MSB FUND INC, 485APOS, 1999-02-26

MSB FUND INC
485APOS, 1999-02-26

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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. 41 ................................... X
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940...................................... X
AMENDMENT NO. 41................................................... 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)
__ON (DATE) PURSUANT TO PARAGRAPH (B)
__60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
X ON MAY 1, 1999 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>
M.S.B. FUND, INC.

-------------

CROSS REFERENCE SHEET

N-1A ITEM NO. LOCATION
- ------------- --------

PART A INFORMATION REQUIRED IN A PROSPECTUS

Item 1. Front and Back Cover Pages................... Front and Back Cover
Pages of the Prospectus

Item 2. Risk/Return Summary: Investments, Risks,
and Performance.............................. Key Points; Performance
Performance Summary

Item 3. Risk/Return Summary: Fee Table.............. Fees and Expenses of
the Fund

Item 4. Investment Objectives, Principal Strategies,
and Related Risks............................ Investment Objective
and Strategies;
Principal Risks

Item 5. Management's Discussion of Fund
Performance.................................. Not Applicable

Item 6. Management, Organization, and Capital
Structure.................................... Portfolio Management

Item 7. Shareholder Information...................... Share Price - Net Asset
Value; Purchase of
Fund Shares; Share
Purchase Options;
Redeeming Shares;
Dividends,
Distributions and
Federal Income Tax
Status

Item 8. Distribution Arrangements.................... Purchase of Fund Shares

Item 9. Financial Highlights Information............. Financial Highlights

PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

Item 10. Cover Page and Table of Contents............. Cover Page of the
Statement of
Additional
Information and
Contents

Item 11. Fund History................................. The Fund

Item 12. Description of the Fund and Its Investments
and Risks.................................... Investment Objective,
Policies and Risks

Item 13. Management of the Fund....................... Officers and Directors
of the Fund

Item 14. Control Persons and Principal Holders
of Securities................................ Officers and Directors
of the Fund

Item 15. Investment Advisory and Other Services....... Investment Advisory
and Other Services;
Independent Auditors

Item 16. Brokerage Allocation and Other Practices..... Purchase and Sale of
Portfolio Securities

Item 17. Capital Stock and Other Securities........... Description of Capital
Stock

Item 18. Purchase, Redemption and Pricing of Shares... Purchase and Redemption
of Shares; Financial
Statements
<PAGE>

Item 19. Taxation of the Fund......................... Income Tax Status,
Dividends and
Distributions

Item 20. Underwriters................................. Investment Advisory
and Other Services

Item 21. Calculation of Performance Data.............. Performance Information

Item 22. Financial Statements......................... Financial Statements

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>

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY.

This Prospectus does not constitute an offer in any state or jurisdiction in
which, or to any person to whom, the Fund may not lawfully make such an offer.

M.S.B.
FUND, INC.

INVESTMENT OBJECTIVE:
LONG-TERM GROWTH OF CAPITAL

PROSPECTUS
O O O O O O O O O O O O O O
May 1, 1999

You should read this Prospectus
and retain it for future reference.

<PAGE>

CONTENTS
PAGE PAGE
Key Points........................... 2 Dividends, Distributions and
Performance Summary.................. 3 Federal Income Tax Status.... 13
Fees and Expenses of the Fund........ 4 Portfolio Management........... 14
Investment Objective and Strategies.. 5 Administrator, Transfer Agent,
Principal Risks...................... 5 Dividend Paying Agent and
Share Price - Net Asset Value........ 6 Custodian.................... 15
Purchase of Fund Shares.............. 7 Distributor.................... 15
Share Purchase Options............... 8 Financial Highlights........... 15
Redeeming Shares..................... 10 Additional Information and
Shareholder Inquiries...... Back
Cover

------------------------------------------------

KEY POINTS

GOAL AND PRINCIPAL STRATEGIES: The Fund's investment objective is to achieve
long-term growth of capital for its shareholders. The Fund seeks to achieve this
objective by investing in a diversified portfolio of equity securities,
primarily common stocks, of companies the investment adviser believes to have
growth potential and a reasonable price. There is no assurance that the Fund in
fact will achieve this objective.

RISKS: All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money. Below is a summary of
the principal risk factors for the Fund.

O MARKET AND INVESTMENT RISKS. The market value of a security may move up or
down. The value of the Fund's shares will fluctuate in accordance with the
value of the securities held in its portfolio. Declines are possible in the
overall stock market or in the particular securities or types of securities
held by the Fund, and it is possible to lose money as a result of your
investment.

O PORTFOLIO MANAGEMENT RISKS. The Investment Adviser's skill will affect the
ability of the Fund to achieve its investment objective. The strategies
employed by the Fund may be more or less successful than other strategies at
different times and under different market or economic conditions.
Accordingly, the Fund's performance for any period may differ from the
performance of the overall market or from other investments that may be
available to you.

INVESTMENTS NOT INSURED OR GUARANTEED: An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.

<PAGE>

PERFORMANCE SUMMARY

The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance from
year-to-year over a 10-year period and by showing how the Fund's average annual
returns for one-, three-, five-, and ten-years compare to those of a broad-based
securities market index. All returns assume reinvestment of dividends but,
unlike the Fund's returns, index returns do not reflect any fees or expenses.
How the Fund has performed in the past is not necessarily an indication of how
the Fund will perform in the future.

<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURNS (AS OF DECEMBER 31 OF EACH YEAR)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

28.06% (7.40%) 16.97% 10.66% 20.64% (1.70%) 24.97% 21.16% 28.88% 31.45%
</TABLE>

Best Quarter: 4th Quarter, 1998 +22.56%
Worst Quarter: 3rd Quarter, 1990 -16.93%

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS

<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years

M.S.B. Fund, Inc. 31.45% 27.09% 20.32% 16.66%

S&P 500 Index<F1> 28.72% 28.28% 24.09% 19.22%
- ---------------
<FN>
<F1> The S & P 500 Index is the Standard & Poor's Composite Index of 500
Stocks, which is a commonly recognized unmanaged price index of 500 widely
held common stocks.
</FN>
</TABLE>

Total return shows the change in the value of an investment in the Fund over
a specified period of time (such as one, three, 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 you may pay.

<PAGE>
FEES AND EXPENSES OF THE FUND

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.

SHAREHOLDER FEES (fees paid directly from your investment, such as
sales charges (loads), deferred sales charges (loads), redemption fees
or exchange fees).......................................................... NONE

ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets). Annual fund
operating expense figures are for the fiscal year ended December 31, 1998, and
are expressed as a percentage of the Fund's average net assets.

Management Fees (without giving effect to expense limitation)....... 0.75%<F2>
Distribution or Service (12b-1) Fees................................ 0.00%
Other Expenses...................................................... 0.64%
Administration, Transfer Agent and Custodian Fees (without
giving effect to fee waiver) 0.26%*
Professional and Directors' Expenses 0.22%
Insurance, Printing and Miscellaneous Expenses 0.16%
Total Annual Fund Operating Expenses (without giving effect
to expense limitation and fee waivers)............................ 1.39%<F2>

- ---------------
<F2> The preceding table is based on expenses incurred during the fiscal year
ended December 31, 1998, without giving effect to expense limitations that
were in effect during the year under the Fund's investment advisory
agreement and voluntary fee waivers by the Fund's Administrator and
Transfer Agent . If the effect of these expense limitations and fee
waivers were included, the Management Fees in the table would have been
0.73%, the Administration and Transfer Agent in the foregoing table would
have been 0.21%, and Total Fund Operating Expenses would have been 1.32%.
The Fund's investment advisory agreement does not provide for any
expiration of the expense limitation. The Administrator and Transfer Agent
have agreed to continue the fee waivers through May 18, 2000.

EXAMPLE

This Example may help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.

The Example assumes that you invest $10,000 in the Fund for the time periods
indicated. The Example also assumes that your investment has a 5% return each
year, all dividends and distributions are reinvested and the Fund's operating
expenses described in the preceding table remain the same as a percentage of net
assets.<F3> Based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$14 $44 $76 $167

- ---------------
<FN>
<F3> If the effect of expense limitations and fee waivers that were in effect
during the year were reflected in the Example, the expenses paid for the
one-, three-, five- and ten-year periods would have been $13, $42, $72 and
$159.
</FN>
</TABLE>

<PAGE>

INVESTMENT OBJECTIVE AND STRATEGIES

INVESTMENT OBJECTIVE

The investment objective of the Fund is to achieve long-term growth of
capital for its shareholders. 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. There is no
assurance that the Fund will, in fact, achieve its objective.

The Board of Directors may change the Fund's investment objective without
shareholder approval.

