<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. 40............................ x
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940............................... x
Amendment No. 40........................................... 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, 1998 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.
Title of Securities Being Registered: Class A Stock, par value $.001 per share
==============================================================================
<PAGE> 2
M.S.B. FUND, INC.
-----------------------
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- --------
PART A INFORMATION REQUIRED IN A PROSPECTUS
<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. Pending Legal Proceedings............. Not Applicable
PART B INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
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 Registrant.......... 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; Officers and
Directors of the Fund; 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 OTHER INFORMATION
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, 1998
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, 1998, 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,
Inc., 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......................... 10
Performance Information................. 11
Redemption of Fund Shares............... 11
Dividends, Distributions and Federal
Income Tax Status..................... 14
Officers and Directors of the Fund...... 15
Investment Advisory and Other
Services.............................. 15
Description of Securities............... 17
Additional Information.................. 17
Account Application..................... 19
Automatic Investment
Plan -- Instructions.................. 21
Automatic Investment Plan Application... 23
</TABLE>
------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fees (after adjustment for fee reduction)............. 0.67%
Other Expenses................................................... 0.74%
Administration, Transfer Agent and Custodian Fees
(after adjustment for fee reduction).................. 0.27%
Professional and Directors' Expenses................... 0.31%
Insurance, Printing and Miscellaneous Expenses......... 0.16%
----
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, 1997. 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 0.33%,
respectively, and Total Fund Operating Expenses would be 1.55% 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 $250 ($50 for
investors enrolling in the Automatic Investment Plan). Subsequent purchases
may be made in amounts of $50 or more ($50 per month for investors
enrolling in the Automatic Investment Plan). 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,
Inc. 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.
3
<PAGE> 6
M.S.B. FUND, INC.
FINANCIAL HIGHLIGHTS
The financial information set forth below for the years 1993 through 1997 has
been audited by KPMG Peat Marwick LLP, independent auditors, whose report
thereon is included in the Fund's 1997 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
1997 Annual Report to Shareholders which is available without charge upon
request to the Fund.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of
year............................. $ 17.23 $ 16.40 $ 17.82 $ 14.54 $ 14.62 $ 15.67 $ 16.79
======= ======= ======= ======= ======= ======= =======
Income from investment operations:
Net investment income............ .38 .26 .39 .22 .22 .18 .16
Net realized and unrealized gain
(loss) on investments.......... 1.27 4.27 (1.69) 2.18 1.33 3.04 (.44)
------- ------- ------- ------- ------- ------- -------
Total from investment operations... 1.65 4.53 (1.30) 2.40 1.55 3.22 (.28)
Less distributions:
From net investment income....... (.37) (.25) (.40) (.21) (.28) (.17) (.18)
From net realized gains.......... (2.11) (2.86) (1.58) (2.11) (.22) (1.93) (2.94)
------- ------- ------- ------- ------- ------- -------
Total distributions................ (2.48) (3.11) (1.98) (2.32) (0.50) (2.10) (3.12)
------- ------- ------- ------- ------- ------- -------
Net asset value at end of year..... $ 16.40 $ 17.82 $ 14.54 $ 14.62 $ 15.67 $ 16.79 $ 13.39
======= ======= ======= ======= ======= ======= =======
Total return....................... 9.78% 28.06% (7.40)% 16.97% 10.66% 20.64% (1.70)%
Ratios/Supplemental Data
Net assets end of year (in
thousands)....................... $49,076 $51,771 $42,109 $41,346 $40,790 $45,205 $35,022
Ratio of expenses to average net
assets........................... 1.19% 1.20% 1.39% 1.86% 1.13% 1.12% 1.28(2)
Ratio of net investment income to
average net assets............... 2.06% 1.30% 2.38% 1.36% 1.43% 1.01% 0.97%
Portfolio turnover rate............ 19% 29% 31% 17% 13% 26% 62%
Average commission rate per
share............................ -- -- -- -- -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995(1) 1996 1997
------- ---- ----
<S> <C> <C> <C>
Net asset value at beginning of
year............................. $ 13.39 $ 13.63 $ 14.60
======= ======= =======
Income from investment operations:
Net investment income............ .08 .11 .07
Net realized and unrealized gain
(loss) on investments.......... 3.17 2.76 4.10
------- ------- -------
Total from investment operations... 3.25 2.87 4.17
Less distributions:
From net investment income....... (.08) (.14) (.07)
From net realized gains.......... (2.93) (1.76) (.97)
------- ------- -------
Total distributions................ (3.01) (1.90) (1.04)
------- ------- -------
Net asset value at end of year..... $ 13.63 $ 14.60 $ 17.73
======= ======= =======
Total return....................... 24.97% 21.16% 28.88%
Ratios/Supplemental Data
Net assets end of year (in
thousands)....................... $32,509 $37,358 $49,267
Ratio of expenses to average net
assets........................... 1.69%(2) 1.41%(2) 1.41%(2)
Ratio of net investment income to
average net assets............... 0.57% 0.71% 0.43%
Portfolio turnover rate............ 68% 45% 23%
Average commission rate per
share............................ -- $0.0443 $0.0475
</TABLE>
- ------------------
(1) Effective May 19, 1995, the Fund engaged Shay Assets Management Co., the
predecessor of the current investment adviser, as its investment adviser on
the same terms applicable under the Funds current investment advisory
agreement.
(2) Without the fee waivers for the years ended December 31, 1997, 1996, 1995
and 1994, the ratio of expenses to average net assets would have been 1.55%,
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 an order for redemption,
together with an appropriate signature guarantee for redemptions of more than
$10,000 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 by non-institutional
investors, 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 your Make your check payable to M.S.B. Fund, Inc.
check payable to M.S.B. Fund, Inc. and send and mail it to the address at the left. Put
to: your account name, address and M.S.B. Fund
M.S.B. Fund, Inc. account number on your check. Subsequent
c/o PFPC Inc. investment forms will be included with each
P.O. Box 8905 shareholder statement for your convenience.
Wilmington, DE 19899-8905 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 to ad-
c/o PFPC Inc. dress at left.
400 Bellevue Parkway
Wilmington, DE 19809
BY TELEPHONE Telephone transactions may not be used for All subsequent investments made by telephone
initial purchases. If you want to make must be paid by wire transfer.
subsequent telephone transactions 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 Fund Please carefully follow instructions at left
that you intend to purchase shares by wire and and include the following information:
to verify wire instructions. Then, wire funds Shareholder Account #
care of Shareholder Name/Registration
PNC Bank, N.A., Philadelphia, PA Taxpayer Identification Number.
ABA#: 031000053
Credit: BNF M.S.B. Fund DDA#8610304163
Further credit: (Shareholder Name and Account
Number)
INSTITUTIONAL First, open an account by submitting a Follow the directions to the left.
INVESTORS -- NEXT completed account application by mail or
DAY overnight courier. Then, notify the Fund by
SETTLEMENT calling 800-661-3938 that you desire to
purchase shares with next day settlement,
indicating the amount of the investment or the
number of shares you desire to purchase and,
if submitting the purchase order by fax,
transmit the fax to 302-791-4088. Then, wire
funds using the wire instructions above.
Federal funds must be received by 4:00 P.M.
New York City time or the order will be
canceled.
AUTOMATIC INVESTMENT See the description of the Automatic This feature must be set up by you in advance.
PROGRAM Investment Program on page 9.
</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. Except for orders by
institutional investors electing next day settlement, 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 to be issued will be determined by dividing the amount tendered
by the net asset value at which the purchase is to be made. 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 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 $250 ($50 for investors
enrolling in the Automatic Investment Plan). The minimum initial investment for
IRAs is also $50. There is a $50 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. 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. Shares held in open account
entitle the shareholder to all benefits of share ownership. 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 $50 or more ($50 per month for
investors enrolling in the Automatic Investment Plan). Orders are subject to
acceptance by the Fund. All such purchases are made at net asset value next
determined after receipt by the Fund of the order form and, except for orders by
institutional investors electing next day settlement, 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 regular and Roth 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
plans, 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.
NEXT DAY SETTLEMENT OPTION FOR INSTITUTIONAL INVESTORS
M.S.B. Fund, Inc. makes available to institutional investors, including but
not limited to banks, savings associations, trust companies, broker-dealers and
other institutions, whether acting for themselves or their customers, the
ability to elect next day settlement of purchase orders for shares of the Fund.
Under these arrangements an institutional investor may submit an order to
purchase shares by telephone or facsimile transmission and must transmit the
funds in payment for the purchase by Federal
9
<PAGE> 12
funds wire transfer no later than the following day. The purchase price for
the shares will be the net asset value per share next determined after receipt
and acceptance of the order to purchase. Institutional investors may submit
purchase orders by telephone for their initial investment in the Fund or any
subsequent investment. The investor must indicate to the Fund at the time the
purchase order is placed whether same day or next day settlement is sought.
Payment for telephone or faxed purchase orders must be made by Federal funds
wire transfer received by PNC Bank by 4:00 P.M., New York City time, on the date
designated for settlement. If payment in Federal funds is not received by such
time, the order will be canceled. Investors making their initial investments in
the Fund must first open an account with the Fund by submitting a completed
account application. Account applications may be obtained by calling the Fund at
1-800-661-3938. See "Summary of Share Purchase Options" for wiring and faxing
instructions.
A purchase order for next day settlement is binding upon the investor. Should
it be necessary to cancel an order because payment was not timely received, the
investor will be responsible for the difference between the price of the shares
when ordered and the price of the shares when the order is canceled and for any
fees or other losses and expenses incurred by the Fund. The Fund may redeem
shares from the investor's account in an amount equal to the amount of such
difference in share price and such fees and other losses and expenses, if any,
and may retain the proceeds of such redemption in satisfaction of the investor's
liability to the Fund. The investor will continue to be responsible for any
deficiency. In addition, the Fund may prohibit or restrict the investor from
electing next day settlement in the future or from making future purchases of
the Fund's shares.
Any Federal funds received in respect of a canceled purchase order will be
returned upon instructions from the sender without any liability to the Fund,
the Investment Adviser, the Distributor or PNC Bank. If it is not possible to
return such Federal funds the same day, the sender will not have use of such
funds until the next business day on which it is possible to effect such return.
The Fund reserves the right to reject any purchase order.
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, Martin
Luther King's Birthday, 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 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 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
ex-
10
<PAGE> 13
change 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 is 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, 1997, 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.
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. 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. Redemptions in
excess of $10,000 may require a signature guarantee. See "--Signature
Guarantee."
11
<PAGE> 14
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.
SIGNATURE GUARANTEE. Except for redemption requests by 401(k) plan omnibus
accounts and redemptions by institutional investors, the signature(s) on
redemption requests that are greater than $10,000 must be guaranteed by a
domestic bank or trust company, broker-dealer, clearing agency, credit union or
savings association (a "Qualified Guarantor"). For redemptions in excess of
$25,000, the signature(s) must be guaranteed by a Qualified Guarantor that is a
participant in a medallion program recognized by the Securities Transfer
Association. The three recognized medallion programs are Securities Transfer
Agents Medallion (STAMP), Stock Exchanges Medallion Program (SEMP) and New York
Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees
that are not a part of these programs will not be accepted for redemptions in
excess of $25,000. A signature guarantee is designed to protect you and the Fund
against fraudulent transactions by unauthorized persons.
In addition to the signature guarantee requirements described above, if the
proceeds of the redemption (i) are to be paid to a person other than the record
owner, or (ii) are to be sent to an address other than the address on the
Transfer Agent's records or within thirty (30) days after the Transfer Agent has
been notified of an address change, the signature(s) on the redemption request
and on the certificates, if any, or stock power must be guaranteed by a
"Qualified Guarantor". The Transfer Agent reserves the right to request
additional information from, and make reasonable inquiries of, any eligible
guarantor institution.
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.
Institutional investors are not restricted as to the frequency or the maximum
amount of redemptions that can be made by telephone.
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 re-
12
<PAGE> 15
deemed 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. An individual shareholder who
holds Fund shares in non-certificate form may elect to have redemption proceeds
of $5,000 or more wired to the shareholder's brokerage account or a commercial
bank account designated by the shareholder. The bank wire charge for this
service is $7.50. Institutional buyers are not restricted as to the minimum or
maximum amount of redemption proceeds that may be transmitted to them by wire
transfer.
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.
13
<PAGE> 16
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 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. Net long-term capital
gains received by individual
14
<PAGE> 17
shareholders, including long-term capital gain distributions by the Fund, are
generally taxed at a maximum rate of 28% for assets held longer than one year
but less than 18 months, or at 20% for assets held for more than 18 months. Net
long-term capital gains received by corporate shareholders are taxed at the same
rates as ordinary income. 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.
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 (although such
shares must be held for more than 18 months in order to qualify for the 20%
maximum tax rate), 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, Inc. 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, Inc.
(the "Investment Adviser"), which, together with its predecessor, Shay Assets
Management Co., has served as the Fund's investment adviser since 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
15
<PAGE> 18
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 1997 in respect of investment advisory services was 0.67% of the
Fund's average net assets.
The Investment Adviser is a Florida corporation that is controlled by Rodger
D. Shay, who is a Vice President of the Fund. The Investment Adviser, with its
principal office located at 111 East Wacker Drive, Chicago, Illinois 60601, is a
registered investment adviser under the Investment Advisers Act of 1940 and
serves as investment adviser to Asset Management Fund, Inc., a registered
investment company comprising five fixed-income portfolios with aggregate net
assets of approximately $1.2 billion at March 31, 1998, and as investment
adviser to Institutional Investors Capital Appreciation Fund, Inc., which had
net assets at March 31, 1998, of approximately $106 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 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 agreed to
waive 25% of any applicable minimum charges during the second year of the
agreements, which year ended May 18, 1997. PFPC has further agreed to waive
voluntarily 25% of such applicable minimum charges during the third and fourth
years of the agreements, ending May 18, 1998 and May 18, 1999, respectively.
DISTRIBUTOR
Shay Financial Services, Inc. (the "Distributor") acts as the distributor of
the Fund. The Distributor is a Florida corporation that is controlled by Rodger
D. Shay, a Vice President of the Fund.
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
Dis-
16
<PAGE> 19
tributor 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, Inc.
Mr. McCabe is Senior Vice President of the Investment Adviser. Mr. McCabe
previously served as Senior Vice President and Chief Investment Officer of
Nationar, the Fund's former investment adviser, from August 1991 through May
1995 and in that capacity had responsibility for the Fund's investments. Prior
to joining Nationar he served as Managing Director and Portfolio Manager at
Sterling Manhattan Corporation, an investment banking firm, for approximately
three years. Prior to that Mr. McCabe served in various positions at Bankers
Trust Company, including Director of Investment Research and Managing Director
of the Investment Management Group. Mr. McCabe is a director and past President
of the New York Society of Security Analysts, a past director of the Financial
Analysts Federation and a member and founding Governor of The Association for
Investment Management and Research.
Mr. Trautman is Vice President of the Investment Adviser. 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.
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, Inc., 111 East Wacker Drive, Chicago,
Illinois 60601 or by calling 800-661-3938.
17
<PAGE> 20
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<PAGE> 21
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 _____
IMPORTANT! PLEASE COMPLETE REVERSE SIDE
</TABLE>
<PAGE> 22
- --------------------------------------------------------------------------------
3. YOUR INVESTMENT (MINIMUM $250; 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 $ ($50
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 my (our) account only.
- ------------------------------------- ------------------------
Name of Bank Account No.
- --------------------------------------------------------------------------------
Address of Bank City State Zip
- ------------------------- -----------------------------------------------
Bank Routing ID No. Name of account holder
- --------------------------------------------------------------------------------
7. YOUR SIGNATURE
The undersigned warrants that he/she has full authority and is of legal age to
purchase shares of the Fund. I have received and read a current Prospectus of
the Fund and agree to its terms. The Fund's Transfer Agent will not be liable
for acting upon instructions it believes are genuine. Under penalties of
perjury, the undersigned whose Social Security (Tax I.D.) number is shown above
certifies that (i) the number is my correct taxpayer identification number and
(ii) currently I am not under IRS notification that I am subject to backup
withholding. If no such number is shown, the undersigned further certifies,
under penalties of perjury, that either (a) no such number has been issued, and
a number has been or soon will be applied for and, if a number is not provided
to you within sixty days, the undersigned understands that all payments
(including redemptions) are subject to 31% withholding under Federal tax law,
until a number is provided; or (b) that the undersigned is not a citizen or
resident of the U.S. and either does not expect to be in the U.S. for 183 days
during each calendar year and does not conduct a business in the U.S. which
would receive any gain from the Fund, or is exempt under an income tax treaty.
<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> 23
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 ($50 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
$250 for those who do not have an existing account ($50 for investors
enrolling in the Automatic Investment Plan).
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> 24
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 25
<TABLE>
<S> <C> <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
</TABLE>
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT $250
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 [ ] $50 [ ] $100 [ ] $250 [ ] other
------------------------------ ($50 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
<PAGE> 26
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> 27
NOTES
<PAGE> 28
NOTES
<PAGE> 29
[M.S.B.]
FUND, INC.
M.S.B. Fund, Inc.
c/o Shay Financial Services,Inc.
111 East Wacker Drive
Chicago, Illinois 60601
Telephone 800-661-3938
<TABLE>
<S> <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 William A. McKenna, Jr.
Joseph R. Ficalora Norman W. Sinclair
David Freer, Jr. Ian D. Smith
</TABLE>
<PAGE> 30
-----------------------------
---------------------
M.S.B.
FUND, INC.
---------------------
-----------------------------
M.S.B. Fund, Inc.
c/o Shay Financial Services, Inc.
111 East Wacker Drive
Chicago, Illinois 60601
Telephone 800-661-3938
INVESTMENT ADVISER
Shay Assets Management, Inc.
111 East Wacker Drive
Chicago, Illinois 60601
DISTRIBUTOR
Shay Financial Services, Inc.
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, 1998
A NO-LOAD FUND
-------------------
PRIMARY OBJECTIVE:
CAPITAL APPRECIATION
-------------------
SECONDARY OBJECTIVE:
INCOME
<PAGE> 31
M.S.B.
FUND, INC.
------------------------------------------------
M.S.B. Fund, Inc.
PRIMARY OBJECTIVE: c/o Shay Financial Services, Inc.
CAPITAL APPRECIATION 111 East Wacker Drive
Chicago, Illinois 60601
800-661-3938
SECONDARY OBJECTIVE:
INCOME
STATEMENT OF
ADDITIONAL
INFORMATION
May 1, 1998
This Statement of Additional Information is
not a prospectus. It should be read in
conjunction with the Prospectus of the Fund,
dated May 1, 1998. A copy of the
Prospectus may be obtained from the Fund
at the address set forth above or by calling
800-661-3938.
------------------------------------------------
<PAGE> 32
<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 ............................................... 15
Distributor .............................................................. 16
Independent Auditors ....................................................... 16
Purchase and Sale of Portfolio Securities .................................. 16
Expenses of the Fund ....................................................... 17
Description of Capital Stock ............................................... 18
General Information ........................................................ 18
Financial Statements ....................................................... 18
</TABLE>
(i)
<PAGE> 33
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> 34
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> 35
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 68%, 45% and 23% in 1995,
1996 and 1997, 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. The Fund's portfolio turnover
rate was lower in 1997 than in 1996 as fewer securities were required to be
sold to meet redemption or other cash requirements.
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 by non-institutional investors, payment.
3
<PAGE> 36
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, 1997.
M.S.B. FUND INC.
DECEMBER 31, 1997 VALUATION SHEET
<TABLE>
<S> <C>
Investment in securities, at value...................... $49,168,766
Cash.................................................... 56
Receivable for fund shares sold......................... 13,362
Dividends and interest receivable....................... 80,207
Prepaid expenses........................................ 43,986
-----------
Total assets....................................... $49,306,377
-----------
Less:
Accrued expenses payable................................ 38,901
-----------
Net assets.............................................. $49,267,476
===========
Number of shares outstanding............................ 2,778,548
Net asset value, offering and redemption price per share $17.73
===========
</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, 1997,
and the average annual total return for such periods:
M.S.B. FUND, INC. TOTAL RETURN DATA
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997
------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Total Return................... 28.88% 95.15% 131.45% 290.09%
Average Annual Total Return.... 28.88% 24.97% 18.27% 14.58%
</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 period. For
example, as indicated in the table above, a 18.27% average annual rate of
return would produce a total return of 131.45% over a five-year period. The
performance information
4
<PAGE> 37
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> 38
OFFICERS AND DIRECTORS OF THE FUND
The Fund has ten 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 51)* 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 of Queens County Savings Bank, its principal subsidiary, since
1989. Mr. Ficalora previously served as President and Chief Operating
Officer of Queens County Savings Bank. Mr. Ficalora also previously served
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 57)* First Vice President and
36 Pacific Street Director (1999)
Newark, NJ 07105
Mr. Gagliardi is President, Chief Executive Officer and a director of
Ironbound Bankcorp and its principal subsidiary, 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 Wilson's Disease. Mr.
Gagliardi has served as First Vice President of the Fund since April 1997.
6
<PAGE> 39
NORMAN W. SINCLAIR (Age 73)* 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.
Mr. Sinclair also serves as Treasurer and Secretary of Townline Bowl Inc.,
which owns and operates bowling lanes. Mr. Sinclair has served as Second
Vice President of the Fund since April 1997.
MALCOLM J. DELANEY (Age 71) Director (2001)
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 64) Director (1999)
18 Oakland Avenue
Warwick, NY 10990-0591
Mr. Dempsey serves as President and Chief Executive Officer and as a
director of Warwick Community Bancorp, Inc. and has been President and Chief
Executive Officer of its principal subsidiary, The Warwick Savings Bank,
since 1985. Mr. Dempsey also serves as a director and as Executive Vice
President of Institutional Investors Capital Appreciation Fund, Inc., an
investment company registered under the Investment Company Act of 1940 for
which Shay Assets Management, Inc. also acts as investment adviser.
