Shay Assets Management Co.
EX-99.B8.A Custodian Services Agreement dated as of May 19, 1995 between
the Registrant and PNC Bank, National Association
EX-99.B8.B Custodian Services Fees Agreement dated as of May 19, 1995
between the Registrant and PNC Bank, National Association
EX-99.B8.C Administration and Accounting, Transfer Agency and Custodian
Services Fee Waivers Agreement dated as of May 19, 1995 between
the Registrant, PNC Bank, National Association and PFPC Inc.
EX-99.B9.A Administration and Accounting Services Agreement dated as of
May 19, 1995 between the Registrant and PFPC Inc.
EX-99.B9.B Transfer Agency Services Agreement dated as of May 19, 1995
between the Registrant and PFPC Inc.
EX-99.B9.C Distribution Agreement dated as of May 19, 1995 between the
Registrant and Shay Financial Services Co.
EX-99.B10 Opinion and consent of Hughes Hubbard & Reed
EX-99.B11 Consent of KPMG Peat Marwick LLP
EX-99.B16 Schedule for Computation of Performance Quotations
EX-27 Financial Data Schedule
</TABLE>
<PAGE> 1
BYLAWS
OF
M.S.B. FUND, INC.
(As Amended to April 18, 1996)
<PAGE> 2
BYLAWS
OF
M.S.B. FUND, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Offices.................................................. 1
Section 1 Location................................................. 1
ARTICLE II Meetings of Stockholders................................. 1
Section 1 Place of Meeting............................. 1
Section 2 Annual Meeting............................... 1
Section 3 Special Meetings............................. 1
Section 4 Notice of Meetings........................... 2
Section 5 Quorum....................................... 2
Section 6 Organization................................. 3
Section 7 Voting....................................... 3
Section 8 Inspectors................................... 3
Section 9 List of Stockholders at Meeting.............. 4
ARTICLE III Board of Directors....................................... 4
Section 1 Number, Qualifications and Term of Office.... 4
Section 2 Vacancies.................................... 6
Section 3 Resignations and Removal of Directors........ 6
Section 4 Increase or Decrease in Size of Board........ 6
Section 5 Place of Meeting............................. 7
Section 6 Annual Meeting............................... 7
Section 7 Regular Meetings............................. 7
Section 8 Special Meetings............................. 7
Section 9 Notice of Special Meetings................... 7
Section 10 Organization; Quorum......................... 7
Section 11 Compensation and Reimbursement of Expenses... 8
Section 12 Presumption of Concurrence................... 8
Section 13 Action of Directors or Committees
Without Meeting.............................. 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 14 Telephonic Meetings of the Board or
Committees................................... 9
ARTICLE IV Committees............................................... 9
Section 1 Executive Committee and Other Committees..... 9
ARTICLE V Officers................................................. 10
Section 1 Number and Description....................... 10
Section 2 Term of Office............................... 10
Section 3 Resignation.................................. 10
Section 4 Vacancies.................................... 10
Section 5 The President................................ 11
Section 6 The First Vice President..................... 11
Section 7 The Second Vice President.................... 11
Section 8 The Secretary................................ 11
Section 9 Assistant Secretaries........................ 12
Section 10 Treasurer.................................... 12
Section 11 Compensation................................. 12
ARTICLE VI ......................................................... 13
Section 1 Representation of Shares of Stock............ 13
Section 2 Open Accounts................................ 13
Section 3 Certificates of Stock........................ 13
Section 4 Lost, Destroyed or Wrongfully Taken
Certificates................................. 13
Section 5 Record Date.................................. 14
Section 6 Record of Stockholders....................... 14
ARTICLE VII Determination of Sale and Redemption Price............... 14
ARTICLE VIII Redemption of Shares..................................... 16
ARTICLE XII Custodian................................................ 22
Section 1 Appointment of Custodian..................... 22
Section 2 Agreements with Custodian.................... 22
ARTICLE XIII Investment Adviser....................................... 23
Section 1 Appointment of Investment Adviser............ 23
Section 2 Agreements with Investment Adviser........... 23
ARTICLE XV Indemnification of Directors and Officers................. 24
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 1 Actions by or in the Right of the
Corporation to Procure a Judgment
in its Favor................................. 24
Section 2 Other Actions or Proceedings................. 25
Section 3 Payment of Indemnification Other Than by
Court Award.................................. 25
Section 4 Indemnification by a Court................... 26
Section 5 Other Provisions............................. 26
Section 6 Limitations and Restrictions of
Indemnification.............................. 27
ARTICLE XVI Interested Directors...................................... 27
ARTICLE XVII Seal...................................................... 28
ARTICLE XVIII Miscellaneous............................................. 28
Section 1 Fiscal year.................................. 28
Section 2 Reports to the Stockholders.................. 28
ARTICLE XIX Amendments................................................ 28
</TABLE>
<PAGE> 5
BYLAWS
OF
M.S.B. FUND, INC.
ARTICLE I.
Offices.
Section 1. Location. The principal office of the Corporation
shall be in the City of New York, County and State of New York. The
Corporation shall also have offices or agencies at such other places, either
within or without the State of New York, as the Board of Directors from time to
time may designate, or as the business of the Corporation may require.
ARTICLE II.
Meetings of Stockholders.
Section 1. Place of Meeting. All meetings of the
stockholders shall be held at the principal office of the Corporation in the
City of New York, or at such other place as may be fixed by the Board of
Directors.
Section 2. Annual Meeting. The annual meeting of
stockholders for the election of directors and the transaction of other
business as may properly come before the meeting shall be held at such time as
the Board of Directors may specify by resolution.
Section 3. Special Meetings. Special meetings of the
stockholders for any purpose may be called to be held at any time by a majority
of the members of the Board of Directors then in office. Special meetings
shall be called upon the written request, addressed to the President or the
Secretary of the Corporation, of the holders of not less than 10 percent in
amount of the stock of the Corporation outstanding and entitled to vote. Such
call and written request shall state the purpose or purposes of the proposed
meeting and the business transacted at any special meeting shall be confined to
such stated purpose or purposes.
Section 4. Notice of Meetings. Written notice of the place,
date, hour and purpose or purposes of each annual meeting of stockholders and
of each special meeting of stockholders shall be given by the Secretary, the
President, or such other officer as may be designated by the President, either
personally or by mail, not less than ten nor more than fifty days before the
date of the meeting. Said written notice, unless it is for the annual meeting,
shall indicate that it is being issued by or at the direction of the person or
persons calling the meeting.
<PAGE> 6
If mailed, the notice of an annual or special meeting of the
stockholders shall be deemed to be given when deposited in the United States
mail, postage prepaid, addressed to each stockholder at his address as it
appears on the record of stockholders, or, if a stockholder shall have filed
with the Secretary of the Corporation a written request that notices to him be
mailed to some other address, then directed to him at such other address.
If any meeting of the stockholders is adjourned to another
time or place, no notice of such adjourned meeting need be given other than by
announcement at the meeting at which such adjournment is taken.
Notice of the place, date, hour and purpose of any meeting of
the stockholders may be waived in writing by any stockholder either before or
after the meeting, and any such waiver shall be filed with the Secretary and by
him entered upon the records of the meeting. The attendance of any stockholder
at a meeting, in person or by proxy, without protesting prior to the conclusion
of the meeting the lack of notice of such meeting, shall constitute a waiver of
notice to him. Whenever all of the stockholders shall consent in writing to
the holding of a meeting, such meeting shall be valid without call or notice.
Section 5. Quorum. At any meeting of the stockholders the
holders of a majority in amount of the outstanding shares of stock entitled to
vote, present in person or represented by proxy, shall constitute a quorum for
the transaction of any business. When a quorum is once present to organize a
meeting, it shall not be broken by the subsequent withdrawal of any
stockholders.
If a quorum is present, directors shall, except as otherwise
required by law, be elected by a plurality of the votes cast at the meeting of
stockholders. Any other corporate action by vote of the stockholders, except
as otherwise required by law, shall be authorized by a majority of the votes
cast at the meeting of stockholders.
In the absence of a quorum at any meeting, the holders of a
majority in amount of the outstanding shares of stock entitled to vote, present
in person or represented by proxy at the meeting, may adjourn the meeting from
time to time until the holders of the number of shares requisite to constitute
a quorum are present in person or represented by proxy at the meeting. At any
adjourned meeting at which a quorum is present, any business may be transacted
that might have been transacted at the meeting as originally convened.
Section 6. Organization. The President, or in his absence
the First Vice President, or in the absence of the President and the First Vice
President, the Second Vice President, or in the absence of each of the
foregoing, a stockholder chosen by a majority in number of the shares of stock
of the Corporation entitled to vote and present in person or represented by
proxy, shall act as chairman of the meeting. The Secretary, or in his absence,
the Assistant Secretary, or in the absence of both the Secretary and the
Assistant Secretary, any person designated by the chairman, shall act as
secretary of the meeting.
Section 7. Voting. Each outstanding share of stock shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. A stockholder may vote either in person or by proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Every
proxy shall be revocable at the pleasure of the stockholder executing it,
except in those cases where an irrevocable proxy is provided by law.
2
<PAGE> 7
Whenever stockholders are required or permitted to take any
action by vote, such action may be taken without a meeting on written consent,
setting forth the action so taken, signed by the holders of all outstanding
shares entitled to vote thereon.
Section 8. Inspectors. The Board of Directors, in advance of
any stockholders' meeting, shall appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a stockholders' meeting may, and on the request of any
stockholder entitled to vote thereat shall appoint one or more inspectors. In
case any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board of Directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and according
to the best of his ability. The inspectors shall determine the number of
shares outstanding, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election
or vote with fairness to all stockholders. On request of the person presiding
at the meeting or any stockholder entitled to vote thereat, the inspectors
shall make a report in writing of any challenge, question or matter determined
by them and execute a certificate of any fact found by them. A report or
certificate made by them shall be prima facie evidence of the facts stated and
of the vote as certified by them.
Section 9. List of Stockholders at Meeting. A list of
stockholders as of the record date, certified by the Secretary of the
Corporation or by the transfer agent, shall be produced at any meeting of
stockholders upon the request thereat or prior thereto of any stockholder. If
the right to vote at any meeting is challenged, the inspectors of election or
person presiding thereat, shall require such list of stockholders to be
produced as evidence of the right of the persons challenged to vote at such
meeting, and all persons who appear from such list to be stockholders entitled
to vote thereat may vote at such meeting.
3
<PAGE> 8
ARTICLE III.
Board of Directors.
Section 1. Number, Qualifications and Term of Office. The
business of the corporation shall be managed by a Board of Directors. The
number of directors constituting the entire Board of Directors shall be the
number established from time to time by vote of a majority of the entire Board
of Directors pursuant to Section 4 of this Article. Each director shall
(a) be at least twenty-one years of age,
(b) be a stockholder of the Corporation,
(c) not have been convicted within ten years of any felony
or misdemeanor involving the purchase or sale of any security or
arising out of conduct as an underwriter, broker, dealer, or
investment adviser, or as an affiliated person, salesman, or employee
of any investment company, bank, or insurance company,
(d) not be, by reason of any misconduct, permanently or
temporarily enjoined by order, judgment, or decree of any court of
competent jurisdiction from acting as an underwriter, broker, dealer,
or investment adviser, or as an affiliated person, salesman, or
employee of any investment company, bank, or insurance company, or
from engaging in or continuing any conduct or practice in connection
with any such activity or in connection with the purchase or sale of
any security,
(e) not be an officer, director, clerk or employee of any
bank or trust company (as such terms are defined in the New York
Banking Law) unless permission to so act has been granted by a general
or specific regulation of the New York Banking Board or unless
application for such permission is made immediately after the election
of such a person as director of the Corporation,
(f) not be an officer, director or employee of any member
bank of the Federal Reserve System unless permission to so act has
been granted by general regulations of the Board of Governors of the
Federal Reserve System or unless application for such permission is
made immediately after the election of such a person as director of
the Corporation, and
(g) not remain in office if he fails to attend at least 60%
of the regular monthly meetings of the Board of Directors in any
twelve-month period commencing on April 1, of each year and continuing
through March 31 of the following year; provided, however, that the
provisions of this clause (g) may be waived by a resolution adopted by
the Board of Directors for good cause shown.
4
<PAGE> 9
Such directors shall be divided into three classes, all
of which shall be as nearly equal in number as possible, and no class shall
include less than three directors. The terms of office of the directors shall
be as follows: That of the first class shall expire at the next annual meeting
of stockholders, the second class at the second annual meeting and the third
class at the third succeeding annual meeting. At each annual meeting after
such initial classification directors to replace those whose terms expire at
such annual meeting shall be elected to hold office until the third succeeding
annual meeting. Not more than 60% of the members of the Board of Directors
shall be persons who are interested persons of the Corporation. In addition,
not more than 50% of the members of the Board of Directors shall be persons who
are directors, officers or employees of any one bank.
Each director shall serve for the term for which he is
elected and until his successor is elected and shall qualify. Upon any change
in the officers or directors of the Corporation, the Corporation shall within
twenty days file with the State of New York, if required, a Supplemental
Broker-Dealer Statement stating the new name and address involved in each such
change.
No Savings Bank shall be represented on the Board by
more than one person. If multiple membership occurs as a result of merger, the
Secretary shall notify the newly constituted savings bank of this policy and
request that it notify the Fund within three months of the effective date of
the merger of the name of the representative it seeks to have continue as a
director.
No director shall continue to serve as a director after
the first Annual Stockholders' Meeting next following such director's
seventy-fifth birthday provided, however, that the provisions of this paragraph
may be waived by a resolution adopted by the Board of Directors to permit a
director to serve out the remainder of his term.
Section 2. Vacancies. Newly created directorships
resulting from an increase in the number of directors and all vacancies
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the Board of
Directors, if immediately after filling any such vacancy at least two-thirds of
the directors then holding office shall have been elected by the holders of the
outstanding stock of the Corporation at an annual or special meeting. In the
event that at any time less than a majority of the directors of the Corporation
holding office at the time were so elected by the holders of the outstanding
stock, the Board of Directors shall forthwith cause to be held as promptly as
possible and in any event within sixty days a meeting of such holders for the
purpose of electing directors to fill any existing vacancies in the Board of
Directors. Any director elected by the Board of Directors shall fill such
vacancy until the next annual meeting of stockholders, and until his successor
is elected and shall qualify. Any director elected by the holders of the
outstanding stock shall fill such vacancy for the unexpired portion of the term
of his predecessor in office, and until his successor is elected and shall
qualify.
5
<PAGE> 10
Section 3. Resignations and Removal of Directors. Any
director may resign at any time by giving written notice to the President or to
the Secretary of the Corporation; such resignation shall take effect at the
date of receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation by the
Board of Directors shall not be necessary to make it effective. Any or all of
the directors may be removed for cause by the Board of Directors. Any or all
of the directors may be removed without cause by a vote of not less than two
thirds of the outstanding shares of the Corporation.
Section 4. Increase or Decrease in Size of Board. The
number of directors may be increased to twenty-four members or decreased to
nine members by the vote of a majority of the entire Board of Directors. When
the number of directors is increased by the Board of Directors and newly
created directorships are filled by the Board of Directors, there shall be no
classification of the additional directors until the next annual meeting of
stockholders. No decrease in the number of directors shall shorten the term of
any incumbent director.
Section 5. Place of Meeting. The Board of Directors
may hold its meeting at such place or places within or without the State of New
York as it may from time to time determine.
Section 6. Annual Meeting. A meeting of the Board of
Directors, to be known as the annual meeting, shall be held without notice
immediately after, and at the same place as, the meeting of stockholders at
which such Board of Directors is elected, for the purpose of electing the
officers of the Corporation.
Section 7. Regular Meetings. Regular meetings of the
Board of Directors shall be held at least once in each calendar quarter at such
time and place as it may from time to time determine, without call and without
notice.
Section 8. Special Meetings. Special meetings of the
Board of Directors may be called at any time by the President, and shall be
called by the Secretary, or such other officer as the President or the Board of
Directors may designate, on the written request of any two directors. Any such
special meeting may be held at such place as shall be specified in the call,
but if no place is specified, then at the principal office of the Corporation
in the City of New York, New York.
Section 9. Notice of Special Meetings. Notice of the
time and place, date and hour, of each special meeting stating the person or
persons calling the meeting shall be given by the Secretary, the President or
such other officer as the President or the Board of Directors may designate, to
each director at least twenty-four hours prior to such meeting. Such notice
may be given verbally, in person or by telephone, in writing by personal
delivery or by mail, or by telegraph and shall specify the purpose or purposes
of such a meeting. Any director may waive notice of any meeting before or
after the meeting and the attendance of a director at any meeting shall
constitute a waiver of notice of such a meeting. No business shall be
transacted at any special meeting except such as shall have been specified in
the notice or waiver of notice thereof.
6
<PAGE> 11
Section 10. Organization; Quorum. Unless the Board of
Directors shall, by resolution, otherwise provide, the President, or in his
absence the First Vice President, shall act as chairman at all meetings of the
Board of Directors; and the Secretary, or in his absence the Assistant
Secretary, or in the absence of both the Secretary and the Assistant Secretary,
such person as may be designated by the chairman, shall act as secretary at all
such meetings.
A majority of the entire Board of Directors shall
constitute a quorum necessary for the transaction of business or of any
specified item of business, and, except as otherwise provided by law, the vote
of a majority of directors present at any meeting at which a quorum is present,
shall be the act of the Board of Directors. If at any meeting of the Board of
Directors a quorum is not present, a majority of the directors present may
adjourn the meeting from time to time.
Section 11. Compensation and Reimbursement of Expenses.
The Board of Directors, by resolution, may authorize the Corporation to
compensate each director for his services as a director of the Corporation, and
each director, as such, shall be entitled to reimbursement for his reasonable
expenses incurred in attending meetings or otherwise in connection with his
attention to the affairs of the Corporation.
Section 12. Presumption of Concurrence. A director who
is present at a meeting of the Board of Directors, or any committee thereof, at
which action on the declaration of any dividend or other distribution in cash
or property, the purchase of the shares of the Corporation, the distribution of
assets to stockholders after dissolution of the Corporation without paying or
adequately providing for all known liabilities of the Corporation, excluding
any claims not filed by creditors within the time limit set in a notice given
to creditors under law, or the making of any loan to any director unless
authorized by vote of the stockholders, is taken shall be presumed to have
concurred in the action unless his dissent thereto shall be entered in the
minutes of the meeting, or unless he shall submit his written dissent to the
person acting as secretary of the meeting before the adjournment thereof, or
shall deliver or send by registered mail such dissent to the Secretary of the
Corporation promptly after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action. A
director who is absent from the meeting of the Board or any committee thereof,
at which such action is taken, shall be presumed to have concurred in the
action unless he shall deliver or send by registered mail his dissent thereto
to the Secretary of the Corporation or shall cause such dissent to be filed
with the minutes of the proceedings of the Board of Directors or committee
within a reasonable time after learning of such action.