PRINCIPAL INVESTMENT STRATEGIES

The Fund invests primarily in equity securities of companies whose growth,
cash flow, earnings and dividend prospects are promising and whose securities
are reasonably priced and have the potential for capital appreciation in the
opinion of its Investment Adviser.

The equity securities in which the Fund invests consist primarily of
dividend-paying common stocks of large-size companies, i.e., companies with a
market capitalization in excess of $5 billion. The Fund may invest up to 25% 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 may invest also include common stocks that do not pay
dividends.

Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets in equity securities. However, if the Fund's
Investment Adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in non-equity securities, such as investment grade corporate
bonds, commercial paper and government securities. In taking this action, the
Fund would reduce its exposure to fluctuations and risks in the market for
equity securities and would increase its exposure to fluctuations and risks of
the market for debt securities. These defensive actions would reduce the benefit
from any upswing in the equity markets and, if the Investment Adviser does not
correctly anticipate fluctuations in the equity and debt securities markets, may
not contribute to the achievement of the Fund's investment objective.

To a limited extent, the Fund also may engage in other investment practices.

More information about the Fund's investments and strategies is provided in
the Statement of Additional Information.

PRINCIPAL RISKS

All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.

The principal risk factors for the Fund are discussed below. Before you
invest, please make sure you understand the risks that apply to your investment.

MARKET AND INVESTMENT RISKS

There are market risks and investment risks with any security. The market
value of a security may move up or down. The value of the Fund's shares will
fluctuate in accordance with the value of the securities held in its portfolio
so that your shares, when redeemed, may be worth more or less than their
original cost. Declines are possible in the overall stock market or in the
particular securities or types of securities held by the Fund.

The Fund may invest up to 25% of its assets in the securities of companies
with a market capitalization of less than $5 billion. These companies carry
additional risks because their earnings tend to be less predictable, their share
prices more volatile and their securities less liquid than the securities of
larger companies.

Investments in mutual funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

PORTFOLIO STRATEGY

The Investment Adviser's skill in choosing appropriate investments for the
Fund will affect the ability of the Fund to achieve its investment objective,

<PAGE>

and the investment strategies employed by the Fund may be more or less
successful than other strategies at different times and under different market
or economic conditions. Accordingly, the Fund's performance for any period may
differ from the performance of the overall market or from other investments that
may be available to you.

YEAR 2000 RISKS

Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 or correctly process certain other dates after 1998 because
of the way dates are encoded. These difficulties are referred to generally as
the "Year 2000" issue. The Fund depends primarily on its Investment Adviser,
Administrator, Transfer Agent and Custodian for operational activities and,
accordingly, is dependent on the proper functioning of the computer systems used
by them and by their vendors and service providers. The Fund could be adversely
affected if the computer systems used by the Fund's Investment Adviser,
Administrator, Transfer Agent and Custodian or other vendors or service
providers do not properly process and calculate date-related information from
and after January 1, 1999. Such an event could have a negative impact on the
handling of securities trades, payments of dividends, pricing, processing of
investments and redemptions and other accounting services, among other
activities.

Although the Fund's Investment Adviser, Administrator, Transfer Agent and
Custodian have been actively working on changes to their computer systems to
address potential problems and believe that their systems will be Year 2000
compliant when required, there is no assurance that the Year 2000 issue will not
result in service disruptions that could have an impact on the operations of the
Fund.

The Year 2000 issue affects practically all companies, organizations and
markets, including companies in which the Fund invests and the markets in which
they trade. At this time no one knows precisely what the degree of impact of the
Year 2000 issue will be. To the extent that the impact on an investment held by
the Fund or on the securities markets or the economy is negative, it could
seriously affect the Fund's investment performance.

SHARE PRICE -- NET ASSET VALUE

The price of the Fund's shares is also referred to as their NET ASSET value
or NAV. The net asset value per share of the Fund is determined by computing the
total value of all securities and other assets of the Fund, subtracting all of
its liabilities and then dividing by the total number of shares of the Fund
outstanding:

Net Asset Value = TOTAL ASSETS - LIABILITIES
------------------------------
Number of Shares Outstanding

The Fund determines net asset value per share of the Fund as of 4:00 P.M.,
New York time. Shares will not be priced on days on which the New York Stock
Exchange is closed for trading.

The Fund uses market prices in valuing portfolio securities, but may use fair
value estimates if reliable market prices are unavailable.

PURCHASE OF FUND SHARES

You purchase shares at the Fund's next-determined net asset value after the
Fund receives your order to purchase. Except for orders by institutional
investors that elect next-day settlement, all orders must be accompanied by a
check or other form of payment and the Fund will not accept non-institutional
orders without payment. Orders to purchase shares are not binding on the Fund
until accepted by the Fund. The Fund reserves the right to reject any purchase
order.

As an M.S.B. Fund shareholder, you pay no shareholder transaction fees, such
as sales loads, redemption fees or exchange fees, when purchasing or redeeming
shares.

INITIAL AND SUBSEQUENT PURCHASES

To make an investment in the Fund, follow the instructions provided below
under the heading "Share Purchase Options." An Account Application may be
obtained separately from the Fund by calling 800-982-1846

<PAGE>

You receive a Confirmation Notice from the Fund confirming each share
purchase. Each Confirmation Notice includes a detachable order form which you
may use to make additional purchases of shares. Subsequent purchases also may be
made by telephone.

AUTOMATIC INVESTMENT PLAN

You may make automatic periodic investments in the Fund by authorizing the
Fund's Transfer Agent to withdraw funds from your bank account. If you desire to
participate in the Automatic Investment Plan, complete the Automatic Investment
Plan Application, which may be obtained separately from the Fund by calling
800-982-1846, and mail it to the Fund. Allow up to one month for processing of
the Automatic Investment Plan application.

TAX-SHELTERED RETIREMENT PLANS

The Fund offers certain tax-sheltered retirement plans through which you may
purchase shares, including regular, SEP, Roth and Education IRAs. Call the Fund
at 800-982-1846 to obtain the appropriate forms.

PAYROLL DEDUCTION PLANS

A number of employers make purchases of M.S.B. Fund shares available to their
employees by means of payroll deductions. Contact your employer for information
about the availability of a payroll deduction plan.

NEXT-DAY SETTLEMENT OPTION FOR INSTITUTIONAL INVESTORS

The Fund makes available a next-day settlement option for institutional
investors, including but not limited to banks, savings associations, trust
companies, broker-dealers and other institutions, whether acting for themselves
or their customers. Next-day settlement permits an institution to place an order
by telephone or fax to purchase Fund shares at the net asset value per share
next determined after receipt of the order to purchase and to deliver payment
for the order by wire transfer the following business day.

To use the next-day settlement option, follow the instructions below under
the heading "Share Purchase Options." You may obtain telephone transaction
authorization forms needed to activate next-day settlement by calling the Fund
at 800-661-3938.

Institutional investors may submit purchase orders by telephone for their
initial investment in the Fund or any subsequent investment.

A purchase order for next-day settlement is binding upon the investor. If the
Fund must cancel your order because payment was not timely received, you 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 your
account in an amount equal to the amount of the difference in share price and
the fees and other losses and expenses incurred, if any, and may retain the
proceeds of the redemption in satisfaction of your liability to the Fund. You
will continue to be responsible for any deficiency. In addition, the Fund may
prohibit or restrict you from electing next-day settlement in the future or from
making future purchases of the Fund's shares.

Any federal funds received by the Fund 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 the Fund's Custodian. If
it is not possible to return the federal funds the same day, you will not have
use of the funds until the next business day when it is possible to effect the
return payment. The Fund reserves the right to reject any purchase order.

REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

You 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. The Fund will so
reinvest dividends and capital gains distributions unless you state a contrary
intention in the space provided for that purpose in the Account Application. You
may change an election at any time prior to a record date for a dividend or
distribution by notifying the Fund in writing.

<PAGE>

SHARE PURCHASE OPTIONS
<TABLE>
<CAPTION>

INITIAL PURCHASE SUBSEQUENT INVESTMENT
---------------- ---------------------
<S> <C> <C>
MINIMUM $250 ($50 for investors $50 ($25 for investments
INVESTMENT enrolling in the Automatic through the Automatic
Investment Plan) Investment Plan)

BY MAIL OR Complete and sign the Make your check payable to
OVERNIGHT application. Make your check "M.S.B. Fund, Inc." and send
COURIER payable to "M.S.B. Fund, Inc." it to the address at the
and send the completed left. Put your account
application and check to: name, address and M.S.B.
Fund account number on your
By Mail: M.S.B. Fund, Inc. check. Subsequent investment
c/o PFPC Inc. forms will be included with each
P.O. Box 8905 shareholder statement for your
Wilmington, DE convenience. Altenratively,
19899-8905 include a not giving your M.S.B.
By Courier: M.S.B. Fund, Inc. Fund account number, your name
c/o PFPC Inc. and your address.
400 Bellevue Parkway
Wilmington, DE 19809

BY TELEPHONE Telephone transactions may If you want to make
not be used for initial telephone transactions, call
purchases, unless the investor 800-661-3938 to request an
is an institution. If you authorization form to set up
want to make telephone your account for this feature.
transactions, call All purchases made by telephone
800-661-3938 to request an must be paid by wire transfer.
authorization form to set up
your account for this
feature. All purchases made
by telephone must be paid by
wire transfer.