HARRY P. DOHERTY (Age 55)** Director (1999)
15 Beach Street
Staten Island, New York 10304
Mr. Doherty serves as Chairman and Chief Executive Officer and as a director
of Staten Island Bancorp, Inc. and has been Chairman and Chief Executive
Officer of its principal subsidiary, 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,
Inc. also acts as investment adviser. Mr. Doherty also serves as a director
of America's Community Bankers, which until December 7, 1997, owned through
subsidiaries a 50% interest in Shay Assets Management Co. and Shay Financial
Services Co., which served as the Fund's investment adviser and distributor,
respectively, from May 1995 to December 7, 1997. Mr. Doherty also is a
director of Community Bankers Association of New York State.
7
<PAGE> 40
DAVID FREER, JR. (Age 58) Director (2001)
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 1990 to 1997, and as Vice President of the Fund from 1985 through
1990.
DAVID F. HOLLAND (Age 56) Director (2000)
17 New England Executive Park
Burlington, Massachusetts 01803
Mr. Holland has been 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, Inc. acts as investment adviser, and formerly
served as Chairman of America's Community Banking Partners, Inc. and as a
director of ACB Investment Services, Inc., which, until December 7, 1997,
owned through a subsidiary a 50% interest in Shay Assets Management Co. and
Shay Financial Services Co., which served as the Fund's investment adviser
and distributor, respectively, from May 1995 to December 7, 1997. Mr.
Holland also is a director of NYCE Corporation. He was a member of the
Thrift Industry Advisory Council from 1995 to 1997 and served as its
President in 1997. See "--Certain Other Affiliations and Business
Relationships."
WILLIAM A. McKENNA, JR. (Age 61) Director (2001)
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., an investment company registered under the Investment Company Act of
1940 for which Shay Assets Management, Inc. acts as investment adviser. 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 and Boys Hope/Girls Hope.
8
<PAGE> 41
IAN D. SMITH (Age 74) 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 61) Vice President and Assistant
1000 Brickell Avenue Secretary
Miami, FL 33131
Mr. Shay has been Chairman and the sole director of the Fund's investment
adviser, Shay Assets Management, Inc., since November 1997 and previously
served as its President and as a director from 1990 to 1997. Mr. Shay also
has served as Chairman and the sole director of the Fund's distributor, Shay
Financial Services, Inc., since November 1997 and previously served as its
President and as a director from 1990 to 1997. Mr. Shay held similar
positions with Shay Assets Management Co. and Shay Financial Services Co.,
which served as the Fund's investment adviser and distributor, respectively,
from 1995 through December 1997. He serves or has previously served in the
following capacities: Chairman and a Director, Asset Management Fund, Inc.,
a registered investment company; Vice President and Assistant Secretary of
Institutional Investors Capital Appreciation Fund, Inc., a registered
investment company; Director, First Home Savings Bank, S.L.A. since 1990.
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.
EDWARD E. SAMMONS, JR. (Age 58) Vice President and
111 East Wacker Drive Secretary
Chicago, IL 60601
Mr. Sammons has been President of the Fund's investment adviser, Shay Assets
Management, Inc., since November 1997 and previously served as its Executive
Vice President from 1990 to 1997. Mr. Sammons also has served as Executive
Vice President of the Fund's distributor, Shay Financial Services, Inc.,
since 1990. He also held the position of Executive Vice President with Shay
Assets Management Co. and Shay Financial Services Co., which served as the
Fund's investment adviser and distributor, respectively, from 1995 through
December 1997. He serves or has previously served in the following
capacities: President and Treasurer of Asset Management Fund, Inc., a
registered investment company; Vice President and Secretary of Institutional
Investors Capital Appreciation Fund, Inc.; Vice
9
<PAGE> 42
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.
JOHN J. McCABE (Age 54) 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.,
since June 1995 and held the comparable position with Shay Assets Management
Co. through December 1997. From August 1991 through May 1995, he was Senior
Vice President and Chief Investment Officer of Nationar. He also serves as
a Vice President of Institutional Investors Capital Appreciation Fund, Inc.
He previously served as Managing Director and Portfolio Manager at Sterling
Manhattan Corporation, an investment banking firm, for approximately three
years and in various positions at Bankers Trust Company, including Director
of Investment Research and Managing Director of the Investment Management
Group. Mr. McCabe is a director and past President of the New York Society
of Security Analysts, a past director of the Financial Analysts Federation
and a member and founding Governor of The Association for Investment
Management and Research.
MARK F. TRAUTMAN (Age 32) Vice President
200 Park Avenue, 45th Floor
New York, New York 10166
Mr. Trautman has been a Vice President of Shay Assets Management, Inc.,
since June 1995 and held the comparable position with Shay Assets Management
Co. through December 1997. He 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 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. From
June 1987 through November 1988, Mr. Trautman held the position of Treasury
Analyst at Thomson McKinnon Securities, Inc., a securities brokerage firm.
He is also a member of The New York Society of Security Analysts and The
Association for Investment Management and Research.
10
<PAGE> 43
JAY F. NUSBLATT (Age 37) 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.
** This director may be regarded as an "interested person" under the
Investment Company Act of 1940 because he is a director of America's
Community Bankers. See "--Certain Other Affiliations and Business
Relationships."
The Fund has an Executive Committee, composed of Messrs. Joseph R.
Ficalora, Michael J. Gagliardi, David Freer, Jr. and Ian D. Smith, which meets
from time to time between meetings of the Board, as necessary, to consider
matters concerning the Fund. Subject to limitations provided by law or the
Fund's by-laws, the Executive Committee is authorized to exercise the power and
authority of the Board of Directors as may be necessary during the intervals
between meetings of the Board of Directors.
CERTAIN OTHER AFFILIATIONS AND BUSINESS RELATIONSHIPS
Certain officers and directors of the Fund are also officers, employees,
directors or shareholders of Shay Assets Management, Inc. ("SAMI") and Shay
Financial Services, Inc. ("SFSI"). Messrs. Rodger D. Shay, Edward E. Sammons,
Jr., John J. McCabe and Mark F. Trautman, who are officers of the Fund, are
officers and employees of SAMI. Mr. Shay is the sole director of SAMI, SFSI
and Shay Investment Services, Inc. ("SISI"), which is the sole stockholder of
SAMI and SFSI. Mr. Shay also is the majority stockholder of SISI.
Messrs. Harry P. Doherty and David F. Holland, who are directors of the
Fund, also hold or have recently held positions with affiliates of Shay Assets
Management Co., which, prior to December, 1997, served as the Fund's investment
adviser. Mr. Doherty is a director of America's Community Bankers (the
"Association"). Until December of 1997, Mr. Holland held positions with
subsidiaries of the Association, including the position of director of ACB
Investment Services, Inc., which was a general partner in the Fund's prior
investment adviser, Shay Assets Management Co. Mr. Holland also served as a
director and officer of the Association prior to 1996. Mr. Doherty may be
considered an "interested person" as the result of his continued position with
the Association and the interest of the Association in certain royalty and
other payments that will be made by SISI and its affiliates to the Association
and its affiliates. Because Mr. Holland has resigned his positions with the
Association and its affiliates, Mr. Holland will not be deemed to be an
"interested person," unless the Securities and Exchange
11
<PAGE> 44
Commission by order determines that Mr. Holland is an "interested person" by
virtue of having a material relationship with the Fund's investment adviser or
distributor as a result of his prior positions with the Association and its
affiliates.
COMPENSATION OF DIRECTORS AND OFFICERS
The directors of the Fund receive compensation for their services as
directors of the Fund consisting of a $3,000 annual retainer per director,
payable in four quarterly installments, and a per-meeting fee of $500 for each
meeting of the Board of Directors attended. The Board of Directors holds its
regular meetings quarterly. Directors also are reimbursed their reasonable
expenses incurred in attending meetings or otherwise incurred in connection
with their attention to the affairs of the Fund. In recognition of the
additional responsibilities and duties performed by the President of the Fund,
the President receives an additional annual retainer of $2,000, payable in four
quarterly installments, which is in addition to compensation the President
receives as a director. The other officers of the Fund do not receive any
compensation from the Fund other than the compensation they may receive as
directors of the Fund. 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 fee is payable for telephonic meetings of
the Board of Directors or any committee.
The total compensation received by directors and officers of the Fund for
service during 1997 was $58,500. The total amount of expenses incurred during
1997 for which the directors were reimbursed was $6,001 .
The following table sets forth the aggregate compensation received by each
director of the Fund from the Fund and any other investment company having the
same investment adviser for services as a director or officer during 1997.
Such compensation does not include reimbursements to the directors for their
expenses incurred in connection with their activities as directors.
12
<PAGE> 45
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM THE FUND
NAME OF DIRECTOR FROM THE FUND AND FUND COMPLEX
- ---------------------------------- ------------- ------------------
<S> <C> <C>
Malcolm J. Delaney................ $5,500 $5,500
Timothy A. Dempsey................ $4,250 $10,250*
Harry P. Doherty.................. $5,000 $12,000*
Joseph R. Ficalora................ $6,500 $6,500
David Freer, Jr................... $6,500 $6,500
Michael J. Gagliardi.............. $5,500 $5,500
David F. Holland.................. $4,250 $21,250*
George J. Kelly................... $4,000 $4,000
William A. McKenna, Jr............ $5,750 $11,250*
Norman W. Sinclair................ $5,500 $5,500
Ian D. Smith...................... $5,750 $5,750
</TABLE>
- ---------------
* Includes compensation of $6,000, $17,000 and $5,500 received by Messrs.
Dempsey, Holland and McKenna as directors and $7,000 received by Mr.
Doherty as a director and officer of one other investment company with the
same investment adviser as the Fund.
As of December 31, 1997, all officers and directors of the Fund, as a
group, owned both of record or beneficially an aggregate of 135,625 shares of
the Fund (approximately 4.9% of the 2,778,548 shares outstanding on such date).
INVESTMENT ADVISORY AND OTHER SERVICES
Shay Assets Management, Inc. 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, Inc. (together with its predecessor, Shay Assets
Management Co.), PFPC, Inc. and PNC Bank, N.A. have served in these capacities
since May 19, 1995, and the Fund's current investment advisory agreement with
Shay Assets Management, Inc. was approved by the shareholders of the Fund on
November 13, 1997.
INVESTMENT ADVISER
Investment decisions for the Fund are made by the Fund's investment
adviser, Shay Assets Management, Inc. (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"), the Investment Adviser receives a fee from the Fund
13
<PAGE> 46
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 amounts
paid by the Fund to the Investment Adviser and its predecessor, Shay Assets
Management Co. for the period May 19, 1995 to December 31, 1995, and for the
years ended December 31, 1996 and 1997 in respect of investment advisory
services were $159,455, $216,493 and $294,823, respectively, representing
0.45%, 0.61% and 0.67% of the Fund's average daily net assets (after all fee
reductions and expense limitations).
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 $1.2 billion
at March 31, 1998, and as investment adviser to Institutional Investors Capital
Appreciation Fund, Inc., an investment company with net assets of approximately
$106 million as of March 31, 1998.
The Investment Adviser, Shay Assets Management, Inc., is a Florida
corporation that is controlled by Rodger D. Shay. The Investment Adviser is a
wholly-owned subsidiary of Shay Investment Services, Inc., which is the holding
company for the Fund's Investment Adviser and Distributor and certain other
related companies engaged primarily in securities-related businesses. Rodger
D. Shay is the majority stockholder of Shay Investment Services, Inc. The
Investment Adviser's principal office is located at 111 East Wacker Drive,
Chicago, Illinois 60601.
Under the Investment Advisory Agreement, the Investment Adviser is not
liable to the Fund for any error of judgment or mistake of law or for any loss
suffered by the Fund, except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the agreement.
The Investment Advisory Agreement will continue in effect from year to
year, subject to termination by the Fund or the Investment Adviser as described
below, if such continuance is approved at least annually by the vote of the
Fund's Board of Directors and a majority of the directors of the Fund who are
not "interested persons" of the Fund or of the Investment Adviser.
14
<PAGE> 47
The Investment Adviser may terminate the Investment Advisory Agreement
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.
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 amounts paid to PFPC for
the period May 19, 1995 to December 31, 1995, and for the years ended December
31, 1996 and 1997 for its services as administrative agent were $38,714,
$62,501 and $60,300 after the fee waivers described below, which applied during
a portion of 1997. 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.
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 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
would 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 agreed to
waive 25% of the applicable minimum charges during the second year of the
agreements, which year ended May 18, 1997. PFPC has further agreed to waive
15
<PAGE> 48
voluntarily 25% of such applicable minimum charges during the third and fourth
years of the agreements, ending May 18, 1998 and May 18, 1999, respectively.
DISTRIBUTOR
Shay Financial Services, Inc. (the "Distributor") is the distributor of
the Fund. The Distributor is a Florida corporation that is controlled by
Rodger D. Shay, who is a Vice President of the Fund.
The Distributor is authorized to undertake certain activities in
connection with the continuous offer and 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 1997 through a
total of 3 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 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 1997, 75.6% of the Fund's brokerage (attributable
to purchases of $7,302,327 and proceeds from sales of $8,396,270) 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 consist 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
16
<PAGE> 49
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 1995, 1996 and 1997 were $78,210, $36,281 and 26,700,
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. Brokerage commissions were
lower in 1997 than in 1996 as fewer securities were required to be sold (which
sales would have generated brokerage commissions) to meet redemption or other
cash requirements.
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.
17
<PAGE> 50
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. All shares of each class are entitled to share pro rata in all
dividends and distributions paid on shares of that class, including liquidating
dividends. 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, 1997, 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, 1997 (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.
18
<PAGE> 51
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 in writing c/o Shay Financial Services, Inc.,
111 East Wacker Drive, Suite 2600, Chicago, IL 60601 or by telephone at
800-527-3713.
19
<PAGE> 52
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, 1997
(b) Statement of Assets and Liabilities as of December
31, 1997
(c) Statement of Operations for the year ended December
31, 1997
(d) Statements of Changes in Net Assets for each of the
years in the two-year period ended December 31,
1997
(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, 1997
(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.
(b) Amendment to Articles FIFTH and SIXTH adopted
January 23, 1986, and to Article SEVENTH adopted
<PAGE> 53
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.
(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 December 9, 1997
between the Registrant and Shay Assets Management, Inc.
(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 Association and PFPC Inc. Previously filed
with Post-Effective Amendment No. 38.
C-2
<PAGE> 54
(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) Distribution Agreement dated as of December 9, 1997
between the Registrant and Shay Financial Services,
Inc.
(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.
(a) Prototype IRA Plan
(b) Prototype Roth IRA Plan
(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.
C-3
<PAGE> 55
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1998, the number of record holders of each class of the
Registrant's capital stock were as follows:
Class A Stock: 2618 record holders
Class B Stock: no record holders
Class C Stock: no record holders
Class D Stock: no record holders
Class E Stock: no record holders
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.
C-4
<PAGE> 56
In addition, the Registrant has entered into a Directors and Officers
Liability Insurance Policy covering the period August 1, 1997 to July 31, 1998.
Such policy insures against loss which any directors or officers of the
Registrant are obligated to pay by reason of claims based on actual or alleged
breach of duty, neglect, error, misstatement, misleading statement, omission or
other act done or wrongfully attempted or any matter claimed against them
solely by reason of their being directors or officers. The policy does not
protect or purport to protect any director or officer against any loss arising
from fines or penalties imposed by law or matters which may be deemed
uninsurable under the law.
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, Inc. (the "Investment Adviser") contained in the section entitled
"Investment Advisory and Other Services"; the information concerning the
organization and controlling persons of Shay Financial Services, Inc. (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."
The Investment Adviser is located at 111 East Wacker Drive, Chicago,
Illinois, 60601 and at 1000 Brickell Avenue, Miami, Florida, 33131, and also
has offices in New York City and Summit, New Jersey. The Investment Adviser is
a wholly-owned subsidiary of Shay Investment Services, Inc. ("SISI"). SISI is
owned by Rodger D. Shay, Sr., Arthur M. Berardelli, Barbara M. Quesep and
Rodger D. Shay, Jr., with Rodger D. Shay, Sr. being the controlling shareholder
of SISI. Shay Financial Services, Inc. ("SFSI") and First Financial Trust
Company ("FFTC") are also wholly-owned subsidiaries of SISI.
Rodger D. Shay, Sr. is the Chairman of the Investment Adviser, SISI, and
SFSI. Edward E. Sammons, Jr. is President of the Investment Adviser and
Executive Vice President of SFSI. Rodger D. Shay, Jr. is the President of SFSI
and Executive Vice President of the Investment Adviser. Roy R. Hingston and
Robert T. Podraza are also Vice Presidents of the Investment Adviser, SISI and
SFSI.
SFSI is a securities broker-dealer registered with the Securities and
Exchange Commission. FFTC is a Texas trust company which provides custodial
services, primarily for institutional customers of SFSI.
Effective December 8, 1997, the Investment Adviser began rendering
investment adviser services to the Fund and two other registered investment
companies, Asset Management Fund, Inc. ("AMF") and Institutional Investors
Capital Appreciation Fund, Inc. ("IICAF"). In addition, the Investment Adviser
acts as investment adviser to several savings banks located in New York State
on a non-discretionary basis.
From its inception in August 1990 to December 7, 1997, the Investment
Adviser was a 50% general partner and the managing partner of Shay Assets
Management Co., the Fund's prior investment adviser. SAMC was the investment
adviser for the Fund and IICAF from May 19, 1995 to December 7, 1997, for AMF
from September 1, 1990 to December 7, 1997, and for the
C-5
<PAGE> 57
Institutional Investors Tax-Advantaged Income Fund, Inc. from May 19, 1995 to
March 15, 1996, and was the Sub-Adviser, providing portfolio management
services, for the U.S. Mortgage Securities Portfolio of Nationar Funds, Inc.
from June 1994 to February 1995. In addition, SAMC acted as investment adviser
to several savings banks located in New York State on a non-discretionary
basis. SAMC was dissolved on December 7, 1997, with its assets, liabilities,
and business (including investment advisory services to the Fund) being
transferred to the Investment Adviser.
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, Inc., 111
East Wacker Drive, Chicago, Illinois 60601; all other books, accounts and other
documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are in the physical
possession of PFPC Inc., 103 Bellevue Parkway, Wilmington, Delaware 19809.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
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, 1997. The Fund will provide a copy of such report to any
recipient of the prospectus upon request and without charge.
C-6
<PAGE> 58
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. 40 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, 1998.
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. 40 to Registration Statement No. 2-22542 has been
signed below by the following persons in the capacities and on the dates
indicated:
/s/ JOSEPH R. FICALORA President and Director
- --------------------------- (Principal Executive Officer) April 30, 1998
(Joseph R. Ficalora)
/s/ JAY F. NUSBLATT Treasurer (Principal
- --------------------------- Officer April 30, 1998
(Jay F. Nusblatt)
/s/ MALCOLM J. DELANEY
- --------------------------- Director April 30, 1998
(Malcolm J. Delaney)
/s/ TIMOTHY A. DEMPSEY
- --------------------------- Director April 30, 1998
(Timothy A. Dempsey)
/s/ HARRY P. DOHERTY
- --------------------------- Director April 30, 1998
(Harry P. Doherty)
/s/ DAVID FREER, JR.
- --------------------------- Director April 30, 1998
(David Freer, Jr.)
/s/ MICHAEL J. GAGLIARDI
- --------------------------- Director April 30, 1998
(Michael J. Gagliardi)
- ---------------------------
(David F. Holland) Director April __, 1998
S-1
<PAGE> 59
/s/ WILLIAM A. MCKENNA, JR.
- --------------------------- Director April 30, 1998
(William A. McKenna, Jr.)
- ---------------------------
(Norman W. Sinclair) Director April __, 1998
/s/ IAN D. SMITH
- --------------------------- Director April 30, 1998
(Ian D. Smith)
S-2
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2 By-Laws of the Registrant
5 Investment Advisory Agreement dated as of December 9, 1997,
between the Registrant and Shay Assets Management, Inc.
9(c) Distribution Agreement dated as of December 9, 1997, between
the Registrant and Shay Financial Services, Inc.
10 Opinion and consent of Hughes Hubbard & Reed LLP
11 Consent of KPMG Peat Marwick LLP
14(b) Prototype Roth IRA Plan
16 Schedule for Computation of Performance Quotations
17 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 2
By-laws of the Registrant
<PAGE> 2
BYLAWS
OF
M.S.B. FUND, INC.