Section 13. Action of Directors or Committees Without
Meeting. Whenever the Board of Directors or any committee thereof is required
or permitted to take action, such action may be taken without a meeting if all
members of the Board or the committee consent in writing to the adoption of a
resolution authorizing the action. The resolution and the written consents by
the members of the Board or committee shall be filed with the minutes of the
proceedings thereof.
7
<PAGE> 12
Section 14. Telephonic Meetings of the Board or
Committees. Any one or more members of the Board of Directors or any committee
thereof may participate in a meeting of such Board or committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
ARTICLE IV.
Committees.
Section 1. Executive Committee and Other Committees. The
Board of Directors of the Corporation, by resolution adopted by a majority of
the entire Board of Directors, may designate from among its members an
executive committee and other committees, each consisting of three or more
directors, and each of which, to the extent provided in the resolution, shall
have all the authority of the Board of Directors, except that no such committee
shall have authority as to the following matters:
(1) The submission to stockholders of any action that needs
stockholder authorization,
(2) The filling of vacancies in the Board of Directors or in
any committee,
(3) The fixing of compensation of the directors for serving
on the Board of Directors or on any committee,
(4) The amendment or repeal of any resolution of the Board
of Directors which by its terms shall not be so
amendable or repealable, and
(5) The amendment or repeal of these bylaws, or the adoption
of new bylaws.
Each such committee shall serve at the pleasure of the Board
of Directors and may adopt its own rules of procedure and shall keep regular
minutes of its proceedings and report the same to the Board of Directors.
ARTICLE V.
Officers.
Section 1. Number and Description. The officers of the
Corporation shall be a President, a First Vice President, a Second Vice
President, a Secretary, one or more Assistant Secretaries and a Treasurer, all
of whom shall be elected by the Board of Directors.
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The Board of Directors may elect or appoint such other
officers and agents as it shall deem necessary or as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as the Board of Directors may prescribe
from time to time. The President shall have authority to appoint any agents,
or employees other than those elected or appointed by the Board of Directors,
and to prescribe their authority and duties, which may include the authority to
appoint subordinate officers, agents or employees.
Any two or more offices, except the office of President and
Secretary, may be held by the same person, but no officer shall execute,
acknowledge or certify any instrument in more than one capacity.
Section 2. Term of Office. Each officer elected or appointed
by the Board of Directors shall hold office until the next annual meeting of
the Board of Directors and until his successor has been elected or appointed
and qualified. Any officer may be removed at any time, with or without cause,
by the affirmative vote of a majority of the entire Board of Directors. Any
officer, agent or employee not elected or appointed by the Board of Directors,
shall hold office at the discretion of the President, or of the officer
appointing him.
Section 3. Resignation. Any officer may resign at any time
by giving written notice to the Board of Directors, or to the President, or
Secretary, or to the officer appointing him. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office caused by the
death, resignation, removal or disqualification of the person elected or
appointed thereto, or by any other cause, shall be filled for the unexpired
portion of the term in the same manner as prescribed in these bylaws for
regular election or appointment to such office. In case of the absence or
disability or refusal to act of any officer of the Corporation, or for any
other reason that the Board of Directors deems sufficient, the Board of
Directors may delegate, for the time being, the powers and duties or any of
them, of such officer, to any other officer or to any director.
Section 5. The President. The President shall be a director
and the principal executive officer of the Corporation. He shall have general
charge, control and supervision of the management and direction of the
business, property and affairs of the Corporation subject to the control and
direction of the Board of Directors.
The President is authorized to sign, execute and acknowledge,
in the names and on behalf of the Corporation, all deeds, mortgages, bonds,
notes, debentures, stock certificates, contracts, leases, reports, and other
documents and instruments, except where the signing and execution thereof by
some other officer, agent or representative of the Corporation shall be
expressly authorized and directed by law or by the Board of Directors or by
these bylaws. Unless otherwise provided by law or by the Board of Directors,
the President may authorize any officer, employee or agent of the Corporation
to sign, execute and acknowledge, in the name and on behalf of the Corporation
and in his place and stead, all such documents and instruments. The President
shall have such other powers and perform such other duties as are incident to
the office of president and as from time to time may be prescribed by the Board
of Directors.
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Section 6. The First Vice President. In the absence or
inability to act of the President, or if the office of President is vacant, the
powers and duties of the President shall temporarily devolve upon the First
Vice President, who shall be a director.
The First Vice President shall have such other powers and
perform such other duties as from time to time may be assigned to him by the
Board of Directors or be delegated to him by the President, including, unless
otherwise ordered by the Board of Directors, the power to sign, execute and
acknowledge all documents and instruments.
Section 7. The Second Vice President. In the absence or
inability to act of the First Vice President, or if that office is vacant, the
powers and duties of the First Vice President shall temporarily devolve upon
the Second Vice President.
The Second Vice President shall have such other powers and
perform such other duties as from time to time may be assigned to him by the
Board of Directors or be delegated to him by the President or First Vice
President, including, unless otherwise ordered by the Board of Directors, the
power to sign, execute and acknowledge all documents and instruments.
Section 8. The Secretary. The Secretary shall: (1) keep the
minutes of the proceedings of the stockholders, Board of Directors, and
executive committee and other committees, if any, in one or more books provided
for that purpose; (2) see that all notices are duly given in accordance with
the provisions of these bylaws or as required by law; (3) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all documents the execution of which on behalf of
the Corporation under its seal is duly authorized; (4) file each written
request by a stockholder that notice to him be mailed to some address other
than the address as it appears on the record of stockholders; (5) sign with the
President, or a Vice President, certificates representing shares of stock of
the Corporation, the issuance of which shall have been authorized by resolution
of the Board of Directors; (6) have general charge of the record of
stockholders of the Corporation; and (7) in general perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors. Any action that
is required or permitted to be performed by the Secretary of the Corporation
pursuant to these bylaws may be performed by the President of the Corporation
or such other officer as the President or the Board of Directors may designate,
to the extent permitted by law.
Section 9. Assistant Secretaries. In the absence of the
Secretary, or during his disability or refusal to act, his powers and duties
shall temporarily devolve upon such one of the Assistant Secretaries as the
President or the Board of Directors may direct, or, if there is but one
Assistant Secretary, then upon such Assistant Secretary. The Assistant
Secretaries shall have such other powers and perform such other duties as from
time to time may be assigned to them, respectively, by the Board of Directors
or be delegated to them by the President or the Secretary.
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Section 10. Treasurer. The Treasurer, subject to the
provisions hereinafter set forth respecting a custodian or custodians, and any
agreements entered into by the Corporation pursuant thereto, shall have
responsibility for the custody and safekeeping of all funds of the Corporation
and shall have charge of their collection, receipt and disbursement; shall have
responsibility for the custody and safekeeping of all securities of the
Corporation; shall receive and have authority to sign receipts for all moneys
paid to the Corporation and shall deposit the same in the name and to the
credit of the Corporation in such banks or depositaries as the Board of
Directors shall approve; shall endorse for collection on behalf of the
Corporation all checks, drafts, notes and other obligations payable to the
Corporation; shall disburse the funds of the Corporation only in such manner as
the Board of Directors may require; shall sign or countersign all notes,
endorsements, guaranties and acceptances made on behalf of the Corporation when
and as directed by the Board of Directors; shall keep full and accurate
accounts of the transactions of his office in books belonging to the
Corporation and render to the Board of Directors, whenever they may require, an
account of his transactions as Treasurer; and in general shall have such other
powers and perform such other duties as are incident to the office of treasurer
and as from time to time may be prescribed by the Board of Directors.
Section 11. Compensation. The salaries or other compensation
of all officers elected or appointed by the Board of Directors shall be fixed
from time to time by the Board of Directors. The salaries or other
compensation of all other officers, agents and employees of the Corporation
shall be fixed from time to time by the President, but only within such limits
as to amount, and in accordance with such other conditions, if any, as from
time to time may be prescribed by the Board of Directors.
ARTICLE VI.
Section 1. Representation of Shares of Stock. The shares of
stock of the Corporation shall be held in open accounts or represented by
certificates for shares of stock. Certificates shall be issued if a
stockholder shall request such issuance.
Section 2. Open Accounts. Open accounts shall be maintained
and recorded by the transfer agent or the registrar of the Corporation. Each
open account shall bear the name and address of the record owner of the shares
held in the open account and such other information as the Board of Directors
may deem appropriate for complete and accurate identification. Upon any change
in the number of shares held in an open account, written notice of such change
shall be mailed to the record owner.
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Section 3. Certificates of Stock. Certificates representing
shares of stock of the Corporation shall be in such form as may be determined
by the Board of Directors. All such certificates shall be consecutively
numbered and shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary or the Treasurer of the Corporation and
may, but need not be, sealed with the seal of the Corporation or a facsimile
thereof. The signatures of the officers upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent or registered by a
registrar other than the Corporation itself or its employee. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of issue.
Each certificate representing shares of stock of the
Corporation shall when issued state upon the face thereof; that the Corporation
is formed under the laws of the State of New York; the name of the person or
persons to whom issued; the number and class of shares which such certificate
represents; and the par value of each share represented by such certificate.
The name and address of the persons to whom certificates for
shares of stock are issued and the number of shares represented by and the date
of issue and transfer of each certificate, shall be entered on books of the
Corporation kept for that purpose. The stock record and transfer books and the
blank stock certificates shall be kept by such transfer agent or by the
Secretary or such other officer as shall be designated by the Board of
Directors for that purpose. Every certificate surrendered to the Corporation
for redemption, transfer, exchange, or credit to an open account shall be
cancelled and shall show thereon the date of cancellation.
Section 4. Lost, Destroyed or Wrongfully Taken Certificates.
The Board of Directors of the Corporation may direct a new certificate to be
issued in place of any certificate theretofore issued by the Corporation
alleged to have been lost, apparently destroyed or wrongfully taken. When
authorizing such issue of a new certificate the Board of Directors, in its
discretion and as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require such
indemnities as it deems adequate, to protect the Corporation from any claim
that may be made against it with respect to any such certificate alleged to
have been lost, destroyed or wrongfully taken.
Section 5. Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent or to dissent from any proposal
without a meeting or for the purpose of determining the stockholders entitled
to receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
not be more than fifty nor less than ten days before the date of any meeting,
nor more than fifty days prior to any other action. When a determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders has been made as provided herein, such determination shall apply
to any adjournment thereof, unless the Board of Directors fixes a new record
date for the adjourned meeting.
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Section 6. Record of Stockholders. The Corporation shall
keep in its principal office, or at the office of its transfer agent or
registrar in the State of New York, a record containing the names and addresses
of all stockholders, the number of shares held by each, and the dates when they
respectively became the owners of record thereof. Except as otherwise provided
by law, the Corporation shall be entitled to recognize the exclusive right of a
record owner to receive dividends and other distributions and to vote the
shares held in his name, and the Corporation shall not be bound to recognize
any other person's equitable or legal claims to or interest in such shares.
ARTICLE VII.
Determination of Sale and Redemption Price.
Shares of stock of the Corporation sold by the Corporation
shall be sold at the net asset value thereof. Shares of stock of the
Corporation that a stockholder requires the Corporation to redeem or that the
Corporation acquires by exercise of its option to redeem shall be redeemed by
the Corporation at the net asset value thereof.
The asset value of each share of stock shall be obtained as of
any given time by dividing the net value of the assets of the Corporation by
the total number of shares then outstanding, including all shares which the
Corporation has sold, whether or not paid for and issued, and all shares which
have been surrendered to the Corporation for redemption or which the
Corporation has elected to redeem upon their having been offered to the
Corporation prior to transfer and the redemption price of which has not been
determined.
The net value of the assets of the Corporation shall be
determined as of any given time in accordance with sound accounting practice by
deducting from the gross value of the assets of the Corporation at such time
the amount of all expenses incurred and accrued and unpaid, such reserves as
may be set up to cover taxes and any other liabilities, and such other
deductions as in the opinion of the Board of Directors are in accordance with
sound accounting practice.
The gross value of the assets of the Corporation as of any
given time shall be an amount equal to all cash, receivables, the market value
of all securities and the fair value of other assets held by the Corporation at
such time, all determined in accordance with sound accounting practice and
giving effect to the following:
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(a) The market value of any security owned by the
Corporation which is listed or admitted to trading privileges on the
New York Stock Exchange or the American Stock Exchange shall be the
last sales price during the period elapsed since last previous
determination or (in the case of securities in which there have been
no previously reported sale transactions during such period) the mean
between the last bid price and the last asking price, for like
securities on such exchange. In case securities being valued are
listed or admitted to trading privileges on any securities exchange
other than the New York Stock Exchange or the American Stock Exchange,
the sale transactions or bid or asked prices of such securities
exchange which are to be used as aforesaid, shall be selected by the
Board of Directors or any officer or other person designated by the
Board of Directors for the purpose.
(b) The market value of securities traded on the NASDAQ
National Market shall be the last sales price during the period
elapsed since the last previous determination or (in the case of
securities in which there have been no previously reported sale
transactions during such period) the mean between the last bid price
and the last asking price. The market value of securities dealt in in
any other over-the-counter market shall be the mean between the last
bid and asked prices in such market.
(c) The market value of securities which are neither listed
nor admitted to trading privileges on any exchange or dealt in in an
over-the-counter market shall be determined in such manner as the
Board of Directors shall prescribe from time to time.
(d) Any person making any determination of the market value
of securities hereunder may rely on any source of quotations or basis
for ascertaining quotations believed by him to be reliable.
ARTICLE VIII.
Redemption of Shares.
Each stockholder of the Corporation shall have the right to
require the Corporation to redeem all or any part of his shares of stock in
accordance with the following:
1. Such right shall be exercised in each instance by the
delivery to the Corporation or its transfer agent during usual
business hours of a request for redemption. Such request shall (A)
consist of an irrevocable written offer addressed to the Corporation
duly executed by such holder to sell each of such shares to the
Corporation at the redemption price per share, accompanied by the
surrender to the Corporation of the certificate or certificates for
the shares to be repurchased in proper form for transfer together with
such proof of the authenticity of signatures as may be required by the
Corporation or (B) be in such other form and in compliance with such
other rules as may be established by the Corporation; provided that in
any case where a certificate has not been issued for part or all of
the shares to be redeemed, the request for redemption shall, if
required by the Corporation, be accompanied by a duly executed stock
power or other instrument of assignment covering such shares, together
with such proof of the authenticity of signatures on such stock power
or other instrument of assignment as may be required by the
Corporation.
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2. The time as of which the redemption price applicable to
any such redemption shall be computed is as of the close of the New
York Stock Exchange on the day on which the request for redemption is
received, if received by the Corporation before the close of the New
York Stock Exchange on a business day; if the request for redemption
is not received on a business day, or if the request for redemption is
received after the close of the New York Stock Exchange on a business
day, then the redemption price shall be computed as of the close of
the next succeeding business day. A business day is a day other than
a public holiday in the State of New York, on which the New York Stock
Exchange is open for trading.
3. The redemption price shall be paid by the Corporation
within seven days after receipt of the request for redemption, except
that any such payment may be postponed or the right of redemption
suspended
(i) for any period during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings or during which trading on the New York Stock
Exchange is restricted;
(ii) for any period during which the Board of
Directors determines that an emergency exists as the result of
which disposal by the Corporation of securities owned by it is
not reasonably practicable or it is not reasonably practicable
for the Corporation fairly to determine the value of its net
assets;
(iii) for such other period as the Securities and
Exchange Commission may by order permit for the protection of
security holders of the Corporation;
provided that applicable rules and regulations of the Securities and
Exchange Commission (or any succeeding governmental authority) shall
govern as to the existence of restricted trading under (i) above or
the emergency under (ii) above.
Should the right of redemption be so postponed by the
Corporation, a stockholder may withdraw his request for redemption if
he so elects, or if he does not so elect, the redemption price shall
be determined as of the close of business of the New York State
Exchange upon the first business day, after the suspension, upon which
the New York Stock Exchange is open for four hours.
4. Subject to the requirements of the Investment Company
Act of 1940 and any rule or regulation of the Securities and Exchange
Commission thereunder (including Rule 18f-1), any payment of the
redemption price may be made in whole or in part in kind, in
securities of the Corporation, if the Board of Directors shall
determine that, by reason of the closing of the New York Stock
Exchange or otherwise, the orderly liquidation of securities owned by
the Corporation is impracticable or payment in cash would be
prejudicial to the best interest of the remaining stockholders of the
Corporation. In making any such payment in whole or in kind such
securities shall be valued in the same manner employed in determining
the redemption price and the securities so delivered shall be selected
in such manner as the Board of Directors may deem fair and equitable.
Whenever delivery of securities is so to be made, such delivery shall
be made as promptly as practicable after receipt by the Corporation or
its transfer agent of a request for redemption in proper form
accompanied by such other documents as may be required by the
Corporation pursuant to these bylaws.
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The Corporation shall have the right to redeem at its
option all, but not less than all, of the shares of stock held in any
stockholder account, the aggregate net asset value of which is less than $25.00
(the "minimum asset value"), in accordance with the following procedures:
1. The minimum asset value shall not exceed one half of the
minimum initial investment in the Corporation as fixed by the Board of
Directors from time to time.
2. Shares shall be redeemed at the net asset value thereof
computed as at the close of the New York Stock Exchange on the
redemption date.
3. The Corporation shall provide to any stockholder whose
shares are to be redeemed not less than 45 days' written notice of the
Corporation's intention to redeem such shares. Such notice shall be
mailed to the last known address of such stockholder by first class or
certified mail and shall be effective when deposited properly
addressed with postage prepaid in the facilities of the U.S. Postal
Service.
4. Such notice shall state (a) the date on which the
Corporation intends to redeem such shares, (b) that the price at which
such shares shall be redeemed will be the net asset value of such
shares computed as at the close of the New York Stock Exchange on the
redemption date, (c) that the redemption price will be paid to such
stockholder by check within seven days after the redemption date, and
(d) that the stockholder may avoid redemption of his shares by
purchasing additional shares in an amount sufficient to increase the
value of his account to the minimum asset value then in effect.
5. No shares of stock may be redeemed without the consent
of the stockholder unless the aggregate asset value of such shares
immediately after the most recent redemption of shares by such
stockholder was less than:
(a) the applicable minimum asset value in effect at
the time of such most recent redemption; or
(b) one-half of the minimum initial investment as in
effect at the time of such most recent redemption, provided
that no minimum asset value was in effect at the time of such
most recent redemption; or
(c) the applicable minimum asset value set forth in
any effective prospectus relating to the shares of the
Corporation, provided that the applicable minimum asset value
has been continuously disclosed in the prospectus or
prospectuses relating to the shares of the Corporation for at
least one year prior to the time the Corporation redeems such
shares.
