<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. 39............................ x
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940............................... x
Amendment No. 39........................................... x
-----------------------
M.S.B. FUND, INC.
(Exact Name of Registrant as Specified in Charter)
200 Park Avenue
New York, New York 10166
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code (212) 573-9354
James H. Bluck
Hughes Hubbard & Reed LLP
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, 1997 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 under the
Securities Act of 1933 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 19, 1997.
==============================================================================
<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, 1997
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, 1997, 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
</TABLE>
<TABLE>
<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)............. 0.61%
Other Expenses................................................... 0.80%
Administration, Transfer Agent and Custodian Fees
(after adjustment for fee reduction).................. 0.32%
Professional and Directors' Expenses................... 0.31%
Insurance, Printing and Miscellaneous Expenses......... 0.17%
----
Total Fund Operating Expenses............................. 1.41%
</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................. $14 $45 $77 $169
</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, 1996. 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 0.38%,
respectively, and Total Fund Operating Expenses would be 1.61% 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 1992 through 1996 has
been audited by KPMG Peat Marwick LLP, independent auditors, whose report
thereon is included in the Fund's 1996 Annual Report to Shareholders and
incorporated by reference in the Statement of Additional Information. The
information presented is for a share outstanding throughout each fiscal year.
Additional information regarding the performance of the Fund is contained in the
1996 Annual Report to Shareholders which is available without charge upon
request to the Fund.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995(1) 1996
---- ---- ---- ---- ---- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of year................... $ 20.60 $ 17.23 $ 16.40 $ 17.82 $ 14.54 $ 14.62 $ 15.67 $ 16.79 $ 13.39 $ 13.63
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Income from investment
operations:
Net investment income..... .32 .38 .26 .39 .22 .22 .18 .16 .08 .11
Net realized and
unrealized gain (loss)
on investments.......... .52 1.27 4.27 (1.69) 2.18 1.33 3.04 (.44) 3.17 2.76
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations................ .84 1.65 4.53 (1.30) 2.40 1.55 3.22 (.28) 3.25 2.87
Less distributions:
From net investment
income.................. (.33) (.37) (.25) (.40) (.21) (.28) (.17) (.18) (.08) (.14)
From net realized gains... (3.88) (2.11) (2.86) (1.58) (2.11) (.22) (1.93) (2.94) (2.93) (1.76)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions......... (4.21) (2.48) (3.11) (1.98) (2.32) (0.50) (2.10) (3.12) (3.01) (1.90)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value at end of
year...................... $ 17.23 $ 16.40 $ 17.82 $ 14.54 $ 14.62 $ 15.67 $ 16.79 $ 13.39 $ 13.63 $ 14.60
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return................ 4.70% 9.78% 28.06% (7.40)% 16.97% 10.66% 20.64% (1.70)% 24.97% 21.16%
Ratios/Supplemental Data
Net assets end of year (in
thousands)................ $48,797 $49,076 $51,771 $42,109 $41,346 $40,790 $45,205 $35,022 $32,509 $37,358
Ratio of expenses to average
net assets................ 0.98% 1.19% 1.20% 1.39% 1.86% 1.13% 1.12% 1.28(2) 1.69%(2) 1.41%(2)
Ratio of net investment
income to average net
assets.................... 1.32% 2.06% 1.30% 2.38% 1.36% 1.43% 1.01% 0.97% 0.57% 0.71%
Portfolio turnover rate..... 37% 19% 29% 31% 17% 13% 26% 62% 68% 45%
Average commission rate per
share..................... -- -- -- -- -- -- -- -- -- $0.0443
</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, 1996, 1995 and
1994, the ratio of expenses to average net assets would have been 1.61%,
1.86% and 1.39%, respectively.
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#8610304163
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.
Investors desiring to make telephone transactions for subsequent investments
should select this feature on their applications or call 800-661-3938 to request
an authorization form to set up their accounts 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 the investor's 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, 1996, 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 of net investment income are paid quarterly.