(As Amended to January 22, 1998)
<PAGE> 3
BYLAWS
OF
M.S.B. FUND, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. Offices .......................................................... 1
Section 1. Location ............................................ 1
ARTICLE II. Meetings of Stockholders ........................................ 1
Section 1. Place of Meeting .................................... 1
Section 2. Annual Meeting ...................................... 1
Section 3. Special Meetings .................................... 1
Section 4. Notice of Meetings .................................. 1
Section 5. Quorum .............................................. 2
Section 6. Organization ........................................ 2
Section 7. Voting .............................................. 2
Section 8. Inspectors .......................................... 3
Section 9. List of Stockholders at Meeting ..................... 3
ARTICLE III. Board of Directors ............................................. 3
Section 1. Number, Qualifications and Term of Office ........... 3
Section 2. Vacancies ........................................... 5
Section 3. Resignations and Removal of Directors ............... 5
Section 4. Increase or Decrease in Size of Board ............... 5
Section 5. Place of Meeting .................................... 6
Section 6. Annual Meeting ...................................... 6
Section 7. Regular Meetings .................................... 6
Section 8. Special Meetings .................................... 6
Section 9. Notice of Special Meetings .......................... 6
Section 10. Organization; Quorum ............................... 6
Section 11. Compensation and Reimbursement of Expenses ......... 7
Section 12. Presumption of Concurrence ......................... 7
Section 13. Action of Directors or Committees Without Meeting .. 7
Section 14. Telephonic Meetings of the Board or Committees ..... 7
ARTICLE IV. Committees ...................................................... 7
Section 1. Executive Committee and Other Committees ............ 7
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE V. Officers ......................................................... 8
Section 1. Number and Description .............................. 8
Section 2. Term of Office ...................................... 8
Section 3. Resignation ......................................... 9
Section 4. Vacancies ........................................... 9
Section 5. The President ....................................... 9
Section 6. The First Vice President ............................ 9
Section 7. The Second Vice President ........................... 9
Section 8. The Secretary ....................................... 10
Section 9. Assistant Secretaries ............................... 10
Section 10. Treasurer .......................................... 10
Section 11. Compensation ....................................... 11
ARTICLE VI ................................................................... 11
Section 1. Representation of Shares of Stock ................... 11
Section 2. Open Accounts ....................................... 11
Section 3. Certificates of Stock ............................... 11
Section 4. Lost, Destroyed or Wrongfully Taken Certificates .... 12
Section 5. Record Date ......................................... 12
Section 6. Record of Stockholders .............................. 12
ARTICLE VII. Determination of Sale and Redemption Price ..................... 12
ARTICLE VIII. Redemption of Shares .......................................... 14
ARTICLE IX. Reserved. ....................................................... 16
ARTICLE X. Restrictions on Investments ...................................... 16
ARTICLE XI. Investment Policy and Objectives of the Corporation ............. 18
ARTICLE XII. Custodian ...................................................... 19
Section 1. Appointment of Custodian ............................ 19
Section 2. Agreements with Custodian ........................... 19
ARTICLE XIII. Investment Adviser ............................................ 20
Section 1. Appointment of Investment Adviser ................... 20
Section 2. Agreements with Investment Adviser .................. 20
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE XIV. Bonding of Officers and Employees .............................. 21
ARTICLE XV. Indemnification of Directors and Officers ....................... 21
Section 1. Actions by or in the Right of the Corporation to
Procure a Judgment in its Favor....................... 21
Section 2. Other Actions or Proceedings ......................... 21
Section 3. Payment of Indemnification Other Than by Court
Award................................................. 22
Section 4. Indemnification by a Court ........................... 23
Section 5. Other Provisions ..................................... 23
Section 6. Limitations and Restrictions of Indemnification ...... 24
ARTICLE XVI. Interested Directors ........................................... 24
ARTICLE XVII. Seal .......................................................... 24
ARTICLE XVIII. Miscellaneous ................................................ 25
Section 1. Fiscal year .......................................... 25
Section 2. Reports to the Stockholders .......................... 25
ARTICLE XIX. Amendments ..................................................... 25
</TABLE>
-iii-
<PAGE> 6
BYLAWS
OF
M.S.B. FUND, INC.
ARTICLE I.
Offices.
Section 1. Location. The principal office of the Corporation shall be in
the City of New York, County and State of New York. The Corporation shall also
have offices or agencies at such other places, either within or without the
State of New York, as the Board of Directors from time to time may designate,
or as the business of the Corporation may require.
ARTICLE II.
Meetings of Stockholders.
Section 1. Place of Meeting. All meetings of the stockholders shall be
held at the principal office of the Corporation in the City of New York, or at
such other place as may be fixed by the Board of Directors.
Section 2. Annual Meeting. The annual meeting of stockholders for the
election of directors and the transaction of other business as may properly
come before the meeting shall be held at such time as the Board of Directors
may specify by resolution.
Section 3. Special Meetings. Special meetings of the stockholders for
any purpose may be called to be held at any time by a majority of the members
of the Board of Directors then in office. Special meetings shall be called
upon the written request, addressed to the President or the Secretary of the
Corporation, of the holders of not less than 10 percent in amount of the stock
of the Corporation outstanding and entitled to vote. Such call and written
request shall state the purpose or purposes of the proposed meeting and the
business transacted at any special meeting shall be confined to such stated
purpose or purposes.
Section 4. Notice of Meetings. Written notice of the place, date, hour
and purpose or purposes of each annual meeting of stockholders and of each
special meeting of stockholders shall be given by the Secretary, the President,
or such other officer as may be designated by the President, either personally
or by mail, not less than ten nor more than sixty days before the date of the
meeting. Said written notice, unless it is for the annual meeting, shall
indicate that it is being issued by or at the direction of the person or
persons calling the meeting.
<PAGE> 7
2
If mailed, the notice of an annual or special meeting of the stockholders
shall be deemed to be given when deposited in the United States mail, postage
prepaid, addressed to each stockholder at his address as it appears on the
record of stockholders, or, if a stockholder shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed to
some other address, then directed to him at such other address.
If any meeting of the stockholders is adjourned to another time or place,
no notice of such adjourned meeting need be given other than by announcement at
the meeting at which such adjournment is taken.
Notice of the place, date, hour and purpose of any meeting of the
stockholders may be waived in writing by any stockholder either before or after
the meeting, and any such waiver shall be filed with the Secretary and by him
entered upon the records of the meeting. The attendance of any stockholder at
a meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice to him. Whenever all of the stockholders shall consent in writing to
the holding of a meeting, such meeting shall be valid without call or notice.
Section 5. Quorum. At any meeting of the stockholders the holders of a
majority in amount of the outstanding shares of stock entitled to vote, present
in person or represented by proxy, shall constitute a quorum for the
transaction of any business. When a quorum is once present to organize a
meeting, it shall not be broken by the subsequent withdrawal of any
stockholders.
If a quorum is present, directors shall, except as otherwise required by
law, be elected by a plurality of the votes cast at the meeting of
stockholders. Any other corporate action by vote of the stockholders, except
as otherwise required by law, shall be authorized by a majority of the votes
cast at the meeting of stockholders.
In the absence of a quorum at any meeting, the holders of a majority in
amount of the outstanding shares of stock entitled to vote, present in person
or represented by proxy at the meeting, may adjourn the meeting from time to
time until the holders of the number of shares requisite to constitute a quorum
are present in person or represented by proxy at the meeting. At any adjourned
meeting at which a quorum is present, any business may be transacted that might
have been transacted at the meeting as originally convened.
Section 6. Organization. The President, or in his absence the First Vice
President, or in the absence of the President and the First Vice President, the
Second Vice President, or in the absence of each of the foregoing, a
stockholder chosen by a majority in number of the shares of stock of the
Corporation entitled to vote and present in person or represented by proxy,
shall act as chairman of the meeting. The Secretary, or in his absence, the
Assistant Secretary, or in the absence of both the Secretary and the Assistant
Secretary, any person designated by the chairman, shall act as secretary of the
meeting.
Section 7. Voting. Each outstanding share of stock shall be entitled to
one vote on each matter submitted to a vote at a meeting of stockholders. A
stockholder may vote either
<PAGE> 8
3
in person or by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Every proxy shall be revocable at the pleasure of
the stockholder executing it, except in those cases where an irrevocable proxy
is provided by law.
Whenever stockholders are required or permitted to take any action by
vote, such action may be taken without a meeting on written consent, setting
forth the action so taken, signed by the holders of all outstanding shares
entitled to vote thereon.
Section 8. Inspectors. The Board of Directors, in advance of any
stockholders' meeting, shall appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a stockholders' meeting may, and on the request of any
stockholder entitled to vote thereat shall appoint one or more inspectors. In
case any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board of Directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and according
to the best of his ability. The inspectors shall determine the number of
shares outstanding, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election
or vote with fairness to all stockholders. On request of the person presiding
at the meeting or any stockholder entitled to vote thereat, the inspectors
shall make a report in writing of any challenge, question or matter determined
by them and execute a certificate of any fact found by them. A report or
certificate made by them shall be prima facie evidence of the facts stated and
of the vote as certified by them.
Section 9. List of Stockholders at Meeting. A list of stockholders as of
the record date, certified by the Secretary of the Corporation or by the
transfer agent, shall be produced at any meeting of stockholders upon the
request thereat or prior thereto of any stockholder. If the right to vote at
any meeting is challenged, the inspectors of election or person presiding
thereat, shall require such list of stockholders to be produced as evidence of
the right of the persons challenged to vote at such meeting, and all persons
who appear from such list to be stockholders entitled to vote thereat may vote
at such meeting.
ARTICLE III.
Board of Directors.
Section 1. Number, Qualifications and Term of Office. The business of
the corporation shall be managed by a Board of Directors. The number of
directors constituting the entire Board of Directors shall be the number
established from time to time by vote of a majority of the entire Board of
Directors pursuant to Section 4 of this Article. Each director shall
<PAGE> 9
4
(a) be at least twenty-one years of age,
(b) be a stockholder of the Corporation,
(c) not have been convicted within ten years of any felony or
misdemeanor involving the purchase or sale of any security or arising out
of conduct as an underwriter, broker, dealer, or investment adviser, or
as an affiliated person, salesman, or employee of any investment company,
bank, or insurance company,
(d) not be, by reason of any misconduct, permanently or temporarily
enjoined by order, judgment, or decree of any court of competent
jurisdiction from acting as an underwriter, broker, dealer, or investment
adviser, or as an affiliated person, salesman, or employee of any
investment company, bank, or insurance company, or from engaging in or
continuing any conduct or practice in connection with any such activity
or in connection with the purchase or sale of any security,
(e) not be an officer, director, clerk or employee of any bank or
trust company (as such terms are defined in the New York Banking Law)
unless permission to so act has been granted by a general or specific
regulation of the New York Banking Board or unless application for such
permission is made immediately after the election of such a person as
director of the Corporation,
(f) not be an officer, director or employee of any member bank of
the Federal Reserve System unless permission to so act has been granted
by general regulations of the Board of Governors of the Federal Reserve
System or unless application for such permission is made immediately
after the election of such a person as director of the Corporation, and
(g) not remain in office if he fails to attend at least 60% of the
regular monthly meetings of the Board of Directors in any twelve-month
period commencing on April 1, of each year and continuing through March
31 of the following year; provided, however, that the provisions of this
clause (g) may be waived by a resolution adopted by the Board of
Directors for good cause shown.
Such directors shall be divided into three classes, all of which
shall be as nearly equal in number as possible, and no class shall include
less than three directors. The terms of office of the directors shall be as
follows: That of the first class shall expire at the next annual meeting of
stockholders, the second class at the second annual meeting and the third class
at the third succeeding annual meeting. At each annual meeting after such
initial classification directors to replace those whose terms expire at such
annual meeting shall be elected to hold office until the third succeeding
annual meeting. Not more than 60% of the members of the Board of Directors
shall be persons who are interested persons of the Corporation. In addition,
not more than 50% of the members of the Board of Directors shall be persons who
are directors, officers or employees of any one bank.
<PAGE> 10
5
Each director shall serve for the term for which he is elected and until
his successor is elected and shall qualify. Upon any change in the officers or
directors of the Corporation, the Corporation shall within twenty days file
with the State of New York, if required, a Supplemental Broker-Dealer Statement
stating the new name and address involved in each such change.
No Savings Bank shall be represented on the Board by more than one person.
If multiple membership occurs as a result of merger, the Secretary shall
notify the newly constituted savings bank of this policy and request that it
notify the Fund within three months of the effective date of the merger of the
name of the representative it seeks to have continue as a director.
No director shall continue to serve as a director after the first Annual
Stockholders' Meeting next following such director's seventy-fifth birthday
provided, however, that the provisions of this paragraph may be waived by a
resolution adopted by the Board of Directors to permit a director to serve out
the remainder of his term.
Section 2. Vacancies. Newly created directorships resulting from an
increase in the number of directors and all vacancies occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors, if immediately
after filling any such vacancy at least two-thirds of the directors then
holding office shall have been elected by the holders of the outstanding stock
of the Corporation at an annual or special meeting. In the event that at any
time less than a majority of the directors of the Corporation holding office at
the time were so elected by the holders of the outstanding stock, the Board of
Directors shall forthwith cause to be held as promptly as possible and in any
event within sixty days a meeting of such holders for the purpose of electing
directors to fill any existing vacancies in the Board of Directors. Any
director elected by the Board of Directors shall fill such vacancy until the
next annual meeting of stockholders, and until his successor is elected and
shall qualify. Any director elected by the holders of the outstanding stock
shall fill such vacancy for the unexpired portion of the term of his
predecessor in office, and until his successor is elected and shall qualify.
Section 3. Resignations and Removal of Directors. Any director may
resign at any time by giving written notice to the President or to the
Secretary of the Corporation; such resignation shall take effect at the date of
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation by the Board of
Directors shall not be necessary to make it effective. Any or all of the
directors may be removed for cause by the Board of Directors. Any or all of
the directors may be removed without cause by a vote of not less than two
thirds of the outstanding shares of the Corporation.
Section 4. Increase or Decrease in Size of Board. The number of
directors may be increased to twenty-four members or decreased to nine members
by the vote of a majority of the entire Board of Directors. When the number of
directors is increased by the Board of Directors and newly created
directorships are filled by the Board of Directors, there shall be no
<PAGE> 11
6
classification of the additional directors until the next annual meeting of
stockholders. No decrease in the number of directors shall shorten the term of
any incumbent director.
Section 5. Place of Meeting. The Board of Directors may hold its meeting
at such place or places within or without the State of New York as it may from
time to time determine.
Section 6. Annual Meeting. A meeting of the Board of Directors, to be
known as the annual meeting, shall be held without notice immediately after,
and at the same place as, the meeting of stockholders at which such Board of
Directors is elected, for the purpose of electing the officers of the
Corporation.
Section 7. Regular Meetings. Regular meetings of the Board of Directors
shall be held at least once in each calendar quarter at such time and place as
it may from time to time determine, without call and without notice.
Section 8. Special Meetings. Special meetings of the Board of Directors
may be called at any time by the President, and shall be called by the
Secretary, or such other officer as the President or the Board of Directors may
designate, on the written request of any two directors. Any such special
meeting may be held at such place as shall be specified in the call, but if no
place is specified, then at the principal office of the Corporation in the City
of New York, New York.
Section 9. Notice of Special Meetings. Notice of the time and place,
date and hour, of each special meeting stating the person or persons calling
the meeting shall be given by the Secretary, the President or such other
officer as the President or the Board of Directors may designate, to each
director at least twenty-four hours prior to such meeting. Such notice may be
given verbally, in person or by telephone, in writing by personal delivery or
by mail, or by telegraph and shall specify the purpose or purposes of such a
meeting. Any director may waive notice of any meeting before or after the
meeting and the attendance of a director at any meeting shall constitute a
waiver of notice of such a meeting. No business shall be transacted at any
special meeting except such as shall have been specified in the notice or
waiver of notice thereof.
Section 10. Organization; Quorum. Unless the Board of Directors shall,
by resolution, otherwise provide, the President, or in his absence the First
Vice President, shall act as chairman at all meetings of the Board of
Directors; and the Secretary, or in his absence the Assistant Secretary, or in
the absence of both the Secretary and the Assistant Secretary, such person as
may be designated by the chairman, shall act as secretary at all such meetings.
A majority of the entire Board of Directors shall constitute a quorum
necessary for the transaction of business or of any specified item of business,
and, except as otherwise provided by law, the vote of a majority of directors
present at any meeting at which a quorum is present, shall be the act of the
Board of Directors. If at any meeting of the Board of Directors a quorum is
not present, a majority of the directors present may adjourn the meeting from
time to time.
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Section 11. Compensation and Reimbursement of Expenses. The Board of
Directors, by resolution, may authorize the Corporation to compensate each
director for his services as a director of the Corporation, and each director,
as such, shall be entitled to reimbursement for his reasonable expenses
incurred in attending meetings or otherwise in connection with his attention to
the affairs of the Corporation.
Section 12. Presumption of Concurrence. A director who is present at a
meeting of the Board of Directors, or any committee thereof, at which action on
the declaration of any dividend or other distribution in cash or property, the
purchase of the shares of the Corporation, the distribution of assets to
stockholders after dissolution of the Corporation without paying or adequately
providing for all known liabilities of the Corporation, excluding any claims
not filed by creditors within the time limit set in a notice given to creditors
under law, or the making of any loan to any director unless authorized by vote
of the stockholders, is taken shall be presumed to have concurred in the action
unless his dissent thereto shall be entered in the minutes of the meeting, or
unless he shall submit his written dissent to the person acting as secretary of
the meeting before the adjournment thereof, or shall deliver or send by
registered mail such dissent to the Secretary of the Corporation promptly after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action. A director who is absent from the
meeting of the Board or any committee thereof, at which such action is taken,
shall be presumed to have concurred in the action unless he shall deliver or
send by registered mail his dissent thereto to the Secretary of the Corporation
or shall cause such dissent to be filed with the minutes of the proceedings of
the Board of Directors or committee within a reasonable time after learning of
such action.
Section 13. Action of Directors or Committees Without Meeting. Whenever
the Board of Directors or any committee thereof is required or permitted to
take action, such action may be taken without a meeting if all members of the
Board or the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents by the members
of the Board or committee shall be filed with the minutes of the proceedings
thereof.
Section 14. Telephonic Meetings of the Board or Committees. Any one or
more members of the Board of Directors or any committee thereof may participate
in a meeting of such Board or committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
ARTICLE IV.
Committees.
Section 1. Executive Committee and Other Committees. The Board of
Directors of the Corporation, by resolution adopted by a majority of the entire
Board of Directors, may designate from among its members an executive committee
and other committees, each
<PAGE> 13
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consisting of three or more directors, and each of which, to the extent
provided in the resolution, shall have all the authority of the Board of
Directors, except that no such committee shall have authority as to the
following matters:
(1) The submission to stockholders of any action that needs
stockholder authorization,
(2) The filling of vacancies in the Board of Directors or in any
committee,
(3) The fixing of compensation of the directors for serving on the
Board of Directors or on any committee,
(4) The amendment or repeal of any resolution of the Board of
Directors which by its terms shall not be so amendable or repealable, and
(5) The amendment or repeal of these bylaws, or the adoption of new
bylaws.
Each such committee shall serve at the pleasure of the Board of Directors
and may adopt its own rules of procedure and shall keep regular minutes of its
proceedings and report the same to the Board of Directors.
ARTICLE V.
Officers.
Section 1. Number and Description. The officers of the Corporation shall
be a President, a First Vice President, a Second Vice President, a Secretary,
one or more Assistant Secretaries and a Treasurer, all of whom shall be elected
by the Board of Directors.
The Board of Directors may elect or appoint such other officers and agents
as it shall deem necessary or as the business of the Corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as the Board of Directors may prescribe from time to time. The
President shall have authority to appoint any agents, or employees other than
those elected or appointed by the Board of Directors, and to prescribe their
authority and duties, which may include the authority to appoint subordinate
officers, agents or employees.
Any two or more offices, except the office of President and Secretary, may
be held by the same person, but no officer shall execute, acknowledge or
certify any instrument in more than one capacity.
Section 2. Term of Office. Each officer elected or appointed by the
Board of Directors shall hold office until the next annual meeting of the Board
of Directors and until his successor has been elected or appointed and
qualified. Any officer may be removed at any time, with or without cause, by
the affirmative vote of a majority of the entire Board of Directors. Any
<PAGE> 14
9
officer, agent or employee not elected or appointed by the Board of Directors,
shall hold office at the discretion of the President, or of the officer
appointing him.
Section 3. Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors, or to the President, or Secretary, or
to the officer appointing him. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office caused by the death,
resignation, removal or disqualification of the person elected or appointed
thereto, or by any other cause, shall be filled for the unexpired portion of
the term in the same manner as prescribed in these bylaws for regular election
or appointment to such office. In case of the absence or disability or refusal
to act of any officer of the Corporation, or for any other reason that the
Board of Directors deems sufficient, the Board of Directors may delegate, for
the time being, the powers and duties or any of them, of such officer, to any
other officer or to any director.
Section 5. The President. The President shall be a director and the
principal executive officer of the Corporation. He shall have general charge,
control and supervision of the management and direction of the business,
property and affairs of the Corporation subject to the control and direction of
the Board of Directors.
The President is authorized to sign, execute and acknowledge, in the names
and on behalf of the Corporation, all deeds, mortgages, bonds, notes,
debentures, stock certificates, contracts, leases, reports, and other documents
and instruments, except where the signing and execution thereof by some other
officer, agent or representative of the Corporation shall be expressly
authorized and directed by law or by the Board of Directors or by these bylaws.
Unless otherwise provided by law or by the Board of Directors, the President
may authorize any officer, employee or agent of the Corporation to sign,
execute and acknowledge, in the name and on behalf of the Corporation and in
his place and stead, all such documents and instruments. The President shall
have such other powers and perform such other duties as are incident to the
office of president and as from time to time may be prescribed by the Board of
Directors.
Section 6. The First Vice President. In the absence or inability to act
of the President, or if the office of President is vacant, the powers and
duties of the President shall temporarily devolve upon the First Vice
President, who shall be a director.
The First Vice President shall have such other powers and perform such
other duties as from time to time may be assigned to him by the Board of
Directors or be delegated to him by the President, including, unless otherwise
ordered by the Board of Directors, the power to sign, execute and acknowledge
all documents and instruments.
Section 7. The Second Vice President. In the absence or inability to act
of the First Vice President, or if that office is vacant, the powers and duties
of the First Vice President shall temporarily devolve upon the Second Vice
President.
<PAGE> 15
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The Second Vice President shall have such other powers and perform such
other duties as from time to time may be assigned to him by the Board of
Directors or be delegated to him by the President or First Vice President,
including, unless otherwise ordered by the Board of Directors, the power to
sign, execute and acknowledge all documents and instruments.
Section 8. The Secretary. The Secretary shall: (1) keep the minutes of
the proceedings of the stockholders, Board of Directors, and executive
committee and other committees, if any, in one or more books provided for that
purpose; (2) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law; (3) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all documents the execution of which on behalf of
the Corporation under its seal is duly authorized; (4) file each written
request by a stockholder that notice to him be mailed to some address other
than the address as it appears on the record of stockholders; (5) sign with the
President, or a Vice President, certificates representing shares of stock of
the Corporation, the issuance of which shall have been authorized by resolution
of the Board of Directors; (6) have general charge of the record of
stockholders of the Corporation; and (7) in general perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors. Any action that
is required or permitted to be performed by the Secretary of the Corporation
pursuant to these bylaws may be performed by the President of the Corporation
or such other officer as the President or the Board of Directors may designate,
to the extent permitted by law.