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It shall be the policy of the Corporation to exercise its option to redeem
shares pursuant to this paragraph with respect to any account which falls below
the minimum asset value, to the extent permitted by the foregoing. Accounts
held pursuant to any incentive savings or deferred compensation plan shall be
exempt from involuntary redemptions.
ARTICLE IX.
Reserved.
ARTICLE X.
Restrictions on Investments.
The authority of the Board of Directors to invest the funds
of the Corporation, to borrow money and to pledge securities as provided in the
Certificate of Incorporation shall be subject to the following restrictions and
limitations:
1. Reserved.
2. Other than for the expenses of organization, the
Corporation may not borrow money except that the Fund may borrow funds
from banks temporarily for administrative or liquidity (but not
leveraging) purposes and such borrowing may not exceed five percent of
the value of the total assets of the Corporation at the time the loan
is made nor be for a period exceeding sixty days.
3. The Corporation shall not underwrite the securities of
other issuers.
4. The Corporation shall not buy or sell real estate, but
may retain or sell real estate acquired as a result of the ownership
of securities. Securities shall not be purchased for the purpose of
acquiring real estate.
5. The Corporation may not buy or sell any commodities or
commodity contracts, but may retain or sell commodities or commodity
contracts acquired as a result of the ownership of securities.
Securities shall not be purchased for the purpose of acquiring
commodities or commodity contracts.
6. The Corporation shall not make loans to other persons.
For these purposes the purchase of a portion of an issue of publicly
distributed bonds, debentures or other debt securities of the type
customarily purchased by institutional investors, whether or not the
purchase was made on the original issue of securities, shall not be
considered the making of a loan.
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7. The Corporation shall not purchase the securities of any
issuer if such purchase, at the time thereof, would cause more than
five percent (5%) of the total assets of the Corporation (taken at
market value) to be invested in the securities of such an issuer.
This limitation shall not apply to obligations of the Government of
the United States or of any corporation which is an instrumentality of
the United States.
8. The Corporation shall not purchase the securities of any
issuer if such purchase at the time thereof would cause more than ten
percent (10%) of any class of securities of such an issuer to be held
by the Corporation. For the purpose of this limitation all
outstanding debt of an issuer having maturity of more than one year
shall be treated as one class.
9. The Corporation shall not purchase securities issued by
any other investment company or investment trust registered under the
Investment Company Act of 1940.
10. The Corporation shall not sell or contract to sell any
security which it does not own unless by virtue of its ownership of
other securities it has at the time of sale a right to obtain
securities equivalent in kind and amount to the securities sold and if
such right is conditional the sale shall be made only upon the same
conditions. The Corporation shall not buy any securities or other
property on margin and shall not buy or sell "puts" or "calls," except
that the Corporation may write (sell) call options, which are listed
on an organized securities exchange, on securities which are owned by
the Corporation, and may buy options for the purpose of effecting
closing purchase transactions relating to such options.
11. The Corporation shall not knowingly either purchase or
retain in its portfolio securities issued by an issuer if an officer,
director, or employee of, or counsel for, the Corporation is an
officer or employee of such an issuer.
12. The Corporation shall not knowingly either purchase or
retain in its portfolio securities issued by an issuer if the officers
and directors of the Corporation, together, own of record or
beneficially more than five percent (5%) of any class of the
securities of such an issuer.
13. The Corporation shall not pledge, mortgage or
hypothecate any assets of the Corporation except as may be necessary
to borrow money temporarily for administrative or liquidity (but not
leveraging) purposes pursuant to subparagraph 2 hereof and except that
securities owned by the Corporation on which an option may have been
written may be pledged, placed in escrow or otherwise segregated in
accordance with the applicable requirements of any organized
securities exchange in order that such securities remain available for
delivery in case the option is exercised.
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14. The Corporation shall not invest in the securities of an
issuer for the purpose of exercising control or management.
15. The Corporation shall diversify its investment among a
number of industries rather than concentrate in a particular industry
or group of industries and its investments in a particular industry
shall not exceed 25 percent of its assets.
16. The Corporation shall not purchase any security whose
disposition by the Fund would be, at the time of purchase, restricted
under the Securities Act of 1933.
After the effective date of the registration of the shares of
stock of the Corporation under the Securities Act of 1933, the provisions of
this Article X shall not be altered, amended, or repealed except as authorized
by the vote of a majority of the outstanding shares of the Corporation.
ARTICLE XI.
Investment Policy and Objectives of the Corporation.
The primary objective of the Corporation shall be to achieve
capital appreciation for its stockholders consistent with safety of principal.
Immediate current return shall not be as important as selection of growth
issues that have promise of long-term increasing dividend income. To achieve
these objectives the Corporation shall select securities of companies whose
growth, earnings and dividend prospects in its opinion are promising over the
longer term. Securities of enterprises that shall be considered to have better
than average management, financial strength and growth prospects will be
favored. Changes in this investment objective may be made by the Board of
Directors without stockholder approval whenever in its judgment economic or
market conditions warrant.
While the Corporation shall not be restricted in the
proportion of assets which may be held in cash, government securities or other
nonequity type securities, the policy of the Corporation shall be to limit such
holdings to the liquid reserves appropriate to redeem shares of stock of the
Corporation or for other purposes determined desirable by the management of the
Corporation. If in the opinion of the Board of Directors of the Corporation,
market conditions shall be unfavorable for common stocks and other equity type
securities, the Corporation may for defensive purposes temporarily retain part
or all of its assets or invest part or all of its assets in investment grade
bonds, government securities and obligations of any corporation organized under
the laws of any state of the United States maturing within 270 days provided
that such obligations receive the highest rating of an independent rating
service designated by the Banking Board. Continuous supervision shall be given
to investments of the Corporation to attain, through suitable shifts in
portfolio securities when required, the Corporation's investment objectives.
Transactions involving portfolio turnover shall be limited to those incidental
in the ordinary course of business and for the objective of the Corporation as
stated.
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ARTICLE XII.
Custodian.
Section 1. Appointment of Custodian. All securities and
funds owned by the Corporation shall at all times be held in the custody of one
or more custodians appointed by the Board of Directors upon such terms and
conditions as the Board of Directors may fix. Each such custodian shall be a
bank or trust company which shall have at all times an aggregate capital,
surplus and undivided profits of not less than $500,000.
Section 2. Agreements with Custodian. Each agreement with a
custodian shall provide, among other things:
(a) The custodian shall receive and hold as custodian for
the Corporation all securities delivered to the custodian and all
moneys paid to the custodian by or for the account of the Corporation;
(b) All securities purchased for the account of the
Corporation shall be paid for by the custodian upon substantially
contemporaneous receipt of such securities by the custodian in
transferable form;
(c) The custodian shall deliver securities owned by the
Corporation only (i) upon sale of such securities for the account of
the Corporation and receipt of payment therefor by the custodian, (ii)
when such securities are called, redeemed, retired, or otherwise
become payable, (iii) in exchange for or upon conversion into other
securities or other securities and cash, whether pursuant to their
terms or to any plan of merger, reorganization, readjustment,
liquidation or otherwise, or (iv) for other proper corporate purposes;
(d) The custodian agreement shall be subject to termination
by the Corporation without the consent of the custodian upon written
notice within such time as may be specified in the agreement, not,
however, exceeding sixty days.
ARTICLE XIII.
Investment Adviser.
Section 1. Appointment of Investment Adviser. The Board of
Directors may appoint an investment adviser to furnish to the Corporation,
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, upon such terms and conditions as the
Board of Directors may determine. The investment adviser and custodian may be
one and the same person.
20
<PAGE> 25
Section 2. Agreements with Investment Adviser. The
appointment of an investment adviser shall be by written agreement, which
agreement shall provide, among other things:
(a) a precise description of all compensation to be paid by
the Corporation thereunder;
(b) that such agreement shall not continue in effect for a
period more than two years unless such continuance is specifically
approved at least annually by the Board of Directors, concurred in by
a majority of the directors who are not interested persons of the
investment adviser or of the Corporation, or by vote of a majority of
the outstanding voting securities of the Corporation;
(c) that such agreement may be terminated without the
payment of any penalty at any time by the Board of Directors of the
Corporation or by vote of a majority of the outstanding shares of the
Corporation on not more than sixty days' written notice to the
investment adviser;
(d) that such agreement shall be automatically terminated in
the event of its assignment by the investment adviser.
The terms "vote of a majority of the outstanding voting
securities", "assignment" and "interested persons", when used herein, shall
have the respective meanings specified in the investment Company Act of 1940.
ARTICLE XIV.
Bonding of Officers and Employees.
All officers and employees of the Corporation who may singly
or jointly with others have access to securities or funds of the Corporation,
either directly or through authority to draw upon such funds or to direct
generally the disposition of such securities, shall be bonded by a reputable
fidelity insurance company against larceny and embezzlement in such reasonable
amounts as a majority of the Board of Directors of the Corporation who are not
such officers and employees shall determine with due consideration to the value
of the aggregate assets of the Corporation to which such persons shall have
access, the type and terms of the arrangements made for the custody and
safekeeping of such assets, and the nature of securities in the Corporation's
portfolio. Such determination shall be made at least once a year.
The Secretary of the Corporation shall make all the filings
and give all the notices required by Rule l7g-1 promulgated under the
Investment Company Act.
21
<PAGE> 26
ARTICLE XV.
Indemnification of Directors and Officers.
Section 1. Actions by or in the Right of the Corporation to
Procure a Judgment in its Favor. The Corporation shall indemnify any person
made, or threatened to be made, a party to an action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he,
his testator or intestate, is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of any other corporation of any type or kind, domestic or foreign, of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
against amounts paid in settlement and reasonable expenses, including
attorneys' fees, actually and necessarily incurred by him in connection with
the defense or settlement of such action, or in connection with an appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation, except
that no indemnification under this Section shall be made in respect of (1) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (2) any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that
the court in which the action was brought, or, if no action was brought, any
court of competent jurisdiction, determines upon application that, in view of
all the circumstances of the case, the person is fairly and reasonably entitled
to indemnity for such portion of the settlement amount and expenses as the
court deems proper.
Section 2. Other Actions or Proceedings. The Corporation
shall indemnify any person made, or threatened to be made, a party to an action
or proceeding (other than one by or in the right of the Corporation to procure
a judgment in its favor), whether civil or criminal, including an action by or
in the right of any other corporation of any type or kind, domestic or foreign,
or any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he, his
testator or intestate, was a director or officer of the Corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise in any capacity, against judgments, fines, amounts
paid in settlement and reasonable expenses, including attorneys' fees actually
and necessarily incurred as a result of such action or proceeding, or any
appeal therein, if such director or officer acted, in good faith, for a purpose
which he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the Corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to
believe that his conduct was unlawful.
The termination of any such civil or criminal action or
proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create a presumption that
any such director or officer did not act, in good faith, for a purpose which he
reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the Corporation or that
he had reasonable cause to believe that his conduct was unlawful.
22
<PAGE> 27
Section 3. Payment of Indemnification Other Than by Court
Award. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 and Section 2 above shall be entitled to indemnification as
authorized in such Sections.
Except as provided in the paragraph above, any indemnification
under Section 1 or Section 2 hereof, unless ordered by a court under Section 4
hereof, shall be made by the Corporation, only if authorized in the specific
case:
(a) By the Board acting by a quorum consisting of directors
who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in
Section 1 or Section 2, as the case may be; or
(b) If such a quorum is not obtainable with due diligence or
even if obtainable, a quorum of disinterested directors so directs:
(i) By the Board upon the opinion in writing of
independent legal counsel that indemnification is proper in
the circumstances because the applicable standard of conduct
set forth in such Sections has been met by such director or
officer; or
(ii) By the stockholders upon a finding that the
director or officer has met the applicable standard of conduct
set forth in such Sections.
Expenses incurred in defending a civil or criminal action or
proceeding may be paid by the Corporation in advance of the final disposition
of such action or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount as, and to the extent, required
by the first paragraph of Section 5 of this Article.
Section 4. Indemnification by a Court. Notwithstanding any
failure of the Corporation to provide indemnification, and despite any contrary
resolution of the Board or of the stockholders in the specific case under
Section 3, indemnification shall be awarded by a court to the extent authorized
under Section 1, Section 2 and the first paragraph of Section 3.
Where indemnification is sought by judicial action, the court
may allow a person such reasonable expenses, including attorneys' fees, during
the pendency of the litigation as are necessary in connection with his defense
therein, if the court shall find that the defendant has by his pleadings or
during the course of the litigation raised genuine issues of fact or law.
23
<PAGE> 28
Section 5. Other Provisions. All expenses incurred in
defending a civil or criminal action or proceeding which are advanced by the
Corporation under the last paragraph of Section 3, or allowed by a court under
the last paragraph of Section 4, shall be repaid in case the person receiving
such advancement or allowance is ultimately found, under the procedure set
forth in this Article of the bylaws not to be entitled to indemnification or,
where indemnification is granted, to the extent the expenses so advanced by the
Corporation or allowed by the court exceed the indemnification to which he is
entitled.
No indemnification, advancement or allowance shall be made
under this Article in any circumstance where it appears:
(1) that the indemnification would be inconsistent
with the law of the jurisdiction of incorporation of a foreign
corporation which prohibits or otherwise limits such
indemnification;
(2) that the indemnification would be inconsistent
with a provision of the certificate of incorporation , a
by-law, a resolution of the board or of the stockholders, an
agreement or other proper corporate action, in effect at the
time of the accrual of the alleged cause of action asserted in
the threatened or pending action or proceeding in which the
expenses were incurred or other amounts were paid, which
prohibits or otherwise limits indemnification; or
(3) if there has been a settlement approved by the
court, that the indemnification would be inconsistent with any
condition with respect to indemnification expressly imposed by
the court in approving the settlement.
If, under this Article of the bylaws any expenses or other
amounts are paid by way of indemnification, otherwise than by court order or
action by the stockholders, the Corporation shall, not later than the next
annual meeting of stockholders unless such meeting is held within three months
from the date of such payment, and in any event, within fifteen months from the
date of such payment, mail to its stockholders of record at the time entitled
to vote for the election of directors a statement specifying the persons paid,
the amounts paid, and the nature and status at the time of such payment of the
litigation or threatened litigation.
Section 6. Limitations and Restrictions of Indemnification.
Notwithstanding anything contained in Sections 1 through 5 above of this
Article to the contrary, this Article does not protect or purport to protect
any director or officer of the Corporation against any liability to the
Corporation or to its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
24
<PAGE> 29
ARTICLE XVI.
Interested Directors.
No contract or other transaction between the Corporation and
one or more of its directors, or between the Corporation and any other
corporation, firm, association or other entity in which one or more of its
directors are directors or officers, or are financially interested, shall be,
except as otherwise provided in the Investment Company Act of 1940, either void
or voidable for this reason alone or by reason alone that such director or
directors are present at the meeting of the Board of Directors, or a committee
thereof, which approves such contract or transaction, or that his or their
votes are counted for such purpose.
(1) If the fact of such common directorship, officership or
financial interest is disclosed or known to the Board of Directors or
committee, and the Board of Directors or committee approves such
contract or transaction by a vote sufficient for such purpose without
counting the vote or votes of such interested director or directors;
(2) If such common directorship, officership or financial
interest is disclosed or known to the stockholders entitled to vote
thereon, and such contract or transaction is approved by vote of the
stockholders; or
(3) If the contract or transaction is fair and reasonable as
to the Corporation at the time it is approved by the Board of
Directors, a committee or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee which approves
such contract or transaction.
ARTICLE XVII.
Seal.
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
New York". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
25
<PAGE> 30
ARTICLE XVIII.
Miscellaneous.
Section 1. Fiscal year. The fiscal year of the Corporation
shall be the calendar year.
Section 2. Reports to the Stockholders. The Board of
Directors shall at least semi-annually submit to the stockholders a written
financial report of the transactions of the Corporation including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XIX.
Amendments.
Except as otherwise provided herein or provided by law, these
bylaws may be amended or repealed or new bylaws may be adopted by the
affirmative vote of the Board of Directors at any regular or special meeting of
the Board. If any bylaw regulating an impending election of directors is
adopted, amended or repealed by the Board there shall be set forth in the
notice of the next meeting of stockholders for the election of directors the
bylaw so adopted, amended or repealed, together with a precise statement of
changes made. Bylaws adopted by the Board of Directors may be amended or
repealed by the stockholders.
26
<PAGE> 1
INVESTMENT ADVISORY AGREEMENT
This Agreement made and entered into as of May 19, 1995, by
and between M.S.B. Fund, Inc., a New York corporation (the "Fund"), and Shay
Assets Management Co., an Illinois general partnership (the "Adviser"):
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management
investment company incorporated in New York on June 8, 1964; and
WHEREAS, the Fund desires to retain the Adviser to render
investment advisory services to the Fund, and the Adviser is willing to render
such services;
NOW, THEREFORE, in consideration of the premises and mutual
promises hereinafter set forth the parties hereto agree as follows:
1. Advisory Services. The Fund hereby appoints the Adviser
to act as investment adviser to the Fund with respect to the assets belonging
to the Fund's Class A stock, $0.001 par value, for the period and on the terms
set forth in this Agreement. Shares of the Fund's Class A stock, $0.001 par
value, are referred to herein as "Fund Shares". The Adviser accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided. The Fund, at its option, may also appoint the
Adviser to act as investment adviser to the Fund hereunder with respect to the
assets belonging to any other class of capital stock of the Fund from time to
time created, but the Adviser shall not be required to accept any such
appointment. The Adviser shall furnish investment research and advice to the
Fund and shall manage the investment and reinvestment of the assets and its
business affairs and matters incidental thereto, all subject to the supervision
of the Board of Directors of the Fund and subject to the provisions of the
Certificate of Incorporation (as defined in paragraph 3(a) of this Agreement)
and By-Laws (as defined in paragraph 3(b) of this Agreement) of the Fund and
any resolution, rules or regulations adopted by the Board of Directors of the
Fund. The Adviser shall for all purposes herein provided be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Board of Directors of the Fund from time to time, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent for the Fund. The Fund shall also be free to retain, at its own expense,
other persons to provide it with any services whatsoever including, but not
limited to, statistical, factual or technical information or advice. The
services of the Adviser herein provided are not to be deemed exclusive and the
Adviser shall be free to render similar services or other services to others.
<PAGE> 2
2. Duties of the Adviser. Subject to the general supervision
of the Board of Directors of the Fund, the Adviser shall, employing its
discretion, manage the investment operations of the Fund and the composition of
the portfolio of securities and investments (including cash) belonging to the
Fund, including the purchase, retention and disposition thereof and the
execution of agreements relating thereto, in accordance with the investment
objective, policies and restrictions of the Fund as stated in the Prospectus
(as defined in paragraph 3(f) of this Agreement), Registration Statement (as
defined in paragraph 3(d) of this Agreement), Certificate of Incorporation and
By-Laws of the Fund and subject to the following understandings:
(a) The Adviser shall furnish a continuous investment program
for the Fund and determine from time to time what investments or securities
will be purchased, retained or sold by the Fund, and what portion of the assets
will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance
of its duties under this Agreement.