Distributions of net long-term capital gains, if any, realized during the fiscal
year usually are distributed in December of such fiscal year. 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.
13
<PAGE> 16
The Fund will notify shareholders after the close of its fiscal year of the
dollar amount and 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
Shay Assets Management Co. serves as investment adviser of the Fund; PFPC Inc.
serves as its administrator, transfer agent, dividend paying agent and
shareholder servicing agent; and PNC Bank, N.A. is 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 1996 in respect of investment advisory services was 0.61% of the Fund's
average net assets.
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 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,
14
<PAGE> 17
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 billion at March 31, 1997, and as investment adviser
to Institutional Investors Capital Appreciation Fund, Inc., which had net assets
at March 31, 1997, of approximately $76 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 ended 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 also 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.
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
15
<PAGE> 18
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
--------------------------------------------------------------------
M.S.B. FUND, INC.
ACCOUNT APPLICATION
DO NOT USE FOR IRA ACCOUNTS.
IF YOU NEED ASSISTANCE IN COMPLETING
THIS
APPLICATION, PLEASE CALL
800-661-3938. Mail check and completed application to:
M.S.B. Fund, Inc.
c/o PFPC Inc.
P.O. Box 8905
Wilmington, DE 19899-8905
<TABLE>
<S><C>
- ----------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------
Minor's Social Security Number
Under the Uniform Gifts to Minors Act
- --------------------------------------------------------------------------------
/ / 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 _____
</TABLE>
IMPORTANT! PLEASE COMPLETE REVERSE SIDE
<PAGE> 20
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
- ---------------------------------------------------------------------------------- -----------------------------------
Name of Bank Account No.
- ---------------------------------------------------------------------------------------------------------------------------
Address of Bank City State Zip
- --------------------------- -----------------------------------------------------------------------------------
Bank Routing ID No. Name of account holder
</TABLE>
- --------------------------------------------------------------------------------
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.
<TABLE>
<S> <C> <C>
X X
- ---------------------------------------------- ---------------------------------------------- ---------------------
Individual (or Custodian) Joint Registrant, if any Date
X X
- ---------------------------------------------- ---------------------------------------------- ---------------------
Corporate Officer, Trustee, etc. Title Date
</TABLE>
- --------------------------------------------------------------------------------
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.
AE
- ----------------
<PAGE> 21
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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>
<C> <C> <C>
OFFICERS
President
JOSEPH R. FICALORA
First Vice President Second Vice President
MICHAEL J. GAGLIARDI NORMAN W. SINCLAIR
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 Michael J. Gagliardi
Timothy A. Dempsey David F. Holland
Harry P. Doherty George J. Kelly
Joseph R. Ficalora William A. McKenna, Jr.
David Freer, Jr. Norman W. Sinclair
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 LLP
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, 1997
A NO-LOAD FUND
-------------------
PRIMARY OBJECTIVE:
CAPITAL APPRECIATION
-------------------
SECONDARY OBJECTIVE:
INCOME
<PAGE> 27
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
SECONDARY OBJECTIVE: 800-661-3938
INCOME STATEMENT OF ADDITIONAL
INFORMATION
May 1, 1997
This Statement of Additional
Information is not a prospectus. It should be
read in conjunction with the Prospectus of the
Fund, dated May 1, 1997. A copy of the
Prospectus may be obtained from the Fund at the
address set forth above or by calling
800-661-3938.
<PAGE> 28
<TABLE>
<CAPTION>
CONTENTS
PAGE
<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 .......... 13
Investment Adviser ............................. 13
Administrator, Transfer Agent, Shareholder
Servicing Agent, Dividend Paying Agent and
Custodian ...................................... 14
Distributor .................................... 15
Independent Auditors ............................ 15
Purchase and Sale of Portfolio Securities ....... 15
Expenses of the Fund ............................ 16
Description of Capital Stock .................... 17
General Information ............................. 17
Financial Statements ............................ 17
</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. 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
for the purpose of closing 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
2
<PAGE> 31
recommend selling the underlying securities because of fundamental investment
considerations. 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 62%, 68% and 45% in 1994,
1995 and 1996, 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 the Fund's investment objectives and policies in the light of
market conditions require more frequent trades.