WIRE First, call 800-661-3938 to Please carefully follow
INSTRUCTIONS notify the Fund that you instructions at left and include
intend to purchase shares by the following information:
wire and to verify wire
instructions. Then, wire
funds care of PNC Bank, N.A., Shareholder Account #___________
Philadelphia, PA Shareholder Name/Registration
Taxpayer Identification
Number.
ABA#: 031000053
Credit: BNF M.S.B. Fund
DDA#8610304163
Further credit: (SHAREHOLDER NAME
ACCOUNT NUMBER)

</TABLE>

INITIAL PURCHASE SUBSEQUENT INVESTMENT
---------------- ---------------------
<S> <C> <C>
INSTITUTIONAL 1. Open an account by submitting Follow the directions to
INVESTORS -- a completed account application the left.
NEXT-DAY by mail or overnight courier.
SETTLEMENT Authorize telephone transactions
on an authorization form available
from the Fund.

2. Notify the Fund by calling
800-661-3938 that you desire to
purchase shares with next-day
settlement.

3. Submit an order to purchase
shares either by fax or telephone,
indicating the amount of the
investment or the number of shares
you desire to purchase. BE SURE TO
INDICATE ON THE ORDER THAT NEXT-DAY
SETTLEMENT IS SOUGHT. If you are
submitting the purchase order by
fax, transmit the fax to
302-791-4088.

4. Wire funds using the wire
instructions above. Federal funds
must be received by 4:00 P.M. New
York City time on the next business
day after the order is submitted or
the order will be canceled.

AUTOMATIC Complete and sign BOTH the Follow the directions to
INVESTMENT Account Application and the the left.
PLAN Automatic Investment Plan
Application which may be obtained
separately from the Fund. Send the
completed applications and a voided
personal check to the Fund at the
address provided above for delivery
by mail or overnight courier. Allow
up to one month for processing of
your Automatic Investment Plan
application.

PAYROLL See your employer for See your employer for
DEDUCTION PLANS information. information.

TO OBTAIN Call the Fund at 800-982-1846. Call the Fund at
ACCOUNT 800-982-1846.
APPLICATIONS
AND OTHER FORMS
- --------------------------------------------------------------------------------

</TABLE>

<PAGE>

SHARE CERTIFICATES

The Fund will not issue certificates representing the Fund's shares unless
you make a request in writing directly to the Fund's Administrator or to an
account representative of an eligible broker-dealer, bank or other financial
intermediary. Wire and telephone redemptions of shares held in certificate form
are not permitted.

PURCHASES THROUGH FINANCIAL INTERMEDIARIES

You may also purchase shares of the Fund through authorized broker/dealers or
other financial intermediaries such as banks, 401(k) plans, financial advisers
and financial supermarkets. These parties may charge transaction fees and may
set different minimum investments or limitations on buying or selling shares.
The intermediaries are responsible for transmitting purchase orders and funds
and for crediting their customers' accounts following timely redemptions made in
accordance with their customer agreements and this Prospectus.

REDEEMING SHARES

You may withdraw any part of your account at any time by redeeming shares
(subject to the conditions and limited exceptions described below). You may make
redemption requests in writing or by telephone if you have elected the telephone
redemption option. If share certificates were issued to you for the shares to be
redeemed, the share certificates must accompany the redemption request.
Procedures for redeeming shares are described below.

Shares are redeemed at their net asset value per share next determined after
receipt by the Fund of the request for redemption and all other necessary
documentation.

The Fund may refuse to honor a request for redemption until any check
delivered in payment for the purchase of the shares being redeemed has cleared.

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 and documents:

o the account number from which shares are to be redeemed,

o the dollar value or number of shares to be redeemed,

o the address the redemption proceeds should be mailed to,

o the shareholder's daytime phone number,

o the signatures of ALL account owners EXACTLY as registered on the account,

o signature guarantees (if required, as described below under the heading
"Signature Guarantees"),

o any supporting legal documentation that may be required in the event of the
death or incapacity of a shareholder,

o any certificates you are holding for the shares being redeemed.

You should direct redemption requests 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 GUARANTEES

Except for redemption requests by 401(k) plan omnibus accounts and
redemptions by institutional investors, redemption requests that are greater
than $10,000 require signature guarantees. A signature guarantee is designed to
protect you and the Fund against fraudulent transactions by unauthorized
persons. The types of signature guarantees that are required are described
below.

<PAGE>

AMOUNT OF TYPE OF SIGNATURE GUARANTEE
REDEMPTION REQUIRED
- ---------- --------------------------
<S> <C>
$10,000 - $25,000 Signatures must be guaranteed by a domestic bank
or trust company, broker-dealer, clearing
agency, credit union or savings association (a
"Qualified Guarantor").

OVER $25,000 Signatures must be guaranteed by a Qualified
Guarantor that is a participant in a medallion
program (described below) recognized by the
Securities Transfer Association.

REDEMPTIONS BY 401(K)
PLAN OMNIBUS ACCOUNTS
OR BY INSTITUTIONAL
INVESTORS Signature guarantee not required.
</TABLE>

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 by a Qualified Guarantor also may be required if:

o the proceeds of the redemption are to be paid to a person other than the
record owner,

o the proceeds are to be sent to an address other than the address on the
records of the Fund's Transfer Agent,

o the redemption request is received within thirty (30) days after the Transfer
Agent has been notified of an address change.

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, you must elect to do so on your application or complete a separate
authorization form supplied by the Fund.

Telephone redemptions must be in amounts of $500 or more. Instructions must
include your M.S.B. Fund account number and the dollar amount or number of
shares to be redeemed. Checks issued must be made payable to the owner of record
and may be mailed only to the address of record.

Telephone redemption requests are not available:

o for retirement account shares,

o for shares purchased within 15 days prior to the redemption request,

o for shares for which share certificates have been issued or

o if an address change has been made for the account within 60 days prior to
the telephone redemption request.

The Fund does not restrict institutional investors as to the frequency or the
maximum dollar amount of redemptions that they can make by telephone.

If there are multiple account owners, the Fund may rely on the telephone
instructions of only one owner.

The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These 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 the Fund's Administrator or
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone and believed to be genuine, and the investor
will bear any loss. The Fund may record all calls.

During periods of substantial economic or market change, telephone
redemptions may be difficult to complete. Shares may be redeemed by mail if you
are unable to contact the Fund by telephone.

<PAGE>

ADDITIONAL INFORMATION CONCERNING REDEMPTIONS

WIRING OF REDEMPTION PROCEEDS. 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. The Fund does not restrict institutional buyers as to the minimum or
maximum amount of redemption proceeds that may be transmitted to them by wire
transfer.

REDEMPTION OF IRA OR RETIREMENT PLAN ACCOUNTS. If you desire to redeem shares
held in an IRA or other retirement plan account, you must indicate on your
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.

BROKER-DEALERS. You also may redeem Fund shares through broker-dealers who
are holding shares on your behalf and have made arrangements with the Fund
permitting redemptions by telephone or fax transmission. These broker-dealers
may charge a fee for this service.

EXCEPTIONS TO OBLIGATION TO REDEEM

Redemptions may be suspended, and the date of payment postponed, if:

o trading on the New York Stock Exchange is suspended or restricted,

o an emergency makes determination of net asset value or disposition of
portfolio securities not reasonably practicable, or

o 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 reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming in any
90-day period is large enough to effect Fund operations (for example, if it
represents more than $250,000 or 1% of the Fund's assets). The Statement of
Additional Information contains supplementary details concerning redemption in
kind.

AUTOMATIC WITHDRAWAL PLAN

You may elect to participate in an Automatic Withdrawal Plan which will
enable you to withdraw cash systematically from your investments in the Fund
without the necessity of submitting a redemption order each time a redemption of
shares is to be made. The redemption of shares under the Automatic Withdrawal
Plan will reduce and may eventually eliminate all shares held in your account.