Section 9. Assistant Secretaries. In the absence of the Secretary, or
during his disability or refusal to act, his powers and duties shall
temporarily devolve upon such one of the Assistant Secretaries as the President
or the Board of Directors may direct, or, if there is but one Assistant
Secretary, then upon such Assistant Secretary. The Assistant Secretaries shall
have such other powers and perform such other duties as from time to time may
be assigned to them, respectively, by the Board of Directors or be delegated to
them by the President or the Secretary.
Section 10. Treasurer. The Treasurer, subject to the provisions
hereinafter set forth respecting a custodian or custodians, and any agreements
entered into by the Corporation pursuant thereto, shall have responsibility for
the custody and safekeeping of all funds of the Corporation and shall have
charge of their collection, receipt and disbursement; shall have responsibility
for the custody and safekeeping of all securities of the Corporation; shall
receive and have authority to sign receipts for all moneys paid to the
Corporation and shall deposit the same in the name and to the credit of the
Corporation in such banks or depositaries as the Board of Directors shall
approve; shall endorse for collection on behalf of the Corporation all checks,
drafts, notes and other obligations payable to the Corporation; shall disburse
the funds of the Corporation only in such manner as the Board of Directors may
require; shall sign or countersign all notes, endorsements, guaranties and
acceptances made on behalf of the Corporation when and as directed by the Board
of Directors; shall keep full and accurate accounts of the transactions of his
office in books belonging to the Corporation and render to the Board of
Directors, whenever they may require, an account of his transactions as
Treasurer; and in general shall have such other powers and perform such other
duties as are incident to the office of treasurer and as from time to time may
be prescribed by the Board of Directors.
<PAGE> 16
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Section 11. Compensation. The salaries or other compensation of all
officers elected or appointed by the Board of Directors shall be fixed from
time to time by the Board of Directors. The salaries or other compensation of
all other officers, agents and employees of the Corporation shall be fixed from
time to time by the President, but only within such limits as to amount, and in
accordance with such other conditions, if any, as from time to time may be
prescribed by the Board of Directors.
ARTICLE VI.
Section 1. Representation of Shares of Stock. The shares of stock of the
Corporation shall be held in open accounts or represented by certificates for
shares of stock. Certificates shall be issued if a stockholder shall request
such issuance.
Section 2. Open Accounts. Open accounts shall be maintained and recorded
by the transfer agent or the registrar of the Corporation. Each open account
shall bear the name and address of the record owner of the shares held in the
open account and such other information as the Board of Directors may deem
appropriate for complete and accurate identification. Upon any change in the
number of shares held in an open account, written notice of such change shall
be mailed to the record owner.
Section 3. Certificates of Stock. Certificates representing shares of
stock of the Corporation shall be in such form as may be determined by the
Board of Directors. All such certificates shall be consecutively numbered and
shall be signed by the President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer of the Corporation and may, but need not
be, sealed with the seal of the Corporation or a facsimile thereof. The
signatures of the officers upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation itself or its employee. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at
the date of issue.
Each certificate representing shares of stock of the Corporation shall
when issued state upon the face thereof; that the Corporation is formed under
the laws of the State of New York; the name of the person or persons to whom
issued; the number and class of shares which such certificate represents; and
the par value of each share represented by such certificate.
The name and address of the persons to whom certificates for shares of
stock are issued and the number of shares represented by and the date of issue
and transfer of each certificate, shall be entered on books of the Corporation
kept for that purpose. The stock record and transfer books and the blank stock
certificates shall be kept by such transfer agent or by the Secretary or such
other officer as shall be designated by the Board of Directors for that
purpose. Every certificate surrendered to the Corporation for redemption,
transfer, exchange, or credit to an open account shall be cancelled and shall
show thereon the date of cancellation.
<PAGE> 17
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Section 4. Lost, Destroyed or Wrongfully Taken Certificates. The Board
of Directors of the Corporation may direct a new certificate to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost, apparently destroyed or wrongfully taken. When authorizing such
issue of a new certificate the Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient, and may require such indemnities as it deems
adequate, to protect the Corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost, destroyed or
wrongfully taken.
Section 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent or to dissent from any proposal
without a meeting or for the purpose of determining the stockholders entitled
to receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
not be more than sixty nor less than ten days before the date of any meeting,
nor more than sixty days prior to any other action. When a determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders has been made as provided herein, such determination shall apply
to any adjournment thereof, unless the Board of Directors fixes a new record
date for the adjourned meeting.
Section 6. Record of Stockholders. The Corporation shall keep in its
principal office, or at the office of its transfer agent or registrar in the
State of New York, a record containing the names and addresses of all
stockholders, the number of shares held by each, and the dates when they
respectively became the owners of record thereof. Except as otherwise provided
by law, the Corporation shall be entitled to recognize the exclusive right of a
record owner to receive dividends and other distributions and to vote the
shares held in his name, and the Corporation shall not be bound to recognize
any other person's equitable or legal claims to or interest in such shares.
ARTICLE VII.
Determination of Sale and Redemption Price.
Shares of stock of the Corporation sold by the Corporation shall be sold
at the net asset value thereof. Shares of stock of the Corporation that a
stockholder requires the Corporation to redeem or that the Corporation acquires
by exercise of its option to redeem shall be redeemed by the Corporation at the
net asset value thereof.
The asset value of each share of stock shall be obtained as of any given
time by dividing the net value of the assets of the Corporation by the total
number of shares then outstanding, including all shares which the Corporation
has sold, whether or not paid for and issued, and all shares which have been
surrendered to the Corporation for redemption or which
<PAGE> 18
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the Corporation has elected to redeem upon their having been offered to the
Corporation prior to transfer and the redemption price of which has not been
determined.
The net value of the assets of the Corporation shall be determined
as of any given time in accordance with sound accounting practice by deducting
from the gross value of the assets of the Corporation at such time the amount
of all expenses incurred and accrued and unpaid, such reserves as may be set up
to cover taxes and any other liabilities, and such other deductions as in the
opinion of the Board of Directors are in accordance with sound accounting
practice.
The gross value of the assets of the Corporation as of any given time
shall be an amount equal to all cash, receivables, the market value of all
securities and the fair value of other assets held by the Corporation at such
time, all determined in accordance with sound accounting practice and giving
effect to the following:
(a) The market value of any security owned by the Corporation which
is listed or admitted to trading privileges on the New York Stock
Exchange or the American Stock Exchange shall be the last sales price
during the period elapsed since last previous determination or (in the
case of securities in which there have been no previously reported sale
transactions during such period) the mean between the last bid price and
the last asking price, for like securities on such exchange. In case
securities being valued are listed or admitted to trading privileges on
any securities exchange other than the New York Stock Exchange or the
American Stock Exchange, the sale transactions or bid or asked prices of
such securities exchange which are to be used as aforesaid, shall be
selected by the Board of Directors or any officer or other person
designated by the Board of Directors for the purpose.
(b) The market value of securities traded on the NASDAQ National
Market shall be the last sales price during the period elapsed since the
last previous determination or (in the case of securities in which there
have been no previously reported sale transactions during such period)
the mean between the last bid price and the last asking price. The
market value of securities dealt in in any other over-the-counter market
shall be the mean between the last bid and asked prices in such market.
(c) The market value of securities which are neither listed nor
admitted to trading privileges on any exchange or dealt in in an
over-the-counter market shall be determined in such manner as the Board
of Directors shall prescribe from time to time.
(d) Any person making any determination of the market value of
securities hereunder may rely on any source of quotations or basis for
ascertaining quotations believed by him to be reliable.
<PAGE> 19
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ARTICLE VIII.
Redemption of Shares.
Each stockholder of the Corporation shall have the right to require
the Corporation to redeem all or any part of his shares of stock in accordance
with the following:
1. Such right shall be exercised in each instance by the delivery to
the Corporation or its transfer agent during usual business hours of a
request for redemption. Such request shall (A) consist of an irrevocable
written offer addressed to the Corporation duly executed by such holder
to sell each of such shares to the Corporation at the redemption price
per share, accompanied by the surrender to the Corporation of the
certificate or certificates for the shares to be repurchased in proper
form for transfer together with such proof of the authenticity of
signatures as may be required by the Corporation or (B) be in such other
form and in compliance with such other rules as may be established by the
Corporation; provided that in any case where a certificate has not been
issued for part or all of the shares to be redeemed, the request for
redemption shall, if required by the Corporation, be accompanied by a
duly executed stock power or other instrument of assignment covering such
shares, together with such proof of the authenticity of signatures on
such stock power or other instrument of assignment as may be required by
the Corporation.
2. The time as of which the redemption price applicable to any such
redemption shall be computed is as of the close of the New York Stock
Exchange on the day on which the request for redemption is received, if
received by the Corporation before the close of the New York Stock
Exchange on a business day; if the request for redemption is not received
on a business day, or if the request for redemption is received after the
close of the New York Stock Exchange on a business day, then the
redemption price shall be computed as of the close of the next succeeding
business day. A business day is a day other than a public holiday in the
State of New York, on which the New York Stock Exchange is open for
trading.
3. The redemption price shall be paid by the Corporation within
seven days after receipt of the request for redemption, except that any
such payment may be postponed or the right of redemption suspended
(i) for any period during which the New York Stock Exchange is
closed other than customary weekend and holiday closings or during
which trading on the New York Stock Exchange is restricted;
(ii) for any period during which the Board of Directors
determines that an emergency exists as the result of which disposal
by the Corporation of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Corporation
fairly to determine the value of its net assets;
<PAGE> 20
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(iii) for such other period as the Securities and Exchange
Commission may by order permit for the protection of security
holders of the Corporation;
provided that applicable rules and regulations of the Securities and
Exchange Commission (or any succeeding governmental authority) shall
govern as to the existence of restricted trading under (i) above or the
emergency under (ii) above.
Should the right of redemption be so postponed by the Corporation, a
stockholder may withdraw his request for redemption if he so elects, or
if he does not so elect, the redemption price shall be determined as of
the close of business of the New York State Exchange upon the first
business day, after the suspension, upon which the New York Stock
Exchange is open for four hours.
4. Subject to the requirements of the Investment Company Act of 1940
and any rule or regulation of the Securities and Exchange Commission
thereunder (including Rule 18f-1), any payment of the redemption price
may be made in whole or in part in kind, in securities of the
Corporation, if the Board of Directors shall determine that, by reason of
the closing of the New York Stock Exchange or otherwise, the orderly
liquidation of securities owned by the Corporation is impracticable or
payment in cash would be prejudicial to the best interest of the
remaining stockholders of the Corporation. In making any such payment in
whole or in kind such securities shall be valued in the same manner
employed in determining the redemption price and the securities so
delivered shall be selected in such manner as the Board of Directors may
deem fair and equitable. Whenever delivery of securities is so to be
made, such delivery shall be made as promptly as practicable after
receipt by the Corporation or its transfer agent of a request for
redemption in proper form accompanied by such other documents as may be
required by the Corporation pursuant to these bylaws.
The Corporation shall have the right to redeem at its option all,
but not less than all, of the shares of stock held in any stockholder account,
the aggregate net asset value of which is less than $25.00 (the "minimum asset
value"), in accordance with the following procedures:
1. The minimum asset value shall not exceed one half of the minimum
initial investment in the Corporation as fixed by the Board of Directors
from time to time.
2. Shares shall be redeemed at the net asset value thereof computed
as at the close of the New York Stock Exchange on the redemption date.
3. The Corporation shall provide to any stockholder whose shares are
to be redeemed not less than 45 days' written notice of the Corporation's
intention to redeem such shares. Such notice shall be mailed to the last
known address of such stockholder by first class or certified mail and
shall be effective when deposited properly addressed with postage prepaid
in the facilities of the U.S. Postal Service.
4. Such notice shall state (a) the date on which the Corporation
intends to redeem such shares, (b) that the price at which such shares
shall be redeemed will be the
<PAGE> 21
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net asset value of such shares computed as at the close of the New York
Stock Exchange on the redemption date, (c) that the redemption price will
be paid to such stockholder by check within seven days after the
redemption date, and (d) that the stockholder may avoid redemption of his
shares by purchasing additional shares in an amount sufficient to
increase the value of his account to the minimum asset value then in
effect.
5. No shares of stock may be redeemed without the consent of the
stockholder unless the aggregate asset value of such shares immediately
after the most recent redemption of shares by such stockholder was less
than:
(a) the applicable minimum asset value in effect at the time
of such most recent redemption; or
(b) one-half of the minimum initial investment as in effect at
the time of such most recent redemption, provided that no minimum
asset value was in effect at the time of such most recent
redemption; or
(c) the applicable minimum asset value set forth in any
effective prospectus relating to the shares of the Corporation,
provided that the applicable minimum asset value has been
continuously disclosed in the prospectus or prospectuses relating
to the shares of the Corporation for at least one year prior to the
time the Corporation redeems such shares.
It shall be the policy of the Corporation to exercise its option to redeem
shares pursuant to this paragraph with respect to any account which falls below
the minimum asset value, to the extent permitted by the foregoing. Accounts
held pursuant to any incentive savings or deferred compensation plan shall be
exempt from involuntary redemptions.
ARTICLE IX.
Reserved.
ARTICLE X.
Restrictions on Investments.
The authority of the Board of Directors to invest the funds of the
Corporation, to borrow money and to pledge securities as provided in the
Certificate of Incorporation shall be subject to the following restrictions and
limitations:
1. Reserved.
2. Other than for the expenses of organization, the Corporation may
not borrow money except that the Fund may borrow funds from banks
temporarily for administrative
<PAGE> 22
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or liquidity (but not leveraging) purposes and such borrowing may not
exceed five percent of the value of the total assets of the Corporation
at the time the loan is made nor be for a period exceeding sixty days.
3. The Corporation shall not underwrite the securities of other
issuers.
4. The Corporation shall not buy or sell real estate, but may retain
or sell real estate acquired as a result of the ownership of securities.
Securities shall not be purchased for the purpose of acquiring real
estate.
5. The Corporation may not buy or sell any commodities or commodity
contracts, but may retain or sell commodities or commodity contracts
acquired as a result of the ownership of securities. Securities shall
not be purchased for the purpose of acquiring commodities or commodity
contracts.
6. The Corporation shall not make loans to other persons. For these
purposes the purchase of a portion of an issue of publicly distributed
bonds, debentures or other debt securities of the type customarily
purchased by institutional investors, whether or not the purchase was
made on the original issue of securities, shall not be considered the
making of a loan.
7. The Corporation shall not purchase the securities of any issuer
if such purchase, at the time thereof, would cause more than five percent
(5%) of the total assets of the Corporation (taken at market value) to be
invested in the securities of such an issuer. This limitation shall not
apply to obligations of the Government of the United States or of any
corporation which is an instrumentality of the United States.
8. The Corporation shall not purchase the securities of any issuer
if such purchase at the time thereof would cause more than ten percent
(10%) of any class of securities of such an issuer to be held by the
Corporation. For the purpose of this limitation all outstanding debt of
an issuer having maturity of more than one year shall be treated as one
class.
9. The Corporation shall not purchase securities issued by any other
investment company or investment trust registered under the Investment
Company Act of 1940.
10. The Corporation shall not sell or contract to sell any security
which it does not own unless by virtue of its ownership of other
securities it has at the time of sale a right to obtain securities
equivalent in kind and amount to the securities sold and if such right is
conditional the sale shall be made only upon the same conditions. The
Corporation shall not buy any securities or other property on margin and
shall not buy or sell "puts" or "calls," except that the Corporation may
write (sell) call options, which are listed on an organized securities
exchange, on securities which are owned by the Corporation, and may buy
options for the purpose of effecting closing purchase transactions
relating to such options.
<PAGE> 23
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11. The Corporation shall not knowingly either purchase or retain in
its portfolio securities issued by an issuer if an officer, director, or
employee of, or counsel for, the Corporation is an officer or employee of
such an issuer.
12. The Corporation shall not knowingly either purchase or retain in
its portfolio securities issued by an issuer if the officers and
directors of the Corporation, together, own of record or beneficially
more than five percent (5%) of any class of the securities of such an
issuer.
13. The Corporation shall not pledge, mortgage or hypothecate any
assets of the Corporation except as may be necessary to borrow money
temporarily for administrative or liquidity (but not leveraging) purposes
pursuant to subparagraph 2 hereof and except that securities owned by the
Corporation on which an option may have been written may be pledged,
placed in escrow or otherwise segregated in accordance with the
applicable requirements of any organized securities exchange in order
that such securities remain available for delivery in case the option is
exercised.
14. The Corporation shall not invest in the securities of an issuer
for the purpose of exercising control or management.
15. The Corporation shall diversify its investment among a number of
industries rather than concentrate in a particular industry or group of
industries and its investments in a particular industry shall not exceed
25 percent of its assets.
16. The Corporation shall not purchase any security whose
disposition by the Fund would be, at the time of purchase, restricted
under the Securities Act of 1933.
After the effective date of the registration of the shares of stock of the
Corporation under the Securities Act of 1933, the provisions of this Article X
shall not be altered, amended, or repealed except as authorized by the vote of
a majority of the outstanding shares of the Corporation.
ARTICLE XI.
Investment Policy and Objectives of the Corporation.
The primary objective of the Corporation shall be to achieve capital
appreciation for its stockholders consistent with safety of principal.
Immediate current return shall not be as important as selection of growth
issues that have promise of long-term increasing dividend income. To achieve
these objectives the Corporation shall select securities of companies whose
growth, earnings and dividend prospects in its opinion are promising over the
longer term. Securities of enterprises that shall be considered to have better
than average management, financial strength and growth prospects will be
favored. Changes in this investment objective may be made by the Board of
Directors without stockholder approval whenever in its judgment economic or
market conditions warrant.
<PAGE> 24
19
While the Corporation shall not be restricted in the proportion of
assets which may be held in cash, government securities or other nonequity type
securities, the policy of the Corporation shall be to limit such holdings to the
liquid reserves appropriate to redeem shares of stock of the Corporation or for
other purposes determined desirable by the management of the Corporation. If in
the opinion of the Board of Directors of the Corporation, market conditions
shall be unfavorable for common stocks and other equity type securities, the
Corporation may for defensive purposes temporarily retain part or all of its
assets or invest part or all of its assets in investment grade bonds, government
securities and obligations of any corporation organized under the laws of any
state of the United States maturing within 270 days provided that such
obligations receive the highest rating of an independent rating service
designated by the Banking Board. Continuous supervision shall be given to
investments of the Corporation to attain, through suitable shifts in portfolio
securities when required, the Corporation's investment objectives. Transactions
involving portfolio turnover shall be limited to those incidental in the
ordinary course of business and for the objective of the Corporation as stated.
ARTICLE XII.
Custodian.
Section 1. Appointment of Custodian. All securities and funds
owned by the Corporation shall at all times be held in the custody of one or
more custodians appointed by the Board of Directors upon such terms and
conditions as the Board of Directors may fix. Each such custodian shall be a
bank or trust company which shall have at all times an aggregate capital,
surplus and undivided profits of not less than $500,000.
Section 2. Agreements with Custodian. Each agreement with a
custodian shall provide, among other things:
(a) The custodian shall receive and hold as custodian for the
Corporation all securities delivered to the custodian and all moneys paid
to the custodian by or for the account of the Corporation;
(b) All securities purchased for the account of the Corporation
shall be paid for by the custodian upon substantially contemporaneous
receipt of such securities by the custodian in transferable form;
(c) The custodian shall deliver securities owned by the Corporation
only (i) upon sale of such securities for the account of the Corporation
and receipt of payment therefor by the custodian, (ii) when such
securities are called, redeemed, retired, or otherwise become payable,
(iii) in exchange for or upon conversion into other securities or other
securities and cash, whether pursuant to their terms or to any plan of
merger, reorganization, readjustment, liquidation or otherwise, or (iv)
for other proper corporate purposes;
<PAGE> 25
20
(d) The custodian agreement shall be subject to termination by the
Corporation without the consent of the custodian upon written notice
within such time as may be specified in the agreement, not, however,
exceeding sixty days.
ARTICLE XIII.
Investment Adviser.
Section 1. Appointment of Investment Adviser. The Board of
Directors may appoint an investment adviser to furnish to the Corporation,
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, upon such terms and conditions as the
Board of Directors may determine. The investment adviser and custodian may be
one and the same person.
Section 2. Agreements with Investment Adviser. The appointment of
an investment adviser shall be by written agreement, which agreement shall
provide, among other things:
(a) a precise description of all compensation to be paid by the
Corporation thereunder;
(b) that such agreement shall not continue in effect for a period
more than two years unless such continuance is specifically approved at
least annually by the Board of Directors, concurred in by a majority of
the directors who are not interested persons of the investment adviser or
of the Corporation, or by vote of a majority of the outstanding voting
securities of the Corporation;
(c) that such agreement may be terminated without the payment of any
penalty at any time by the Board of Directors of the Corporation or by
vote of a majority of the outstanding shares of the Corporation on not
more than sixty days' written notice to the investment adviser;
(d) that such agreement shall be automatically terminated in the
event of its assignment by the investment adviser.
The terms "vote of a majority of the outstanding voting securities",
"assignment" and "interested persons", when used herein, shall have the
respective meanings specified in the investment Company Act of 1940.
<PAGE> 26
21
ARTICLE XIV.
Bonding of Officers and Employees.
All officers and employees of the Corporation who may singly or
jointly with others have access to securities or funds of the Corporation,
either directly or through authority to draw upon such funds or to direct
generally the disposition of such securities, shall be bonded by a reputable
fidelity insurance company against larceny and embezzlement in such reasonable
amounts as a majority of the Board of Directors of the Corporation who are not
such officers and employees shall determine with due consideration to the value
of the aggregate assets of the Corporation to which such persons shall have
access, the type and terms of the arrangements made for the custody and
safekeeping of such assets, and the nature of securities in the Corporation's
portfolio. Such determination shall be made at least once a year.
The Secretary of the Corporation shall make all the filings and give
all the notices required by Rule l7g-1 promulgated under the Investment Company
Act.
ARTICLE XV.
Indemnification of Directors and Officers.