(c) The Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the Certificate
of Incorporation, the By-Laws and Prospectus of the Fund and with the
instructions and directions of the Board of Directors of the Fund and will
conform to and comply with the requirements of the Investment Company Act of
1940, as amended from time to time, and the rules and regulations of the
Securities and Exchange Commission thereunder (collectively, the "1940 Act")
and all other applicable Federal and state laws and regulations including
without limitation the provisions of the Internal Revenue Code, as amended from
time to time, applicable to the Fund as a regulated investment company.
(d) The Adviser shall determine the securities and other
investments to be purchased or sold by the Fund and, as agent for the Fund,
will effect transactions pursuant to its determinations either directly with
the issuer or with any broker and/or dealer in such securities. In placing
orders with brokers and/or dealers the Adviser intends to seek the best price
and execution for purchases and sales and will comply with such policies with
respect to brokerage as are set forth in the Fund's Registration Statement and
Prospectus or as the Fund's Board of Directors may adopt from time to time. On
occasions when the Adviser deems the purchase or sale of a security to be in
the best interest of the Fund as well as other customers, the Adviser may, to
the extent permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased in order to
obtain the best price and execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in a manner it considers to be
equitable and consistent with its fiduciary obligations to the Fund and, if
applicable, to such other customers.
(e) The Adviser shall maintain books and records with respect
to the portfolio transactions of the Fund and shall render to the Fund's Board
of Directors such periodic and special reports as the Board of Directors may
reasonably request.
(f) The Adviser shall provide the Fund's custodian and
administrator on each business day with information relating to all
transactions concerning the assets of the Fund, except redemptions of and any
subscriptions for Fund Shares, and will provide on a timely basis to the Fund's
administrator and other persons providing services to the Fundsuch information
as the administrator or such other persons may reasonably request in connection
with the performance of their respective duties and obligations with respect to
the Fund.
<PAGE> 3
(g) The Adviser will report to the Board of Directors of the
Fund at each meeting thereof all changes in the investments and other assets of
the Fund since the prior report, and will keep the Board of Directors informed
of material developments affecting the Fund and the Adviser, and on its own
initiative, will furnish the Board of Directors from time to time with such
information as the Adviser may believe appropriate for this purpose, whether
concerning the individual companies whose securities are included in the Fund's
holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Fund maintains
investments. The Adviser also will furnish the Board of Directors with such
statistical and analytical information with respect to securities and other
investments of the Fund as the Adviser may believe appropriate or as the Board
of Directors may reasonably request. The Adviser shall prepare and furnish to
the Board of Directors all such other written materials and documents as may be
requested or as may otherwise be necessary or appropriate in connection with
meetings of the Board of Directors, and, if the Secretary of the Fund is an
officer, director, or employee of the Adviser or any of its affiliated persons,
the Adviser shall cause to be prepared and shall bear the costs of preparing
and keeping the minutes of the meetings of the Board of Directors and
committees thereof and of meetings of the stockholders of the Fund.
(h) The Adviser shall furnish such office and other facilities
as may be required by the Fund.
3. Delivery of Documents. The Fund has delivered, or will
deliver promptly, copies of each of the following documents to the Adviser and
will promptly notify and deliver to it all future amendments and supplements if
any:
(a) Certificate of incorporation of the Fund, as filed with
the Secretary of State of the State of New York and in effect on the date
hereof and as amended or restated from time to time (the "Certificate of
Incorporation").
(b) By-Laws of the Fund, as in effect on the date hereof and
as amended or restated from time to time (the "By-Laws").
(c) Certified resolutions of the Board of Directors of the
Fund and of the Fund's stockholders, respectively, authorizing the appointment
of the Adviser and approving the form of this Agreement.
(d) Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-1A (the "Registration Statement")
as filed with the Securities and Exchange Commission (the "Commission") and in
effect on the date hereof relating to the Fund, and all subsequent amendments
thereto.
3
<PAGE> 4
(e) Notification of Registration under the 1940 Act on Form
N-8A as filed with the Commission.
(f) Prospectus or Prospectuses and Statement or Statements
ofAdditional Information of the Fund, if any, as currently in effect and as
amended or supplemented from time to time, being herein called the
"Prospectus".
4. Employees of the Adviser. The Adviser shall authorize and
permit any of its directors, officers and employees who may be elected as
Directors or officers of the Fund to serve in the capacities in which they are
elected.
5. Books and Records. The Adviser shall keep the Fund's
books and records required to be maintained by it pursuant to paragraph 2(e) of
this Agreement. The Adviser agrees that all records which it maintains for the
Fund are the property to the Fund and it will promptly surrender any of such
records to the Fund upon the Fund's request. The Adviser further agrees to
preserve for the period prescribed by Rule 31a-2 of the Commission under the
1940 Act any such records as are required to be maintained by the Adviser with
respect to the Fund hereunder or by Rule 31a-1 of the Commission under the 1940
Act, as such rule may be amended from time to time, and any other applicable
rule that may be adopted by the Commission.
6. Expenses. During the term of this Agreement the Adviser
will pay all expenses (including without limitation the compensation of all its
directors, officers and employees serving as Directors or officers of the Fund
pursuant to paragraph 4 of this Agreement) incurred by it in connection with
its activities under this Agreement other than the cost of the securities and
investments purchased for the Fund (including taxes and brokerage commissions,
if any). The Adviser also shall pay the salaries, fees and expenses of
Directors, officers and employees of the Fund who are affiliated persons of the
Adviser or affiliated persons of any affiliated person of the Adviser. All
other expenses shall be borne by the Fund, subject to the limitations and
reimbursements provided for in paragraphs 7 and 8 hereof.
7. Compensation and General Expense Limitation.
(a) For the services provided and expenses borne by the
Adviser pursuant to this Agreement, the Fund shall pay to the Adviser
compensation based on the annual percentage of the Fund's average daily net
assets paid monthly, as follows: 0.75% of the first $100 million and 0.50% over
$100 million; provided, however, that if the Restricted Expenses (as defined
below) of the Fund with respect to any fiscal year of the Fund exceed an amount
(the "Restricted Expense Cap") equal to 1.10% of the average daily net asset
value of the Fund during such fiscal year, the fee payable to the Adviser with
respect to such fiscal year shall be reduced by the amount of such excess, but
not below zero. The fee payable to the Adviser pursuant to this paragraph 7
(the "Advisory Fee") shall commence on the date on which this Agreement is
approved by a majority of the Fund's outstanding voting securities, as defined
in the 1940 Act (the "Stockholder Approval Date") and shall be accrued daily,
subject to adjustment as provided below in this paragraph 7 and subject to
further adjustment as provided in paragraph 8, and the fee for each month will
be paid to the Adviser during the succeeding month.
4
<PAGE> 5
(b) The amount of compensation payable to the Adviser with
respect to each day during a fiscal year of the Fund shall be adjusted as
follows:
(i) If the total amount of Restricted Expenses accrued
by the Fund from the beginning of the fiscal year
through the close of business on such day exceeds
the Applicable Pro Rata Portion of the Restricted
Expense Cap (as defined below) through such day,
the compensation payable to the Adviser with
respect to such day shall be reduced by the amount
of such excess.
(ii) If the total amount of Restricted Expenses accrued
by the Fund from the beginning of the fiscal year
through the close of business on such day is less
than the Applicable Pro Rata Portion of the
Restricted Expense Cap through such day, the
compensation payable to the Adviser with respect to
such day shall be increased by the amount of such
excess, except to the extent such increase would
cause the aggregate compensation payable to the
Adviser with respect to the period from the
beginning of such fiscal year through such date to
exceed the Applicable Pro Rata Portion of the
Advisory Fee (as defined below).
In the event any reduction of the Advisory Fee provided for in this paragraph
7(b) would result in an aggregate Advisory Fee of less than zero for any month
in a fiscal year, the Adviser shall make a refund payment to the Fund in such
amount; provided, however, the Adviser shall not be obligated to refund an
amount greater than the aggregate amount of the Advisory Fee previously paid to
the Adviser with respect to such fiscal year.
(c) For purposes of this paragraph 7:
(i) "Applicable Pro Rata Portion of the Restricted
Expense Cap" as of any day shall mean the dollar
amount computed by multiplying 1.10% by (A) the
ratio computed by dividing the number of days
elapsed since the beginning of the relevant fiscal
year by the number of days in such year and (B) the
average daily net asset value of the Fund from the
beginning of the relevant fiscal year through such
day.
5
<PAGE> 6
(ii) "Applicable Pro Rata Portion of the Advisory Fee"
as of any day shall mean the dollar amount of the
Advisory Fee that would be payable to the Adviser
with respect to the period from the beginning of
the relevant fiscal year through such day, if such
amount were computed without regard to the
limitations set forth in paragraph 7(b) and
paragraph 8, multiplied by the ratio computed by
dividing the number of days elapsed since the
beginning of the relevant fiscal year by the number
of days in such fiscal year.
(d) In the event this Agreement becomes effective on a date
other than the first day of any fiscal year, solely for the purpose of
computing the amount of the Advisory Fee for such fiscal year, such first
fiscal year shall be deemed to begin on the Stockholder Approval Date and to
end on December 31 of such year. In the event this Agreement terminates on a
date other than the last day of any fiscal year, solely for thepurpose of
computing the amount of the Advisory Fee for such fiscal year, such fiscal year
shall be deemed to begin on January 1 of such year and to end on the date of
the termination of this Agreement. In either of such events, the Applicable
Pro Rata Portion of the Restricted Expense Cap and the Applicable Pro Rata
Portion of the Advisory Fee shall be reduced by multiplying such amount by the
ratio computed by dividing the number of days deemed to occur in such fiscal
year by 365.
(e) As used herein, the term "Restricted Expenses" means all
expenses of the Fund, including without limitation (i) the general expenses of
the Fund, (ii) the fees payable to the Adviser, the Fund's administrator, if
any, the Fund's transfer agent and dividend paying agent, if any, and the
Fund's custodian and (iii) registration fees and the costs and expenses of
qualifying the Fund's shares for offer and sale under the Blue Sky laws of any
jurisdiction where such shares may be qualified from time to time; but the
Restricted Expenses shall exclude (A) the fees and expenses of the Fund's
outside counsel (other than registration and filing fees disbursed by such
counsel on behalf of the Fund), (B) the fees and expenses of the Fund's
independent accountants, (C) Directors' fees and the expenses incurred by
Directors and reimbursed by the Fund and (D) fees and expenses paid under a
plan of distribution, if any, adopted pursuant to Rule 12b-1 under the 1940
Act.
7A. Compensation during the Interim Period.
Notwithstanding any other provision of this Agreement, in
order to comply with Rule 15a-4 under the 1940 Act: (i) the compensation
payable to the Adviser with respect to the period from the date hereof until
the Stockholder Approval Date (the "Interim Period") shall be equal to the
amount that would have been payable with respect to the Interim Period to
Nationar as the Fund's prior investment adviser, administrator, transfer agent,
registrar and custodian pursuant to the Amended and Restated Agreement between
the Fund and Nationar dated as of April 1, 1994 filed as an exhibit to the
Fund's registration statement on Form N-1A and (ii) the Adviser shall bear the
fees and other compensation of the Fund's administrator, transfer agent,
registrar and custodian with respect to the Interim Period.
6
<PAGE> 7
8. Blue Sky Limitation on Expenses.
(a) In the event the Expenses (as defined in paragraph 8(b)
below) of the Fund for any fiscal year exceed the lowest applicable annual
expense limitations, if any, established pursuant to the statutes or
regulations of any jurisdictions in which Fund Shares are then qualified for
offer and sale (such excess hereinafter called the "Blue Sky Excess Expense"),
the compensation due to the Adviser under paragraph 7 for the fiscal year in
question shall be reduced by an amount equal to the Blue Sky Excess Expense of
the Fund, and if the Blue Sky Excess Expense of the Fund exceeds the fees of
the Fund payable to the Adviser with respect to the Fund for the fiscal year in
question, the Adviser shall, to the extent required by such statute or
regulations, reimburse the Fund for the amount of such excess. If for any
month the Expenses shall exceed 1/12th of the percentage of average daily net
assets allowable as Expenses, the payment to the Adviser for that month shall
be reduced, and, if necessary, the Adviser shall make a refund payment to the
Fund so that the Expenses will not exceed such percentage. As of the end of
the fiscal year, however, the foregoing computations shall be readjusted so
that the aggregatecompensation payable to the Adviser for the year is equal to
the amount provided for in paragraph 7 hereof, reduced by an amount equal to
the Blue Sky Excess Expense of the Fund. The aggregate of the repayments, if
any, by the Adviser to the Fund for the year shall be the amount necessary to
reimburse the Fund for the amount of such excess.
(b) For purposes of paragraph 8(a) of this Agreement, the term
"Expenses" means the general expenses of the Fund, including without limitation
fees payable to the Adviser, the Fund's administrator, if any, the Fund's
transfer agent, if any, and to the Fund's custodian; but the Expenses shall
exclude any interest, taxes, brokerage commissions and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business.
9. Limitation of Liability. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this Agreement relates, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
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<PAGE> 8
10. Effective Date and Term. This Agreement shall become
effective on the date hereof. This Agreement shall remain in effect for a
period of twelve (12) months from the date of such effectiveness and shall
continue in effect for successive twelve-month periods (or for such shorter
periods as may be specified by the Fund's Board of Directors) subject to
termination as hereinafter provided, if such continuance is approved at least
annually (a) by vote of the Fund's Board of Directors, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by vote of a
majority of the Directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that this Agreement shall not continue and shall
terminate on the 120th day after the date hereof unless, on or prior to such
date, this Agreement is approved by a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund. The annual approvals
provided for herein shall be effective to continue this Agreement from year to
year (or for such shorter period referred to above) if given within a period
beginning not more than ninety (90) days prior to (and including) the
anniversary of the date upon which the most recent previous continuance of this
Agreement became effective, notwithstanding the fact that more than three
hundred sixty-five (365) days may have elapsed since the date on which such
approval was last given. This Agreement may be terminated (i) by the Fund at
any time, without the payment of any penalty, by the Board of Directors of the
Fund or by vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the Fund, on 30 (thirty) days' written notice to the
Adviser, or (ii) after the third anniversary of the date of this Agreement, by
the Adviser at any time, without the payment of any penalty, on 90 (ninety)
days' written notice to the Fund. This Agreement will automatically and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
11. Amendment of Agreement. This Agreement may be amended by
mutual consent, provided that the amendment is approved (a) by vote of a
majority of those Directors of the Fund who are not parties to this Agreement
or "interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such amendment, and
(b), if required by the 1940 Act, by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund.
12. Notices. Notices of any kind to be given to the Adviser
by the Fund shall be in writing and shall be duly given if mailed or delivered
to the Adviser at 111 East Wacker Dr., Chicago, IL 60601, Attention: Executive
Vice President, or at such other address or to such other individual as shall
be specified by the Adviser to the Fund in accordance with this paragraph 12.
Notices of any kind to be given to the Fund by the Adviser shall be in writing
and shall be duly given if mailed or delivered to the Fund at 330 Madison
Avenue, New York, NY 10017, Attention: President, or at such other address or
to such other individual as shall be specified by the Fund to the Adviser in
accordance with this paragraph 12, with copies to each of the Fund's Directors
at their respective addresses set forth in the Fund's Registration Statement
and to the legal counsel to the Fund.
13. Authority. The Directors have authorized the execution
of this Agreement in their capacity as Directors and not individually. The
Adviser agrees that neither the stockholders nor the Directors nor any officer,
employee, representative or agent of the Fund shall be personally liable upon,
nor shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Fund, that the
stockholders, Directors, officers, employees, representatives and agents of the
Fund shall not be personally liable hereunder, and that the Adviser shall look
solely to the property of the Fund for the satisfaction of any claim hereunder.
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<PAGE> 9
14. Controlling Law. This Agreement shall be governed by the
construed in accordance with the laws of the state of New York.
15. Multiple Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed to be an
original, but which together shall constitute one and the same instrument.
16. Captions. The captions of the paragraphs are for
descriptive purposes only and they are not intended to limit or otherwise
affect the content of this Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
------------------------------
David Freer, Jr.
President
SHAY ASSETS MANAGEMENT CO.
By: /s/ EDWARD E. SAMMONS, JR.
--------------------------------
Edward E. Sammons, Jr.
Executive Vice President,
Shay Assets Management, Inc.,
Managing Partner
10
<PAGE> 1
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of May 19, 1995 by and between PNC
BANK, NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and
M.S.B. FUND, INC., a New York corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to retain PNC Bank to provide
custodian services, and PNC Bank wishes to furnish custodian services, either
directly or though an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, In consideration of the premises and mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as
amended.
(b) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) "Authorized Person" means any officer of the Fund and
any other person duly authorized by the Fund's Board of Directors to give Oral
and Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment
thereto as may be received by PNC Bank. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
<PAGE> 2
(d) "Book-Entry System" means Federal Reserve Treasury
book-entry system for United States and federal agency securities, its
successor or successors, and its nominee or nominees and any book-entry system
maintained by an exchange registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "Oral Instructions" mean oral instructions received
by PNC Bank from an Authorized Person or from a person reasonably believed by
PNC Bank to be an Authorized Person.
(g) "PNC Bank" means PNC Bank, National Association or a
subsidiary or affiliate of PNC Bank, National Association.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Securities Laws" means the 1933 Act, the 1934 Act,
the 1940 Act and the CEA.
(j) "Shares" mean the shares of stock of any series or
class of the Fund.
(k) "Property" means:
(i) any and all securities and other investment
items which the Fund may from time to time
deposit, or cause to be deposited, with PNC
Bank or which PNC Bank may from time to time
hold for the Fund;
(ii) all income in respect of any of such
securities or other investment items;
(iii) all proceeds of the sale of any of such
securities or investment items; and
(iv) all proceeds of the sale of securities issued
by the Fund, which are received by PNC Bank
from time to time, from or on behalf of the
Fund.
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<PAGE> 3
(k) "Written Instructions" mean written
instructions signed by two Authorized Persons and received by PNC Bank. The
instructions may be delivered by hand, mail, tested telegram, cable, telex or
facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PNC Bank to
provide custodian services to the Fund, and PNC Bank accepts such appointment
and agrees to furnish such services, subject to the direction and control of
the Board of Directors of the Fund.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where
applicable, will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of
the Fund's Board of Directors, approving the appointment
of PNC Bank or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreements;
(d) a copy of the distribution agreement, if any, with
respect to each class of Shares;
(e) a copy of the Fund's administration agreement if PNC
Bank is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in
respect of the Fund; and
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH LAWS.