Under the Automatic Withdrawal Plan, you may have payments made to you either
monthly or quarterly. In addition, you 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 you designate 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 your
shares on the redemption date.

Under the Automatic Withdrawal Plan, you may not redeem shares for which
share certificates have been issued. If you elect to participate in the
Automatic Withdrawal Plan, all income dividends and capital gain distributions
payable to you will be reinvested in Fund shares regardless of previous
instructions which you may have given to the Fund.

Either you or the Fund may terminate the Automatic Withdrawal Plan by giving
at least 30 days' written notice at any time.

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 your account is less than $250, and you are not
enrolled in the Automatic Investment Plan, the Fund may notify you that, unless
you bring the account up to $250 in value, the Fund will redeem all shares and

<PAGE>

close your account. The Fund will give you forty-five days after it sends the
notice to bring your account up to $250 before it takes any action. 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 your account
drops below $250 solely 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

DIVIDEND POLICY

The Fund pays dividends of net investment income, if any, annually. The Fund
usually makes distributions of net long-term capital gains, if any, realized
during a fiscal year in December of that fiscal year.

The Fund's dividend distribution will vary with the amount of dividend and
other investment income received, and the expenses incurred, by the Fund. In
periods of relatively low dividend and interest rates, the Fund's dividend and
interest income may not exceed the Fund's expenses, so that dividend
distributions may not occur or may be low.

TAX STATUS; TREATMENT OF DIVIDENDS, DISTRIBUTIONS, GAINS AND LOSSES

TAX STATUS 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. The Fund intends to distribute all of its net investment
income and capital gains to shareholders. Assuming that it is so qualified and
makes such distributions, the Fund will not be subject to federal income tax on
the net investment income and capital gains distributed. If the Fund failed to
qualify as a regulated investment company or failed to meet certain 90%
distribution requirements, it would be taxed as an ordinary corporation. Even if
it meets these qualifications, if the Fund did not distribute 98% of its
ordinary income and 98% of its capital gain net income, it would be subject to a
non-deductible 4% excise tax on the amount required to be but not distributed.

TAXATION OF DIVIDENDS AND DISTRIBUTIONS. All distributions received by a
shareholder will be taxable to the shareholder, either as ordinary income or
capital gains, whether or not the distributions are reinvested in additional
shares of the Fund and regardless of the length of time the shareholder has
owned his shares. Shareholders that are tax-exempt entities will not be subject
to tax on distributions by the Fund. The Fund expects that its distributions
will consist primarily of long-term capital gains. However, increases in the
Fund's portfolio turnover rate may cause the Fund to realize an increased level
of short-term gains.

Dividends from the net long-term capital gains of the Fund will be taxable as
long-term capital gains to shareholders, regardless of the length of time a
shareholder has owned his shares. Long-term capital gain distributions received
by shareholders that are individuals generally are taxed at a 20% tax rate. Net
long-term capital gains received by corporate shareholders are taxed at the same
rates as ordinary income.

Dividends paid out of the net investment income and short-term capital gains
of the Fund will be taxable as ordinary income to shareholders. A portion of
dividends paid from net investment income attributable to dividends from
domestic corporations may qualify for the dividends-received deduction for
corporate shareholders.

Dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be taxable as if received by shareholders on December 31 of the
calendar year in which the dividends or distributions are declared.

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.

Shareholders buying shares just prior to a distribution should note that the
distribution will be taxable to them even though the price of the shares will
have included the amount of the forthcoming distribution.

<PAGE>

TAXATION OF GAINS AND LOSSES UPON SALE OR REDEMPTION. Any gain (or loss)
realized by a shareholder that is an individual upon a sale or redemption of
Fund shares, generally will be subject to tax as long-term capital gain (or
loss) at a maximum rate of 20% if the shares have been held for more than one
year. If the shares have been held less than one year the shareholder will
realize short-term capital gain or loss, except that any loss realized on Fund
shares that the shareholder has held for six months or less will be treated as
long-term capital loss to the extent of any capital gains dividend received by
the shareholder with respect to such shares. Gain realized by a corporate
shareholder will be taxed as ordinary income.

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.

OTHER. The foregoing discussion relates only to shareholders who are U.S.
persons (citizens, residents and domestic entities). Shareholders that are not
U.S. persons should consider that different tax consequences, including the
imposition of a 30% withholding tax, may apply.

You should consult your own tax advisers for specific questions about the
federal, state or local income tax implications of an investment in the Fund.

PORTFOLIO MANAGEMENT

INVESTMENT ADVISER

Shay Assets Management, Inc. (the "Investment Adviser") makes the investment
decisions for the Fund, subject to policies established by the Fund's Board of
Directors, and is responsible for placing purchase and sale orders for portfolio
securities and other investments.

Shay Assets Management, Inc. 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 $1.5 billion
at December 31, 1998, and as investment adviser to Institutional Investors
Capital Appreciation Fund, Inc., which had net assets at December 31, 1998, of
approximately $119 million.

The Investment Adviser's principal office is located at 230 West Monroe
Street, Chicago, Illinois 60606. The Investment Adviser is controlled by Rodger
D. Shay, who is a Vice President of the Fund. Shay Assets Management, Inc.,
together with its predecessor, Shay Assets Management Co., has served as the
Fund's investment adviser since May 19, 1995.

INVESTMENT ADVISER'S FEE

The Fund pays the Investment Adviser a graduated investment management fee.
The fee is 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. In 1998 the Fund's total
payment for investment advisory services was 0.73% of the Fund's average net
assets.

PORTFOLIO MANAGERS

The individuals with primary responsibility for the management of the Fund's
portfolio are John J. McCabe and Mark Trautman. Mr. McCabe and Mr. Trautman have
been responsible for the Fund's investments since 1991 and 1993 respectively,
first 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 and joined the
Investment Adviser in May 1995. 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

<PAGE>

responsibility for the Fund's investments. 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 and joined the
Investment Adviser in May 1995. 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.

ADMINISTRATOR, TRANSFER AGENT, DIVIDEND PAYING AGENT AND CUSTODIAN

ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Fund appointed
PFPC Inc. ("PFPC" or the "Administrator"), P.O. Box 8905, Wilmington, Delaware
19899-8905, as its administrator effective May 19, 1995. PFPC also serves as the
transfer agent, registrar and dividend paying agent for the Fund's shares.

CUSTODIAN. PFPC Trust Company ("PFPC Trust" or the "Custodian"),
Philadelphia, Pennsylvania, is the custodian of the Fund's investments. PFPC
Trust and PFPC are affiliates of PNC Bank Corp.

DISTRIBUTOR

Shay Financial Services, Inc. (the "Distributor") acts as the distributor of
the Fund. The Distributor's principal office is located at 230 West Monroe
Street, Chicago, IL 60606. The Distributor is controlled by Rodger D. Shay, a
Vice President of the Fund. The Fund has authorized the Distributor to undertake
certain activities in connection with the sale of shares of the Fund, including
informing potential investors about the Fund through written materials, seminars
and personal contacts. The Distributor does not receive any compensation from
the Fund for these activities.

FINANCIAL HIGHLIGHTS

The financial highlights information, including the financial highlights
table, contained in the Fund's Annual Report to shareholders for the year ended
December 31, 1998 (the "Annual Report") is incorporated herein by reference to
the Annual Report.

The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the Fund's
financial statements, are included in the Annual Report, which is available
upon request.

<PAGE>

NOTES

<PAGE>

NOTES

<PAGE>

NOTES

<PAGE>

M.S.B.
FUND, INC.

M.S.B. Fund, Inc.
c/o Shay Financial Services, Inc.
230 West Monroe Street
Chicago, Illinois 60606
Telephone 800-661-3938

INVESTMENT ADVISER
Shay Assets Management, Inc.
230 West Monroe Street
Chicago, Illinois 60606

DISTRIBUTOR
Shay Financial Services, Inc.
230 West Monroe Street
Chicago, Illinois 60606

ADMINISTRATOR, TRANSFER AGENT,
SHAREHOLDER SERVICING AGENT
AND DIVIDEND PAYING AGENT
PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809

CUSTODIAN
PFPC Trust Company
17th & Chestnut Streets
Philadelphia, Pennsylvania 19101

LEGAL COUNSEL
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004

<PAGE>
ADDITIONAL INFORMATION AND SHAREHOLDER INQUIRIES

A current Statement of Additional Information ("SAI") which provides more detail
about the Fund is on file with the Securities and Exchange Commission. The SAI
is incorporated herein by reference, which means that it is legally considered
part of this Prospectus.

Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.