Section 1. Actions by or in the Right of the Corporation to Procure
a Judgment in its Favor. The Corporation shall indemnify any person made, or
threatened to be made, a party to an action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he,
his testator or intestate, is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of any other corporation of any type or kind, domestic or foreign, of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with the defense or
settlement of such action, or in connection with an appeal therein, if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation, except that no
indemnification under this Section shall be made in respect of (1) a threatened
action, or a pending action which is settled or otherwise disposed of, or (2)
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or, if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
Section 2. Other Actions or Proceedings. The Corporation shall
indemnify any person made, or threatened to be made, a party to an action or
proceeding (other than one by or in the right of the Corporation to procure a
judgment in its favor), whether civil or criminal,
<PAGE> 27
22
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the Corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
The termination of any such civil or criminal action or proceeding
by judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the Corporation or that he had reasonable
cause to believe that his conduct was unlawful.
Section 3. Payment of Indemnification Other Than by Court Award. A
person who has been successful, on the merits or otherwise, in the defense of a
civil or criminal action or proceeding of the character described in Section 1
and Section 2 above shall be entitled to indemnification as authorized in such
Sections.
Except as provided in the paragraph above, any indemnification under
Section 1 or Section 2 hereof, unless ordered by a court under Section 4 hereof,
shall be made by the Corporation, only if authorized in the specific case:
(a) By the Board acting by a quorum consisting of directors who are
not parties to such action or proceeding upon a finding that the director
or officer has met the standard of conduct set forth in Section 1 or
Section 2, as the case may be; or
(b) If such a quorum is not obtainable with due diligence or even if
obtainable, a quorum of disinterested directors so directs:
(i) By the Board upon the opinion in writing of independent
legal counsel that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in such
Sections has been met by such director or officer; or
(ii) By the stockholders upon a finding that the director or
officer has met the applicable standard of conduct set forth in such
Sections.
<PAGE> 28
23
Expenses incurred in defending a civil or criminal action or
proceeding may be paid by the Corporation in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount as, and to the extent, required by the
first paragraph of Section 5 of this Article.
Section 4. Indemnification by a Court. Notwithstanding any failure
of the Corporation to provide indemnification, and despite any contrary
resolution of the Board or of the stockholders in the specific case under
Section 3, indemnification shall be awarded by a court to the extent authorized
under Section 1, Section 2 and the first paragraph of Section 3.
Where indemnification is sought by judicial action, the court may
allow a person such reasonable expenses, including attorneys' fees, during the
pendency of the litigation as are necessary in connection with his defense
therein, if the court shall find that the defendant has by his pleadings or
during the course of the litigation raised genuine issues of fact or law.
Section 5. Other Provisions. All expenses incurred in defending a
civil or criminal action or proceeding which are advanced by the Corporation
under the last paragraph of Section 3, or allowed by a court under the last
paragraph of Section 4, shall be repaid in case the person receiving such
advancement or allowance is ultimately found, under the procedure set forth in
this Article of the bylaws not to be entitled to indemnification or, where
indemnification is granted, to the extent the expenses so advanced by the
Corporation or allowed by the court exceed the indemnification to which he is
entitled.
No indemnification, advancement or allowance shall be made under
this Article in any circumstance where it appears:
(1) that the indemnification would be inconsistent with the
law of the jurisdiction of incorporation of a foreign corporation
which prohibits or otherwise limits such indemnification;
(2) that the indemnification would be inconsistent with a
provision of the certificate of incorporation , a by-law, a
resolution of the board or of the stockholders, an agreement or
other proper corporate action, in effect at the time of the accrual
of the alleged cause of action asserted in the threatened or pending
action or proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits
indemnification; or
(3) if there has been a settlement approved by the court, that
the indemnification would be inconsistent with any condition with
respect to indemnification expressly imposed by the court in
approving the settlement.
If, under this Article of the bylaws any expenses or other amounts
are paid by way of indemnification, otherwise than by court order or action by
the stockholders, the Corporation shall, not later than the next annual meeting
of stockholders unless such meeting is held within three months from the date of
such payment, and in any event, within fifteen months from the date of such
payment, mail to its stockholders of record at the time entitled to vote for
the
<PAGE> 29
24
election of directors a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
Section 6. Limitations and Restrictions of Indemnification.
Notwithstanding anything contained in Sections 1 through 5 above of this
Article to the contrary, this Article does not protect or purport to protect any
director or officer of the Corporation against any liability to the Corporation
or to its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
ARTICLE XVI.
Interested Directors.
No contract or other transaction between the Corporation and one or
more of its directors, or between the Corporation and any other corporation,
firm, association or other entity in which one or more of its directors are
directors or officers, or are financially interested, shall be, except as
otherwise provided in the Investment Company Act of 1940, either void or
voidable for this reason alone or by reason alone that such director or
directors are present at the meeting of the Board of Directors, or a committee
thereof, which approves such contract or transaction, or that his or their votes
are counted for such purpose.
(1) If the fact of such common directorship, officership or
financial interest is disclosed or known to the Board of Directors or
committee, and the Board of Directors or committee approves such contract
or transaction by a vote sufficient for such purpose without counting the
vote or votes of such interested director or directors;
(2) If such common directorship, officership or financial interest
is disclosed or known to the stockholders entitled to vote thereon, and
such contract or transaction is approved by vote of the stockholders; or
(3) If the contract or transaction is fair and reasonable as to the
Corporation at the time it is approved by the Board of Directors, a
committee or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee which approves
such contract or transaction.
ARTICLE XVII.
Seal.
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal, New
York". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
<PAGE> 30
25
ARTICLE XVIII.
Miscellaneous.
Section 1. Fiscal year. The fiscal year of the Corporation shall
be the calendar year.
Section 2. Reports to the Stockholders. The Board of Directors
shall at least semi-annually submit to the stockholders a written financial
report of the transactions of the Corporation including financial statements
which shall at least annually be certified by independent public accountants.
ARTICLE XIX.
Amendments.
Except as otherwise provided herein or provided by law, these bylaws
may be amended or repealed or new bylaws may be adopted by the affirmative vote
of the Board of Directors at any regular or special meeting of the Board. If
any bylaw regulating an impending election of directors is adopted, amended or
repealed by the Board there shall be set forth in the notice of the next meeting
of stockholders for the election of directors the bylaw so adopted, amended or
repealed, together with a precise statement of changes made. Bylaws adopted by
the Board of Directors may be amended or repealed by the stockholders.
<PAGE> 1
EXHIBIT 5
Investment Advisory Agreement dated as of December 9, 1997 between
the Registrant and Shay Assets Management, Inc.
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
This Agreement made and entered into as of December 9, 1997, by and
between M.S.B. Fund, Inc., a New York corporation (the "Fund"), and Shay
Assets Management, Inc., a Florida corporation (the "Adviser"):
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management investment
company incorporated in New York on June 8, 1964; and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth the parties hereto agree as follows:
1. Advisory Services. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund with respect to the assets belonging to
the Fund's Class A stock, $0.001 par value, for the period and on the
terms set forth in this Agreement. Shares of the Fund's Class A stock,
$0.001 par value, are referred to herein as "Fund Shares". The Adviser
accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided. The Fund, at its option,
may also appoint the Adviser to act as investment adviser to the Fund
hereunder with respect to the assets belonging to any other class of
capital stock of the Fund from time to time created, but the Adviser
shall not be required to accept any such appointment. The Adviser shall
furnish investment research and advice to the Fund and shall manage the
investment and reinvestment of the assets and its business affairs and
matters incidental thereto, all subject to the supervision of the Board
of Directors of the Fund and subject to the provisions of the Certificate
of Incorporation (as defined in paragraph 3(a) of this Agreement) and
By-Laws (as defined in paragraph 3(b) of this Agreement) of the Fund and
any resolution, rules or regulations adopted by the Board of Directors of
the Fund. The Adviser shall for all purposes herein provided be deemed
to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Directors of the Fund from
time to time, have no authority to act for or represent the Fund in any
way or otherwise be deemed an agent for the Fund. The Fund shall also be
free to retain, at its own expense, other persons to provide it with any
services whatsoever including, but not limited to, statistical, factual
or technical information or advice. The services of the Adviser herein
provided are not to be deemed exclusive and the Adviser shall be free to
render similar services or other services to others.
<PAGE> 3
2
2. Duties of the Adviser. Subject to the general supervision of the
Board of Directors of the Fund, the Adviser shall, employing its
discretion, manage the investment operations of the Fund and the
composition of the portfolio of securities and investments (including
cash) belonging to the Fund, including the purchase, retention and
disposition thereof and the execution of agreements relating thereto, in
accordance with the investment objective, policies and restrictions of
the Fund as stated in the Prospectus (as defined in paragraph 3(f) of
this Agreement), Registration Statement (as defined in paragraph 3(d) of
this Agreement), Certificate of Incorporation and By-Laws of the Fund and
subject to the following understandings:
(a) The Adviser shall furnish a continuous investment program for the
Fund and determine from time to time what investments or securities will
be purchased, retained or sold by the Fund, and what portion of the
assets will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Certificate of
Incorporation, the By-Laws and Prospectus of the Fund and with the
instructions and directions of the Board of Directors of the Fund and
will conform to and comply with the requirements of the Investment
Company Act of 1940, as amended from time to time, and the rules and
regulations of the Securities and Exchange Commission thereunder
(collectively, the "1940 Act") and all other applicable Federal and state
laws and regulations, including without limitation the provisions of the
Internal Revenue Code, as amended from time to time, applicable to the
Fund as a regulated investment company.
(d) The Adviser shall determine the securities and other investments to
be purchased or sold by the Fund and, as agent for the Fund, will effect
transactions pursuant to its determinations either directly with the
issuer or with any broker and/or dealer in such securities. In placing
orders with brokers and/or dealers the Adviser intends to seek the best
price and execution for purchases and sales and will comply with such
policies with respect to brokerage as are set forth in the Fund's
Registration Statement and Prospectus or as the Fund's Board of Directors
may adopt from time to time. On occasions when the Adviser deems the
purchase or sale of a security to be in the best interest of the Fund as
well as other customers, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be sold or purchased in order to obtain the best price
and execution. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be
made by the Adviser in a manner it considers to be equitable and
consistent with its fiduciary obligations to the Fund and, if applicable,
to such other customers.
<PAGE> 4
3
(e) The Adviser shall maintain books and records with respect to the
portfolio transactions of the Fund and shall render to the Fund's Board
of Directors such periodic and special reports as the Board of Directors
may reasonably request.
(f) The Adviser shall provide the Fund's custodian and administrator on
each business day with information relating to all transactions
concerning the assets of the Fund, except redemptions of and any
subscriptions for Fund Shares, and will provide on a timely basis to the
Fund's administrator and other persons providing services to the Fund
such information as the administrator or such other persons may
reasonably request in connection with the performance of their respective
duties and obligations with respect to the Fund.
(g) The Adviser will report to the Board of Directors of the Fund at each
meeting thereof all changes in the investments and other assets of the
Fund since the prior report, and will keep the Board of Directors
informed of material developments affecting the Fund and the Adviser, and
on its own initiative, will furnish the Board of Directors from time to
time with such information as the Adviser may believe appropriate for
this purpose, whether concerning the individual companies whose
securities are included in the Fund's holdings, the industries in which
they engage, or the economic, social or political conditions prevailing
in each country in which the Fund maintains investments. The Adviser
also will furnish the Board of Directors with such statistical and
analytical information with respect to securities and other investments
of the Fund as the Adviser may believe appropriate or as the Board of
Directors may reasonably request. The Adviser shall prepare and furnish
to the Board of Directors all such other written materials and documents
as may be requested or as may otherwise be necessary or appropriate in
connection with meetings of the Board of Directors, and, if the Secretary
of the Fund is an officer, director, or employee of the Adviser or any of
its affiliated persons, the Adviser shall cause to be prepared and shall
bear the costs of preparing and keeping the minutes of the meetings of
the Board of Directors and committees thereof and of meetings of the
stockholders of the Fund.
(h) The Adviser shall furnish such office and other facilities as may be
required by the Fund.
3. Delivery of Documents. The Fund has delivered, or will deliver
promptly, copies of each of the following documents to the Adviser and
will promptly notify and deliver to it all future amendments and
supplements if any:
(a) Certificate of incorporation of the Fund, as filed with the Secretary
of State of the State of New York and in effect on the date hereof and as
amended or restated from time to time (the "Certificate of
Incorporation").
<PAGE> 5
4
(b) By-Laws of the Fund, as in effect on the date hereof and as amended
or restated from time to time (the "By-Laws").
(c) Certified resolutions of the Board of Directors of the Fund and of
the Fund's stockholders, respectively, authorizing the appointment of the
Adviser and approving the form of this Agreement.
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement") as filed
with the Securities and Exchange Commission (the "Commission") and in
effect on the date hereof relating to the Fund, and all subsequent
amendments thereto.
(e) Notification of Registration under the 1940 Act on Form N-8A as filed
with the Commission.
(f) Prospectus or Prospectuses and Statement or Statements of Additional
Information of the Fund, if any, as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus".
4. Employees of the Adviser. The Adviser shall authorize and permit any
of its directors, officers and employees who may be elected as Directors
or officers of the Fund to serve in the capacities in which they are
elected.
5. Books and Records. The Adviser shall keep the Fund's books and
records required to be maintained by it pursuant to paragraph 2(e) of
this Agreement. The Adviser agrees that all records which it maintains
for the Fund are the property to the Fund and it will promptly surrender
any of such records to the Fund upon the Fund's request. The Adviser
further agrees to preserve for the period prescribed by Rule 31a-2 of the
Commission under the 1940 Act any such records as are required to be
maintained by the Adviser with respect to the Fund hereunder or by Rule
31a-1 of the Commission under the 1940 Act, as such rule may be amended
from time to time, and any other applicable rule that may be adopted by
the Commission.
6. Expenses. During the term of this Agreement the Adviser will pay all
expenses (including without limitation the compensation of all its
directors, officers and employees serving as Directors or officers of the
Fund pursuant to paragraph 4 of this Agreement) incurred by it in
connection with its activities under this Agreement other than the cost
of the securities and investments purchased for the Fund (including taxes
and brokerage commissions, if any). The Adviser also shall pay the
salaries, fees and expenses of Directors, officers and employees of the
Fund who are affiliated persons of the Adviser or
<PAGE> 6
5
affiliated persons of any affiliated person of the Adviser. All other
expenses shall be borne by the Fund, subject to the limitations and
reimbursements provided for in paragraphs 7 and 8 hereof.
7. Compensation and General Expense Limitation.
(a) For the services provided and expenses borne by the Adviser pursuant
to this Agreement, the Fund shall pay to the Adviser compensation based
on the annual percentage of the Fund's average daily net assets paid
monthly, as follows: 0.75% of the first $100 million and 0.50% over $100
million; provided, however, that if the Restricted Expenses (as defined
below) of the Fund with respect to any fiscal year of the Fund exceed an
amount (the "Restricted Expense Cap") equal to 1.10% of the average daily
net asset value of the Fund during such fiscal year, the fee payable to
the Adviser with respect to such fiscal year shall be reduced by the
amount of such excess, but not below zero. The fee payable to the
Adviser pursuant to this paragraph 7 (the "Advisory Fee") shall commence
on the date hereof (the "Effective Date") and shall be accrued daily,
subject to adjustment as provided below in this paragraph 7 and subject
to further adjustment as provided in paragraph 8, and the fee for each
month will be paid to the Adviser during the succeeding month.
(b) The amount of compensation payable to the Adviser with respect to
each day during a fiscal year of the Fund shall be adjusted as follows:
(i) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the
close of business on such day exceeds the Applicable Pro
Rata Portion of the Restricted Expense Cap (as defined
below) through such day, the compensation payable to the
Adviser with respect to such day shall be reduced by the
amount of such excess.
(ii) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the
close of business on such day is less than the Applicable
Pro Rata Portion of the Restricted Expense Cap through
such day, the compensation payable to the Adviser with
respect to such day shall be increased by the amount of
such excess, except to the extent such increase would
cause the aggregate compensation payable to the Adviser
with respect to the period from the beginning of such
fiscal year through such date to exceed the Applicable
Pro Rata Portion of the Advisory Fee (as defined below).
<PAGE> 7
6
In the event any reduction of the Advisory Fee provided for in this paragraph
7(b) would result in an aggregate Advisory Fee of less than zero for any month
in a fiscal year, the Adviser shall make a refund payment to the Fund in such
amount; provided, however, the Adviser shall not be obligated to refund an
amount greater than the aggregate amount of the Advisory Fee previously paid to
the Adviser with respect to such fiscal year.
(c) For purposes of this paragraph 7:
(i) "Applicable Pro Rata Portion of the Restricted Expense
Cap" as of any day shall mean the dollar amount computed
by multiplying 1.10% by (A) the ratio computed by
dividing the number of days elapsed since the beginning
of the relevant fiscal year by the number of days in such
year and (B) the average daily net asset value of the
Fund from the beginning of the relevant fiscal year
through such day.
(ii) "Applicable Pro Rata Portion of the Advisory Fee" as of
any day shall mean the dollar amount of the Advisory Fee
that would be payable to the Adviser with respect to the
period from the beginning of the relevant fiscal year
through such day, if such amount were computed without
regard to the limitations set forth in paragraph 7(b) and
paragraph 8, multiplied by the ratio computed by dividing
the number of days elapsed since the beginning of the
relevant fiscal year by the number of days in such fiscal
year.
(d) In the event this Agreement becomes effective on a date other than
the first day of any fiscal year, solely for the purpose of computing the
amount of the Advisory Fee for such fiscal year, such first fiscal year
shall be deemed to begin on the Effective Date and to end on December 31
of such year. In the event this Agreement terminates on a date other
than the last day of any fiscal year, solely for the purpose of computing
the amount of the Advisory Fee for such fiscal year, such fiscal year
shall be deemed to begin on January 1 of such year and to end on the date
of the termination of this Agreement. In either of such events, the
Applicable Pro Rata Portion of the Restricted Expense Cap and the
Applicable Pro Rata Portion of the Advisory Fee shall be reduced by
multiplying such amount by the ratio computed by dividing the number of
days deemed to occur in such fiscal year by 365.
(e) As used herein, the term "Restricted Expenses" means all expenses of
the Fund, including without limitation (i) the general expenses of the
Fund, (ii) the fees payable to the Adviser, the Fund's administrator, if
any, the Fund's transfer agent and dividend paying agent, if any, and the
Fund's custodian and (iii) registration fees and the costs and expenses
of qualifying the Fund's shares for offer and sale under the Blue Sky
laws of any jurisdiction where such shares may be qualified from time to
time; but the Restricted
<PAGE> 8
7
Expenses shall exclude (A) the fees and expenses of the Fund's outside
counsel (other than registration and filing fees disbursed by such counsel
on behalf of the Fund), (B) the fees and expenses of the Fund's
independent accountants, (C) Directors' fees and the expenses incurred by
Directors and reimbursed by the Fund and (D) fees and expenses paid under
a plan of distribution, if any, adopted pursuant to Rule 12b-1 under the
1940 Act.
8. Blue Sky Limitation on Expenses.
(a) In the event the Expenses (as defined in paragraph 8(b) below) of the
Fund for any fiscal year exceed the lowest applicable annual expense
limitations, if any, established pursuant to the statutes or regulations
of any jurisdictions in which Fund Shares are then qualified for offer
and sale (such excess hereinafter called the "Blue Sky Excess Expense"),
the compensation due to the Adviser under paragraph 7 for the fiscal year
in question shall be reduced by an amount equal to the Blue Sky Excess
Expense of the Fund, and if the Blue Sky Excess Expense of the Fund
exceeds the fees of the Fund payable to the Adviser with respect to the
Fund for the fiscal year in question, the Adviser shall, to the extent
required by such statute or regulations, reimburse the Fund for the
amount of such excess. If for any month the Expenses shall exceed 1/12th
of the percentage of average daily net assets allowable as Expenses, the
payment to the Adviser for that month shall be reduced, and, if
necessary, the Adviser shall make a refund payment to the Fund so that
the Expenses will not exceed such percentage. As of the end of the
fiscal year, however, the foregoing computations shall be readjusted so
that the aggregate compensation payable to the Adviser for the year is
equal to the amount provided for in paragraph 7 hereof, reduced by an
amount equal to the Blue Sky Excess Expense of the Fund. The aggregate
of the repayments, if any, by the Adviser to the Fund for the year shall
be the amount necessary to reimburse the Fund for the amount of such
excess.
(b) For purposes of paragraph 8(a) of this Agreement, the term "Expenses"
means the general expenses of the Fund, including without limitation fees
payable to the Adviser, the Fund's administrator, if any, the Fund's
transfer agent, if any, and to the Fund's custodian; but the Expenses
shall exclude any interest, taxes, brokerage commissions and litigation
and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business.
9. Limitation of Liability. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except a
loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or a loss resulting from willful misfeasance,
bad faith or gross negligence on its part
<PAGE> 9
8
in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
10. Effective Date and Term. This Agreement shall become effective on
the date hereof. This Agreement shall remain in effect until May 30,
1998, and shall continue in effect thereafter for successive twelve-month
periods (or for such shorter periods as may be specified by the Fund's
Board of Directors) subject to termination as hereinafter provided, if
such continuance is approved at least annually (a) by vote of the Fund's
Board of Directors, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by vote of a majority of the Directors
of the Fund who are not parties to this Agreement or "interested persons"
(as defined in the 1940 Act) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
The annual approvals provided for herein shall be effective to continue
this Agreement from year to year (or for such shorter period referred to
above) if given within a period beginning not more than ninety (90) days
prior to (and including) the anniversary of the date upon which the most
recent previous continuance of this Agreement became effective,
notwithstanding the fact that more than three hundred sixty-five (365)
days may have elapsed since the date on which such approval was last
given. This Agreement may be terminated (i) by the Fund at any time,
without the payment of any penalty, by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the Fund, on 30 (thirty) days' written notice to the
Adviser, or (ii) after May 19, 1998, by the Adviser at any time, without
the payment of any penalty, on 90 (ninety) days' written notice to the
Fund. This Agreement will automatically and immediately terminate in the
event of its assignment (as defined in the 1940 Act).