In performing its duties hereunder, PNC Bank will comply with
all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PNC Bank hereunder and will act in conformity with
the instructions and directions of the Board of Directors of the Fund which are
timely delivered to PNC Bank. Except as specifically set forth herein, PNC
Bank assumes no responsibility for such compliance by the Fund.
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<PAGE> 4
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank
shall act only upon Oral and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PNC Bank to be an Authorized Person) pursuant to this
Agreement. PNC Bank may assume that any Oral or Written Instructions received
hereunder are not in any way inconsistent with the provisions of organizational
documents of the Fund or of any vote, resolution or proceeding of the Fund's
Board of Directors or of the Fund's shareholders, unless and until PNC Bank
receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PNC Bank Written
Instructions confirming Oral Instructions (except where such Oral Instructions
are given by an affiliate of PNC Bank) so that PNC Bank receives the Written
Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written Instructions
are not received by PNC Bank shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral or Written Instructions reasonably appear to have been received from an
Authorized Person, PNC Bank shall incur no liability to the Fund in acting upon
such Oral or Written Instructions provided that PNC Bank's actions comply with
the other provisions of this Agreement.
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<PAGE> 5
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PNC Bank is in doubt as to
any action it should or should not take, PNC Bank may request directions or
advice, including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as
to any question of law pertaining to any action it should or should not take,
PNC Bank may request advice at its own cost from such counsel of its own
choosing (who may be counsel for the Fund, the Fund's investment adviser or PNC
Bank, at the option of PNC Bank).
(c) Conflicting Advice. In the event of a conflict
between directions, advice or Oral or Written Instructions PNC Bank receives
from the Fund, and the advice it receives from counsel, PNC Bank shall be
entitled to rely upon and follow the advice of counsel. In the event PNC Bank
so relies on the advice of counsel, PNC Bank remains liable for any action or
omission on the part of PNC Bank which constitutes willful misfeasance, bad
faith, gross negligence or reckless disregard by PNC Bank of any duties,
obligations or responsibilities set forth in this Agreement.
(d) Protection of PNC Bank. PNC Bank shall be protected
in any action it takes or does not take in reliance upon directions, advice or
Oral or Written Instructions it receives from the Fund or from counsel and
which PNC Bank believes, in good faith, to be consistent with those directions,
advice or Oral or Written Instructions. Nothing in this section shall be
construed so as to impose an obligation upon PNC Bank (i) to seek such
directions, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions unless,
under the terms of other provisions of this Agreement, the same is a condition
of PNC Bank's properly taking or not taking such action. Nothing in this
subsection shall excuse PNC Bank when an action or omission on the part of PNC
Bank constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PNC Bank of any duties, obligations or responsibilities set forth
in this Agreement.
5
<PAGE> 6
7. RECORDS. The books and records pertaining to the
Fund, which relate to the custody services provided hereby and are in the
possession or under the control of PNC Bank, shall be the property of the Fund.
Such books and records shall be prepared and maintained as required by the 1940
Act and other applicable securities laws, rules and regulations. The Fund and
Authorized Persons shall have access to such books and records at all times
during PNC Bank's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PNC Bank to the
Fund or to an authorized representative of the Fund, at the Fund's expense.
8. CONFIDENTIALITY. PNC Bank agrees on its own behalf
and that of its employees to keep confidential all records of the Fund and
information relating to the Fund and its shareholders (past, present and
future), unless the release of such records or information is otherwise
consented to, in writing, by the Fund. The Fund agrees that such consent shall
not be unreasonably withheld and may not be withheld where PNC Bank may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall
cooperate with the Fund's independent public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
ensure that the necessary information is made available to such accountants for
the expression of their opinion, as required by the Fund.
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<PAGE> 7
10. DISASTER RECOVERY. PNC Bank shall enter into and
shall maintain in effect with appropriate parties one or more agreements making
reasonable provisions for emergency use of electronic data processing equipment
to the extent appropriate equipment is available. In the event of equipment
failures, PNC Bank shall, at no additional expense to the Fund, take reasonable
steps to minimize service interruptions. PNC Bank shall have no liability with
respect to the loss of data or service interruptions caused by equipment
failure provided such loss or interruption is not caused by PNC Bank's own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties or obligations under, or other material noncompliance with, this
Agreement.
11. COMPENSATION. As compensation for custody services
rendered by PNC Bank during the term of this Agreement, the Fund will pay to
PNC Bank a fee or fees as may be agreed to in writing from time to time by the
Fund and PNC Bank.
12. INDEMNIFICATION. The Fund agrees to indemnify and
hold harmless PNC Bank and its affiliates from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the Securities Laws and any state and foreign securities and blue
sky laws, and amendments thereto, and expenses, including (without limitation)
reasonable attorneys' fees and disbursements (collectively, "Losses") arising
directly or indirectly from any action or omission to act which PNC Bank takes
(i) at the request or on the direction of or in reliance on the advice of the
Fund or (ii) upon Oral or Written Instructions. Neither PNC Bank, nor any of
its affiliates, shall be indemnified against any liability (or any expenses
incident to such liability) arising out of PNC Bank's or its affiliates' own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties under this Agreement.
7
<PAGE> 8
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on
behalf of the Fund except as specifically set forth herein or as may be
specifically agreed to by PNC Bank in writing. PNC Bank shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PNC Bank shall be
liable for any damages arising out of PNC Bank's failure to perform its duties
under this agreement to the extent such damages arise out of PNC Bank's willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
under this Agreement.
(b) Without limiting the generality of the foregoing or
of any other provision of this Agreement, (i) PNC Bank shall not be under any
duty or obligation to inquire into and shall not be liable for (A) the validity
or invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, and which PNC Bank reasonably believes to be genuine; or (B)
subject to section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PNC Bank's control, including acts of civil or military
authority, national emergencies, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, PNC Bank shall have no liability to the Fund for any consequential,
special or indirect losses or damages which the Fund may incur or suffer by or
as a consequence of PNC Bank's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by PNC Bank.
8
<PAGE> 9
14. DESCRIPTION OF SERVICES.
(a) Delivery of the Property. The Fund will deliver or
arrange for delivery to PNC Bank, all the Property owned by the Fund, including
cash received as a result of the distribution of Shares, during the term of
this Agreement. PNC Bank will not be responsible for such property until
actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting
upon Written Instructions, shall open and maintain separate accounts in
the Fund's name using all cash received from or for the account of the Fund,
subject to the terms of this Agreement. In addition, upon Written
Instructions, PNC Bank shall open separate custodial accounts for each separate
series of the Fund (collectively, the "Accounts") and shall hold in the
Accounts all cash received from or for the Accounts of the Fund specifically
designated to each separate series.
PNC Bank shall make cash payments from or for the Accounts of
the Fund only for:
(i) purchases of securities in the name of the
Fund or PNC Bank or PNC Bank's nominee as
provided in sub-section (j) and for which
PNC Bank has received a copy of the broker's
or dealer's confirmation or payee's invoice,
as appropriate;
(ii) purchase or redemption of Shares of the Fund
delivered to PNC Bank;
(iii) payment of, subject to Written Instructions,
interest, taxes, administration, accounting,
distribution, advisory, management fees or
similar expenses which are to be borne by the
Fund;
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as
agent for the shareholders, an amount equal
to the amount of dividends and distributions
stated in the Written Instructions to be
distributed in cash by the transfer agent to
shareholders, or, in lieu of paying the
Fund's transfer agent, PNC Bank may arrange
for the direct payment of cash dividends and
distributions to shareholders in accordance
with procedures mutually agreed upon from
time to time by and among the Fund, PNC Bank
and the Fund's transfer agent;
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<PAGE> 10
(v) payments, upon receipt of Written
Instructions, in connection with the
conversion, exchange or surrender of
securities owned or subscribed to by the Fund
and held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received
with respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-section (c) of this Section;
and
(viii) payments, upon Written Instructions, made for
other proper Fund purposes.
PNC Bank is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the Accounts.
(c) Receipt of Securities; Subcustodians.
(i) PNC Bank shall hold all securities received
by it for the Accounts in a separate account
that physically segregates such securities
from those of any other persons, firms or
corporations, except for securities held in a
Book-Entry System. All such securities shall
be held or disposed of only upon Written
Instructions of the Fund pursuant to the
terms of this Agreement. PNC Bank shall have
no power or authority to assign, hypothecate,
pledge or otherwise dispose of any such
securities or investment, except upon the
express terms of this Agreement and upon
Written Instructions, accompanied by a
certified resolution of the Fund's Board of
Directors, authorizing the transaction. In
no case may any member of the Fund's Board of
Directors, or any officer, employee or agent
of the Fund withdraw any securities.
At PNC Bank's own expense and for its own
convenience, PNC Bank may enter into
sub-custodian agreements with other United
States banks or trust companies to perform
duties described in this sub-section (c).
Such bank or trust company shall have an
aggregate capital, surplus and undivided
profits, according to its last published
report, of at least one million dollars
($1,000,000), if it is a subsidiary or
affiliate of PNC Bank, or at least twenty
million dollars ($20,000,000) if such bank or
trust company is not a subsidiary or
affiliate of PNC Bank. In addition, such
bank or trust company must be qualified to
act as a custodian and agree to comply with
the relevant provisions of the 1940 Act and
other applicable rules and regulations. Any
such arrangement will not be entered into
without prior written notice to the Fund.
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<PAGE> 11
PNC Bank shall remain responsible for the
performance of all of its duties as described
in this Agreement and shall hold the Fund
harmless from its own acts or omissions,
under the standards of care provided for
herein, or the acts and omissions of any
sub-custodian chosen by PNC Bank under the
terms of this sub-section (c).
(d) Transactions Requiring Instructions. Upon receipt of
Oral or Written Instructions and not otherwise, PNC Bank, directly or through
the use of the Book-Entry System, shall:
(i) deliver any securities held for the Fund
against the receipt of payment for the sale
of such securities;
(ii) execute and deliver to such persons as may be
designated in such Oral or Written
Instructions, proxies, consents,
authorizations, and any other instruments
whereby the authority of the Fund as owner of
any securities may be exercised;
(iii) deliver any securities to the issuer thereof,
or its agent, when such securities are
called, redeemed, retired or otherwise become
payable; provided that, in any such case, the
cash or other consideration is to be
delivered to PNC Bank;
(iv) deliver any securities held for the Fund
against receipt of other securities or cash
issued or paid in connection with the
liquidation, reorganization, refinancing,
tender offer, merger, consolidation or
recapitalization of any corporation, or the
exercise of any conversion privilege;
(v) deliver any securities held for the Fund to
any protective committee, reorganization
committee or other person in connection with
the reorganization, refinancing, merger,
consolidation, recapitalization or sale of
assets of any corporation, and receive and
hold under the terms of this Agreement such
certificates of deposit, interim receipts or
other instruments or documents as may be
issued to it to evidence such delivery;
(vi) make such transfer or exchanges of the assets
of the Fund and take such other steps as
shall be stated in said Oral or Written
Instructions to be for the purpose of
effectuating a duly authorized plan of
liquidation, reorganization, merger,
consolidation or recapitalization of the
Fund;
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<PAGE> 12
(vii) release securities belonging to the Fund to
any bank or trust company for the purpose of
a pledge or hypothecation to secure any loan
incurred by the Fund; provided, however, that
securities shall be released only upon
payment to PNC Bank of the monies borrowed,
except that in cases where additional
collateral is required to secure a borrowing
already made subject to proper prior
authorization, further securities may be
released for that purpose; and repay such
loan upon redelivery to it of the securities
pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the
loan;
(viii) release and deliver securities owned by the
Fund in connection with any repurchase
agreement entered into on behalf of the Fund,
but only on receipt of payment therefor; and
pay out moneys of the Fund in connection with
such repurchase agreements, but only upon the
delivery of the securities;
(ix) release and deliver or exchange securities
owned by the Fund in connection with any
conversion of such securities, pursuant to
their terms, into other securities;
(x) release and deliver securities owned by the
fund for the purpose of redeeming in kind
shares of the Fund upon delivery thereof to
PNC Bank; and
(xi) release and deliver or exchange securities
owned by the Fund for other corporate
purposes.
PNC Bank must also receive a certified
resolution describing the nature of the
corporate purpose and the name and address of
the person(s) to whom delivery shall be made
when such action is pursuant to
sub-paragraph (xi).
(e) Use of Book-Entry System. The Fund shall deliver to
PNC Bank certified resolutions of the Fund's Board of Directors approving,
authorizing and instructing PNC Bank on a continuous basis, to deposit in the
Book-Entry System all securities belonging to the Fund eligible for deposit
therein and to utilize the Book-Entry System to the extent possible in
connection with settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. PNC Bank shall
continue to perform such duties until it receives Written or Oral Instructions
authorizing contrary actions.
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<PAGE> 13
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of the Fund which
are maintained in the Book-Entry System, the
records of PNC Bank shall identify by
Book-Entry or otherwise those securities
belonging to the Fund. PNC Bank shall
furnish to the Fund a detailed statement of
the Property held for the Fund under this
Agreement at least monthly and from time to
time and upon written request.
(ii) Securities and any cash of the Fund deposited
in the Book-Entry System will at all times
be segregated from any assets and cash
controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be
commingled with other assets held in such
capacities. PNC Bank and its sub-custodian,
if any, will pay out money only upon receipt
of securities and will deliver securities
only upon the receipt of money.
(iii) All books and records maintained by PNC Bank
which relate to the Fund's participation in
the Book-Entry System will at all times
during PNC Bank's regular business hours be
open to the inspection of Authorized Persons,
and PNC Bank will furnish to the Fund all
information in respect of the services
rendered as it may require.
PNC Bank will also provide the Fund with such reports on its
own system of internal control as the Fund may reasonably request from time to
time.
(f) Registration of Securities. All Securities held for
theFund which are issued or issuable only in bearer form, except such
securities held in the Book-Entry System, shall be held by PNC Bank in bearer
form; all other securities held for the Fund may be registered in the name of
the Fund, PNC Bank, the Book-Entry System, a sub-custodian, or any duly
appointed nominees of the Fund, PNC Bank, Book-Entry System or sub-custodian.
The Fund reserves the right to instruct PNC Bank as to the method of
registration and safekeeping of the securities of the Fund. The Fund agrees to
furnish to PNC Bank appropriate instruments to enable PNC Bank to hold or
deliver in proper form for transfer, or to register in the name of its nominee
or in the name of the Book-Entry System, any securities which it may hold for
the Accounts and which may from time to time be registered in the name of the
Fund.
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<PAGE> 14
(g) Voting and Other Action. Neither PNC Bank nor its
nominee shall vote any of the securities held pursuant to this Agreement by or
for the account of the Fund, except in accordance with Written Instructions.
PNC Bank, directly or through the use of the Book-Entry System, shall execute
in blank and promptly deliver all notices, proxies and proxy soliciting
materials to the registered holder of such securities. If the registered
holder is not the Fund, then Written or Oral Instructions must designate the
person who owns such securities.
(h) Transactions Not Requiring Instructions. In the
absence of contrary Written Instructions, PNC Bank is authorized to and shall
take the following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account
of the Fund, all income, dividends,
distributions, coupons, option
premiums, other payments and similar
items, included or to be included in
the Property, and, in addition,
promptly advise the Fund of such
receipt and credit such income, as
collected, to the Fund's custodian
account;
(B) endorse and deposit for collection,
in the name of the Fund, checks,
drafts, or other orders for the
payment of money;
(C) receive and hold for the account of
the Fund all securities received as
a distribution on the Fund's
securities as a result of a stock
dividend, share split-up or
reorganization, recapitalization,
readjustment or other rearrangement
or distribution of rights or similar
securities issued with respect to
any securities belonging to the Fund
and held by PNC Bank hereunder;
14
<PAGE> 15
(D) present for payment and collect the
amount payable upon all securities
which may mature or be called,
redeemed, or retired, or otherwise
become payable on the date such
securities become payable; and
(E) take any action which may be
necessary and proper in connection
with the collection and receipt of
such income and other payments and
the endorsement for collection of
checks, drafts, and other negotiable
instruments.
(ii) Miscellaneous Transactions.
(A) deliver or cause to be delivered
Property against payment or other
consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or
dealer selling for the
account of the Fund in
accordance with street
delivery custom;
(2) for the exchange of interim
receipts or temporary
securities for definitive
securities; and
(3) for transfer of securities into
the name of the Fund or PNC
Bank or nominee of either, or
for exchange of securities
for a different number of
bonds, certificates, or other
evidence, representing the
same aggregate face amount or
number of units bearing the
same interest rate, maturity
date and call provisions, if
any; provided that, in any
such case, the new securities
are to be delivered to PNC
Bank.
(B) Unless and until PNC Bank receives
Oral or Written Instructions to the
contrary, PNC Bank shall:
(1) pay all income items held by it
which call for payment upon
presentation and hold the
cash received by it upon such
payment for the account of
the Fund;
(2) collect interest and cash
dividends received, with
notice to the Fund;
15
<PAGE> 16
(3) hold for the account of the
Fund all stock dividends,
rights and similar securities
issued with respect to any
securities held by PNC Bank;
and
(4) execute as agent on behalf of
the Fund all necessary
ownership certificates
required by the Internal
Revenue Code or the Income
Tax Regulations of the United
States Treasury Department or
under the laws of any state
now or hereafter in effect,
inserting the Fund's name on
such certificate as the owner
of the securities covered
thereby, to the extent it may
lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or
Oral Instructions establish and maintain a
segregated accounts on its records for and on
behalf of the Fund. Such accounts may be
used to transfer cash and securities,
including securities in the Book-Entry
System:
(A) for the purposes of compliance by
the Fund with the procedures
required by a securities or option
exchange, providing such procedures
comply with the 1940 Act and any
releases of the SEC relating to the
maintenance of segregated accounts
by registered investment companies;
and
(B) Upon receipt of Written
Instructions, for other proper
corporate purposes.
(ii) PNC Bank shall arrange for the establishment
of IRA custodian accounts for such
shareholders holding Shares through IRA
accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code of
1986, as amended (including regulations
promulgated thereunder), and with such other
procedures as are mutually agreed upon from
time to time by and among the Fund, PNC Bank
and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle
purchased securities upon receipt of Oral or Written Instructions from the Fund
or its investment advisers that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if
applicable;
(ii) the number of shares or the principal amount
purchased and accrued interest, if any;
16
<PAGE> 17
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
and
(vi) the name of the person from whom or the
broker through whom the purchase was made.
PNC Bank shall upon receipt of securities
purchased by or for the Fund pay out of the
moneys held for the account of the Fund the
total amount payable to the person from whom
or the broker through whom the purchase was
made, provided that the same conforms to the
total amount payable as set forth in such
Oral or Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold
securities upon receipt of Oral or Written
Instructions from the Fund that specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if
applicable;
(ii) the number of shares or principal amount
sold, and accrued interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon
such sale;
(vi) the name of the broker through whom or the
person to whom the sale was made; and
(vii) the location to which the security must be
delivered and delivery deadline, if any.