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, 1996.
<TABLE>
<CAPTION>
M.S.B. FUND INC.
DECEMBER 31, 1996 VALUATION SHEET
<S> <C>
Investment in securities, at value.................... $37,277,781
Cash.................................................... 616
Receivable for fund shares sold......................... 7,143
Dividends and interest receivable..................... 85,446
Prepaid expenses........................................ 22,278
Total assets.......................................... $37,393,264
Less:
Accrued expenses payable................................ 35,369
Net assets.............................................. $37,357,895
Number of shares outstanding............................ 2,558,271
Net asset value, offering and redemption price per share $14.60
</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, 1996,
and the average annual total return for such periods:
<TABLE>
<CAPTION>
M.S.B. FUND, INC. TOTAL RETURN DATA
PERIODS ENDED DECEMBER 31, 1996
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Total Return............... 21.16% 48.87% 98.74% 216.91%
Average Annual Total Return 21.16% 14.18% 14.72% 12.23%
</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 14.72% average annual
rate of return would produce a total return of 98.74% 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, CDA Investment Technologies, Inc., Changing
Times, Chicago Tribune, 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 eleven 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
---------------------------------- -------------------------
JOSEPH R. FICALORA (Age 50)* President and Director (1999)
38-25 Main Street
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
President of the Fund since April 1997 and served as First Vice President of
the Fund from March 1996 to April 1997.
MICHAEL J. GAGLIARDI (Age 56)* First Vice President and
36 Pacific Street Director (1999)
Newark, NJ 07105
Mr. Gagliardi is President, Chief Executive Officer and a director 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. Mr. Gagliardi has served as First Vice President of the Fund since
April 1997.
6
<PAGE> 35
NORMAN W. SINCLAIR (Age 72)* Second Vice President and
38 Ambleside Road Director (2000)
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. Mr. Sinclair has served as Second Vice President of the Fund since
April 1997.
MALCOLM J. DELANEY (Age 70) 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 served as a director of
the North Fork Bancorporation, Inc. until August 1996.
TIMOTHY A. DEMPSEY (Age 63) Director (1999)
18 Oakland Avenue
Warwick, NY 10990-0591
Mr. Dempsey has been President and Chief Executive Officer of The Warwick
Savings Bank since 1985. Mr. Dempsey also serves as a director and as
Executive Vice President of Institutional Investors Capital Appreciation
Fund, an investment company registered under the Investment Company Act of
1940 for which Shay Assets Management Co. acts as investment adviser.
HARRY P. DOHERTY (Age 54)** 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. Mr.
Doherty also serves as a director of America's Community Bankers, which owns
through subsidiaries a 50% interest in the Fund's Investment Adviser and
Distributor, and as Chairman of Community Bankers Association of New York
State.
7
<PAGE> 36
DAVID FREER, JR. (Age 57) Director (1998)
187 East Market Street
Suite 100
Rhinebeck, NY 12572
Mr. Freer has served as President, Treasurer and a director of Budget
Payment Corporation, which engages in the business of financing insurance
premiums, since 1990. Mr. Freer served as President of the Fund from
November of 1990 to April ,1997, and as Vice President of the Fund from 1985
through 1990.
DAVID F. HOLLAND (Age 55)** Director (2000)
17 New England Executive Park
Burlington, Massachusetts 01803
Mr. Holland has been President and Chief Executive Officer of Boston Federal
Savings Bank since 1986 and Chairman of the Board of Boston Federal Savings
Bank since 1989 and has been Chairman and Chief Executive Officer of its
holding company, BostonFed Bancorp Inc. since its inception in 1995. Mr.