The SAI, annual report and semi-annual report are available without charge upon
request. To obtain a copy of the current SAI, annual or semi-annual report or
other information about the Fund or to make shareholder inquiries:

Call: 800-661-3938
Write to: M.S.B. Fund, Inc.
Shay Financial Services, Inc.
230 West Monroe Street
Chicago, Illinois 60606
E-mail: Send your request to
[email protected]

You may view information about the Fund (including the SAI) by visiting the
Securities and Exchange Commision's internet website (www.sec.gov). You can also
review and obtain copies of Fund information by visiting the SEC's Public
Reference Room in Washington, DC (phone 800-SEC-0330) or by sending your request
and a duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.

M.S.B.
FUND, INC.

PROSPECTUS
O O O O O O O O O O O O O O

May 1, 1999
A NO-LOAD FUND

O O O O O O O O O O O O O O

INVESTMENT OBJECTIVE:
LONG-TERM GROWTH OF CAPITAL

Investment Company Act File No. 811-1273

<PAGE>

M.S.B.
FUND, INC.
--------------------------------------------

INVESTMENT OBJECTIVE: M.S.B. Fund, Inc.
LONG-TERM GROWTH c/o Shay Financial Services, Inc.
OF CAPITAL 230 West Monroe Street
Chicago, Illinois 60606
800-661-3938

STATEMENT OF ADDITIONAL
INFORMATION

May 1, 1999

This Statement of Additional Information is
not a prospectus. You should read this
document in conjunction with the Prospectus
of the Fund, dated May 1, 1999. This
document incorporates by reference the
Prospectus and the financial statements,
accompanying notes and report of independent
auditors appearing in the Annual Report. You
may obtain a copy of the Prospectus and the
Annual Report from the Fund at the above
address or by calling 800-661-3938.

--------------------------------------------

<PAGE>

CONTENTS
PAGE

The Fund................................................................ 1

Investment Objective, Policies, and Risks............................... 1

Investment Objective................................................. 1

Risks................................................................ 1

Additional Investment Strategies..................................... 2

Investments under Abnormal Market Conditions......................... 2

Fundamental Investment Policies-- Investment Restrictions
Regarding Portfolio Securities....................................... 3

Issuance of Senior Securities........................................ 4

Writing Covered Options.............................................. 4

Portfolio Turnover................................................... 5

Purchase and Redemption of Shares....................................... 6

Performance Information................................................. 7

Income Tax Status, Dividends and Distributions.......................... 8

Officers and Directors of the Fund...................................... 8

Certain Other Affiliations and Business Relationships................ 14

Compensation of Directors and Officers............................... 14

Investment Advisory and Other Services.................................. 16

Investment Adviser................................................... 16

Administrator, Transfer Agent, Shareholder Servicing Agent,
Dividend Paying Agent and Custodian.................................. 17

Distributor.......................................................... 18

Independent Auditors.................................................... 18

Purchase and Sale of Portfolio Securities............................... 19

Expenses of the Fund.................................................... 20

Description of Capital Stock............................................ 20

General Information..................................................... 20

Financial Statements.................................................... 21

<PAGE>

THE FUND

M.S.B. Fund, Inc. (the "Fund") is a diversified open-end management
investment company organized as a New York corporation. The Fund was
incorporated under the laws of the State of New York on June 8, 1964.

INVESTMENT OBJECTIVE, POLICIES, AND RISKS

INVESTMENT OBJECTIVE

The investment objective of the Fund is to achieve long-term growth
of capital for its shareholders. 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. There is
no assurance that the Fund will, in fact, achieve its objective.

The Board of Directors may change the Fund's investment objective
without shareholder approval.

RISKS

MARKET AND INVESTMENT RISKS. There are market risks and investment
risks with any security. The market value of a security may move up or down. The
value of the Fund's shares will fluctuate in accordance with the value of the
securities held in its portfolio so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Declines are possible in the
overall stock market or in the particular securities or types of securities held
by the Fund.

The Fund may invest up to 25% of its assets in the securities of
companies with a market capitalization of less than $5 billion. These companies
carry additional risks because their earnings tend to be less predictable, their
share prices more volatile and their securities less liquid than the securities
of larger companies.

Investments in mutual funds are not bank deposits and are not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund may invest from time to time in convertible debt securities
and may, under abnormal market conditions, invest up to 100% of its assets in
fixed income securities. See "--Investments under Abnormal Market Conditions" in
this Statement of Additional Information. Investments in fixed income securities
expose the Fund to the risk that interest or principal may not be paid in a
timely manner. In addition, prices of fixed income securities tend to move
inversely with changes in interest rates. An increase in interest rates will
result in a drop in the prices of fixed income securities, which could adversely
affect the Fund's share price.

PORTFOLIO STRATEGY RISKS. The Investment Adviser's skill in choosing
appropriate investments for the Fund will affect the ability of the Fund to
achieve its investment objective, and the investment strategies employed by the

<PAGE>

Fund may be more or less successful than other strategies at different times and
under different market or economic conditions. Accordingly, the Fund's
performance for any period may differ from the performance of the overall market
or from other investments that may be available to an investor.

ADDITIONAL INVESTMENT STRATEGIES

In addition to the principal investments and investment strategies
described in the Prospectus (see "Investment Objective and Strategies" in the
Prospectus), the Fund may also invest in preferred stocks and corporate 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. Additionally, 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 may also
write covered options. See "--Writing Covered Options."

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, and any of the advisers or
managers of the Fund who individually beneficially own more than one half of one
percent of the securities of that issuer, together beneficially own more than
five percent of the securities of the issuer.

INVESTMENTS UNDER ABNORMAL MARKET CONDITIONS

<PAGE>

FUNDAMENTAL INVESTMENT POLICIES -- INVESTMENT RESTRICTIONS REGARDING PORTFOLIO
SECURITIES

As a matter of fundamental policy, the Fund may not:

o 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;

o 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;

o 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;

o Invest more than 25% of its assets in any one industry;

o Invest in securities whose sale by the Fund would be restricted under the
Securities Act of 1933 (letter stock);

o Invest in companies for the purpose of exercising control or management;

o Purchase securities issued by another registered investment company;

o Buy or sell real estate, commodities or commodity contracts, unless
acquired as a result of ownership of securities;

o Make loans other than by the purchase of a portion of publicly distributed
debt securities;

o Underwrite securities issued by others;

o Make short sales of securities;

o Buy securities on margin;

o Buy or sell put options;

o 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; or

o 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 Fund's fundamental investment policies may be changed only upon affirmative
vote of a majority of the voting securities of the Fund.

<PAGE>

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.
The Fund may borrow 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. This policy is a fundamental investment policy of the Fund and may
not be altered, amended, or repealed except as authorized by the vote of a
majority of the outstanding shares of the Fund.

WRITING COVERED OPTIONS

COVERED CALL 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 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 purchaser exercises the option. 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 the Fund writes an option 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.

<PAGE>

The writing of covered call options involves certain risks. An
option position may be closed out only on an exchange which provides a market
for an option of the same series. Although the Fund will generally write only
those call options for which there appears to be an active market, there is no
assurance that an active market on an exchange will exist for any particular
option at any particular time. If the Fund as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it would,
as a result, be subject to any price decline in the underlying security. If such
a situation were to arise, the Fund's Investment Adviser would determine whether
to hold the underlying securities and risk depreciation in their market value or
to sell the securities and substitute cash or other securities as collateral for
the option obligation.

In general, premiums received on options which are not exercised and
gains or losses realized on closing purchase transactions are treated as
short-term capital gains or losses. When an option is exercised the premium is
added to the exercise price and the resulting gain or loss is characterized as a
short- or long-term capital gain or loss depending on the holding period of the
underlying securities. In general, brokerage commissions associated with buying
and selling call options are higher than those associated with other securities
transactions.

The Board of Directors has directed the Fund's Investment Adviser to
write options only in situations where the exercise price plus the premium (less
transaction costs) would, at the time the option is written, equal a price at
which the Investment Adviser would recommend selling the underlying securities
because of fundamental investment considerations. Consequently, the Fund does
not believe that option writing has a material effect on the Fund's portfolio
turnover rate and the Fund believes that option writing may contribute to the
objective of the Fund of achieving long-term growth of capital. 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. The Board of Directors may change these
restrictions whenever such changes appear to be in the best interest of the
Fund.

EFFECT OF OPTION WRITING ON 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. 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 "Income Tax Status, Dividends and Distributions" in this Statement of
Additional Information. For the effect of options on the computation of net
asset value see "Purchase and Redemption of Shares --- Purchase and Redemption
at Net Asset Value" in the Prospectus.