11. Amendment of Agreement. This Agreement may be amended by mutual
consent, provided that the amendment is approved (a) by vote of a
majority of those Directors of the Fund who are not parties to this
Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting
on such amendment, and (b), if required by the 1940 Act, by vote of a
majority of the outstanding voting securities (as defined in the 1940
Act) of the Fund.
12. Notices. Notices of any kind to be given to the Adviser by the Fund
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 111 East Wacker Dr., Chicago, IL 60601, Attention: Executive
Vice President, or at such other address or to such other individual as
shall be specified by the Adviser to the Fund in accordance with this
paragraph 12. Notices of any kind to be given to the Fund by the Adviser
shall be in writing and shall be duly given if mailed or delivered to the
Fund at 200 Park Avenue, New York, NY 10166, Attention: President, or at
such other address or to such other individual as shall be specified by
the Fund to the Adviser in accordance with this paragraph 12, with copies
to each of the Fund's Directors at their respective addresses set forth
in the Fund's Registration Statement and to the legal counsel to the
Fund.
<PAGE> 10
9
13. Authority. The Directors have authorized the execution of this
Agreement in their capacity as Directors and not individually. The
Adviser agrees that neither the stockholders nor the Directors nor any
officer, employee, representative or agent of the Fund shall be
personally liable upon, nor shall resort be had to their private property
for the satisfaction of, obligations given, executed or delivered on
behalf of or by the Fund, that the stockholders, Directors, officers,
employees, representatives and agents of the Fund shall not be personally
liable hereunder, and that the Adviser shall look solely to the property
of the Fund for the satisfaction of any claim hereunder.
14. Controlling Law. This Agreement shall be governed by the construed
in accordance with the laws of the state of New York.
15. Multiple Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed to be an original,
but which together shall constitute one and the same instrument.
16. Captions. The captions of the paragraphs are for descriptive
purposes only and they are not intended to limit or otherwise affect the
content of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
M.S.B. FUND, INC.
By: /s/ JOSEPH R. FICALORA
--------------------------------
Joseph R. Ficalora
President
SHAY ASSETS MANAGEMENT, INC.
By: /s/ ROBERT T. PODRAZA
--------------------------------
Robert T. Podraza
Vice President
<PAGE> 1
EXHIBIT 9(c)
Distribution Agreement dated as of December 9, 1997 between
the Registrant and Shay Financial Services, Inc.
<PAGE> 2
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of the 9th day of December, 1997,
between M.S.B. FUND, INC., a New York corporation (herein called the
"Fund"), and SHAY FINANCIAL SERVICES, INC., a Florida corporation (herein
called the "Distributor").
WHEREAS, the Fund is an open-end management investment company and is so
registered under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain the Distributor as the distributor
for the Fund to provide for the distribution of shares of Class A stock
of the Fund, each such share having a par value of $.001 per share
(herein collectively called "Shares"), and is willing to render such
services;
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein the parties hereto agree as follows:
I. DELIVERY OF DOCUMENTS
The Fund has delivered to Distributor copies of each of the following
documents and will deliver to it all future amendments and supplements
thereto, if any:
(a) The Fund's Certificate of Incorporation and all amendments
thereto (such Certificate of Incorporation, as currently in effect and as it
shall from time to time be amended, herein called the Fund's "Certificate of
Incorporation");
(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
2
(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 Certificate of Incorporation, 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
<PAGE> 4
3
Distributor shall not be obligated to bear the expenses incurred by the Fund in
connection with the preparation and printing of any amendment to any
Registration Statement or Prospectus necessary for the continued effective
registration of the Shares under the 1933 Act.
(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 Certificate of Incorporation 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.
(e) The Fund reserves the right to reject any order for Shares.
IIA. COMPENSATION
The Distributor shall be entitled to no compensation or reimbursement of
expenses for the distribution and service activities provided by the
Distributor pursuant to this Agreement. Notwithstanding anything in this
Agreement to the contrary, affiliated persons of the
<PAGE> 5
4
Distributor may receive compensation or reimbursement from the Fund with
respect to the provision of management services or service as a director
or officer of the Fund.
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 portfolio 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.
<PAGE> 6
5
2. Distributor Representations. Distributor represents and warrants to
the Fund that it is duly incorporated as a Florida corporation and is
registered as a broker-dealer under the Securities Exchange Act of 1934
and the laws of each state where such registration is required for the
distribution of the Fund's Shares and is and at all times will remain
duly authorized and licensed to carry out its services as contemplated
herein.
3. Fund Indemnification. The Fund will indemnify, defend and hold
harmless Distributor, its several directors and officers, 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 directors and officers, 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.
<PAGE> 7
6
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.
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
<PAGE> 8
7
likelihood that such person ultimately will be found entitled to
indemnification hereunder.
5. General Indemnity Provisions. No indemnifying party shall be liable
under its indemnity agreement contained in subsection 3 or 4 hereof with
respect to any claim made against such indemnifying party unless the
indemnified party shall have notified the indemnifying party in writing
within twenty (20) days after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
the indemnified party (or after the indemnified party shall have received
notice of such service on any designated agent), but failure to notify
the indemnifying party of any such claim shall not relieve it from any
liability which it may otherwise have to the indemnified party. The
indemnifying party will be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, and if the indemnifying party
elects to assume the defense, such defense shall be conducted by counsel
chosen by it and reasonably satisfactory to the indemnified party. In
the event the indemnifying party elects to assume the defense of any such
suit and retain such counsel, the indemnified party shall bear the fees
and expenses of any additional counsel retained by the indemnified party.
6. Indemnity in Connection with the Acceptance of Orders to Purchase Fund
Shares prior to Receipt of Payment (Next Day Settlement). The Prospectus
of the Fund, as amended or supplemented from time to time, may authorize
the Fund to accept orders to purchase shares of the Fund prior to receipt
of payment therefor in Federal funds. The parties recognize that in the
event any such purchase order is canceled as a result of the failure of
the investor to make timely payment for such shares, the Fund may suffer
dilution in the event the net asset value per share of the Fund
applicable on the date such purchase order is canceled is less than the
purchase price per share applicable to such purchase order and that the
Fund may incur fees and other losses and expenses in connection with the
processing and cancellation of such purchase order. In the event of any
such cancellation of any such purchase order, the Distributor will (i)
pay to the Fund an amount equal to the decline in the price of the shares
from price applicable at the time the purchase order was accepted (i.e.
the net asset value per share of the Fund next determined after the
acceptance of such purchase order) to the price applicable at the time
the purchase order was canceled (i.e. the net asset value per share of
the Fund next determined after the cancellation of such purchase order),
less the net amount, if any, of any Gain on Canceled Shares (as defined
below) accrued from the beginning of the fiscal year of the Fund in which
the cancellation takes place to the date of such cancellation, (ii)
reimburse the Fund for any and all fees and other losses and expenses
incurred in connection with the processing and cancellation of such
purchase order and (iii) pay all legal fees incurred in connection with
any legal action taken against an investor for nonpayment or taken by an
investor against the Fund as a result of the cancellation. As used
herein, "Gain on Canceled Shares" shall mean the amount, if any, by which
the aggregate purchase price applicable to all orders to purchase shares
of the Fund that are
<PAGE> 9
8
accepted but subsequently canceled for nonpayment (measured by the
respective net asset values per share of the Fund next determined after
the acceptance of such purchase orders) exceeds the aggregate value of
such shares at the time of cancellation (measured by the respective net
asset values per share of the Fund next determined after the cancellation
of such purchase orders).
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 May 30, 1998. Thereafter, if not terminated, this Agreement shall
continue automatically for successive terms of one year expiring on May
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.
<PAGE> 10
9
IX. CONSTRUCTION; GOVERNING LAW
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of this Agreement shall not be affected
thereby. Subject to the provisions of Section VI hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York
law; provided, however, that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or any rule or regulation of the
Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this 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
President
SHAY FINANCIAL SERVICES, INC.
By: /s/ ROBERT T. PODRAZA
-------------------------------
Robert T. Podraza
Vice President
<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, 1998
M.S.B. Fund, Inc.
200 Park Avenue
New York, New York 10166
Dear Sirs:
You have requested our opinion in connection with the filing of
Post-Effective Amendment No. 40 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. 40, upon delivery of certificates for Shares or crediting of Shares to a
shareholder's account as provided for in Registration Statement No. 2-22542, as
amended, and payment therefor in accordance with the provisions of such
Registration Statement, will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 40 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 Board of Directors
M.S.B. Fund, Inc.:
We consent to the use of our report dated February 6, 1998 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 30, 1998
<PAGE> 1
EXHIBIT 14(b)
Prototype Roth IRA Plan
<PAGE> 2
M.S.B. FUND, INC.
ROTH INDIVIDUAL RETIREMENT ACCOUNT
APPLICATION INSTRUCTIONS 2
ROTH IRA DISCLOSURE STATEMENT 3
CUSTODIAL ACCOUNT AGREEMENT 7
APPLICATION, ADOPTION AGREEMENT
& BENEFICIARY DESIGNATION 11
TRANSFER AUTHORIZATION FORM 13
ROLLOVER/CONVERSION CERTIFICATION
FORM 15
WITHDRAWAL AUTHORIZATION 16
<PAGE> 3
APPLICATION INSTRUCTIONS
DO NOT USE THIS FORM FOR REGULAR (TRADITIONAL), SIMPLE OR EDUCATION IRAS.
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1. HOW TO COMPLETE THE ENCLOSED FORMS:
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IF YOU ARE OPENING A ROTH IRA WHICH WILL NOT CONTAIN CONTRIBUTIONS THAT HAVE
BEEN TRANSFERRED FROM ANOTHER ROTH IRA OR A TRADITIONAL IRA:
- To establish a Roth IRA, please complete the "Application, Adoption
Agreement and Beneficiary Designation" (Application). Please note that
the Applicant's name must be that of an individual not a business.
- If you are opening a Roth IRA for your spouse who is unemployed or
earns less than you earn, a separate Application must be completed by
your spouse.
- The maximum allowable contribution to your Roth IRA is the lesser of
(a) $2,000 or (b) 100% of your compensation or earnings from
self-employment. If your spouse is not employed or earns less than you
earn, your spouse may also contribute to a Roth IRA. The maximum
contribution to your spouse's Roth IRA is the lesser of (a) $2,000, or
(b) the combined compensation of both spouses, minus the dollar amount
of the IRA contribution made by the compensated (or more highly
compensated) spouse. The total contribution to each individual's IRAs
(deductible, non-deductible and Roth) combined cannot exceed these
limits. There is a phase-out of eligibility to make a Roth IRA
contribution if your adjusted gross income (AGI) is between $95,000 and
$110,000 or single filers, between $150,000 and $160,000 for married
joint filers and between $0 and $10,000 for a married separate filer.
- The minimum initial investment is $50.00. If you are dividing your
contribution between Roth IRAs for yourself and your spouse, the amounts
invested in each account will be combined for the purpose of satisfying
the minimum initial investment. A prospectus for the Fund may be
obtained from the Fund at 1-800-661-3938. Please be sure to read the
prospectus carefully before investing.
- Please be sure to read carefully the "Terms and Conditions of the
Roth IRA Adoption Agreement" in Section 5 of the Application. There is
a $10.00 annual custodial maintenance fee on each account in the Fund.
- Please make checks payable to M.S.B. FUND, INC. If you are dividing
your contribution between yourself and your spouse's Roth IRA, only one
check, with instructions on how to allocate the contribution between
accounts, needs to be included with both Applications.
IF YOU ARE OPENING A ROTH IRA WHICH WILL CONTAIN CONTRIBUTIONS WHICH HAVE BEEN
TRANSFERRED FROM ANOTHER ROTH IRA OR A TRADITIONAL IRA:
- Please read and follow the general instructions above for
establishing a Roth IRA. Be sure to note on the Application that your
contribution is a transfer, a rollover from another Roth IRA, or a
Conversion Roth IRA.
- YOU MAY NOT ESTABLISH A CONVERSION ROTH IRA IN ANY TAX YEAR IN WHICH
YOUR ADJUSTED GROSS INCOME EXCEEDS $100,000, OR IF YOU ARE MARRIED AND
FILING SEPARATELY.
- To transfer the distribution from your current Roth IRA directly from
that plan to your M.S.B. FUND, INC. Roth IRA, please complete a
"Transfer Authorization Form".
- To certify that the contribution you are making to the Roth IRA is a
rollover from a Roth IRA or a converted Traditional IRA, please complete
the "Rollover/Conversion Certification Form." Rollovers and Conversions
must be completed within 60 calendar days of the date you receive the
distribution.
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2. MAIL THE COMPLETED APPLICATION AND CHECK (IF APPLICABLE) TO:
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FIRST CLASS MAIL: OVERNIGHT EXPRESS:
M.S.B. FUND, INC. M.S.B. FUND, INC.
Attn: M.S.B. FUND, INC. IRA Attn: M.S.B. FUND, INC. IRA
PO Box 8905 400 Bellevue Pkwy Suite 108
Wilmington, DE 19899-8905 Wilmington, DE 19809-3710
1-800-661-3938
2
<PAGE> 4
ROTH INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
The following information is the disclosure statement required by Federal
Tax regulations. You should read this disclosure statement, the Custodial
Account Agreement, and the prospectus for the Fund in which your M.S.B.
FUND, INC. Roth Individual Retirement Account (Roth IRA) contributions will
be invested.
REVOCATION OF YOUR ROTH IRA
You have the right to revoke your M.S.B. FUND, INC. Roth IRA and receive
the entire amount of your initial contribution by notifying PNC Bank,
National Association, the Custodian of your M.S.B. FUND, INC. Roth IRA, in
writing within seven (7) days of establishment of your Roth IRA. If you
revoke your Roth IRA within seven days, you are entitled to a return of the
entire amount paid by you, without adjustment for such items as sales
commission, administrative expenses, or fluctuations in market value. If
you decide to revoke your Roth IRA, notice should be delivered or mailed
to:
FIRST CLASS MAIL: OVERNIGHT EXPRESS:
PNC Bank, National Association PNC Bank, National Association
c/o PFPC Inc. c/o PFPC Inc.
Attn: M.S.B. FUND, INC. Roth IRA Attn: M.S.B. FUND, INC. Roth IRA
PO Box 8905 400 Bellevue Pkwy Suite 108
Wilmington, DE 19899-8905 Wilmington, DE 19809-3710
1-800-661-3938
This notice should be signed by you and include the following:
1. The date;
2. A statement that you elect to revoke your M.S.B. FUND,
INC. Roth IRA;
3. Your M.S.B. FUND, INC. Roth IRA account number;
4. The date your M.S.B. FUND, INC. Roth IRA was established;
5. Your signature and your printed or typed name.
Mailed notice will be deemed given on the date that it is postmarked, if it
is deposited in the United States mail, first class postage prepaid and
properly addressed. This means that if you mail your notice it must be
postmarked on or before the seventh day after your M.S.B. FUND, INC. Roth
IRA was opened. A revoked Roth IRA will be reported to the Internal
Revenue Service and the Depositor on Forms 1099-R and 5498.
YOUR ROTH INDIVIDUAL RETIREMENT ACCOUNT
You have opened a M.S.B. FUND, INC. Roth Individual Retirement Account
which is an account for the exclusive benefit of you and your
beneficiaries, created by a written instrument (the Custodial Account
Agreement). The following requirements apply to your M.S.B. FUND, INC.
Roth IRA:
1. Contributions, transfers and rollovers may be made only
in "cash" by check, draft, or other form acceptable to the
Custodian;
2. The Custodian must be a bank;
3. No part may be invested in life insurance;
4. Your interest must be nonforfeitable;
5. The assets of the custodial account may not be mixed with
other property except in a common investment fund;
6. There is no age limit on contributions as long as you
have earned income;
7. Your adjusted gross income must be within the eligibility
limits (discussed under "Contributions" below); and
8. There are no mandatory withdrawals during your lifetime.
CONTRIBUTIONS
The maximum allowable contribution to your Roth IRA is the lesser of (a)
$2,000 or (b) 100% of your compensation or earnings from self-employment.
If your spouse is not employed or earns less than you earn, your spouse may
also contribute to a Roth IRA. The maximum contribution to your spouse's
Roth IRA is the lesser of (a) $2,000, or (b) the combined compensation of
both spouses, minus the dollar amount of the IRA contribution made by the
compensated (or more highly compensated) spouse. THE TOTAL CONTRIBUTION TO
EACH INDIVIDUAL'S IRAS (DEDUCTIBLE, NON-DEDUCTIBLE AND ROTH) COMBINED
CANNOT EXCEED THESE LIMITS.
Contributions can be made to a Roth IRA past age 70 -1/2 as long as the
above requirements of earned income are met.
There is a phase-out of eligibility to make a Roth IRA contribution if your
adjusted gross income (AGI) is between certain levels. For a single
depositor, the $2,000 maximum annual contribution is phased out to zero
between AGI of $95,000 and $110,000; for a married depositor who files
jointly, between AGI of $150,000 and $160,000; and for a married depositor
who files separately, between $0 and $10,000. Single filers with AGI above
$110,000, joint filers with AGI above $160,000 and married separate filers
with AGI above $10,000 in 1998 may not contribute to a Roth IRA.
3
<PAGE> 5
CONVERSION IRA ROLLOVERS
YOU MAY ONLY CONVERT A TRADITIONAL IRA INTO A CONVERSION ROTH IRA IF YOUR
AGI (SINGLE OR JOINT) DOES NOT EXCEED $100,000 AND YOU DO NOT FILE MARRIED
AND SEPARATELY. If a distribution is converted from a traditional IRA,
i.e. deposited to your M.S.B. FUND, INC. Roth IRA within 60 calendar days
of receipt, the amount converted will be taxed as ordinary income, except
that the amount of any distribution from the traditional IRA which
represents non-deductible contributions is not taxed. The IRS enforces the
60-day time limit strictly. The 10% penalty for distributions under age
59-1/2 will not apply to the amount converted if held in your Conversion
Roth IRA for at least five years and certain other criteria are met. See
the section on Taxation of Distributions below. The rules regarding
conversions to Roth IRAs are complex and you should consult your tax
advisor prior to rolling over all or any part of a distribution.
EXCESS CONTRIBUTIONS
Amounts contributed to your M.S.B. FUND, INC. Roth IRA in excess of the
allowable limit will be subject to a non-deductible excise tax of 6% for
each year until the excess is used up as an allowable contribution (in a
subsequent year) or returned to you. A distribution of excess
contributions may be subject to the 10% excise tax on early distributions
discussed below. The 6% excise tax will not apply if the excess
contribution and earnings applicable to it are distributed by the due date
for your Federal Income Tax Return, including extensions.
INCOME TAX DEDUCTION
Your contribution is not deductible on your Federal Income Tax Return.
TAXATION OF DISTRIBUTIONS
CONTRIBUTORY ROTH IRAS
Any distribution, or portion of any distribution, which consists of the
return of contributions you made to your M.S.B. FUND, INC. Roth IRA is not
subject to federal income tax. For federal income tax purposes,
contributions are presumed to be withdrawn first. The earnings on your
contributions will not be subject to federal income tax when withdrawn if
the assets being withdrawn have been in your Roth IRA for at least five (5)
years, and any one of the following criteria is also met:
1. you are over the age of 59-1/2, or
2. used to purchase a first home, up to $10,000, or
3. made because you became disabled, or
4. due to your death.
All distributions made prior to the five-year holding period, regardless of
the reason, are subject to ordinary income tax on the earnings plus a 10%
penalty tax on early distributions. Exceptions to the 10% penalty are
described below in the section on Early Distributions under Penalty Tax on
Certain Transactions.
Rollovers from one Roth IRA to another Roth IRA are permitted within the 60
calendar day period after receipt. The amount rolled over within 60 days
will not be taxable. The IRS enforces the 60-day time limit strictly.
Rollovers from a Roth IRA to a Regular IRA are not permitted.
CONVERSION ROTH IRAS
The five-year holding period applies separately to each year's converted
IRA funds. For example, a conversion in 1998 and a second conversion in
2000 would have two different five-year periods, one ending in 2003 and one
ending in 2005, with non-taxable distributions being available if the other
criteria above are met beginning in the sixth year after the conversion.
IRS penalties, in addition to the 10% premature distribution penalty which
applies if you are under age 59-1/2, may apply if you withdraw from a
conversion Roth IRA prior to the five-year period.
Distributions under $10 will not be reported to you on IRS Form 1099-R as
allowed under IRS regulations. However, you must still report these
distributions to the IRS on IRS Form 1040 as well as other forms which may
be required to properly file your tax return.
PENALTY TAX ON CERTAIN TRANSACTIONS
EXCESS CONTRIBUTIONS
If you make an excess contribution to your Roth IRA and it is not corrected
on a timely basis, an excise tax of 6% is imposed on the excess amount.
This tax will apply each year to any part or all of the excess which
remains in your account.
4
<PAGE> 6
EARLY DISTRIBUTIONS
All distributions made prior to the five-year holding period, regardless of
the reason, are subject to ordinary income tax on the earnings plus the 10%
penalty tax on early distributions. The distribution is subject to the
penalty tax unless the distribution is the result of one of the following
exceptions:
1. you are over age 59-1/2, or
2. due to death, or
3. made because you became disabled, or
4. used specifically for deductible medical expenses which exceed
7.5% of your adjusted gross income, or
5. used for health insurance cost due to your unemployment, or
6. used for higher education defined in section 529(e)(5) of the
Internal Revenue Code, or
7. used to cover expenses of first time home purchase up to $10,000,
or
8. part of a scheduled series of substantially equal payments over
your life, or over the joint life expectancy of you and a beneficiary.
If you request a distribution in the form of a series of substantially
equal payments, and you modify the payments before 5 years have
elapsed and before attaining age 59-1/2, the penalty tax will apply
retroactively to the year payments began through the year of such
modification.
The 10% penalty tax is in addition to any federal income tax that is owed
at distribution. For more information on the 10% penalty tax and the
exceptions listed above, consult IRS Publication 590.
REQUIRED DISTRIBUTIONS
You are not required to take distributions from your Roth IRA during your
lifetime.
ADDITIONAL INFORMATION ON DISTRIBUTIONS
A Roth IRA distribution request form is available from the Custodian, and
should be obtained and used to request any distribution from your Roth IRA.