Holland also serves as a director of Asset Management Fund, Inc., which is
an investment company registered under the Investment Company Act of 1940
for which Shay Assets Management Co. acts as investment adviser, Chairman of
America's Community Banking Partners, Inc., a director of ACB Investment
Services, Inc., which owns through a subsidiary a 50% interest in the Fund's
Investment Adviser and Distributor, a director of NYCE Corporation and
President of the Thrift Industry Advisory Council.
GEORGE J. KELLY (Age 74) Director (2000)
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 60) 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. In addition, Mr. McKenna serves on the board of a number of
educational and civic organizations, including St. Joseph's College in
Brooklyn, New York, St. Vincent's Services
8
<PAGE> 37
and Wyckoff Heights Medical Center. He also serves as a director of Tablet
Publishing Co.
IAN D. SMITH (Age 73) Director (2000)
69 Pietro Drive
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 served as Second Vice President of the
Fund from March 1994 to April 1997 and previously served as President of the
Fund from March 1985 through March 1987.
RODGER D. SHAY (Age 60) Vice President and Assistant
888 Brickell Avenue, 5th Floor Secretary
Miami, FL 33131
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., the Fund's Investment Adviser, 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., the Fund's Distributor, since 1990. He also 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 57) 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.
9
<PAGE> 38
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.
JOHN J. McCABE (Age 53) Vice President
200 Park Avenue, 45th Floor
New York, New York 10166
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. He also serves as a Vice President of
Institutional Investors Capital Appreciation Fund, Inc. Mr. McCabe has
served as Vice President of the Fund since May 1995.
MARK F. TRAUTMAN (Age 31) Vice President
200 Park Avenue, 45th Floor
New York, New York 10166
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 a Vice President of, and 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. 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,
10
<PAGE> 39
Inc., securities brokerage firm. Mr. Trautman has served as Vice
President of the Fund since May 1995.
JAY F. NUSBLATT (Age 36) Treasurer
103 Bellevue Parkway
Wilmington, Delaware 19809
Mr. Nusblatt has been Vice President and Director of Fund Accounting and
Administration of PFPC Inc., the Fund's administrative agent, 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. Mr. Nusblatt has
served as Treasurer of the Fund since May 1995.
________________________
* These directors are regarded as "interested persons" under the
Investment Company Act of 1940 because they are officers of the Fund.
** These directors are regarded as "interested persons" under the
Investment Company Act of 1940 because they are affiliated persons of
the Fund's Investment Adviser.
The Fund has an Executive Committee, composed of Messrs. Ficalora,
Gagliardi, Freer 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 and 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.
Directors receive an annual retainer of $3,000, payable at the end of each
quarter, and an additional $500 for each meeting of the Board of Directors
attended. Directors serving on a committee of the Board of Directors receive
additional compensation of $250 for each committee meeting attended in person
if the meeting is held on a date on which a meeting of the Board of Directors
is not held. No additional fee is paid for telephonic meetings. In 1996 the
total director compensation was $28,500.* The Fund does not provide officers
with any compensation other than the compensation they may receive for service
as a director, except that the President receives an additional annual retainer
of $2,000 in recognition of the additional responsibilities of the President.
The Fund does not provide officers and directors directly or indirectly with
any pension or retirement benefits for their services to the Fund. The Fund,
however, does reimburse directors and officers for their reasonable expenses
incurred in
- -------------
* THE FUND COMPENSATED DIRECTORS FOR THEIR SERVICES AS DIRECTORS IN 1996 AT THE
RATE OF $300 FOR EACH MONTHLY BOARD MEETING ATTENDED AND $600 FOR EACH
QUARTERLY BOARD MEETING, AND DID NOT PROVIDE ANY ADDITIONAL COMPENSATION TO
OFFICERS IN 1996. THE BOARD OF DIRECTORS MET MONTHLY THROUGH JULY 1996 AND
CURRENTLY MEETS QUARTERLY.