PNC Bank shall deliver the securities upon receipt of the
total amount payable to the Fund upon such sale, provided that the total amount
payable is the same as was set forth in the Oral or Written Instructions.
Subject to the foregoing, PNC Bank may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
17
<PAGE> 18
(l) Reports; Proxy Materials.
(i) PNC Bank shall furnish to the Fund the
following reports:
(A) such periodic and special reports as
the Fund may reasonably request;
(B) a monthly statement summarizing all
transactions and entries for the
Fund, listing securities belonging
to the Fund with the adjusted
average cost of each issue and the
market value at the end of such
month and stating the cash account
of the Fund including disbursements;
(C) the reports required to be furnished
to the Fund pursuant to Rule 17f-4;
and
(D) such other information as may be
agreed upon from time to time
between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund
any proxy statement, proxy material, notice
of a call or conversion or similar
communication received by it as custodian of
the Property. PNC Bank shall be under no
other obligation to inform the Fund as to
such actions or events.
(iii) PNC Bank shall furnish to the Fund's
Investment Adviser and Administrator and
other persons providing services to the Fund
such information as they may reasonably
request in connection with the performance of
their respective duties and obligations to
the Fund.
(m) Collections. All collections of monies or
other property in respect, or which are to become part, of the Property (but
not the safekeeping thereof upon receipt by PNC Bank) shall be at the sole risk
of the Fund. If payment is not received by PNC Bank within a reasonable time
after proper demands have been made, PNC Bank shall notify the Fund in writing,
including copies of all demand letters, any written responses, memoranda of all
oral responses and shall await instructions from the Fund. PNC Bank shall not
be obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. PNC Bank shall also notify the Fund as soon
as reasonably practicable whenever income due on securities is not collected in
due course and shall provide the Fund with periodic status reports of such
income collected after a reasonable time.
18
<PAGE> 19
15. DURATION AND TERMINATION. This Agreement shall
continue until terminated by the Fund or by PNC Bank on sixty (60) days' prior
written notice to the other party. In the event this Agreement is terminated
(pending appointment of a successor to PNC Bank or vote of the shareholders of
the Fund to dissolve or to function without a custodian of its cash, securities
or other property), PNC Bank shall not deliver cash, securities or other
property of the Fund to the Fund. It may deliver them to a bank or trust
company of PNC Bank's choice, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
twenty million dollars ($20,000,000), as a custodian for the Fund to be held
under terms similar to those of this Agreement. PNC Bank shall not be required
to make any such delivery or payment until full payment shall have been made to
PNC Bank of all of its fees, compensation, costs and expenses. PNC Bank shall
have a security interest in and shall have a right of setoff against the
Property as security for the payment of such fees, compensation, costs and
expenses.
16. NOTICES. All notices and other communications,
including Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered. Notice shall be addressed (a) if to PNC Bank at Airport Business
Center, International Court 2, 200 Stevens Drive, Lester, Pennsylvania 19113,
marked for the attention of the Custodian Services Department (or its
successor); (b) if to the Fund, c/o Shay Asset Management Co., 111 East Wacker
Drive, Chicago, Illinois 60601, with a copy to Hughes Hubbard & Reed, One
Battery Park Plaza, New York, N.Y., 10004, Attn: James H. Bluck, Esq. or (c)
at such other address as shall have been given by like notice to the sender of
any such notice or other communication by the other party. Any notice given by
PNC Bank pursuant to Section 15 hereof also shall be given to each member of
the Board of Directors of the Fund at the address set forth in the
RegistrationStatement of the Fund as then in effect and to the legal counsel to
the Fund.
19
<PAGE> 20
17. AMENDMENTS. This Agreement, or any term hereof, may
be changed or waived only by a written amendment, signed by the party against
whom enforcement of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PNC Bank may assign its
rights and delegate its duties hereunder to any wholly-owned direct or
indirect subsidiary of PNC Bank, National Association or PNC Bank Corp.,
provided that (i) PNC Bank gives the Fund thirty (30) days' prior written
notice; (ii) the delegate (or assignee) agrees with PNC Bank and the Fund to
comply with all relevant provisions of the 1940 Act; and (iii) PNC Bank and
such delegate (or assignee) promptly provide such information as the Fund may
request, and respond to such questions as the Fund may ask, relative to the
delegation (or assignment), including (without limitation) the capabilities of
the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
20
<PAGE> 21
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be
a contract made in Pennsylvania and governed by Pennsylvania law, without
regard to principles of conflicts of law.
(d) Partial Invalidity. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any
party to this Agreement shall constitute the valid and binding execution hereof
by such party.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
--------------------------------
John Foster
Vice President
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
--------------------------------
David Freer, Jr.
President
22
<PAGE> 23
AUTHORIZED PERSONS APPENDIX
<TABLE>
<CAPTION>
NAME (TYPE) SIGNATURE
<S> <C>
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
</TABLE>
23
<PAGE> 1
May 19, 1995
M.S.B. FUND, INC.
Re: Custodian Services Fees
Dear Sir/Madam:
This letter constitutes our agreement with respect to compensation to
be paid to PNC Bank, National Association ("PNC Bank") under the terms of a
Custodian Services Agreement dated May 19, 1995 between you (the "Fund") and
PNC Bank (the "Agreement"). Pursuant to Paragraph 11 of that Agreement, and in
consideration of the services to be provided to you, you will pay PNC Bank the
following:
1. An annual custody fee to be calculated daily and paid monthly
based upon the following: .02% of the first $100 million of average gross
assets; .015% of the next $400 million of average gross assets; .012% of the
next $500 million of average gross assets; and .01% of average gross assets
over $1 billion; exclusive of out-of-pocket expenses and transaction charges.
2. A transaction charge of $29.00 for each purchase or sale of a
physical security or delivery of a physical security upon its maturity date or
delivery of a physical security for reissuance; $10.00 for each purchase, sale,
free receive or free deliver, or maturity or other book-entry transaction with
respect to a depository eligible security, Federal book-entry security, DTC
eligible security, other book-entry security (other than a GNMA security) or a
direct commercial paper issue; $18.00 for each purchase, sale, free receive or
free delivery, or maturity or other book-entry transaction with respect to a
GNMA security; $30.00 for each purchase, sale, exercise or expiration of an
option contract position (round trip); $50.00 for each purchase, sale, exercise
or expiration of a futures contract position (round trip); $7.50 for each
repurchase trade collateral tranche received from PNC Bank (round trip); and
$15.00 for each repurchase trade collateral tranche received from an
institution other than PNC Bank (round trip).
3. PNC Bank's out-of-pocket expenses including, but not limited
to, overnight express charges, Federal Reserve wire fees and foreign
sub-custody services.
4. With respect to the daily net overdrawn cash balances, a
monthly charge shall be assessed based on the average federal funds rate for
that month.
<PAGE> 2
5. The minimum monthly fee shall be $500, exclusive of
out-of-pocket expenses and transaction charges.
If during the three years following the commencement of the Agreement,
PNC Bank is removed from the Agreement for any reason other than cause related
to a significant decline in service levels, the Fund shall pay any costs of
time and material associated with deconversion, subject to a ceiling of
$15,000, and PNC Bank shall recoup 50% of the fees waived during the first two
years.
The fee for the period from the day of the year this fee letter is
entered into until the end of that year shall be prorated according to the
proportion which such period bears to the full annual period.
If the foregoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
-------------------------------
John Foster
Vice President
Accepted:
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
-------------------------------
David Freer, Jr.
President
<PAGE> 1
May 19, 1995
M.S.B. FUND, INC.
Re: Administration and Accounting, Transfer Agency
and Custodian Services Fee Waivers
Dear Sir/Madam:
PNC Bank, National Association ("PNC Bank") agrees to waive certain
fees under a Custodian Services Agreement dated May 19, 1995 between PNC Bank
and you (the "Fund") and PFPC Inc. ("PFPC") agrees to waive certain fees under
an Administration and Accounting Services Agreement and under a Transfer Agency
Agreement, each dated May 19, 1995, between PFPC and the Fund (collectively the
"Agreements") as listed below.
For the first twelve months following the commencement of each
Agreement, PNC Bank and PFPC shall limit the combined annual Administration and
Accounting, Custody, and Transfer Agency fees to .25% of average net assets;
exclusive of transaction charges, miscellaneous fees and out-of-pocket
expenses. For the subsequent twelve month period, PNC Bank and PFPC shall
waive 25% of the monthly minimum Administration and Accounting, Custody, and
Transfer Agency fees.
If the foregoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
---------------------------------
John Foster
Vice President
PFPC INC.
By: /s/ STEPHEN M. WYNNE
--------------------------------
Stephen M. Wynne
Executive Vice President
Acknowledged:
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
----------------------------
David Freer, Jr.
President
<PAGE> 1
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of May 19, 1995 by and between
M.S.B. FUND, INC., a New York corporation (the "Fund"), and PFPC INC., a
Delaware corporation ("PFPC"), which is an indirect wholly owned subsidiary of
PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to retain PFPC as its administrator
to provide administration and accounting services, and PFPC wishes to furnish
such services.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as
amended.
(b) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) "Authorized Person" means any officer of the Fund and
any other person duly authorized by the Fund's Board of Directors to give Oral
and Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment
thereto as may be received by PFPC. An Authorized Person's scope of authority
may be limited by the Fund by setting forth such limitation in the Authorized
Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received
by PFPC from an Authorized Person or from a person reasonably believed by PFPC
to be an Authorized Person.
<PAGE> 2
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act,
the 1940 Act and the CEA.
(h) "Shares" mean the shares of stock of any series or
class of the Fund.
(i) "Written Instructions" mean written instructions
signed by an Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile sending
device.
2. APPOINTMENT.
(a) The Fund hereby appoints PFPC to provide
administration and accounting services in accordance with the terms set forth
in this Agreement. PFPC accepts such appointment and agrees that, subject to
the direction and control of the Board of Directors of the Fund, it shall, at
its expense, provide administrative services, including without limitation the
services described in this Section and in Sections 9, 10, 14 and 15 hereof,
including such other administrative services as are reasonably requested by the
Fund. PFPC shall make periodic reports to the Fund's Board of Directors
concerning the performance of its obligations hereunder. PFPC shall provide on
a timely basis to the Fund's Investment Adviser, Transfer Agent and Custodian
and other persons providing services to the Fund with such information as such
persons may reasonably request in connection with the performance of their
respective duties and obligations with respect to the Fund. PFPC will report
to the Board of Directors of the Fund at each meeting thereof and will keep the
Board of Directors informed of material developments affecting the Fund.
(b) PFPC will furnish the Fund upon request a Secretary,
Treasurer, Assistant Secretary and/or Assistant Treasurer. PFPC shall
authorize and permit any of its directors, officers and employees who may be
elected as directors or officers of the Fund to serve, without compensation
from the Fund, in the capacities in which they are elected.
2
<PAGE> 3
3. DELIVERY OF DOCUMENTS. The Fund has provided or,
where applicable, will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions
of the Fund's Board of Directors, approving the appointment of PFPC or its
affiliates to provide services to the Fund and approving this Agreement;
(b) a copy of Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or
agreements;
(d) a copy of the distribution agreement, if any, with
respect to each class of Shares representing an interest in the Fund;
(e) a copy of any additional administration agreement
with respect to the Fund;
(f) a copy of any shareholder servicing agreement made in
respect of the Fund; and
(g) copies (certified or authenticated, where applicable)
of any and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
In performing its duties hereunder, PFPC will comply with all
applicable requirements of the Securities Laws, and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder and will act in conformity with the
instructions and directions of the Board of Directors of the Fund which are
timely delivered to PFPC. Except as specifically set forth herein, PFPC
assumes no responsibility for such compliance by the Fund.
3
<PAGE> 4
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC
shall act only upon Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of organizational
documents or this Agreement or of any vote, resolution or proceeding of the
Fund's Board of Directors or of the Fund's shareholders, unless and until PFPC
receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written
Instructions confirming Oral Instructions (except where such Oral Instructions
are given by an affiliate of PFPC) so that PFPC receives the Written
Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written Instructions
are not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral or Written Instructions reasonably appear to have been received from an
Authorized Person, PFPC shall incur no liability to the Fund in acting upon
such Oral or Written Instructions provided that PFPC's actions comply with the
other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any
action it should or should not take, PFPC may request directions or advice,
including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to
any question of law pertaining to any action it should or should not take, PFPC
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's investment adviser or PFPC, at the
option of PFPC).
(c) Conflicting Advice. In the event of a conflict
between directions, advice or Oral or Written Instructions
PFPC receives from the Fund and the advice PFPC receives from counsel, PFPC may
rely upon and follow the advice of counsel. In the event PFPC so relies on the
advice of counsel, PFPC remains liable for any action or omission on the part
of PFPC which constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC of any duties, obligations or responsibilities set
forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any
action it takes or does not take in reliance upon directions, advice or Oral or
Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice and
Oral or Written Instructions. Nothing in this section shall be construed so as
to impose an obligation upon PFPC (i) to seek such directions, advice or Oral
or Written Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of PFPC's properly taking
or not taking such action. Nothing in this subsection shall excuse PFPC when
an action or omission on the part of PFPC constitutes willful misfeasance, bad
faith, gross negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement.
4
<PAGE> 5
7. RECORDS.
(a) The books and records pertaining to the Fund which
are in the possession or under the control of PFPC shall be the property of the
Fund. The Fund and Authorized Persons shall have access to such books and
records at all times during PFPC's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
PFPC to the Fund or to an Authorized Person, at the Fund's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to the
Fund's books of account;
(ii) records of the Fund's securities
transactions;
(iii) all other books and records as the Fund is
required to maintain pursuant to Rule 31a-1
or any other rules of the SEC under the 1940
Act in connection with PFPC's services
provided hereunder; and
(iv) all other books and records of the Fund
relating to its operations prior to the date
of this Agreement, to the extent such books
and records are delivered to PFPC.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and
that of its employees to keep confidential all records of the Fund and
information relating to the Fund and its shareholders (past, present and
future), unless the release of such records or information is otherwise
consented to in writing by the Fund. The Fund agrees that such consent shall
not be unreasonably withheld and may not be withheld where PFPC may be exposed
to civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
5
<PAGE> 6
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison
with the Fund's independent public accountants and shall provide account
analyses, fiscal year summaries, and other audit-related schedules with
respect to the Fund. PFPC shall take all reasonable action in the performance
of its duties under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall
maintain ineffect with appropriate parties one or more agreements making
reasonable provisions for emergency use of electronic data processing equipment
to the extent appropriate equipment is available. In the event of equipment
failures, PFPC shall, at no additional expense to the Fund, take reasonable
steps to minimize service interruptions. PFPC shall have no liability with
respect to the loss of data or service interruptions caused by equipment
failure, provided such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties or
obligations under, or other material noncompliance with, this Agreement.
11. COMPENSATION. As compensation for services rendered
by PFPC during the term of this Agreement, the Fund will pay to PFPC a fee or
fees as may be agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund agrees to indemnify and
hold harmless PFPC and its affiliates from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the Securities Laws and any state or foreign securities and blue
sky laws, and amendments thereto), and expenses, including (without limitation)
reasonable attorneys' fees and disbursements (collectively, "Losses") arising
directly or indirectly from any action or omission to act which PFPC takes (i)
at the request or on the direction of or in reliance on the advice of the Fund
or (ii) upon Oral or Written Instructions. Neither PFPC, nor any of its
affiliates, shall be indemnified against any liability (or any expenses
incident to such liability) arising out of PFPC's or its affiliates' own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement.
6
<PAGE> 7
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on
behalf of the Fund except as specifically set forth herein or as may be
specifically agreed to by PFPC in writing. PFPC shall be obligated to exercise
care and diligence in the performance of its duties hereunder, to act in good
faith and to use its best efforts, within reasonable limits, in performing
services provided for under this Agreement. PFPC shall be liable for any
damages arising out of PFPC's failure to perform its duties under this
Agreement to the extent such damages arise out of PFPC's willful misfeasance,
bad faith, gross negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or
of any other provision of this Agreement, (i) PFPC shall not be liable for
losses beyond its control, provided that PFPC has acted in accordance with the
standard of care set forth above; and (ii) PFPC shall not be liable for (A) the
validity or invalidity or authority or lack thereof of any Oral or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to be
genuine; or (B) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PFPC's control, including acts of
civil or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
7
<PAGE> 8
(c) Notwithstanding anything in this Agreement to the
contrary, neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur
or suffer by or as a consequence of PFPC's or any affiliate's performance of
the services provided hereunder, whether or not the likelihood of such losses
or damages was known by PFPC or its affiliates.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
Unless PFPC receives Written Instructions to the contrary,
PFPC is authorized to take, and shall take, the following actions without Oral
or Written Instructions:
(i) Maintain the Fund's accounting records;
(ii) Record and journalize investment, capital
share and income and expense activities;
(iii) Verify investment buy/sell trade tickets when
received from the investment adviser for the
Fund (the "Adviser") and transmit trades to
the Fund's custodian (the "Custodian") for
proper settlement;
(iv) Maintain individual ledgers for investment
securities;
(v) Maintain historical tax lots for each
security;
(vi) Reconcile cash and investment balances of the
Fund with the Custodian, and provide the
Adviser with the beginning cash balance
available for investment purposes;
(vii) Update the cash availability throughout the
day as required by the Adviser;
(viii) Post to and prepare the Statement of Assets
and Liabilities and the Statement of
Operations;
(ix) Calculate various contractual expenses (e.g.,
advisory and custody fees);
(x) Monitor the expense accruals and notify an
officer of the Fund of any proposed
adjustments;
8
<PAGE> 9
(xi) Control all disbursements and authorize such
disbursements upon Written Instructions;
(xii) Calculate capital gains and losses and
foreign exchange gains and losses;
(xiii) Determine net income;
(xiv) Obtain security market quotes from
independent pricing services approved by the
Adviser, or if such quotes are unavailable,
then obtain such prices from the Adviser, and
in either case calculate the market value of
the Fund's investments;
(xv) Transmit or mail a copy of the daily
portfolio valuation to the Adviser;
(xvi) Compute net asset value with the frequency
prescribed in the Fund's then-current
Prospectus;
(xvii) Calculate dividends and capital gains
distributions, if any, as required by the
Fund and recommend the required amount of
distributions from ordinary income and
capital gains to avoid Federal income tax and
Federal excise tax;
(xviii) Prepare such quarterly, annual and
semi-annual financial statements as may be
required under the 1940 Act or as may
otherwise be requested by the Fund;
(xix) Prepare and provide to the Fund and the
Adviser daily (A) a current security position
report, (B) a summary report of transactions
and pending maturities (including the
principal, cost and accrued interest on each
portfolio security in maturity date order)
and (C) a current cash position and cash
projection report;
(xx) As appropriate, compute yields, total return,
expense ratios, portfolio turnover rate, and,
if required, portfolio average
dollar-weighted maturity and such other
measures of performance and statistics as may
be requested by the Fund; and
(xxi) Prepare a monthly financial statement, which
will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
9
<PAGE> 10
15. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services with
respect to the Fund:
(i) Prepare quarterly broker security
transactions summaries;
(ii) Prepare monthly security transaction
listings;
(iii) Supply various normal and customary Fund
statistical data as requested on an ongoing
basis;
(iv) Prepare for execution and file the Fund's
Federal and state tax returns and other
required tax filings and tax reports,
including without limitation reports with
respect to the payment of dividends and
capital gains distributions to stockholders
of the Fund;
(v) Prepare and file the Fund's Semi-Annual
Reports with the SEC on Form N-SAR;
(vi) Prepare and file with the SEC the Fund's
annual, semi-annual, and quarterly
stockholder reports;
(vii) Assist in the preparation of registration
statements and other filings relating to the
registration of Shares;
(viii) Monitor the Fund's status as a regulated
investment company under Sub-chapter M of the
Internal Revenue Code of 1986, as amended;
(ix) Coordinate contractual relationships and
communications between the Fund and its
contractual service providers;
(x) Monitor the Fund's compliance with the
amounts and conditions of each state
securities qualification;
(xi) Upon the approval of the Fund, assist any
regulatory body in any requested review of
the Fund's books and records maintained by
PFPC;
(xii) With the approval of the Fund, provide
information typically supplied in the
investment company industry to companies that
publish, track or report the price,
performance or other information with respect
to investment companies;
10
<PAGE> 11
(xiii) Prepare and provide to the Board of Directors
of the Fund such reports and other written
materials and documents as may be reasonably
requested by the Board of Directors;
(xiv) Prepare and file on a timely basis so as to
incur the minimum filing fee Notices to the
SEC required pursuant to Rule 24f-2 under the
1940 Act;
(xv) Prepare and file all necessary registrations
and qualifications and all necessary
compliance filings under the state securities
and Blue Sky laws; and
(xvi) Perform such other duties as the Fund's Board
of Directors may reasonably request from
time to time.
