<PAGE> 1
M.S.B. FUND, INC.
MESSAGE FROM THE PRESIDENT:
Dear Shareholder:
I am very pleased to report that the M.S.B. Fund produced a total return of
5.79% for the year-ended December 31, 1999. This performance helped to bring our
three-year average annual return to 21.47%. The five and ten-year average annual
returns for the periods ending December 31, 1999 were 22.10% and 14.46%,
respectively. If a shareholder had invested $10,000 in the Fund at inception in
1964 and reinvested all capital gains and dividends in the Fund, the
shareholder's investment would have grown to $581,646 on December 31, 1999.
There is no question that the 20th Century will go down in history as the
American Century. The progress and productivity generated by American sweat,
diligence and ingenuity was awesome. In 1900, for example, life expectancy was
47 years and inflation-adjusted per capita income was about $4,750. In 1999,
life expectancy equaled 77 years and per capita income approximated $32,600.
Today, ninety-nine percent of Americans don't think twice about electricity,
flush toilets and running water. Back in 1900, only 3% of households had
electricity, fewer than 25% had running water and only 15% had the luxury of
flush toilets.
Today, the United States is the most powerful and influential nation the world
has ever known. It invests more dollars in technology than any other nation, and
it's workers are the planet's most skilled, most productive and enjoy the
highest living standards.
Key to our continuing economic expansion is price stability. The well-oiled U.S.
economic machine produces its best results when inflation remains in check.
Fortunately, we have been living in one of the most rewarding low inflationary
periods in history. Inflation, as measured by the Consumer Price Index, has
averaged 2.5% since the current recovery began in 1991, and continued
technological advancements combined with the sound monetary and fiscal policy,
suggest inflationary volatility will remain subdued.
Business to business online commerce is estimated to reach $1 trillion by 2003,
and is already keeping a lid on prices as some companies are willing to sell
products at a loss to gain a share of market. It also allows many businesses to
build products after an order has been received thus reducing inventory and
distribution costs. Best of all, online buyers get to bid on prices from a
multitude of suppliers around the globe.
More and more investors are convinced that America is at the top of its economic
gain and continue to demonstrate their confidence by investing in equity
securities. Today, about 50% of all adult Americans own stock outright or
through equity mutual funds, up from about 16% in 1982, when the current bull
market began.
We believe the M.S.B. Fund's investment philosophy of seeking to create
shareholder value over time and its investment discipline of investing only in
companies with strong balance sheets that are believed to have the capability of
generating rising cash-flows should continue to be well positioned to capitalize
on our nation's economic prowess, technological supremacy and rising share of
world output.
Sincerely,
Joseph R. Ficalora
Joseph R. Ficalora
President
1
<PAGE> 2
M.S.B. FUND, INC.
INVESTMENT ACHIEVEMENT
The following 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.
The total return of the Fund for various periods is compared with the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) and the Dow Jones
Industrial Average (DJIA), which are groups of unmanaged securities, and with
the Lipper Large Capitalization Value Funds Average, which is a broad equity
fund measurement. The S&P 500 and DJIA do not include a reduction of total
return for expenses. These results should be considered in light of the makeup
of each index, the investment objectives and portfolio composition of the Fund
and the periods indicated.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
---------------------------
PERIODS ENDING 12/31/99
---------------------------
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
M.S.B. Fund, Inc......... 5.79% 22.10% 14.46%
Lipper Large
Capitalization Value
Funds Average.......... 11.23% 22.56% 15.06%
Standard & Poor's 500
Composite Stock Price
Index.................. 21.04% 28.56% 18.21%
Dow Jones Industrial
Average................ 27.21% 27.03% 18.35%
</TABLE>
* Assumes reinvestment of all dividends and distributions and the deduction of
all applicable fees and expenses. Data for the Lipper Large Capitalization
Value Funds Average, the S&P 500 and DJIA are from Lipper, Inc. The S&P 500
and DJIA do not include a reduction in total return for expenses.
The following graph shows that an investment of $10,000 in the Fund on
December 31, 1989 would have been worth $38,585 on December 31, 1999, assuming
all dividends and distributions have been reinvested. A similar investment in
the S&P 500, over the same period, would have grown to $53,219.