PORTFOLIO TURNOVER

The Fund's annual portfolio turnover rate was 45%, 23% and 32% in
1996, 1997 and 1998, 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 objective and policies in the light of market
conditions require more frequent trades. The Fund's portfolio turnover rate was

<PAGE>

lower in 1997 and in 1998 than in 1996 as fewer securities were required to be
sold to meet redemption or other cash requirements.

PURCHASE AND REDEMPTION OF SHARES

PURCHASE AND REDEMPTION AT NET ASSET VALUE. Investors may purchase
or redeem shares of the Fund 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.

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. 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 determined by computing
the total value of all securities and other assets of the Fund, subtracting all
of its liabilities and then dividing 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 exchange or system on the date of
computation, such security will be valued at the mean of the last bid and asked
prices on such day on such exchange or system.

Securities not listed on a national securities exchange or on the
NASDAQ National Market System but traded in an over-the-counter market are
valued at the average of the last bid and asked prices prior to the computation.
Short term interest-bearing investments for which market quotations are not
available are valued at cost plus discount earned, which the Board of Directors
has determined to be fair value. Other securities are valued at their fair
value, as determined in good faith by the Board of Directors of the Fund.

Securities underlying outstanding call options written by the Fund
are valued at their market price as determined above. Premiums received on the
sale of call options are included in the net asset value; however, the current
market value of outstanding options written by the Fund 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.

PROCEDURE FOR PURCHASING AND REDEEMING SHARES. Shareholders are
purchased through the Fund's Distributor, Shay Financial Services, Inc., or by
sending money directly to the Fund. Procedures for purchasing and selling shares
are described in the Prospectus.

<PAGE>

Investors may also purchase shares of the Fund through authorized
broker/dealers or other financial intermediaries such as banks, 401(k) plans,
financial advisers and financial supermarkets. These parties may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. The intermediaries are responsible for transmitting
purchase orders and funds and for crediting their customers' accounts following
timely redemptions made in accordance with their customer agreements and this
Prospectus.

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 the 90-day period. The Fund reserves the right to pay redemption proceeds in
excess of this 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 (determined on the same basis used to
compute the net asset value of the shares being redeemed) 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 will incur a brokerage
charge on the disposition of the securities through a broker.

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,
1998, and the average annual total return for such periods:

M.S.B. FUND, INC. TOTAL RETURN DATA

<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1998

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Total Return................... 31.45% 105.26% 152.20% 367.08%

Average Annual Total Return.... 31.45% 27.09% 20.32% 16.66%
</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 20.32%

<PAGE>

average annual rate of return would produce a total return of 152.20% over a
five-year period. The performance information reported above does not take into
account any federal or state income taxes that may be payable by an investor.

The foregoing information is a statement of the past record of the
Fund and should not be construed as a representation or prediction of future
results. The investment return and principal value of an investment in the Fund
will fluctuate with changing market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost. Comparisons
of total returns on a year-to-year basis may facilitate an understanding of how
changing market conditions affect the Fund. 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.

INCOME TAX STATUS, DIVIDENDS AND DISTRIBUTIONS

The Fund has elected to qualify, and intends to remain qualified, as
a regulated investment company under Subchapter M of the Internal Revenue Code.
It is the Fund's policy to distribute 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. If the Fund should fail to qualify for Subchaper
M status, it would be subject to federal corporate income tax on its net
investment income and capital gains. In addition, distributions to shareholders
would be taxed as corporate dividends at ordinary income rates. No portion of
the dividends would be afforded capital gains treatment. 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 excess of the amounts not distributed over
the amounts required to be 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.

OFFICERS AND DIRECTORS OF THE FUND

The directors of the Fund, in addition to reviewing the actions of
the Fund's Investment Adviser, decide upon matters of general policy at their
regular meetings. The Fund's officers supervise the business operations 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.

<PAGE>

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 52)<F4> President and Director
38-25 Main Street [1999]
Flushing, NY 11354

Mr. Ficalora has been Chairman, President and Chief Executive Officer of
Queens County Bancorp, Inc. since its inception in July 1993, and has been
President 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 58)<F4> 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 Center for the Study of Wilson's Disease. Mr. Gagliardi has served
as First Vice President of the Fund since April 1997.

- ----------
<F4>
These directors are regarded as "interested persons" under the Investment
Company Act of 1940 because they are officers of the Fund.

<PAGE>

NORMAN W. SINCLAIR (Age 74)<F5> 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 72) 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 65) Director [1999]
18 Oakland Avenue
Warwick, NY 10990-0591

Mr. Dempsey serves as Chairman 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 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 56)<F6> 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

- ----------
<F5>
This director is regarded as an "interested person" under the Investment Company
Act of 1940 because he is an officer of the Fund.

<F6>
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."

<PAGE>

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.

DAVID FREER, JR. (Age 59) Director (2001)
Greatview Lane
P.O. Box 732
Highland, NY 12528

Since 1990, Mr. Freer has served as President, Treasurer and a director of
Budget Payment Corporation, which until 1999 engaged in the business of
financing insurance premiums. 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 57) 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., an investment company
registered under the Investment Company Act of 1940 for which Shay Assets
Management, Inc. acts as investment adviser. He 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. He has been a
director of the Federal Home Loan Bank of Boston since 1998, and previously
served in that capacity from 1989 until 1994. He has been a director and
chairman of the Center for Financial Studies since December of 1995. Mr.
Holland was also a director from 1990 through 1995 and the chairman from 1993
through 1994 of America's Community Bankers. See "--Certain Other
Affiliations and Business Relationships."

<PAGE>

WILLIAM A. McKENNA, JR. (Age 62) 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. Since May
1998, Mr. McKenna has served as a trustee of RSI Trust, an investment company
registered under the Investment Company Act of 1940. 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.

IAN D. SMITH (Age 75) 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 62) Vice President and
1000 Brickell Avenue Assistant 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

<PAGE>

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 59) Vice President and
230 West Monroe Street, Suite 2810 Secretary
Chicago, IL 60606

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. from 1990 through
December 1997. These companies 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 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 55) 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 33) 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

<PAGE>

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.

JAY F. NUSBLATT (Age 38) 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. and as an officer to
other mutual funds registered under the Investment Company Act of 1940 who
are clients of PFPC. Mr. Nusblatt has served as Treasurer of the Fund since
May 1995.

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 SISI and its affiliates make to the Association and its
affiliates. Because Mr. Holland has resigned his positions with the Association

<PAGE>

and its affiliates, Mr. Holland will not be deemed to be an "interested person,"
unless the Securities and Exchange 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:

o a $3,000 annual retainer per director, payable in four quarterly
installments

o a per-meeting fee of $500 for each meeting of the Board of Directors
attended (the Board of Directors holds its regular meetings quarterly)

o a per-meeting fee of $250 for each meeting of a Board committee attended
in person on a date on which a meeting of the Board of Directors is not
held.

Directors are also reimbursed for 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 the 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.
No fee is payable for telephonic meetings of the Board of Directors or any
committee. No pension or retirement benefits are paid to directors, advisory
board members, or executive officers.

The total compensation received by directors and officers of the
Fund for service during 1998 was $50,500. The total amount of expenses incurred
during 1998 for which the directors were reimbursed was $6,407.

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
1998. Such compensation does not include reimbursements to the directors for
their expenses incurred in connection with their activities as directors.

<PAGE>

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 ....... $5,000 $ 5,000
Timothy A. Dempsey ....... $4,750 $ 9,750<F7>
Harry P. Doherty ......... $5,000 $12,000<F7>
Joseph R. Ficalora ....... $7,000 $ 7,000
David Freer, Jr. ......... $5,000 $ 5,000
Michael J. Gagliardi ..... $5,000 $ 5,000
David F. Holland ......... $4,500 $20,500<F7>
William A. McKenna, Jr. .. $4,500 $ 9,500<F7>
Norman W. Sinclair ....... $4,750 $ 4,750
Ian D. Smith ............. $5,000 $ 5,000

- ----------
<FN>
<F7>
Includes compensation of $5,000, $16,000 and $5,000 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.
</FN>
</TABLE>

As of December 31, 1998, all officers and directors of the Fund, as
a group, owned both of record or beneficially an aggregate of 160,310 shares of
the Fund (approximately 5.2% of the 3,063,416 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 PFPC Trust Company is the custodian
for the Fund.

INVESTMENT ADVISER

Shay Assets Management, Inc. (the Fund's "Investment Adviser") makes
investment decisions for the Fund and 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
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

<PAGE>

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 years ended December 31, 1996, 1997 and 1998 in respect
of investment advisory services were $216,493, $294,823 and $407,390,
respectively, representing 0.61%, 0.67% and 0.73% of the Fund's average daily
net assets (after all fee reductions and expense limitations). The Investment
Adviser pays for the Fund's legal counsel to prepare the minutes of meetings of
the Board of Directors and its committees.