11
<PAGE> 40
attending meetings or otherwise in connection with their attention to the
affairs of the Fund. In 1996, the total of such reimbursed expenses was
$10,364.
The following table sets forth the aggregate compensation received during
1996 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.
<TABLE>
<CAPTION>
COMPENSATION TABLE
NAME OF DIRECTOR AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM THE FUND
FROM THE FUND AND FUND COMPLEX
<S> <C> <C>
Malcolm J. Delaney..... $2,700 $2,700
Timothy A. Dempsey..... --- $5,250*
Harry P. Doherty....... $2,100 $9,600*
Joseph R. Ficalora..... $3,000 $3,000
David Freer, Jr........ $3,300 $3,300
Michael J. Gagliardi... $3,300 $3,300
David F. Holland....... --- $14,500*
George J. Kelly........ $3,300 $3,300
William A. McKenna, Jr. $3,000 $8,500*
Gilbert O. Robert...... $1,500 $1,500
Norman W. Sinclair..... $3,000 $3,000
Ian D. Smith........... $3,300 $3,300
</TABLE>
- -------------------
* Includes (i) compensation of $5,500 received by Mr. McKenna and $5,250
received by Mr. Dempsey as directors and $7,500 received by Mr. Doherty as
a director and officer of two other investment companies with the same
investment adviser as the Fund, (ii) compensation of $14,500 received by
Mr. Holland as a director of one other investment company with the same
investment adviser as the Fund.
As of March 31, 1997, all officers and directors of the Fund, as a group,
owned both of record or beneficially an aggregate of 93,961 shares
(approximately 3.6% of the 2,610,289 shares outstanding on such date).
12
<PAGE> 41
INVESTMENT ADVISORY AND OTHER SERVICES
Shay Assets Management Co. serves as the Investment Adviser of the Fund;
PFPC Inc. serves as its administrator, transfer agent, dividend paying agent
and shareholder servicing agent; and PNC Bank, N.A. is the custodian for the
Fund. Shay Assets Management Co., PFPC, Inc. and PNC Bank, N.A. have served in
these capacities since May 19, 1995, and the Fund's investment advisory
agreement with Shay Assets Management Co. was approved by the shareholders of
the Fund on June 6, 1995.
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 Investment Advisory Agreement also provides for a reduction in
the fee payable to the Investment Adviser to the extent the expenses of the
Fund would exceed any applicable limit established pursuant to the statutes or
regulations of any jurisdictions in which the Fund's shares are qualified for
offer and sale. The total amount paid by the Fund in 1996 in respect of
investment advisory services was 0.61% of the Fund's average daily net assets
(after all fee reductions and expense limitations).
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 America's Community Banking Partners, Inc., 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 billion at March 31, 1997, and as investment adviser
to Institutional Investors Capital Appreciation Fund, Inc., an investment
company with net assets of approximately $76 million as of March 31, 1997. The
Investment Adviser's principal office is located at 111 East Wacker Drive,
Chicago, Illinois 60601.
13
<PAGE> 42
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 and officers of the Fund also are directors, officers or
employees of the Investment Adviser and its affiliates. 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. The amount paid to PFPC in 1996 for its services as administrative
agent was $62,501 after the fee waiver described below. PFPC also serves as
the transfer agent, registrar, shareholder servicing agent and dividend paying
agent for the Fund's shares and receives additional compensation in such
capacities.
14
<PAGE> 43
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 ended 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
also 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 1996 through a
total of nine brokers, drawn from a list of brokers selected by the Investment
Adviser on the basis of their ability to provide efficient execution of
portfolio transactions and investment research and 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
15
<PAGE> 44
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 1996, 69% of the Fund's brokerage (attributable to purchases of
$14,953,498 and proceeds from sales of $17,778,502) 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 and electronic 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 and statistical
information 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
1994, 1995 and 1996 were $87,747, $78,210, and $36,281, respectively. 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 joint and 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 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.