M.S.B. FUND, INC.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MSB S&P
--- ---
<S> <C> <C>
'1989 10000.00 10000.00
'1990 9262.00 9690.00
'1991 10833.00 12636.00
'1992 11988.00 13596.00
'1993 14462.00 14969.00
'1994 14219.00 15164.00
'1995 17769.00 20855.00
'1996 21529.00 25641.00
'1997 27746.00 34195.00
'1998 36474.00 43968.00
'1999 38585.00 53219.00
</TABLE>
M.S.B. FUND, INC.
TOTAL RETURN COMPARISON
LOGO
2
<PAGE> 3
INVESTMENT RESULTS, OUTLOOK AND STRATEGIES
M.S.B. FUND, INC.
The M.S.B. Fund's net asset value per share on December 31, 1999 was $21.09
versus $21.49 on December 31, 1998. Shareholders received per share
distributions from dividend income of $0.0068, short-term capital gains of
$0.0624 and long-term capital gains of $1.5345 during the year. The Fund's total
return for the one-year period ending December 31, 1999 was 5.79%. For
comparison purposes the one-year total return as of December 31, 1999 for the
Lipper Large Capitalization Value Funds Average(1) was 11.23%. Total return
assumes the reinvestment of all dividends and capital gains and the deduction of
all applicable fees and expenses.
During the 8-year period beginning December 31, 1991 and ending December 31,
1999, coinciding with the tenure of the current portfolio management team, the
M.S.B. Fund has provided a cumulative total return of 256.17%. This compares
favorably to the 8-year cumulative return of 209.59% for the Lipper Growth &
Income Funds Average (1992-1998) / Lipper Large Capitalization Value Funds
Average (1999)(2). The Fund's average annual total return for the 8-year period
ending December 31, 1999 was 17.21% versus 15.17% for the Lipper Growth & Income
/ Large Capitalization Value Funds Average.
Our portfolio companies continued to deliver consistent earnings growth
throughout 1999, nearly identical to their fundamental performance in 1998 or
approximately 13%-14% on average. However, their collective stock price
performances did not reflect this underlying growth in either year. During 1998,
the Fund gained over 30% compared to less than 10% in 1999. This anomaly can be
explained by Benjamin Graham's famous quote, "In the short-term, the stock
market is a voting machine, in the long-term it is a weighing machine." Stock
prices are largely affected by investor emotion over short time periods, however
they are largely determined by fundamental performance in the long run.
Investors' appetite for the type of companies owned by the M.S.B. Fund changed
significantly from 1998 to 1999. In 1998, the market was suffering from the
"Asian Contagion" and investors favored companies that were likely to continue
to deliver steady earnings growth through various economic environments.
Companies of this type are well represented in the M.S.B. Fund. By early 1999,
the memory of the "Asian Contagion" had all but evaporated and Internet euphoria
engrossed the investor community. The prospect of higher inflation also fueled
the rise in cyclical companies this past year. These two sectors of the market
are not represented in the M.S.B. Fund due to the lack of earnings visibility
and high valuations in the technology sector and the volatility of earnings in
the cyclical sector.
During 1999, we continued our focus on large capitalization issues with strong
fundamentals available at reasonable prices with the additions of Cintas
Corporation and William Wrigley Jr. Company. We eliminated a number of
securities whose market prices reflected their full potential in our opinion or
whose fundamentals changed so that continued ownership by the Fund was not
warranted. These companies included Electronic Data Systems Corporation,
Hewlett-Packard Company, International Flavors & Fragrances Inc., Nike Inc. and
Philip Morris Companies Inc.
We prefer to maintain our focus on those companies that can deliver steady
earnings growth over time and that can be purchased at reasonable prices. We are
confident that over the long-term the stock market will appropriately value the
earnings streams of our portfolio companies. We do not believe that it is in
shareholders' best interest for the portfolio management team to try to jump
from sector to sector attempting to profit from the latest trend.
3
<PAGE> 4
We do not view the ownership of a stock certificate as a slip of paper to be
sold to the next highest bidder, but as a partial ownership position in an
ongoing business. The M.S.B. Fund's portfolio turnover is significantly lower
than that of other mutual funds. Our average holding period is between 3 and 10
years, a number we would like to see increase over time. In addition to reducing
taxable distributions to shareholders, it is a testament to our commitment to
becoming long-term partners with our portfolio companies. From time to time,
some of our companies may stumble, but provided that the long-term fundamental
outlook remains intact, we may use that time as an opportunity to increase our
ownership position. However, if the long-term fundamental outlook deteriorates
for any of our companies, we will seek to reinvest our capital elsewhere.