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 $1.3 billion
at December 31, 1998, and to Institutional Investors Capital Appreciation Fund,
Inc., a registered investment company with net assets of approximately $119
million as of December 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 230 West Monroe Street,
Suite 2810, Chicago, Illinois 60606. Shay Assets Management, Inc. (together with
its predecessor, Shay Assets Management Co.) has served as the Fund's Investment
Adviser since May 19, 1995. The Fund's current investment advisory agreement
with Shay Assets Management, Inc. was approved by the shareholders of the Fund
on November 13, 1997.

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 (i) a breach of
fiduciary duty with respect to the receipt of compensation for services, (ii) a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or (iii) from reckless disregard by it of
its obligations and duties under the agreement.

The Investment Advisory Agreement will continue in effect from year
to year, subject to termination by the Fund or the Investment Adviser as
described below, if such continuance is approved at least annually by the vote
of the Fund's Board of Directors and a majority of the directors of the Fund who
are not "interested persons" of the Fund or of the Investment Adviser.

The Investment Adviser may terminate the Investment Advisory
Agreement 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.

<PAGE>

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: 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, maintenance of the Fund's books and records; preparation of various
filings, reports, statements and returns filed with governmental authorities or
distributed to shareholders of the Fund and 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
years ended December 31, 1996, 1997 and 1998 were $62,510, $60,300 and $60,300
after the fee waivers described below. PFPC also serves as the transfer agent,
registrar, shareholder servicing agent and dividend paying agent for the Fund's
shares and receives additional compensation in such capacities.

PFPC has served in the foregoing capacities since May 19, 1995. An
officer of PFPC also is an officer of the Fund. See "Officers and Directors of
the Fund."

CUSTODIAN. PFPC Trust Company ("PFPC Trust"), 17th & Chestnut
Streets, Philadelphia, Pennsylvania, is the custodian of the Fund's investments.
PFPC Trust and PFPC are affiliates of PNC Bank Corp. PFPC Trust (or its
affiliate PNC Bank, N.A.) has served as the Fund's Custodian since May 19, 1995.

FEE WAIVER. The Fund's administrator and custodian 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. The
administrator and transfer agent also agreed to waive 25% of the applicable
minimum charges during the second, third and fourth years of the agreements,
which period ends May 18, 1999. PFPC has further voluntarily agreed to waive 25%
of such applicable minimum charges during the fifth year of the agreement ending
May 18, 2000.

<PAGE>

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 principal business
address of Shay Financial Services, Inc. is located at 230 West Monroe Street,
Chicago, IL 60606.

The Fund has authorized the Distributor 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 is obligated to use
its best efforts to effect sales of shares of the Fund, but has no obligation to
sell any particular number of shares. The Distributor does not receive any
compensation from the Fund in connection with such activities.

Certain directors and officers of the Fund also are directors,
officers or employees of the Distributor and its affiliates. See "Officers and
Directors of the Fund."

INDEPENDENT AUDITORS

KPMG LLP, 1600 Market Street, Philadelphia, Pennsylvania, served as
the Fund's independent auditors, and in that capacity audited the Fund's annual
financial statements, for the year ended December 31, 1998. Subject to
stockholder approval at the 1999 Annual Meeting of Stockholders, the Board of
Directors has approved Arthur Andersen LLP, 1601 Market Street, Philadelphia,
Pennsylvania, to serve as the Fund's independent auditors for the year ended
December 31, 1999.

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. 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. Transactions in portfolio securities were effected during the calendar
year 1998 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.

<PAGE>

In 1998, brokerage commissions of $25,150 (attributable to purchases
of $9,346,680 and proceeds from sales of $11,669,816) were paid to 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 the Investment Adviser uses such research and
information in rendering investment advice to the Fund, the research and
information tend to reduce the Investment Adviser's expenses. The Investment
Adviser may use research services and statistical information furnished by
brokers through which the Fund effects securities transactions in servicing all
of its accounts, and the Investment Adviser may not use all such services in
connection with the Fund. The total amounts of brokerage commissions paid in
1996, 1997 and 1998 were $36,281, $26,700 and $31,426, respectively. The
Investment Adviser monitors the reasonableness of commissions paid by the Fund
based on its experience in the market, and the Board of Directors periodically
reviews the reasonableness of such commissions as well. Brokerage commissions
were lower in 1997 and in 1998 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. Each semi-annual report to
shareholders includes a statement of operational expenses.

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

<PAGE>

invested in accordance with the separate investment objectives, policies and
restrictions that the Board of Directors may establish for such other
portfolios. 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. The Board
of Directors may establish additional portfolios 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. They also 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. In each instance, reference
is made to the copy of such contract, agreement or other document filed as an
exhibit to the Registration Statement 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, 1998, including the notes thereto and the report of KPMG LLP,
contained in the Fund's Annual Report to shareholders for the year ended
December 31, 1998 (the "Annual Report") are incorporated herein by reference.
Except as set forth above, this Statement of Additional Information does not
incorporate any other portion of the Annual Report. KPMG LLP has audited such
financial statements, and the financial statements are incorporated by reference
in reliance on the report of KPMG LLP and the authority of such firm as experts
in accounting and auditing.

The Fund will provide a copy of the Annual Report without charge to
each person to whom this Statement of Additional Information is delivered.
Investors should direct requests to the Fund in writing c/o Shay Financial
Services, Inc., 230 West Monroe Street, Suite 2810, Chicago, IL 60606, or by
telephone at 800-982-1846.

<PAGE>

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Certificate of Incorporation of the Registrant

(1) Text of the complete Articles of Incorporation as in
effect at April 30, 1984. Previously filed with
Post-Effective Amendment No. 23 as Exhibit 1.

(2) Amendment to Articles FIFTH and SIXTH adopted January
23, 1986, and to Article SEVENTH adopted March 27, 1986.
Previously filed with Post-Effective Amendment No. 25 as
Exhibit A.

(3) Amendment to Article FOURTH adopted March 28, 1987.
Previously filed with Post-Effective Amendment No. 26
as Exhibit 1(a).

(b) By-Laws of the Registrant

(1) Form of Certificate for Common Stock. Previously
filed with Post-Effective Amendment No. 25 as Exhibit
C.

(2) Articles Fourth and Seventh of Certificate of
Incorporation. Previously filed with Post-Effective
Amendment No. 26 as Exhibit 1(a) and with
Post-Effective Amendment No. 25 as Exhibit A,
respectively.

(3) Articles II, VIII, and XIX of By-Laws. (See Exhibit
(b).)

(d) Investment Advisory Agreement dated as of December 9, 1997 between
the Registrant and Shay Assets Management, Inc. Previously filed
with Post-Effective Amendment No. 40 as Exhibit 5.

(e) Distribution Agreement dated as of December 9, 1997 between the
Registrant and Shay Financial Services, Inc. Previously filed with
Post-Effective Amendment No. 40 as Exhibit 9(c).

(f) Not Applicable

(g) Custodian Agreements

<PAGE>

(1) 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 as Exhibit 8(a).

(2) 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 as Exhibit 8(b).

(3) 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 as Exhibit 8(c).

(h) 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 as
Exhibit 9(a).

(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 as Exhibit
9(b).

(i) Legal Opinion and Consent of Hughes Hubbard & Reed LLP

(j) Consent of KPMG LLP

(k) Not Applicable

(l) Not Applicable

(m) Not Applicable

(n) Financial Data Schedule

(o) Not Applicable

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUND

Not Applicable

<PAGE>

ITEM 25. INDEMNIFICATION

Sections 721-726 of the New York Business Corporation Law provide that a
New York corporation shall have the power and, in certain cases, the obligation
to indemnify officers or directors against certain liabilities.

Article XV of the By-Laws of the Registrant provides that the Registrant
shall indemnify directors or officers to the full extent permitted by New York
law.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

In addition, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, indemnification by the Registrant of its
directors and officers against liabilities arising out of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of their respective offices is against public policy and, therefore,
unenforceable. In the event that any questions arise as to the lawfulness of
indemnification under the Investment Company Act of 1940 or the advancement of
legal fees or other expenses incurred by its officers and directors, the
Registrant will not advance such expenses or provide such indemnification unless
there has been a determination by a court, by a vote of a majority of a quorum
consisting of disinterested, non-party directors, or by independent legal
counsel in a written opinion or by other reasonable and fair means that such
indemnification or advancement would not violate Section 17 of the Investment
Company Act of 1940 and the rules and regulations thereunder.

In addition, the Registrant has entered into a Directors and Officers
Liability Insurance Policy covering the period August 1, 1998 to July 31, 1999.
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.