PROHIBITED TRANSACTIONS
If you or your beneficiary engage in any prohibited transaction (such as
any sale, exchange, borrowing, or leasing of any property between you and
your Roth IRA; or any other interference with the independent status of the
account), the account will lose its exemption from tax and be treated as
having been distributed to you. The value of the earnings on your account
will be includable in your gross income. If you are under age 59-1/2, you
would also be subject to the 10% penalty tax on early distributions.
If you or your beneficiary use (pledge) all or any part of your Roth IRA as
security for a loan, then the portion so pledged will be treated as if
distributed to you, and will be taxable to you as a nonqualified
distribution, and subject to a 10% penalty tax on the taxable portion of
such distribution if you have not attained age 59-1/2 during the year which
you make such a pledge.
INCOME TAX WITHHOLDING
The Custodian is required to withhold income tax from any distribution from
your Roth IRA to you at the rate of 10% unless you choose not to have tax
withheld. You may elect out of withholding by advising the Custodian in
writing, prior to the distribution, that you do not want tax withheld from
the distribution. This election may be made on IRS Form W-4P, or any other
form acceptable to the Custodian. If you do not elect out of tax
withholding, you may direct the Custodian to withhold an additional amount
of tax in excess of 10%, but not more than 90%.
ADDITIONAL INFORMATION
For more detailed information, you may obtain Publication 590, Individual
Retirement Arrangements (IRAs) from any district office of the Internal
Revenue Service or by calling 1-800-TAX-FORM.
Any Roth IRA transaction may have tax consequences; consult your tax
adviser to obtain information about the tax consequences in connection with
your particular circumstances.
INFORMATION ABOUT YOUR INVESTMENTS
A mutual fund investment involves investment risks, including possible loss
of principal. In addition, growth in the value of your account is neither
guaranteed nor projected due to the characteristics of a mutual fund
investment. Detailed information about the shares of each mutual fund
available for investment by your M.S.B. FUND, INC. Roth IRA must be
furnished to you in the form of a prospectus. The method for computing and
allocating net investment income and capital gains set forth in the
prospectus. (See prospectus section entitled "Dividends, Distribution and
Federal Income Tax Status.") If you made an initial contribution of $1,000
on the first day of a calendar year and no further investment during that
year, your contributions would also be subject to certain costs and
expenses which would reduce any yield you might obtain from your
investment. (See the prospectus section entitled "Annual Fund Operating
Expenses," and the sections referred to therein.) For further information
5
<PAGE> 7
regarding expenses, earnings, and distributions, see the fund's financial
statements, prospectus and/or statement of additional information.
FEES AND CHARGES
The charges in connection with your M.S.B. FUND, INC. Roth IRA are set
forth in the Application. The Custodian may also charge a service fee in
connection with any distribution from your Roth IRA.
IRS APPROVED FORM
Your M.S.B. FUND, INC. Roth IRA is the Internal Revenue Service's model
custodial account contained in IRS Form 5305-RA. Certain additions have
been added in Article IX of the form. By following this form, your M.S.B.
FUND, INC. Roth IRA meets the requirements of the Internal Revenue Code.
However, the IRS has not endorsed the merits of the investments allowed
under the Roth IRA. THIS FORM CANNOT BE USED WITH SIMPLE, SEPS,
TRADITIONAL OR EDUCATION IRAS.
12/97
6
<PAGE> 8
CUSTODIAL ACCOUNT AGREEMENT
(UNDER SECTION 408A OF THE INTERNAL REVENUE CODE - FORM 5305-RA (JANUARY 1998))
The depositor whose name appears in the accompanying Application is
establishing a Roth individual retirement account (Roth IRA) under section 408A
to provide for his or her retirement and for the support of his or her
beneficiaries after death.
The custodian, PNC Bank, National Association (PNC Bank), has given the
depositor the disclosure statement required under Regulations section 1.408-6.
The depositor and the custodian make the following agreement:
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA,
then, except in the case of a rollover contribution described in
section 408A(e), the custodian will accept only cash contributions
and only up to a maximum amount of $2,000 for any tax year of the
depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the
same tax year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0
between certain levels of adjusted gross income (AGI). For a single
depositor, the $2,000 annual contribution is phased out between AGI of
$95,000 and $110,000; for a married depositor who files jointly,
between AGI of $150,000 and $160,000; and for a married depositor who
files separately, between $0 and $10,000. In the case of a conversion,
the custodian will not accept IRA Conversion Contributions in a tax
year if the depositor's AGI for that tax year exceeds $100,000 or if
the depositor is married and files a separate return. Adjusted gross
income is defined in section 408A(c)(3) and does not include IRA
Conversion Contributions.
ARTICLE III
The depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or
common investment fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles
(within the meaning of section 408(m)) except as otherwise permitted
by section 408(m)(3), which provides an exception for certain gold,
silver, and platinum coins, coins issued under the laws of any state,
and certain bullion.
ARTICLE V
1. If the depositor dies before his or her entire interest is
distributed to him or her and the grantor's surviving spouse is not
the sole beneficiary, the entire remaining interest will, at the
election of the depositor or, if the depositor has not so elected, at
the election of the beneficiary or beneficiaries, either:
(a) Be distributed by December 31 of the year containing the
fifth anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year
following the year of the depositor's death.
If distributions do not begin by the date described in (b),
distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine
the minimum annual payment for each year, divide the grantor's entire
interest in the trust as of the close of business on December 31 of
the preceding year by the life expectancy of the designated
beneficiary using the attained age of the designated beneficiary as
of the beneficiary's birthday in the year distributions are required
to commence and subtract 1 for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the
depositor's date of death, such spouse will then be treated as the
depositor.
7
<PAGE> 9
ARTICLE VI
1. The depositor agrees to provide the custodian with information
necessary for the custodian to prepare any reports required under
sections 408(i) and 408A(d)(3)(E), Regulations sections 1.408-5 and
1.408-6, and under guidance published by the Internal Revenue
Service.
2. The custodian agrees to submit reports to the Internal Revenue
Service and the depositor as prescribed by the Internal Revenue
Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated,
the provisions of Articles I through IV and this sentence will be
controlling. Any additional articles that are not consistent with
section 408A, the related regulations, and other published guidance
will be invalid.
ARTICLE VIII
This agreement will be amended from time to time to comply with the
provisions of the Code, related regulations, and other published
guidance. Other amendments may be made with the consent of the
depositor and the custodian.
ARTICLE IX
1. All funds in the custodial account (including earnings) shall
be invested in shares of beneficial interest of any one or more of
the regulated investment companies managed by the company listed on
the Application Form ("company") contained in this package or any of
its subsidiaries or affiliates, and which have been designated by
such company as eligible for investment under this custodial account,
which investment companies shall be collectively referred to as "the
Funds" and which shares shall be collectively referred to as "Fund
Shares". Fund Shares shall be purchased at the public offering value
for Fund Shares next to be determined after receipt of the
contribution by the custodian or its agent.
2. The shareholder of record of all Fund Shares shall be the
custodian or its nominee.
3. The depositor shall, from time to time, direct the custodian to
invest the funds of his/her custodian account in Fund Shares. Any
funds which are not directed as to investment will be returned to the
depositor without being deemed to have been contributed to his/her
custodial account. The depositor shall be the beneficial owner of
all Fund Shares held in the custodial account, and the custodian
shall not vote any such shares except upon written direction of the
depositor.
4. The custodian agrees to forward, or to cause to be forwarded,
to every depositor the then-current prospectus of the Funds, as
applicable, which have been designated by the company as eligible for
investment under the custodial account and selected by the depositor
for such investment, and all notices, proxies and related proxy
soliciting materials applicable to said Fund Shares received by it.
5. Each depositor shall have the right by written notice to the
custodian to designate or to change a beneficiary to receive any
benefit to which such depositor may be entitled in the event of
his/her death prior to the complete distribution of such benefit. If
no such designation is in effect on the depositor's death, or if the
designated beneficiary has predeceased the depositor, the beneficiary
shall be the depositor's estate.
6. (a) The custodian shall have the right to receive rollover and
conversion contributions as allowed under IRS Code Section 408A,
however it is the depositor's responsibility to ensure that such
rollovers and conversions are eligible to be contributed to this
Roth IRA. The custodian reserves the right to refuse to accept
any property which is not in the form of cash.
(b) The custodian, upon written direction of the depositor and after
submission to the custodian of such documents as it may
reasonably require, shall transfer the assets held under this
Agreement (reduced by any amounts referred to in paragraph 8 of
this Article IX) to a successor Roth individual retirement
account or directly to the depositor.
Any amounts received or transferred by the custodian under this
paragraph 6 shall be accompanied by such records and other
documents as the custodian deems necessary to establish the
nature, value and extent of the assets and of the various
interests therein.
7. Without in any way limiting the foregoing, the depositor hereby
irrevocably delegates to the custodian the right and power to amend
at any time and from time to time the terms and provisions of this
Agreement and hereby consents to such amendments, provided they shall
comply with all applicable provisions of the Code, the Treasury
regulations thereunder and with any other governmental law,
regulation or ruling. Any such amendments shall be effective when
the notice of such amendments is mailed to the address of the
depositor indicated by the custodian's records.
8
<PAGE> 10
8. Any income taxes or other taxes of any kind whatsoever levied
or assessed upon or in respect of the assets of the custodial account
or the income arising therefrom, any transfer taxes incurred, all
other administrative expenses incurred, all other administrative
expenses incurred by the custodian in the performance of its duties
including fees for legal services rendered to the custodian, and the
custodian's compensation may be paid by the depositor and, unless so
paid within such time period as the custodian may establish, shall be
paid from the depositor's custodial account. The custodian reserves
the right to change or adjust its compensation upon 30 days advance
notice to the depositor.
9. The benefits provided hereunder shall not be subject to
alienation, assignment, garnishment, attachment, execution or levy of
any kind, and any attempt to cause such benefits to be so subjected
shall not be recognized, except to such extent as may be required by
law.
10. The custodian may rely upon any statement by the depositor when
taking any action or determining any fact or question which may arise
under this Custodial Agreement. The depositor hereby agrees that the
custodian will not be liable for any loss or expense resulting from
any action taken or determination made in reliance on such statement.
The depositor assumes sole responsibility for assuring that
contributions to the custodial account satisfy the limits specified
in the appropriate provisions of the Code.
11. The custodian may resign at any time upon 30 days written
notice to the depositor and may be removed by the depositor at any
time upon 30 days written notice to the custodian. Upon the
resignation or removal of the custodian, a successor custodian shall
be appointed within 30 days of such resignation notice and in the
absence of such appointment, the custodian shall appoint a successor
unless the Agreement be sooner terminated. Any successor custodian
shall be a bank (as defined in section 408(n) of the Code) or such
other person found qualified to act as a custodian under an
individual account plan by the Secretary of the Treasury or his
delegate. The appointment of a successor custodian shall be
effective upon receipt by the custodian of such successor's written
acceptance which shall be submitted to the custodian and the
depositor. Within 30 days of the effective date of a successor
custodian's appointment, the custodian shall transfer and deliver to
the successor custodian applicable account records and assets of the
custodial account (reduced by any unpaid amounts referred to in
paragraph 8 of this Article IX). The successor custodian shall be
subject to the provisions of this Agreement (or any successor
thereto) on the effective date of its appointment.
12. The custodian shall, from time to time, in accordance with
instructions in writing from the depositor, make distributions out of
the custodial account to the depositor in the manner and amounts as
may be specified in such instructions (reduced by any amounts
referred to in Article IX, paragraph 8). A Roth IRA Withdrawal
Authorization form is available from the custodian, and should be
obtained and used to request any distribution from your Roth IRA. The
custodian assumes (and shall have) no responsibility to make any
distribution to the depositor (or the depositor's beneficiary if the
depositor is deceased) unless and until such written instructions
specify the occasion for such distribution and the elected manner of
distribution. Prior to making any such distribution from the
custodial account, the custodian shall be furnished with any and all
applications, certificates, tax waivers, signature guarantees, and
other documents (including proof of any legal representative's
authority) deemed necessary or advisable by the custodian, but the
custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply
if not satisfied such instructions are genuine, and assumes no duty
of further inquiry. Upon receipt of proper written instructions as
required above, the custodian shall cause the assets of the custodial
account to be distributed in cash and/or in kind, as specified in
such written instructions.
13. No distributions are required to be taken from the Roth IRA
during the lifetime of the depositor. If the depositor desires to
take distributions from the Roth IRA, such distributions of the
assets of the custodial account shall be made as the depositor shall
elect by written instructions to the custodian. The recalculation of
life expectancy of the depositor and/or the depositor's spouse
beneficiary may be made only at the written election of the
depositor. The recalculation of life expectancy of the spouse
beneficiary shall only be made at the written election of the
surviving spouse beneficiary.
14. The custodian is authorized to hire agents (including any
transfer agent for Fund Shares) to perform certain duties thereunder.
15. This Agreement shall terminate coincident with the complete
distribution of the assets of the depositor's account.
16. All notices to be given by the custodian to the depositor shall
be deemed to have been given when mailed to the address of the
depositor indicated by the custodian's records.
17. The custodian shall not be responsible for any losses,
penalties or other consequences to the depositor or any other person
arising out of the making of, or the failure to make, any
contribution or withdrawal.
18. In addition to the reports required by paragraph (2) of Article
VI, the custodian shall periodically cause to be mailed to the
depositor in respect of each such period an account of all
transactions affecting the custodial account during such period and a
statement showing the custodial account as of the end of such period.
If, within 60 days after such mailing, the depositor has not given
the custodian written notice of any exception or objection thereto,
the periodic accounting shall be deemed to have been approved and, in
such case or upon the written approval of the depositor, the
custodian shall be released, relieved and discharged with respect to
all matters and statements set forth in such accounting as though the
account had been settled by judgment or decree of a court of
competent jurisdiction.
9
<PAGE> 11
19. In performing the duties conferred upon the custodian by the
depositor hereunder, the custodian shall act as the agent of the
depositor. The parties do not intend to confer any fiduciary duties
on the custodian and none shall be implied. The custodian shall not
be liable (and does not assume any responsibility) for the collection
of contributions, the propriety of any contribution under this
Agreement, the selection of any Fund Shares for this custodial
account, or the purpose or propriety of any distribution made, which
matters are the sole responsibility of the depositor or the
depositor's beneficiary, as the case may be.
20. The custodian shall be responsible solely for the performance
of those duties expressly assigned to it in this Agreement and by
operation of law. In determining the taxable amount of a
distribution, the depositor shall rely only on his or her Federal tax
records, and the custodian shall withhold Federal income tax from any
distribution from the custodial account as if the total amount of the
distribution is includable in the depositor's income.
21. Except to the extent superseded by Federal law, this Agreement
shall be governed by, and construed, administered and enforced
according to, the laws of the Commonwealth of Pennsylvania, and all
contributions shall be deemed made in Pennsylvania.
GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise
noted.)
PURPOSE OF FORM
Form 5305-RA is a model custodial account agreement that meets the
requirements of section 408A and has been automatically approved by the
IRS. A Roth individual retirement account (Roth IRA) is established after
the form is fully executed by both the individual (depositor) and the
custodian. This account must be created in the United States for the
exclusive benefit of the depositor or his or her beneficiaries.
Do not file Form 5305-RA with the IRS. Instead, keep it for your records.
Unlike contributions to traditional individual retirement arrangements,
contributions to a Roth IRA are not deductible from the grantor's gross
income; and distributions after 5 years that are made when the grantor is
59 1/2 years of age or older or on account of death, disability, or the
purchase of a home by a first-time homebuyer (limited to $10,000), are not
includible in gross income. For more information on Roth IRAs, including
the required disclosure the depositor can get from the custodian, get Pub.
590, Individual Retirement Arrangements (IRAs).
This Roth IRA can be used by a depositor to hold: (1) IRA Conversion
Contributions, amounts rolled over or transferred from another Roth IRA,
and annual cash contributions of up to $2,000 from the depositor; or (2) if
designated as a Roth Conversion IRA (by checking the box on the
application), only IRA Conversion Contributions for the same tax year.
To simplify the identification of funds distributed from Roth IRAs,
depositors are encouraged to maintain IRA Conversion Contributions for each
tax year in a separate Roth IRA.
DEFINITIONS
ROTH CONVERSION IRA. A Roth Conversion IRA is a Roth IRA that accepts only
IRA Conversion Contributions made during the same tax year.
IRA CONVERSION CONTRIBUTIONS. IRA Conversion Contributions are amounts
rolled over, transferred, or considered transferred from a nonRoth IRA to a
Roth IRA. A nonRoth IRA is an individual retirement account or annuity
described in section 408(a) or 408(b), other than a Roth IRA.
CUSTODIAN. The custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to
act as custodian.
DEPOSITOR. The depositor is the person who establishes the custodial
account.
SPECIFIC INSTRUCTIONS
ARTICLE I. The depositor may be subject to a 6 percent tax on excess
contributions if (1) contributions to other individual retirement
arrangements of the depositor have been made for the same tax year, (2) the
depositor's adjusted gross income exceeds the applicable limits in Article
II for the tax year, or (3) the depositor's and spouse's compensation does
not exceed the amount contributed for them for the tax year. The depositor
should see the disclosure statement or Pub. 590 for more information.
ARTICLE IX. - Article IX and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete
the agreement. They may include, for example, definitions, investment
powers, voting rights, exculpatory provisions, amendment and termination,
removal of the custodian, custodian's fees, state law requirements,
beginning date of distributions, accepting only cash, treatment of excess
contributions, prohibited transactions with the depositor, etc. Use
additional pages if necessary and attach them to this form.
NOTE: Form 5305-RA may be reproduced and reduced in size.
10
<PAGE> 12
<TABLE>
<S> <C>
M.S.B. FUND, INC. ROTH IRA APPLICATION
C/O PFPC INC. PO BOX 8905 ADOPTION AGREEMENT &
WILMINGTON DE 19899-8905 BENEFICIARY DESIGNATION
For assistance in completing this form please call 1-800-661-3938. BOTH PAGES MUST BE COMPLETED.
- ------------------------------------------------------------------------------------------------------------------------------------
1. PLEASE TELL US ABOUT YOURSELF: This information is required in order to establish your account.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
First Middle Last Name Social Security Number
/ /
- ------------------------------------------------------------------------------------------------------------------------------------
Street Date of Birth
( )
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code Telephone Number
- ------------------------------------------------------------------------------------------------------------------------------------
2. PLEASE TELL US ABOUT YOUR CONTRIBUTION IN A. PLEASE INDICATE THE DOLLAR AMOUNT OR PERCENTAGE OF YOUR
CONTRIBUTION YOU WISH TO INVEST IN SECTION B. THE INITIAL INVESTMENT MUST BE AT LEAST $50.00.
- ------------------------------------------------------------------------------------------------------------------------------------
A. TYPE OF ROTH: (SPECIFY CONTRIBUTORY OR CONVERSION AND THE TYPE OF CONTRIBUTION)
[ ] CONTRIBUTORY ROTH
[ ] CONTRIBUTION - CURRENT YEAR $_________. PRIOR YEAR $_________. (No more than $2,000 per year)
[ ] ROLLOVER - This contribution is a ROLLOVER from a Contributory ROTH IRA which has been completed within 60 days of
receipt of the funds. TAX YEAR ORIGINAL ROTH ESTABLISHED: _______________.
[ ] TRANSFER OF ASSETS - This contribution is a TRANSFER OF ASSETS from another Contributory ROTH IRA. I have
attached a completed "Transfer of Assets" form. TAX YEAR ORIGINAL ROTH ESTABLISHED: ________________.
[ ] CONVERSION ROTH: MY INCOME FOR THE CURRENT TAX YEAR IS UNDER $100,000 AND I AM NOT MARRIED FILING SEPARATELY.
[ ] ROLLOVER - This contribution is a CONVERSION from a TRADITIONAL IRA which has been completed within 60 days of
receipt of the funds. I realize I must pay ordinary income taxes on the amount being converted from the Traditional
IRA to the CONVERSION ROTH IRA.
[ ] TRANSFER OF ASSETS - This contribution is a Transfer of Assets from a CONVERSION ROTH IRA. DATE OF CONVERSION:
_________.
B. INVESTMENT: (CONTRIBUTIONS WILL BE CONSIDERED CURRENT YEAR IF NOT DESIGNATED ABOVE.)
M.S. B. FUND, INC. (012) $_________________
- ------------------------------------------------------------------------------------------------------------------------------------
3. BENEFICIARY DESIGNATION
- ------------------------------------------------------------------------------------------------------------------------------------
Complete this section to designate Primary and Contingent Beneficiary(ies) to receive, in the event of your death, any benefits
which may be payable under your Roth IRA. A beneficiary must survive you to receive anything. If your Primary Beneficiary(ies) do
not survive you, your Contingent Beneficiary(ies) will receive the funds. If more than one person is named and no percentage is
indicated, a joint tenancy with the right of survivorship will be deemed to have been created. If the beneficiary is a trust,
please indicate the date of the trust and the trustee(s) name. You may change your beneficiaries at any time by giving written
notice to the custodian.
PARTICIPANT'S DESIGNATION: In the event of my death, I hereby designate the following individuals as the Primary and Contingent
Beneficiary(ies) to receive all benefits that may become due and payable under my M.S.B. FUND, INC. Roth IRA.
CONSENT OF PARTICIPANT'S SPOUSE: Spousal consent is required in community property and marital property states where a Roth IRA
Depositor wishes to name a beneficiary other than, or in addition to, the spouse. Spouses of Participants who reside in community
property or marital property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI) must sign the consent below.
I hereby consent to and join in the designation of beneficiary(ies) below. I give to the Depositor any interest I have in the
funds deposited in this account.
_____________________________________________________________________________________________________________
Signature of Participant's Spouse (if applicable) Date
</TABLE>
<PAGE> 13
PRIMARY BENEFICIARY(IES): PLEASE CHECK HERE IF YOU HAVE ATTACHED A SEPARATE
SHEET WITH ADDITIONAL PRIMARY BENEFICIARIES. SIGN AND DATE THE SHEET.