16. DURATION AND TERMINATION. This Agreement shall
continue until terminated by either party on sixty (60) days' prior written
notice to the other party.
17. NOTICES. All notices and other communications,
including Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on theday it is
delivered. Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway,
Wilmington, Delaware 19809, Attn: Jay Nusblatt; (b) if to the Fund, c/o Shay
Asset Management Co., 111 East Wacker Drive, Chicago, Illinois 60601, with a
copy to Hughes Hubbard & Reed, One Battery Park Plaza, New York, N.Y. 10004,
Attn: James H. Bluck, Esq.; or (c) at such other address as shall have been
provided by like notice to the sender of any such notice or other communication
by the other party. Any notice given by PFPC pursuant to Section 16 hereof
also shall be given to each member of the Board of Directors of the Fund at the
address set forth in the Registration Statement of the Fund as then in effect
and to the legal counsel to the Fund.
11
<PAGE> 12
18. AMENDMENTS. This Agreement, or any term hereof, may
be changed or waived only by written amendment, signed by the party against
whom enforcement of such change or waiver is sought.
19. DELEGATION; ASSIGNMENT. PFPC may assign its rights
and delegate its duties hereunder to any wholly-owned direct or indirect
subsidiary of PNC Bank, National Association or PNC Bank Corp., provided that
(i) PFPC gives the Fund thirty (30) days' prior written notice; (ii) the
delegate (or assignee) agrees with PFPC and the Fund to comply with all
relevant provisions of the 1940 Act and the rules and regulations of the SEC
thereunder and with this Agreement; and (iii) PFPC and such delegate (or
assignee) promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation (or
assignment), including (without limitation) the capabilities of the delegate
(or assignee). Except as provided above, this Agreement and the rights and
duties of PFPC hereunder may not be assigned without the prior written consent
of the Fund.
20. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
21. FURTHER ACTIONS. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
22. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
12
<PAGE> 13
(b) Captions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be
a contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any
party to this Agreement shall constitute the valid and binding execution hereof
by such party.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
PFPC INC.
By: /s/ STEPHEN M. WYNNE
------------------------------------
Stephen M. Wynne
Executive Vice President
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
------------------------------------
David Freer, Jr.
President
14
<PAGE> 15
AUTHORIZED PERSONS APPENDIX
<TABLE>
<CAPTION>
NAME (TYPE) SIGNATURE
<S> <C>
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- ---------------------------------- ----------------------------------
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- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
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</TABLE>
<PAGE> 1
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of May 19, 1995 by and between PFPC
INC., a Delaware corporation ("PFPC"), and M.S.B. FUND, INC., a New York
corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing agent and
PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as
amended.
(b) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) "Authorized Person" means any officer of the Fund and
any other person duly authorized by the Fund's Board of Directors to give Oral
and Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment
thereto as may be received by PFPC. An Authorized Person's scope of authority
may be limited by the Fund by setting forth such limitation in the Authorized
Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received
by PFPC from an Authorized Person or from a person reasonably believed by PFPC
to be an Authorized Person.
<PAGE> 2
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act,
the 1940 Act and the CEA.
(h) "Shares" mean the shares of stock of any series or
class of the Fund.
(i) "Written Instructions" mean written instructions
signed by an Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile sending
device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve
as transfer agent, registrar, dividend disbursing agent and shareholder
servicing agent to the Fund in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such services,
subject to the direction and control of the Board of Directors of the Fund.
3. DELIVERY OF DOCUMENTS. The Fund has provided or,
where applicable, will provide PFPC with the following:
(a) Certified or authenticated copies of the
resolutions of the Fund's Board of Directors,
approving the appointment of PFPC or its
affiliates to provide services to the Fund
and approving this Agreement;
(b) A copy of the Fund's most recent effective
registration statement;
(c) A copy of the advisory agreement with respect
to the Fund;
(d) A copy of the distribution agreement, if any,
with respect to each class of Shares of the
Fund;
(e) A copy of the Fund's administration
agreements if PFPC is not providing the Fund
with such services;
(f) Copies of any shareholder servicing
agreements made in respect of the Fund; and
(g) Copies (certified or authenticated where
applicable) of any and all amendments or
supplements to the foregoing.
2
<PAGE> 3
4. COMPLIANCE WITH RULES AND REGULATIONS. In performing
its duties hereunder, PFPC will comply with all applicable requirements of the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PFPC
hereunder and will act in conformity with the instructions and directions of
the Board of Directors of the Fund which are timely delivered to PFPC. Except
as specifically set forth herein, PFPC assumes no responsibility for such
compliance by the Fund or any of its investment portfolios.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC
shall act only upon Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of organizational
documents or this Agreement or of any vote, resolution or proceeding of the
Fund's Board of Directors or of the Fund's shareholders, unless and until PFPC
receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written
Instructions confirming Oral Instructions so that PFPC receives the Written
Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written Instructions
are not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral or Written Instructions reasonably appear to have been received from an
Authorized Person, PFPC shall incur no liability to the Fund in acting upon
such Oral or Written Instructions provided that PFPC's actions comply with the
other provisions of this Agreement.
3
<PAGE> 4
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any
action it should or should not take, PFPC may request directions or advice,
including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to
any question of law pertaining to any action it should or should not take, PFPC
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's investment adviser or PFPC, at the
option of PFPC).
(c) Conflicting Advice. In the event of a conflict
between directions, advice or Oral or Written Instructions PFPC receives from
the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any
action it takes or does not take in reliance upon directions, advice or Oral or
Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice or Oral
or Written Instructions. Nothing in this section shall be construed so as to
impose an obligation upon PFPC (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions, advice
or Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or not taking
such action. Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
4
<PAGE> 5
7. RECORDS. PFPC shall prepare and keep records
relating to its services to be provided hereunder as and to the extent required
by Section 31 of the 1940 Act and the rules and regulations thereunder. The
books and records pertaining to the Fund, which are in the possession or under
the control of PFPC, shall be the property of the Fund. The Fund and
Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or
to an Authorized Person, at the Fund's expense.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and
that of its employees to keep confidential all records of the Fund and
information relating to the Fund and its shareholders (past, present and
future), unless the release of such records or information is otherwise
consented to in writing by the Fund. The Fund agrees that such consent shall
not be unreasonably withheld and may not be withheld where PFPC may be exposed
to civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate
with the Fund's independent public accountants and shall take all reasonable
actions in the performance of its obligations under this Agreement to ensure
that the necessary information is made available to such accountants for the
expression of their unqualified opinion, as required by the Fund.
5
<PAGE> 6
10. DISASTER RECOVERY. PFPC shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provisions for emergency use of electronic data processing equipment
to the extent appropriate equipment is available. In the event of equipment
failures, PFPC shall, at no additional expense to the Fund, take reasonable
steps to minimize service interruptions. PFPC shall have no liability with
respect to the loss of data or service interruptions caused by equipment
failure, provided such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties or
obligations under, or other material noncompliance with, this Agreement.
11. COMPENSATION. As compensation for services rendered
by PFPC during the term of this Agreement, the Fund will pay to PFPC a fee or
fees as may be agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund agrees to indemnify and
hold harmless PFPC and its affiliates from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the Securities Laws and any state and foreign securities and blue
sky laws, and amendments thereto), and expenses, including (without limitation)
reasonable attorneys' fees and disbursements (collectively, "Losses"), arising
directly or indirectly from any action or omission to act which PFPC takes (i)
at the request or on the direction of or in reliance on the advice of the Fund
or (ii) upon Oral or Written Instructions. Neither PFPC, nor any of its
affiliates, shall be indemnified against any liability (or any expenses
incident to such liability) arising out of PFPC's or its affiliates' own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement.
6
<PAGE> 7
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on
behalf of the Fund except as specifically set forth herein or as may be
specifically agreed to by PFPC in writing. PFPC shall be obligated to exercise
care and diligence in the performance of its duties hereunder, to act in good
faith and to use its best efforts, within reasonable limits, in performing
services provided for under this Agreement. PFPC shall be liable for any
damages arising out of PFPC's failure to perform its duties under this
Agreement to the extent such damages arise out of PFPC's willful misfeasance,
bad faith, gross negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or
of any other provision of this Agreement, (i) PFPC, shall not be liable for
losses beyond its control, provided that PFPC has acted in accordance with the
standard of care set forth above; and (ii) PFPC shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, and which PFPC reasonably believes to be genuine; or (B)
subject to Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur
or suffer by or as a consequence of PFPC's or its affiliates' performance of
the services provided hereunder, whether or not the likelihood of such losses
or damages was known by PFPC or its affiliates.
7
<PAGE> 8
14. DESCRIPTION OF SERVICES.
Unless PFPC receives Written Instructions to the contrary,
PFPC is authorized to take, and shall take, the following actions without Oral
or Written Instructions.
(a) Services Provided on an Ongoing Basis, If Applicable.
(i) Calculate 12b--1 payments;
(ii) Maintain proper stockholder registrations;
(iii) Review new applications and correspond with
stockholders to complete or correct
information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in
conjunction with proxy solicitations;
(vi) Countersign share certificates;
(vii) Prepare and mail to stockholders confirmation
of activity and periodic statements;
(viii) Provide toll--free lines for direct
shareholder use, plus customer liaison staff
for on--line inquiry response;
(ix) Mail duplicate confirmations to
broker--dealers of their Funds' activity,
whether executed through the broker--dealer
or directly with PFPC;
(x) Provide periodic stockholder lists and
statistics to the Fund;
(xi) Provide detailed data for underwriter/broker
confirmations;
(xii) Prepare periodic mailing of year--end tax and
statement information;
(xiii) Notify on a timely basis the investment
adviser, accounting agent, and custodian of
Fund activity; and
(xiv) Perform other participating broker--dealer
stockholder services as may be agreed upon
from time to time.
8
<PAGE> 9
(b) Services Provided by PFPC Under Oral or Written
Instructions (which may be standing Instructions or operating procedures).
(i) Accept and post daily Fund purchases and
redemptions;
(ii) Accept, post and perform stockholder
transfers and exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies;
(v) Issue (when requested in writing by the
stockholder) and cancel certificates; and
(vi) Perform such other duties as the Fund may
reasonably request from time to time.
(c) Purchase of Shares. PFPC shall issue and credit an
account of an investor with the appropriate number of Shares, in the manner
described in the Fund's prospectus, once it receives:
(i) A purchase order;
(ii) Proper information to establish a stockholder
account; and
(iii) Confirmation of receipt or crediting of funds
for such order to the Fund's custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only
if that function is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Directors. Shares shall be redeemed and
payment therefor shall be made in accordance with the Fund's prospectus when
the record holder tenders Shares in proper form and directs the method of
redemption. If Shares are received in proper form, Shares shall be redeemed
before the funds are provided to PFPC from the Fund's custodian (the
"Custodian"). If the record holder has not directed that redemption proceeds
be wired, when the Custodian provides PFPC with funds, the redemption check
shall be sent to and made payable to the record holder, unless:
9
<PAGE> 10
(i) the surrendered certificate is drawn to the
order of an assignee or holder and the
transfer authorization is signed by the
record holder; or
(ii) Transfer authorizations are signed by the
record holder when Shares are held in
book--entry form.
When a broker-dealer notifies PFPC of a redemption desired by
a customer, and the Custodian provides PFPC with funds, PFPC shall prepare and
send the redemption check to the broker-dealer and made payable to the
broker-dealer on behalf of its customer.
(e) Dividends and Distributions. Upon receipt of a
resolution of the Fund's Board of Directors authorizing the declaration and
payment of dividends and distributions, PFPC shall issue dividends and
distributions declared by the Fund in Shares, or, upon shareholder election,
pay such dividends and distributions in cash, if provided for in the Fund's
prospectus. Such issuance or payment of dividends or distributions, as well as
payments upon redemption as described above, shall be made after deduction and
payment of the required amount of funds to be withheld to designated
authorities in accordance with any applicable tax laws or other laws, rules or
regulations. PFPC shall prepare and mail to the Fund's shareholders such tax
forms and other information, or permissible substitute notice, relating to
dividends and distributions paid by the Fund as are required to be filed and
mailed by applicable law, rule or regulation. PFPC shall prepare, maintain and
file with the IRS and other appropriate taxing authorities reports relating to
all dividends above a stipulated amount paid by the Fund to its shareholders as
required by tax or other law, rule or regulation.
(f) Shareholder Account Services.
(i) PFPC shall offer to arrange, in accordance
with the prospectus, for issuance of Shares
obtained through:
10
<PAGE> 11
-- Any pre-authorized check plan; and
-- Direct purchases through broker wire orders,
checks and applications.
(ii) PFPC shall offer to arrange, in accordance
with the prospectus, for a shareholder's:
-- Exchange of Shares for shares of another fund
with which the Fund has exchange privileges;
-- Automatic redemption from an account where
that shareholder participates in a automatic
redemption plan; and/or
-- Redemption of Shares from an account with a
checkwriting privilege.
(g) Communications to Shareholders. Upon timely Written
Instructions, PFPC shall address and mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund
shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Prospectus and Proxy material; and
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards
for the meetings of the Fund's shareholders.
(h) Records. PFPC shall maintain records of the accounts
for each shareholder showing the following information:
(i) Name, address and United States Tax
Identification or Social Security number;
11
<PAGE> 12
(ii) Number and class of Shares held and number
and class of Shares for which certificates,
if any, have been issued, including
certificate numbers and denominations;
(iii) Historical information regarding the account
of each shareholder, including dividends and
distributions paid and the date and price for
all transactions on a shareholder's account;
(iv) Any stop or restraining order placed against
a shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the
transfer agent to perform any calculations
contemplated or required by this Agreement.
(i) Lost or Stolen Certificates. PFPC shall place a stop
notice against any certificate reported to be lost or stolen and comply with
all applicable federal regulatory requirements for reporting such loss or
alleged misappropriation. A new certificate shall be registered and issued
only upon:
(i) The shareholder's pledge of a lost instrument
bond or such other appropriate indemnity bond
issued by a surety company approved by PFPC;
and
(ii) Completion of a release and indemnification
agreement signed by the shareholder to
protect PFPC and its affiliates.
(j) Shareholder Inspection of Stock Records. Upon a
request from any Fund shareholder to inspect stock records, PFPC will notify
the Fund and the Fund will issue instructions granting or denying each such
request. Unless PFPC has acted contrary to the Fund's instructions, the Fund
agrees and does hereby, release PFPC from any liability for refusal of
permission for a particular shareholder to inspect the Fund's stock records.
(k) Withdrawal of Shares and Cancellation of
Certificates.
12
<PAGE> 13
PFPC is hereby instructed to cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
(l) Reports and Information. PFPC shall furnish the Fund
with the following reports:
(i) reports as to the number of Shares sold in
each state or other jurisdiction, and
(ii) such periodic and special reports and such
other information, including statistical
information concerning stockholder accounts
as the Fund may reasonably request.
PFPC shall furnish to the Fund's Investment Adviser,
Administrator and Custodian and other persons providing services to the Fund
with such information as they may reasonably request in connection with the
performance of their respective duties and obligations with respect to the
Fund.
15. DURATION AND TERMINATION. This Agreement shall
continue until terminated by the Fund or by PFPC on sixty (60) days' prior
written notice to the other party.
16. NOTICES. All notices and other communications,
including Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered. Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway,
Wilmington, Delaware 19809, Attn: Jay Nusblatt; (b) if to the Fund, c/o Shay
Asset Management Co., 111 East Wacker Drive, Chicago, Illinois 60601, with a
copy to Hughes Hubbard & Reed, One Battery Park Plaza, New York, N.Y. 10004,
Attn: James H. Bluck, Esq.; or (c) at such other address as shall have been
provided by like notice to the sender of any such notice or other communication
by the other party. Any notice given by PFPC pursuant to Section 15 hereof
also shall be given to each member of the Board of Directors of the Fund at the
address set forth in the Registration Statement of the Fund as then in effect
and to the legal counsel to the Fund.
13
<PAGE> 14
17. AMENDMENTS. This Agreement, or any term hereof, may
be changed or waived only by a written amendment, signed by the party against
whom enforcement of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PFPC may assign its rights
and delegate its duties hereunder to any wholly-owned direct or indirect
subsidiary of PNC Bank, National Association or PNC Bank Corp., provided that
(i) PFPC gives the Fund thirty (30) days' prior written notice; (ii) the
delegate (or assignee) agrees with PFPC and the Fund to comply with all
relevant provisions of the 1940 Act and the rules and regulations of the SEC
thereunder and with this Agreement; and (iii) PFPC and such delegate (or
assignee) promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation (or
assignment), including (without limitation) the capabilities of the delegate
(or assignee). Except as provided above, this Agreement and the rights and
duties of PFPC hereunder may not be assigned without the prior written consent
of the Fund.
19. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
14
<PAGE> 15
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be
a contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any
party to this Agreement shall constitute the valid and binding execution hereof
by such party.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
PFPC INC.
By: /s/ ROBERT J. PERLSWEIG
-------------------------------------
Robert J. Perlsweig
Executive Vice President
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
-------------------------------------
David Freer, Jr.
President
16
<PAGE> 17
AUTHORIZED PERSONS APPENDIX
<TABLE>
<CAPTION>
NAME (TYPE) SIGNATURE
<S> <C>
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
</TABLE>
17
<PAGE> 1
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of the 19th day of May,
1995 between M.S.B. FUND, INC., a New York corporation (herein called the
"Fund"), and SHAY FINANCIAL SERVICES CO., an Illinois general partnership
(herein called the "Distributor");
WHEREAS, the Fund is an open-end management investment company
and is so registered under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain the Distributor as the
distributor for the Fund to provide for the distribution of shares of Class A
stock of the Fund, each such share having a par value of $.001 per share
(herein collectively called "Shares"), and is willing to render such services;
NOW THEREFORE, in consideration of the premises and mutual
covenants set forth herein the parties hereto agree as follows:
I. DELIVERY OF DOCUMENTS
The Fund has delivered to Distributor copies of each of the
following documents and will deliver to it all future amendments and
supplements thereto, if any:
(a) The Fund's Certificate of Incorporation and all
amendments thereto (such Certificate of Incorporation, as currently in effect
and as it shall from time to time be amended, herein called the "Fund's
Articles");
(b) The By-Laws of the Fund (such By-Laws, as currently
in effect and as it shall from time to time be amended, herein called the
"By-Laws");
(c) Resolutions of the Board of Directors of the Fund
authorizing the execution and delivery of this Agreement;
(d) The Fund's Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act"), on Form N-1A as filed with the
Securities and Exchange Commission (the "Commission") on April 25, 1995 and all
subsequent amendments thereto (said Registration Statement, as presently in
effect and as amended or supplemented from time to time, is herein called the
"Registration Statement");
(e) Notification of Registration of the Fund under the
1940 Act on Form N-8A as filed with the Commission; and
(f) The current Prospectus and Statement of Additional
Information of the Fund (such prospectus and statement of additional
information, as filed with the Securities and Exchange Commission and as they
shall from time to time be amended and supplemented, herein called the
"Prospectus").
<PAGE> 2
II. DISTRIBUTION
1. Appointment of Distributor. The Fund hereby appoints
Distributor to serve as the distributor of the Fund's Shares and Distributor
hereby accepts such appointment and agrees to render the services and duties
set forth in this Section II.
2. Services and Duties.
(a) Except as provided below, the Fund agrees to offer
for sale exclusively through Distributor as agent, from time to time during the
term of this Agreement, Shares of the Fund (whether authorized but unissued or
treasury shares, in the Fund's sole discretion) upon the terms and at the net
asset value as described in the Prospectus. Distributor will act only in its
own behalf as principal in making agreements with selected dealers or others
for the sale of Shares, and shall offer Shares only at the net asset value
thereof as set forth in the Prospectus. Distributor shall devote its best
efforts to effect sales of Shares of the Fund, but shall not be obligated to
sell any certain number of Shares. All subscriptions for Shares solicited by
the Distributor shall be directed to the Fund for acceptance and shall not be
binding on the Fund until accepted by it. The Distributor shall have no
authority to make binding subscriptions on behalf of the Fund. The Fund
reserves the right to offer Shares directly to investors, including offers in
connection with (i) the merger or consolidation of the Fund or its series or
classes with any other investment company or series or class thereof, (ii) the
Fund's acquisition by purchase or otherwise of all or substantially all of the
assets or stock of any other investment company or (iii) reinvestment in Shares
by the Fund's stockholders of dividends or other distributions or any other
offering by the Fund of securities to its stockholders.
(b) In all matters relating to the sale of Shares,
Distributor will act in conformity with the Fund's Articles, By-Laws, and
Prospectus and with the instructions and directions of the Board of Directors
of the Fund and will conform to and comply with the requirements of the 1933
Act, and the 1940 Act, the regulations of the National Association of
Securities Dealers, Inc. and all other applicable federal or state laws and
regulations. In connection with such sales, Distributor acknowledges and
agrees that it is not authorized to provide any information or make any
representations other than as contained in the Fund's Registration Statement
and Prospectus and any sales literature specifically approved by the Fund.
(c) Distributor will bear the cost of (i) printing and
distributing the Prospectus and Statement of Additional Information (including
any supplement thereto) to persons who are not either shareholders or counsel,
independent accountants or other persons providing similar services to the
Fund, and (ii) preparing, printing and distributing any literature,
advertisement or material which is primarily intended to result in the sale of
the Shares; provided, however, that Distributor shall not be obligated to bear
the expenses incurred by the Fund in connection with the preparation and
printing of any amendment to any Registration Statement or Prospectus necessary
for the continued effective registration of the Shares under the 1933 Act.
2
<PAGE> 3
(d) All Shares of the Fund offered for sale by
Distributor shall be offered for sale to the public at the net asset value
(determined in the manner set forth in the Fund's Articles and then current
Prospectus). No broker-dealer or other person who enters into a selling
agreement with Distributor shall be authorized to act as agent for the Fund in
connection with the offering or sale of its Shares to the public or otherwise.
3. Sales of Shares.
(a) The Fund shall pay all costs and expenses in
connection with the registration of the Shares under the 1933 Act, and all
expenses in connection with maintaining facilities for the issue and transfer
of the Shares and for supplying information, prices and other data to be
furnished by the Fund hereunder, and all expenses in connection with preparing,
printing and distributing the Prospectus except as set forth in subsection 2(c)
of Section II hereof.
(b) The Fund shall execute all documents, furnish all
information and otherwise take all actions which may be reasonably necessary in
the discretion of the Fund's officers in connection with the qualification of
the Shares for sale in such states as Distributor may designate to the Fund and
the Fund may approve, and the Fund shall pay all filing fees which may be
incurred in connection with such qualification. Distributor shall pay all
expenses connected with its qualification as a dealer under state or federal
laws and, except as otherwise specifically provided in this Agreement, all
other expenses incurred by Distributor in connection with the sale of the
Shares as contemplated in this Agreement.
(c) The Fund shall have the right to suspend the offering
and sale of Shares of the Fund at any time in the absolute discretion of the
Fund in response to conditions in the securities markets or otherwise, and to
suspend the redemption of Shares of the Fund at any time permitted by the 1940
Act or the rules of the commission ("Rules"). Upon notice of any such
suspension of the offering and sale of Shares, the Distributor shall cease to
offer Shares. The Distributor shall not make or cause to be made any offers of
Shares in any state or other jurisdiction where such Shares are not then
qualified for offer or sale or exempt from such qualification.
(d) All orders for the Fund's Shares shall be transmitted
promptly to the Fund. Upon the effective date of the appointment of PFPC, Inc.
as the Fund's administrator, transfer agent and shareholder servicing agent,
all orders for the Fund's Shares shall be transmitted promptly to PFPC, Inc.
(e) The Fund reserves the right to reject any order for
Shares.
IIA. COMPENSATION
The Distributor shall be entitled to no compensation or
reimbursement of expenses for the distribution and service activities provided
by the Distributor pursuant to this Agreement. Notwithstanding anything in
this Agreement to the contrary, affiliated persons of the Distributor may
receive compensation or reimbursement from the Fund with respect to the
provision of management services or service as a director or officer of the
Fund.
3
<PAGE> 4
III. LIMITATION OF LIABILITY
Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement.
IV. CONFIDENTIALITY
Distributor will treat confidentially and as proprietary
information of the Fund all records and other information relative to the Fund,
to the Fund's prior or present shareholders and to those persons or entities
who respond to Distributor inquiries concerning investment in the Fund, and,
except as provided below, will not use such records and information for any
purpose other than the performance of its responsibilities and duties hereunder
or the performance of its responsibilities and duties with regard to sales of
the shares of any fund which may be added to the Fund in the future. Any other
use by Distributor of the information and records referred to above may be made
only after prior notification to and approval in writing by the Fund. Such
approval shall not be unreasonably withheld and may not be withheld where (i)
Distributor may be exposed to civil or criminal contempt proceedings for
failure to divulge such information; (ii) Distributor is requested to divulge
such information by duly constituted authorities; or (iii) Distributor is so
requested by the Fund.
V. INDEMNIFICATION
1. Fund Representations. The Fund represents and
warrants to Distributor that at all times the Registration Statement and
Prospectus will, in all material respects, conform to the applicable
requirements of the 1933 Act and the rules thereunder, that the Registration
Statement did not contain at the time it became effective and will not contain
at the time any subsequent amendment thereto becomes effective any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein not
misleading and that the Prospectus does not contain and will not contain at any
time when it is authorized for use any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty in this
subsection shall apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Fund by or on behalf of or
otherwise approved by and with respect to Distributor expressly for use in the
Registration Statement or Prospectus.
4
<PAGE> 5
2. Distributor Representations. Distributor represents
and warrants to the Fund that it is duly formed as an Illinois general
partnership and is and at all times will remain duly authorized and licensed to
carry out its services as contemplated herein.
3. Fund Indemnification. The Fund will indemnify,
defend and hold harmless Distributor, its several officers and general
partners, and any person who controls Distributor within the meaning of Section
15 of the 1933 Act, from and against any losses, claims, damages or
liabilities, joint or several, to which any of them may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Prospectus or in any application
or other document executed by or on behalf of the Fund, or arise out of, or are
based upon, information furnished by or on behalf of the Fund filed in any
state in order to qualify the Shares under the securities or blue sky laws
thereof ("Blue Sky Application"), or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse Distributor, its several officers and general partners, and any
person who controls Distributor within the meaning of Section 15 of the 1933
Act, for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Fund shall not be liable in any case to the
extent that such loss, claim, damage or liability arises out of, or is based
upon, any untrue statement, alleged untrue statement, or omission or alleged
omission made in the Registration Statement, the Prospectus, any Blue Sky
Application or any application or other document executed by or on behalf of
the Fund in reliance upon and in conformity with written information furnished
to the Fund by or on behalf of or otherwise approved by and with respect to
Distributor specifically for inclusion therein.
The Fund shall not indemnify any person pursuant to this
subsection 3 unless the court or other body before which the proceeding was
brought has rendered a final decision on the merits that such person was not
liable by reason of his willful misfeasance, bad faith or gross negligence in
the performance of his duties, or his reckless disregard of obligations and
duties, under this Agreement ("disabling conduct") or, in the absence of such a
decision, a reasonable determination (based upon a review of the facts) that
such person was not liable by reason of disabling conduct has been made by the
vote of a majority of a quorum of directors of the Fund who are neither
"interested persons" of the Fund (as defined in the 1940 Act) nor parties to
the proceeding, or by an independent legal counsel in a written opinion.
The Fund shall advance attorneys' fees and other expenses
incurred by any person in defending any claim, demand, action or suit which is
the subject of a claim for indemnification pursuant to this subsection 3, so
long as: (i) such person shall undertake to repay all such advances unless it
is ultimately determined that he is entitled to indemnification hereunder; and
(ii) such person shall provide security for such undertaking, or the Fund shall
be insured against losses arising by reason of any lawful advances, or a
majority of a quorum of the disinterested, non-party directors of the Fund (or
an independent legal counsel in a written opinion) shall determine based on a
review of readily available facts (as opposed to a full trial-type inquiry)
that there is a reasonable likelihood that such person ultimately will be found
entitled to indemnification hereunder.
5
<PAGE> 6
4. Distributor Indemnification. Distributor will
indemnify, defend and hold harmless the Fund, the Fund's several officers and
directors and any person who controls the Fund within the meaning of Section 15
of the 1933 Act, from and against any losses, claims, damages or liabilities
joint or several, to which any of them may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect hereof) arise out of, or are based upon, any breach
of its representations and warranties in subsection 2 of this Section V or its
agreements in subsection 2 or 3 of Section II hereof, or which arise out of, or
are based upon, any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, the Prospectus, any Blue Sky
Application or any application or other document executed by or on behalf of
the Fund, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, which statement or omission was made in reliance upon or in
conformity with information furnished in writing to the Fund or any of its
several officers and directors by or on behalf of or otherwise approved by and
with respect to Distributor specifically for inclusion therein, and will
reimburse the Fund, the Fund's several officers and directors, and any person
who controls the Fund or any Fund within the meaning of Section 15 of the 1933
Act, for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim.
The Distributor shall advance attorneys' fees and other
expenses incurred by any person in defending any claim, demand, action or suit
which is the subject of a claim for indemnification pursuant to this subsection
4, so long as: (i) such person shall undertake to repay all such advances
unless it is ultimately determined that he is entitled to indemnification
hereunder; and (ii) such person shall provide security for such undertaking, or
the Fund shall be insured against losses arising by reason of any lawful
advances, or a majority of a quorum of the disinterested, non-party directors
of the Fund (or an independent legal counsel in a written opinion) shall
determine based on a review of readily available facts (as opposed to a full
trial-type inquiry) that there is a reasonable likelihood that such person
ultimately will be found entitled to indemnification hereunder.
5. General Indemnity Provisions. No indemnifying party
shall be liable under its indemnity agreement contained in subsection 3 or 4
hereof with respect to any claim made against such indemnifying party unless
the indemnified party shall have notified the indemnifying party in writing
within twenty (20) days after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
indemnified party (or after the indemnified party shall have received notice of
such service on any designated agent), but failure to notify the indemnifying
party of any such claim shall not relieve it from any liability which it may
otherwise have to the indemnified party. The indemnifying party will be
entitled to participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any such liability, and if
the indemnifying party elects to assume the defense, such defense shall be
conducted by counsel chosen by it and reasonably satisfactory to the
indemnified party. In the event the indemnifying party elects to assume the
defense of any such suit and retain such counsel, the indemnified party shall
bear the fees and expenses of any additional counsel retained by the
indemnified party.
6
<PAGE> 7
VI. DURATION AND TERMINATION
This Agreement shall become effective as of the date first
above written, and, unless sooner terminated as provided herein, shall remain
in effect for a period of twelve (12) months from the date of such
effectiveness. Thereafter, if not terminated, this Agreement shall continue
automatically for successive terms of one year, provided that such continuance
is specifically approved at least annually (a) by a majority of those members
of the Board of Directors of the Fund who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
this Distribution Agreement (the "Disinterested Directors"), pursuant to a vote
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund; provided, however, that this
Agreement shall automatically terminate in the event of its assignment and may
be terminated by the Fund at any time, without the payment of any penalty, by
vote of a majority of the Disinterested Directors or by a vote of a majority of
the outstanding voting securities on 60 days' written notice to, or by the
Distributor at any time, without the payment of any penalty, on 60 days'
written notice to the Fund. The terms "assignment" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the
1940 Act and the rules and regulations thereunder.
VII. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
VIII. NOTICES
Notice of any kind to be given to the Distributor by the Fund
shall be in writing and shall be duly given if mailed or delivered to the
Distributor at 111 East Wacker Dr., Chicago, IL 60601, Attention: Executive
Vice President, or at such other address or to such other individual as shall
be specified by the Distributor to the Fund in accordance with this Section
VIII. Notices of any kind to be given to the Fund by the Distributor shall be
in writing and shall be duly given if mailed or delivered to the Fund at its
address set forth in the then-current Prospectus, Attention: President, or at
such other address or to such other individual as shall be specified by the
Fund to the Distributor in accordance with this Section, with copies to each of
the Fund's Directors at their respective addresses set forth in the Fund's
Registration Statement and to the legal counsel to the Fund.
7
<PAGE> 8
IX. CONSTRUCTION; GOVERNING LAW
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section VI hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by New York law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation of the Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
M.S.B. FUND, INC.
By: /s/ DAVID FREER, JR.
-------------------------------------
David Freer, Jr.
President
Attest: --------------------
Secretary
SHAY FINANCIAL SERVICES CO.
By: /s/ EDWARD E. SAMMONS, JR.
------------------------------------
Edward E. Sammons, Jr.
Executive Vice President,
Shay Financial
Services, Inc., Managing Partner
Attest: --------------------
Secretary
8
<PAGE> 1
April 29, 1996
M.S.B. Fund, Inc.
26 Broadway
New York, New York 10004
Dear Sirs:
You have requested our opinion in connection with the filing of
Post-Effective Amendment No. 38 on Form N-1A to the Registration Statement of
M.S.B. Fund, Inc. filed under the Securities Act of 1933 (Registration No.
2-22542) and the Investment Company Act of 1940 (File No. 811-1273) and
pertaining to shares (the "Shares") of Class A stock of the Fund, par value
$0.001 per share.
In this connection, we have examined such records and documents,
including a certificate of an officer of the Fund on which we have relied as to
factual matters, and have made such examination of law as we have deemed
appropriate. Based upon the foregoing, it is our opinion that the Shares to be
sold pursuant to Registration Statement No. 2-22542 as amended by
Post-Effective Amendment No. 38, upon delivery of certificates for Shares or
crediting of Shares to a shareholder's account as provided for in Registration
Statement No. 2-22542, as amended, and payment therefor in accordance with the
provisions of such Registration Statement, will be legally issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 38 to Registration Statement No. 2-22542.
Very truly yours,
HUGHES HUBBARD & REED
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Shareholders and Board of Directors of
M.S.B. Fund, Inc.:
We consent to the use of our report dated February 9, 1996,
incorporated herein by reference in the Post Effective Amendment No. 38 to this
Registration Statement on Form N-1A of the M.S.B. Fund, Inc. and to the
reference to our firm under the heading "Financial Highlights" in the Form N-1A
and to the reference to our firm under the heading "Independent Auditors" in
the Statement of Additional Information.
KPMG PEAT MARWICK LLP
New York, New York
April 29, 1996
<PAGE> 1
COMPUTATION OF PERFORMANCE QUOTATIONS
The following table shows the computation of the Total Return and
Average Annual Total Return included in the Statement of Additional
Information:
M.S.B. FUND, INC. TOTAL RETURN DATA
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1995
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Hypothetical Initial
Investment (P) $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Redeemable Value
(ERV) $1,249.70 $1,482.30 $1,918.60 $2,950.70
Total Return
((ERV/P)-1) x 100 24.97% 48.23% 91.86% 195.07%
Average Annual Total Return
((ERV/P)1/n - 1) x 100
[n=number of years in period] 24.97% 14.02% 13.92% 11.43%
- -----------------------
</TABLE>
Assumes (i) reinvestment of all dividends and distributions and (ii) deduction
of all applicable charges and expenses.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 28,410,700
<INVESTMENTS-AT-VALUE> 33,073,563
<RECEIVABLES> 404,701
<ASSETS-OTHER> 13,666
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,491,930
<PAYABLE-FOR-SECURITIES> 5,351
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 977,445
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</TABLE>