16
<PAGE> 45
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.
GENERAL INFORMATION
Statements contained in the Prospectus and this Statement of Additional
Information as to the contents of any contract or agreement or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract, agreement or other document filed as an
exhibit to the Registration of which the Prospectus and this Statement of
Additional Information form a part, each such statement being qualified in all
respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements of the Fund for the fiscal year ended
December 31, 1996, including the notes thereto and the report of KPMG Peat
Marwick LLP, contained in the Fund's Annual Report to shareholders for the year
ended December 31, 1996 (the "Annual Report") are incorporated herein by
reference to the Annual Report. Except as set forth above, no other portion of
the Annual Report is incorporated herein. Such financial statements have been
audited by KPMG Peat Marwick LLP and have been incorporated by reference herein
in reliance on the report of KPMG Peat Marwick LLP and the authority of such
firm as experts in accounting and auditing.
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.
17
<PAGE> 46
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 incorporated by
reference 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, 1996
(b) Statement of Assets and Liabilities
as of December 31, 1996
(c) Statement of Operations for the year
ended December 31, 1996
(d) Statements of Changes in Net Assets
for each of the years in the
two-year period ended December 31,
1996
(e) Financial Highlights, Selected Data
for Each Share of Capital Stock
Outstanding Throughout Each Year for
each of the years in the five-year
period ending December 31, 1996
(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> 47
(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. Previously filed with
Post-Effective Amendment No. 38.
(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. Previously filed with Post-Effective
Amendment No. 38.
(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. Previously filed with
Post-Effective Amendment No. 38.
(b) Custodian Services Fees Agreement
dated as of May 19, 1995 between the
Registrant and PNC Bank, National
Association. Previously filed with
Post-Effective Amendment No. 38.
(c) Administration and Accounting,
Transfer Agency and Custodian
Services Fee Waivers Agreement dated
as of May 19, 1995 between the
Registrant, PNC Bank, National
C-2
<PAGE> 48
Association and PFPC Inc. Previously
filed with Post-Effective Amendment
No. 38.
(9) Other Material Contracts
(a) Administration and Accounting
Services Agreement dated as of May
19, 1995 between the Registrant and
PFPC Inc. Previously filed with
Post-Effective Amendment No. 38.
(b) Transfer Agency Services Agreement
dated as of May 19, 1995 between the
Registrant and PFPC Inc. Previously
filed with Post-Effective Amendment
No. 38.
(c) Amended and Restated Distribution
Agreement dated as of April 17, 1997
between the Registrant and Shay
Financial Services Co.
(10) Opinion and consent of Hughes Hubbard & Reed LLP.
(11) Consent of KPMG Peat Marwick LLP.
(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.
(17) Financial Data Schedule.
(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, 1997, the number of record holders of each class of
the Registrant's capital stock were as follows:
Class A Stock: 2,141 record holders
Class B Stock: no record holders
Class C Stock: no record holders
C-3
<PAGE> 49
Class D Stock: no record holders
Class E Stock: no record holders
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, officers and controlling
persons 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, 1996 to July 31, 1997.
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
C-4
<PAGE> 50
officer against any loss arising from fines or penalties imposed by law or
matters which may be deemed uninsurable under the law.
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, the Investment Adviser acts as 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 America's Community
Banking Partners, Inc., 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 America's Community Banking Partners, Inc.
and holds other executive positions with ACB. Mr. McKenna is a
C-5
<PAGE> 51
member of the Board of Directors of ACB, America's Community Banking Partners,
Inc. 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. America's Community Banking
Partners, Inc. owns a majority of the outstanding shares of First Financial
Trust Company.
S.A.M., the managing partner of the Investment Adviser, is located at
111 E. Wacker Drive, Chicago, Illinois 60601 and at 888 Brickell Avenue, 5th
Floor, Miami, FL 33131. 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.