- ------------------------------------- -------------------------------------
Name % of Distribution Name % of Distribution
- ------------------------------------- -------------------------------------
Street Street
- ------------------------------------- -------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- -------------------------------------
Birth Date Relationship Birth Date Relationship
( ) ( )
- ------------------------------------- -------------------------------------
Social Security Number Telephone Social Security Number Telephone
CONTINGENT BENEFICIARY(IES): PLEASE CHECK HERE IF YOU HAVE ATTACHED A
SEPARATE SHEET WITH ADDITIONAL CONTINGENT BENEFICIARIES. SIGN AND DATE THE
SHEET.
- ------------------------------------- -------------------------------------
Name % of Distribution Name % of Distribution
- ------------------------------------- -------------------------------------
Street Street
- ------------------------------------- -------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- -------------------------------------
Birth Date Relationship Birth Date Relationship
( ) ( )
- ------------------------------------- -------------------------------------
Social Security Number Telephone Social Security Number Telephone
- ------------------------------------------------------------------------------
TERMS AND CONDITIONS OF THE ROTH IRA ADOPTION AGREEMENT
- ------------------------------------------------------------------------------
Please sign and date this Roth IRA Application Agreement & Beneficiary
Designation form "Application". You, the Depositor, acknowledge that you have
received and read the current Prospectus for the Fund.
All subsequent contributions will be invested as indicated by you in the
"Investment" section of this form. All dividends and distributions from the
Fund shares held in your Account will be reinvested in shares of the Fund from
which received. The custodian, upon written instructions from you, may
exchange any M.S.B. FUND, INC. shares for any other M.S.B. FUND, INC. shares in
accordance with the then current prospectus.
CUSTODIAL FEES: $10.00 annual maintenance fee per account. The annual
maintenance fee may be paid by the Depositor in addition to the maximum annual
contribution to his or her Roth IRA. If the fee is not included, the custodian
will deduct the fee from the Account at year-end or at the time the Account is
closed.
The custodian reserves the right to change the custodian fee, but will give at
least 30 days written notice to the Depositor of any fee changes. The
custodian will keep those records, identify and file returns and provide other
information concerning your Account as required of custodians by the Internal
Revenue Code and any Regulations issued or forms adopted by the Treasury
Department of the United States.
I (THE DEPOSITOR) HEREBY ESTABLISH A ROTH IRA UNDER THE TERMS AND CONDITIONS
CONTAINED IN THE ACCOMPANYING CUSTODIAL ACCOUNT AGREEMENT, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THE COMBINED INSTRUMENT IS HEREINAFTER
REFERRED TO AS THE "AGREEMENT." THIS ROTH IRA BECOMES EFFECTIVE UPON WRITTEN
ACCEPTANCE OF THIS APPLICATION BY THE CUSTODIAN, PNC BANK, NATIONAL
ASSOCIATION, WHICH WRITTEN ACCEPTANCE SHALL CONSIST OF A CONFIRMATION OF
TRANSACTION STATEMENT ISSUED BY THE CUSTODIAN. THE DEPOSITOR UNDERSTANDS AND
AGREES THAT THE CUSTODIAN IS NOT RESPONSIBLE FOR ANY ASSETS UNTIL, RECEIVED.
THE DEPOSITOR UNDERSTANDS THE ELIGIBILITY REQUIREMENTS FOR CONTRIBUTING TO A
ROTH IRA AND ASSUMES ALL RESPONSIBILITY FOR EACH YEARS CONTRIBUTION, ENSURING
THAT THE CONTRIBUTIONS ARE WITHIN THE LIMITS SET FORTH IN SECTION 408A AND ANY
TAX CONSEQUENCES OF ANY TYPE (ROLLOVER, CONVERSION OR CONTRIBUTORY)
CONTRIBUTION OR DISTRIBUTION FROM THE ROTH IRA.
I (THE DEPOSITOR) CERTIFY UNDER PENALTIES OF PERJURY THAT MY SOCIAL SECURITY
NUMBER SET FORTH ABOVE IS TRUE, CORRECT AND COMPLETE AND THAT THIS NUMBER IS MY
TAXPAYER IDENTIFICATION NUMBER.
Owner's Signature_____________________________________________________
Date________________________
Acceptance by custodian shall consist of a confirmation of transaction
statement issued by the custodian: PNC Bank, National Association, C/O PFPC
Inc., 400 Bellevue Parkway, Wilmington, DE 19809
Distributor: SHAY FINANCIAL SERVICES, INC.
Shares of M.S.B. FUND, INC. are offered by the Distributor. The Distributor is
not a bank, and shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any bank nor are they federally insured or otherwise
supported by the FDIC, the Federal Reserve Board or any other agency.
FOR DEALER USE ONLY
- --------------------------------- --------------------------------------
Broker/Dealer Number Representative's Number
12
<PAGE> 14
<TABLE>
<S> <C>
M.S.B. FUND, INC. TRANSFER OF ASSETS
PAGE 1 OF 2 ROTH IRA
INSTRUCTIONS FOR COMPLETING THIS FORM ARE PROVIDED ON PAGE 2
- ------------------------------------------------------------------------------------------------------------------------------------
1. PLEASE TELL US ABOUT YOURSELF:
- ------------------------------------------------------------------------------------------------------------------------------------
/ /
- ------------------------------------------------------------------------------------------------------------------------------------
Name (Exactly as it appears on your current retirement account Date of Birth
- -
- ------------------------------------------------------------------------------------------------------------------------------------
Street Social Security Number
( )
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code Telephone Number
- ------------------------------------------------------------------------------------------------------------------------------------
2. PLEASE TELL US WHERE TO INVEST. COMPLETE ITEMS A, B AND C.
- ------------------------------------------------------------------------------------------------------------------------------------
A. [ ] I am opening a new account(s) and have attached C. [ ] These are funds from CONVERSION ROTH IRA.
the required application or documents. Date Converted: ________________
[ ] Deposit the proceeds into my existing Roth IRA.
B. [ ] Please purchase into the following fund or [ ] These are Roth Contribution monies.
account:. Tax Year of First Contribution: ______________.
M.S.B. FUND, INC (012) $______________
- ------------------------------------------------------------------------------------------------------------------------------------
3. PLEASE TELL US ABOUT YOUR CURRENT PLAN AND AUTHORIZE THE TRANSFER FROM YOUR CURRENT CUSTODIAN.
- CHECK WITH YOUR CURRENT CUSTODIAN FOR THE CORRECT ADDRESS AND IF THEY NEED A SIGNATURE GUARANTEE TO AVOID DELAYS.
- ATTACH A COPY OF A CURRENT STATEMENT IF POSSIBLE.
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSFER OF ASSETS CAN ONLY OCCUR BETWEEN Please transfer the following investments to PNC Bank, N.A.
ROTH IRAs. as custodian for M.S.B. FUND, INC. Roth IRA.
- ------------------------------------------------------------ For Certificate of Deposits [ ] Immediately [ ]
Name of current Custodian or Agent At Maturity [ ] Date _____________
1.
- ------------------------------------------------------------ --------------------------------------------------------
Address of current Custodian or Agent Fund Name or Type of Investment to be transferred
- ------------------------------------------------------------ ------------------------------------------------------------
City State Zip Code Account Number for Investment 1
[ ] Entire Account [ ] Partial $
( ) Telephone Number of 2. --------------------
- ----------------------------------------- --------------------------------------------------------
Custodian Fund Name or Type of Investment to be transferred
I AUTHORIZE THE TRANSFER OF ASSETS AS NOTED ABOVE TO MY M.S.B. ------------------------------------------------------------
FUND, INC. ROTH IRA AND AUTHORIZE M.S.B. FUND, INC. AND PNC BANK, Account Number for Investment 1
N.A. TO PROCESS THIS REQUEST ON MY BEHALF. I UNDERSTAND IT IS [ ] Entire Account [ ] Partial $
MY RESPONSIBILITY TO ASSURE THE PROMPT TRANSFER OF ASSETS BY THE ---------------------
CURRENT CUSTODIAN. I HAVE READ AND UNDERSTAND ALL INFORMATION ============================================================
IN THE INSTRUCTIONS. TO BE COMPLETED BY PNC BANK CUSTODIAN ONLY
ISSUE CHECK PAYABLE TO:
- ------------------------------------------------------------ M.S.B. FUND, INC. FBO:
Signature of Roth IRA Depositor (Required) Date --------------------------------------
Account No:
------------------------------------------------
- ------------------------------------------------------------ SSN:
Signature Guarantee Stamp and Signature --------------------------------------------------------
(If required by your current custodian or transfer agent)
</TABLE>
13
<PAGE> 15
M.S.B. FUND, INC. TRANSFER OF ASSETS
PAGE 2 OF 2 ROTH IRA
- --------------------------------------------------------------------------------
INSTRUCTIONS TO THE SHAREHOLDER (PLEASE READ CAREFULLY):
This form will be used by M.S.B. FUND, INC. to initiate a transfer of assets on
your behalf from an existing Roth IRA as designated on this form to your Roth
IRA plan at M.S.B. FUND, INC. Please remember that a TRANSFER OF ASSETS can
only occur between two ROTH IRAs. If you are requesting a ROLLOVER or a
Conversion IRA, please complete the ROLLOVER CERTIFICATION FORM. For
certificate of deposits please indicate if you wish to have the funds
transferred immediately, which may incur a redemption penalty if they have not
matured, or at maturity. We can not accept requests to transfer assets from
certificates more than 60 days prior to their maturity. When completed, please
return the signed form, a copy of your current custodian's statement, and the
appropriate new account application for your Roth IRA if required to:
FIRST CLASS MAIL OVERNIGHT MAIL:
M.S.B. FUND, INC. M.S.B. FUND, INC.
C/O PFPC Inc. C/O PFPC Inc.
PO Box 8905 400 Bellevue Pkwy Suite 108
Wilmington DE 19899-8905 Wilmington DE 19809-3710
Insufficient information or incorrect forms will result in delays in processing
your instructions. If you need assistance in completing this form or if you
need additional forms please contact our Customer Service Representatives at
1-800-661-3938. We would be happy to help you.
INSTRUCTIONS TO RESIGNING CUSTODIAN/TRANSFER AGENT:
Please liquidate the Depositor's account(s) ONLY IF THEY ARE ROTH IRAs, as
specified in section 3. ISSUE A CHECK PAYABLE AS INDICATED IN SECTION 3 AND
MAIL ALONG WITH ANY OTHER INSTRUCTIONS TO:
FIRST CLASS MAIL OVERNIGHT MAIL:
M.S.B. FUND, INC. M.S.B. FUND, INC.
C/O PFPC Inc. C/O PFPC Inc.
PO Box 8957 400 Bellevue Pkwy Suite 108
Wilmington DE 19899-8957 Wilmington DE 19809-3710
1-800-661-3938
ACCEPTANCE BY PNC BANK, NATIONAL ASSOCIATION AS CUSTODIAN:
PNC Bank, National Association (PNC Bank, N.A.), accepts its appointment as
custodian of the above referenced Roth IRA account and has established a Roth
IRA as indicated by the shareholder on the front of this form under the
relevant IRS guidelines for Roth IRAs under the shareholder's name in M.S.B.
FUND, INC. M.S.B. FUND, INC. and PNC Bank, N.A. as custodian cannot accept
assets other than cash. Upon receipt of the check, the proceeds will be
credited to the named shareholder's account.
Accepted by PNC Bank, N.A., as custodian for M.S.B. FUND, INC.
__________________________________________________ _________________________
Authorized Representative of PNC Bank, N.A. Date
12/97
14
<PAGE> 16
<TABLE>
<S> <C>
M.S.B. FUND, INC. ROLLOVER/CONVERSION
CERTIFICATION FORM
- ------------------------------------------------------------------------------------------------------------------------------------
Use this form to certify a rollover distribution from your current Roth IRA or eligible conversion distribution from a Traditional
IRA to your M.S.B. FUND, INC. Roth IRA. You must complete the rollover within 60 calendar days of your receipt of that
distribution.
- ------------------------------------------------------------------------------------------------------------------------------------
First Middle Last Name Social Security Number
/ /
- ------------------------------------------------------------------------------------------------------------------------------------
Street Date of Birth
( )
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code Telephone Number
- ------------------------------------------------------------------------------------------------------------------------------------
TYPE OF ROLLOVER CONTRIBUTION (PLEASE CHECK ONE)
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] ROTH IRA ROLLOVER - A distribution from another Roth IRA which is being rolled over into your M.S.B. FUND, INC. Roth
IRA within 60 days of receipt. Note that 365 days must have passed since you last received a rollover distribution
from the distributing Roth IRA.
[ ] TRADITIONAL IRA CONVERSION DISTRIBUTION - A distribution from a regular (traditional) IRA which is being converted
and/or rolled over into your M.S.B. FUND, INC. Conversion Roth IRA within 60 days of receipt. Ordinary income taxes
must be paid on the distribution in the year of the distribution, with the exception that income taxes in respect to
distributions taken in 1998 must be paid over four years.
[ ] QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION.
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION
- ------------------------------------------------------------------------------------------------------------------------------------
I certify that the contribution described above is an eligible Roth IRA rollover/conversion contribution and that I am rolling over
this contribution within 60 calendar days of my receipt of that distribution. I understand that this rollover is irrevocable and
involves important tax considerations. Other tax considerations may also apply.
I agree that I am solely responsible for all tax consequences of this rollover contribution. I also agree that the Roth IRA
custodian shall have no responsibility for any tax consequences.
I HAVE READ AND UNDERSTAND AND AGREE TO BE LEGALLY BOUND BY THE TERMS OF THIS FORM. I ALSO UNDERSTAND THAT THE ROTH IRA CUSTODIAN
WILL RELY ON THIS FORM WHEN ACCEPTING MY ROLLOVER/CONVERSION CONTRIBUTION. I UNDERSTAND I AM NOT ELIGIBLE FOR A CONVERSION IF MY
ADJUSTED GROSS INCOME EXCEEDS $100,000 OR I AM MARRIED AND FILING SEPARATELY. I UNDERSTAND THAT THIS ROLLOVER/CONVERSION IS
IRREVOCABLE AND MAY NOT BE REVERSED IN THE FUTURE. I ALSO UNDERSTAND THAT I AM RESPONSIBLE FOR THE MOVEMENT OF THE
ROLLOVER/CONVERSION TO MY SUCCESSOR ROTH IRA, AND THAT PNC BANK, NATIONAL ASSOCIATION AND PFPC INC. HAVE NO DUTY TO ENFORCE THE
COLLECTION OF ANY ASSETS TO BE ROLLED OVER TO MY M.S.B. FUND, INC. ROTH IRA.
- -----------------------------------------------------------------------------
Depositor's Signature
- -----------------------------------------------
Date
</TABLE>
12/97
15
<PAGE> 17
<TABLE>
<S> <C>
M.S.B. FUND, INC. ROTH IRA
c/o PFPC Retirement Plan Services WITHDRAWAL AUTHORIZATION
PO Box 8905 Wilmington DE 19899-8905 AND INSTRUCTIONS FOR DISTRIBUTION
FOR ASSISTANCE IN COMPLETING THIS FORM PLEASE CALL OUR CUSTOMER SERVICE AT 1-800-661-3938.
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE TELL US ABOUT YOURSELF:
- -----------------------------------------------------------------------------------------------------------------------------------
NAME:
------------------------------------------------------------------------------------------------------------------------------
(PLEASE PRINT FULL NAME)
SOCIAL SECURITY NUMBER:_________-_______-_________ DATE OF BIRTH _________/__________/___________
mm dd yy
ADDRESS:
---------------------------------------------------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP
FUND:_______________________________________________________ ACCOUNT NUMBER: _______________________________________________
ACCOUNT TYPE: CONTRIBUTORY 1st Tax Year of Contributions _________________ [ ] CONVERSION Year of Conversion _____________
- -----------------------------------------------------------------------------------------------------------------------------------
REASON FOR DISTRIBUTION - CHECK THE BOX THAT APPLIES IN BOTH SECTIONS A AND B.
- -----------------------------------------------------------------------------------------------------------------------------------
A. [ ] Over five year holding period OR [ ] Five year holding period not reached
B. [ ] Under age 59 1/2 [ ] 1st Time Home Purchase
[ ] Age 59 1/2 or older [ ] Divorce or Legal Separation
[ ] Disability [ ] Death
- -----------------------------------------------------------------------------------------------------------------------------------
The proper documentation must be received or attached for each distribution type before the request will be processed. All legal
documents must be a certified copy; and signature guarantees are required for the Roth IRA owner/beneficiary or spouse.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PAYOUT METHOD
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] Partial Withdrawal / Amount:_______________________________________ DOLLARS / SHARES (CIRCLE ONE)
[ ] Total Distribution of Account
[ ] Mail to my address currently on file. [ ] Mail to the following address:
[ ] Purchase funds into my existing non-retirement mutual fund account: _________________________________________________________
Account Number _______________________________________ _________________________________________________________
Fund _________________________________________________ Financial Institution Name:______________________________
[ ] NEW ACCOUNT: check here and attach completed application to Account Number:__________________________________________
purchase funds into a new mutual fund account. (to be used if check going to another Financial Institution)
- -----------------------------------------------------------------------------------------------------------------------------------
WITHHOLDING ELECTION (Form W-4P OMB#1545-0415)
- -----------------------------------------------------------------------------------------------------------------------------------
Federal income tax will be withheld from payments from Roth IRAs unless you elect otherwise. You can use Form W-4P, or a
substitute form such as this one, to instruct the fund to withhold no tax from your Roth IRA payment or to revoke this election.
Generally, non-periodic payments must have tax withheld at a rate of 10%. You can elect to have no income tax withheld from a
nonperiodic payment by filing Form W-4P or this substitute with the fund and check the appropriate box on the form. Your election
will remain in effect for any subsequent distributions unless you change or revoke your election by completing a new W-4P or
substitute form, and submit it to the fund.
Number of allowances on which withholding is to be computed ________.
_____ I elect not to have federal income tax withheld from my distribution.
_____ I elect to have federal income tax withheld from my distribution. If you want a percentage exceeding the current rate,
please indicate the percentage _________% (not more than 90%).
_____ I want the following additional amount withheld from each distribution $__________.
CAUTION: Remember you are liable for the payment of Federal income tax on the taxable amount of your distribution(s) and there
are penalties for not paying enough tax during the year, either through withholding or estimated tax payments.
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE
- -----------------------------------------------------------------------------------------------------------------------------------
I certify that I am the Depositor authorized to make these elections and that all information provided is true and accurate. I
further certify that no tax or legal advice has been given to me by the custodian, M.S.B. FUND, INC., or any agent of either of
them, and that all decisions regarding the elections made on this form are my own. The custodian is hereby authorized and directed
to distribute funds from my account in the manner requested. The custodian may conclusively rely on this certification and
authorization without further investigation or inquiry. I expressly assume responsibility for any adverse consequences which may
arise from the Election(s) and agree that the custodian, the M.S.B. FUND, INC., and their agents shall in no way be responsible, and
shall be indemnified and held harmless, for any tax, legal or other consequences of the Election(s) made on this form. This form
MAY ONLY be used for one account. If you have another account from which you wish to take distributions, please fill out a separate
form.
X
----------------------------------------------------------------------------------------- ---------------------------------
Depositor's Signature (or beneficiary's signature if Depositor is deceased.) Date
*(THE MEDALLION SIGNATURE GUARANTEE MAY BE EXECUTED BY BANKS, BROKER DEALERS, CREDIT UNIONS, NATIONAL SECURITIES EXCHANGES AND
SAVINGS ASSOCIATIONS WHICH PARTICIPATE IN STAMP, SEMP OR NYSE-MSP. A NOTARY PUBLIC IS NOT A SUBSTITUTE FOR A SIGNATURE GUARANTEE.
THE MEDALLION SIGNATURE GUARANTEE STAMP MUST INCLUDE THE WORDS "SIGNATURE GUARANTEED, MEDALLION GUARANTEED" AND OTHERWISE COMPLY
WITH THE MEDALLION PROGRAM REQUIREMENTS. PLEASE CHECK YOUR FUND PROSPECTUS OR WITH YOUR FUND AS TO WHETHER A SIGNATURE GUARANTEE IS
REQUIRED.)
- --------------------------------------------------------------------
Signature Guarantee - Medallion Stamp*
12/97
</TABLE>
<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:
M.S.B. FUND, INC. TOTAL RETURN DATA
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997
------------------------------------------
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)* $1,288.80 $1,951.50 $2,314.50 $3,900.90
Total Return
((ERV/P)-1) x 100 28.88% 95.15% 131.45% 290.09%
Average Annual Total Return
1/n
((ERV/P) - 1) x 100
[n=number of years in period] 28.88% 24.97% 18.27% 14.58%
</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 FINANCIAL 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, 1997, 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-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 32813464
<INVESTMENTS-AT-VALUE> 49168766
<RECEIVABLES> 93569
<ASSETS-OTHER> 44042
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49306377
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38901
<TOTAL-LIABILITIES> 38901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32911965
<SHARES-COMMON-STOCK> 2778548
<SHARES-COMMON-PRIOR> 2558271
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 5787
<ACCUMULATED-NET-GAINS> 209
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16355302
<NET-ASSETS> 49267476
<DIVIDEND-INCOME> 646090
<INTEREST-INCOME> 162784
<OTHER-INCOME> 0
<EXPENSES-NET> 620912
<NET-INVESTMENT-INCOME> 187962
<REALIZED-GAINS-CURRENT> 2574612
<APPREC-INCREASE-CURRENT> 8335101
<NET-CHANGE-FROM-OPS> 11097675
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 193749
<DISTRIBUTIONS-OF-GAINS> 2574403
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 233081
<NUMBER-OF-SHARES-REDEEMED> 144397
<SHARES-REINVESTED> 132193
<NET-CHANGE-IN-ASSETS> 11909581
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 7151
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 329848
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 680537
<AVERAGE-NET-ASSETS> 43979768
<PER-SHARE-NAV-BEGIN> 14.60
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 4.10
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> .97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.73
<EXPENSE-RATIO> 1.41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