<PAGE>

ITEM 26. 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 230 West Monroe Street, Suite
2810, Chicago, Illinois, 60606, 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 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.

<PAGE>

ITEM 27. PRINCIPAL UNDERWRITERS

(a) The Distributor, Shay Financial Services, Inc., serves as the
principal distributor for Institutional Investors Capital
Appreciation Fund, Inc. and Asset Management Fund, Inc. in
addition to serving M.S.B. Fund, Inc.

(b) Rodger D. Shay is the Chairman and sole director of the
Distributor. He also serves as an officer of the Registrant.
Edward E. Sammons, Jr. is the Executive Vice President of the
Distributor and an officer of the Registrant. Other information
about Mr. Shay and Mr. Sammons required by this Item 27 is
incorporated herein by reference to Item 26 and the "Officers and
Directors of the Fund" in the Statement of Additional
Information. Set forth below are the names, principal business
addresses and positions and offices with the Distributor of the
other officers of the Distributor.

<TABLE>
<CAPTION>
NAME OF DIRECTOR OR POSITIONS AND OFFICES
OFFICER OF THE DISTRIBUTOR PRINCIPAL BUSINESS ADDRESS WITH DISTRIBUTOR
<S> <C> <C>
Robert T. Podraza 230 West Monroe Street Chief Financial Officer and
Chicago, IL 60606 Chief Operating Officer

Rodger D. Shay, Jr. 230 West Monroe Street President
Chicago, IL 60606
</TABLE>

ITEM 28. 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
Investment Adviser, Shay Assets Management, Inc., 230 West Monroe Street, Suite
2810, Chicago, Illinois 60606; 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., 230 West Monroe Street, Suite 2810,
Chicago, Illinois 60606; 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 29. MANAGEMENT SERVICES

Not Applicable

ITEM 30. UNDERTAKINGS

Not Applicable

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 41 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 February 26, 1999.

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. 41 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 February 26, 1999
- -------------------------------- (Principal Executive
(Joseph R. Ficalora) Officer)

/s/ JAY F. NUSBLATT Treasurer (Principal February 26, 1999
- -------------------------------- Financial Officer)
(Jay F. Nusblatt)

/s/ MALCOLM J. DELANEY Director February 26, 1999
- --------------------------------
(Malcolm J. Delaney)

/s/ TIMOTHY A. DEMPSEY Director February 26, 1999
- --------------------------------
(Timothy A. Dempsey)

/s/ HARRY P. DOHERTY Director February 26, 1999
- --------------------------------
(Harry P. Doherty)

/s/ DAVID FREER, JR. Director February 26, 1999
- --------------------------------
(David Freer, Jr.)

/s/ MICHAEL J. GAGLIARDI Director February 26, 1999
- --------------------------------
(Michael J. Gagliardi)

/s/ DAVID F. HOLLAND Director February 26, 1999
- --------------------------------
(David F. Holland)

<PAGE>

/s/ WILLIAM A. MCKENNA, JR. Director February 26, 1999
- --------------------------------
(William A. McKenna, Jr.)

/s/ NORMAN W. SINCLAIR Director February 26, 1999
- --------------------------------
(Norman W. Sinclair)

/s/ IAN D. SMITH Director February 26, 1999
- --------------------------------
(Ian D. Smith)

EXHIBIT (b)

By-Laws of the Registrant

<PAGE>

BYLAWS

M.S.B. FUND, INC.

(As Amended to January 21, 1999, effective May 1, 1999)

<PAGE>

BYLAWS

M.S.B. FUND, INC.
PAGE

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

<PAGE>

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

<PAGE>

ARTICLE XIV. Bonding of Officers and Employees...................... 20

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................ 22
Section 5. Other Provisions.......................... 23
Section 6. Limitations and Restrictions of
Indemnification........................... 23

ARTICLE XVI. Interested Directors................................... 24

ARTICLE XVII. Seal.................................................. 24

ARTICLE XVIII. Miscellaneous........................................ 24

Section 1. Fiscal Year............................... 24
Section 2. Reports to the Stockholders............... 24

ARTICLE XIX. Amendments............................................. 25

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BYLAWS

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.

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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

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stockholder may vote either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact. Every proxy shall be
revocable at the pleasure of the stockholder executing it, except in those cases
where an irrevocable proxy is provided by law.

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>

(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>

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 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.

<PAGE>

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.

<PAGE>

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 consisting of three or more directors, and each of

<PAGE>

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 officer,

<PAGE>

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>

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>

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>

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 the Corporation

<PAGE>

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>

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>

(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 $250 (the "minimum asset
value"), in accordance with the following procedures:

1. 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.

2. 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.

3. Such notice shall state (a) the date on which the Corporation
intends to redeem such shares, (b) that the price at which such shares
shall be redeemed will be the net asset value of such shares computed as
at the close of the New York Stock Exchange on the redemption date, (c)
that the redemption price will be paid to such stockholder by check within
seven days after the redemption date, and (d) that the stockholder may

<PAGE>

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.

4. No shares of stock may be redeemed without the consent of the
stockholder unless:

(a) the aggregate asset value of such shares immediately after
the most recent redemption of shares by such stockholder was less
than the applicable minimum asset value in effect at the time of
such most recent redemption; or

(b) the aggregate asset value of such shares immediately after
the most recent redemption of shares by such stockholder was less
than the applicable minimum asset value set forth in the
then-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.

IRAs, accounts enrolled in the Fund's Automatic Investment Plan and accounts
held pursuant to any incentive savings or deferred compensation plan shall be
exempt from involuntary redemptions.

ARTICLE IX.

Reserved.

ARTICLE X.

Restrictions on Investments.

The authority of the Board of Directors to invest the funds of the
Corporation, to borrow money and to pledge securities as provided in the
Certificate of Incorporation shall be subject to the following restrictions and
limitations:

1. Reserved.

2. Other than for the expenses of organization, the Corporation may
not borrow money except that the Fund may borrow funds from banks
temporarily for administrative or liquidity (but not leveraging) purposes
and such borrowing may not exceed five percent of the value of the total
assets of the Corporation at the time the loan is made nor be for a period
exceeding sixty days.

3. The Corporation shall not underwrite the securities of other
issuers.

<PAGE>

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.

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

<PAGE>

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 objective of the Corporation shall be to achieve long-term
growth of capital for its stockholders. To achieve these objectives the
Corporation shall select securities of companies whose growth, cash flow,
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.

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

<PAGE>

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;

(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.

<PAGE>

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.

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

<PAGE>

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, 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

<PAGE>

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.

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.

<PAGE>

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
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.

<PAGE>
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.

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

<PAGE>

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.

EXHIBIT (i)

Opinion and Consent of Hughes Hubbard & Reed LLP

<PAGE>

Hughes Hubbard & Reed LLP One Battery Park Plaza
New York, New York 10004-1482
Telephone: 212-837-6000
Facsimile: 212-422-4726

February 26, 1999

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. 41 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.
41, 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. 41 to Registration Statement No. 2-22542.

Very truly yours,

/s/ HUGHES HUBBARD & REED LLP

EXHIBIT (j)

Consent of KPMG LLP

<PAGE>

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors
M.S.B. Fund, Inc.:

We consent to the use of our report dated February 5, 1999 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 LLP

Philadelphia, PA
February 26, 1999

<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,
1998, 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-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 38905270
<INVESTMENTS-AT-VALUE> 65788125
<RECEIVABLES> 106353
<ASSETS-OTHER> 43785
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 65938263
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 114689
<TOTAL-LIABILITIES> 114689
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38940719
<SHARES-COMMON-STOCK> 3063416
<SHARES-COMMON-PRIOR> 2840740
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (5934)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (268)
<ACCUM-APPREC-OR-DEPREC> 26882855
<NET-ASSETS> 65823574
<DIVIDEND-INCOME> 643966
<INTEREST-INCOME> 107055
<OTHER-INCOME> 0
<EXPENSES-NET> (737368)
<NET-INVESTMENT-INCOME> 13653
<REALIZED-GAINS-CURRENT> 5141955
<APPREC-INCREASE-CURRENT> 10527553
<NET-CHANGE-FROM-OPS> 15683161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19587)
<DISTRIBUTIONS-OF-GAINS> (5142223)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 280690
<NUMBER-OF-SHARES-REDEEMED> (191350)
<SHARES-REINVESTED> 195529
<NET-CHANGE-IN-ASSETS> 16556098
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 209
<OVERDISTRIB-NII-PRIOR> (5787)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 418487
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 773065
<AVERAGE-NET-ASSETS> 55798272
<PER-SHARE-NAV-BEGIN> 17.73
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 5.55
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> (1.79)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.49
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>