C-6
<PAGE> 52
ITEM 31. MANAGEMENT SERVICES
Not applicable.
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, 1996. The Fund will provide a copy of such report to any
recipient of the prospectus upon request and without charge.
C-7
<PAGE> 53
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. 39 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 30, 1997.
M.S.B. FUND, INC.
By: /s/ JOSEPH R. FICALORA
-----------------------------
Joseph R. Ficalora
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 39 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>
/s/ JOSEPH R. FICALORA President and Director April 30, 1997
------------------------------------------ (Principal Executive Officer)
(Joseph R. Ficalora)
/s/ JAY F. NUSBLATT Treasurer (Principal Financial April 30, 1997
----------------------- Officer)
(Jay F. Nusblatt)
/s/ MALCOLM J. DELANEY Director April 30, 1997
------------------------------------------
(Malcolm J. Delaney)
/s/ TIMOTHY A. DEMPSEY Director April 30, 1997
------------------------------------------
(Timothy A. Dempsey)
/s/ HARRY P. DOHERTY Director April 30, 1997
------------------------------------------
(Harry P. Doherty)
/s/ DAVID FREER, JR. Director April 30, 1997
------------------------------------------
(David Freer, Jr.)
/s/ MICHAEL J. GAGLIARDI Director April 30, 1997
------------------------------------------
(Michael J. Gagliardi)
/s/ DAVID F. HOLLAND Director April 30, 1997
------------------------------------------
(David F. Holland)
</TABLE>
S-1
<PAGE> 54
<TABLE>
<S> <C> <C>
/s/ GEORGE J. KELLY Director April 30, 1997
------------------------------------------
(George J. Kelly)
/s/ WILLIAM A. McKENNA, JR. Director April 30, 1997
------------------------------------------
(William A. McKenna, Jr.)
/s/ NORMAN W. SINCLAIR Director April 30, 1997
------------------------------------------
(Norman W. Sinclair)
/s/ IAN D. SMITH Director April 30, 1997
------------------------------------------
(Ian D. Smith)
</TABLE>
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
-----------
<S> <C>
9(c) Amended and Restated Distribution Agreement dated as of April 17,
1997, between the Registrant and Shay Financial Services Co.
10 Opinion and consent of Hughes Hubbard & Reed LLP
11 Consent of KPMG Peat Marwick LLP
16 Schedule for Computation of Performance Quotations
17 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 9(c)
Amended and Restated Distribution Agreement dated as of April 17,
1997 between the Registrant and Shay Financial Services Co.
<PAGE> 2
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
This Amended and Restated Distribution Agreement is made as of the
17th day of April, 1997 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"), and amends and restates
the Distribution Agreement between the Fund and the Distributor dated as of May
19, 1995.
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 most recent amendment to 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"), 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
<PAGE> 3
(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").
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 in the ordinary
course of business following the procedures set forth in the Fund's Prospectus
as in effect from time to time. 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 of, 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
<PAGE> 4
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.
(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's transfer agent, unless otherwise directed by the Fund.
(c) 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
<PAGE> 5
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.
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 or its affiliates expressly for use in the Registration
Statement or Prospectus.
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.
<PAGE> 6
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 or
its affiliates 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.
<PAGE> 7
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.
<PAGE> 8
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 until October 1, 1997. Thereafter, if not terminated, this Agreement
shall continue automatically for successive terms of one year expiring on
September 30 of each 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.
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
<PAGE> 9
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 agreement to
be executed by their officers designated below as of the day and year first
above written.
M.S.B. FUND, INC.
By /s/ JOSEPH R. FICALORA
Joseph R. Ficalora
Attest: /s/ EDWARD E. SAMMONS, JR. President
Secretary
SHAY FINANCIAL SERVICES CO.
By: /s/ RODGER D. SHAY
Rodger D. Shay
President,
Attest: /s/ ROBERT T. PODRAZA Shay Financial Services, Inc.,
Secretary Managing Partner
<PAGE> 1
EXHIBIT 10
Opinion and Consent of Hughes Hubbard & Reed LLP
<PAGE> 2
Hughes Hubbard & Reed LLP One Battery Park Plaza
New York, New York 10004-1482
Telephone: 212-837-6000
Facsimile: 212-422-4726
April 30, 1997
M.S.B. Fund, Inc.
200 Park Avenue, 45th Floor
New York, New York 10166
Dear Sirs:
You have requested our opinion in connection with the filing of
Post-Effective Amendment No. 39 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. 39, 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.
<PAGE> 3
We hereby consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 39 to Registration Statement No. 2-22542.
Very truly yours,
/s/ HUGHES HUBBARD & REED LLP
<PAGE> 1
EXHIBIT 11(a)
Consent of KPMG Peat Marwick LLP
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
To the Directors
M.S.B. Fund, Inc.
We consent to the use of our report dated February 4, 1997 incorporated by
reference herein and to the references to our firm under the heading
"Financial Highlights" in the Prospectus and under the headings of "Independent
Auditors" and "Financial Statements" in the Statement of Additional Information
in the Registration Statement.
/s/ KPMG PEAT MARWICK LLP
Philadelphia, PA
April 28, 1997
<PAGE> 1
EXHIBIT 16
Schedule for Computation of Performance Quotations
<PAGE> 2
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:
<TABLE>
<CAPTION>
M.S.B. FUND, INC. TOTAL RETURN DATA
PERIODS ENDED DECEMBER 31, 1996
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)* $1,211.60 $1,488.70 $1,987.40 $3,169.10
Total Return 21.16% 48.87% 98.74% 216.91%
((ERV/P)-1) x 100
Average Annual Total Return 21.16% 14.18% 14.72% 12.23%
((ERV/P)(1/n) - 1) x 100
[n=number of years in period]
</TABLE>
* Assumes (i) reinvestment of all dividends and distributions and (ii)
deduction of all applicable charges and expenses.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS OF THE FUND CONTAINED IN THE FUND'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS (INCLUDING THE NOTES
THERETO).
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 29257580
<INVESTMENTS-AT-VALUE> 37277781
<RECEIVABLES> 92589
<ASSETS-OTHER> 22894
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 37393264
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34204
<TOTAL-LIABILITIES> 34204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29344845
<SHARES-COMMON-STOCK> 2558271
<SHARES-COMMON-PRIOR> 2385057
<ACCUMULATED-NII-CURRENT> 254835
<OVERDISTRIBUTION-NII> 5986
<ACCUMULATED-NET-GAINS> 3295884
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8020201
<NET-ASSETS> 37359060
<DIVIDEND-INCOME> 572946
<INTEREST-INCOME> 182272
<OTHER-INCOME> 0
<EXPENSES-NET> 500383
<NET-INVESTMENT-INCOME> 254835
<REALIZED-GAINS-CURRENT> 3295884
<APPREC-INCREASE-CURRENT> 3357338
<NET-CHANGE-FROM-OPS> 6908057
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 338202
<DISTRIBUTIONS-OF-GAINS> 4200893
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 251166
<NUMBER-OF-SHARES-REDEEMED> 332365
<SHARES-REINVESTED> 254413
<NET-CHANGE-IN-ASSETS> 4849926
<ACCUMULATED-NII-PRIOR> 202291
<ACCUMULATED-GAINS-PRIOR> 6187058
<OVERDISTRIB-NII-PRIOR> 77381
<OVERDIST-NET-GAINS-PRIOR> 905009
<GROSS-ADVISORY-FEES> 267615
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 574954
<AVERAGE-NET-ASSETS> 35681997
<PER-SHARE-NAV-BEGIN> 13.63
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 2.76
<PER-SHARE-DIVIDEND> .14
<PER-SHARE-DISTRIBUTIONS> 1.76
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.60
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