During the past 35 years, the M.S.B. Fund has experienced a wide variety of
economic environments and stock market cycles. The Fund's investment philosophy
of purchasing high quality companies at reasonable prices has persevered
throughout this extended period. We are confident that adherence to our
investment principles will provide us with continued success as we begin the
next millennium.
Footnote 1: Lipper, Inc. reorganized its fund classifications during 1999. The
Growth & Income category, of which the M.S.B. Fund was a member, no longer
exists. The Fund is now a member of the Large Capitalization Value category.
Footnote 2: In the interest of continuity, we have added the 1999 annual return
for the Lipper Large Capitalization Value Funds Average to the 1992-1998
cumulative return for the Lipper Growth & Income Funds Average reported in last
year's annual report.
4
<PAGE> 5
M.S.B. FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCK (98.2%)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
ADVERTISING (4.3%)
50,000 Interpublic Group of Cos., Inc.... $ 2,884,375
BANKS (3.7%)
6,000 M & T Bank Corp................... 2,485,500
BEVERAGES-NON-ALCOHOLIC (3.4%)
40,000 Coca-Cola Co...................... 2,330,000
COMMERCIAL SERVICES (2.7%)
35,000 Cintas Corp....................... 1,859,375
COMPUTER SOFTWARE &
SERVICES (8.8%)
50,000 Automatic Data Processing, Inc.... 2,693,750
28,000 Microsoft Corp.*.................. 3,268,999
-----------
5,962,749
DISTRIBUTOR-CONSUMER
PRODUCTS (3.5%)
60,000 Sysco Corp........................ 2,373,750
ELECTRICAL EQUIPMENT (3.0%)
35,000 Emerson Electric Co............... 2,008,125
ELECTRONICS &
SEMICONDUCTORS (4.3%)
35,000 Intel Corp........................ 2,880,938
ENTERTAINMENT (2.8%)
65,000 Walt Disney Co.................... 1,901,250
FINANCIAL SERVICES (11.5%)
20,000 American Express Co............... 3,324,999
35,000 Fannie Mae........................ 2,185,313
50,000 Freddie Mac....................... 2,353,125
-----------
7,863,437
FOOD PROCESSING (3.4%)
27,500 Wm. Wrigley Jr., Co............... 2,280,781
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
FOODS (2.9%)
50,000 Campbell Soup Co.................. $ 1,934,375
HEALTH CARE-DIVERSIFIED (3.2%)
23,500 Johnson & Johnson................. 2,188,438
HEALTH CARE-DRUGS (5.7%)
51,000 Abbott Laboratories............... 1,851,938
30,000 Merck & Co., Inc.................. 2,011,874
-----------
3,863,812
HOUSEHOLD PRODUCTS (3.4%)
45,000 Clorox Co......................... 2,266,875
INSURANCE (5.0%)
60 Berkshire Hathaway, Inc. *........ 3,366,000
OFFICE EQUIPMENT AND
SUPPLIES (3.2%)
45,000 Pitney Bowes, Inc................. 2,174,063
PERSONAL CARE (3.0%)
50,000 Gillette Co....................... 2,059,375
PUBLISHING-NEWSPAPERS (3.6%)
30,000 Gannett Co., Inc.................. 2,446,875
RESTAURANTS (2.7%)
45,000 McDonald's Corp................... 1,814,063
RETAIL-DRUG CHAINS (2.5%)
57,000 Walgreen Co....................... 1,667,250
RETAIL-FOOD CHAINS (2.9%)
60,000 Albertson's, Inc.................. 1,935,000
RETAIL-GENERAL
MERCHANDISE (4.6%)
45,000 Wal-Mart Stores, Inc.............. 3,110,625
</TABLE>
- --------------------------------------------------------------------------------
See Accompanying Notes to Financial Statements.
5
<PAGE> 6
M.S.B. FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- --------- ------
<C> <S> <C>
RETAIL-SPECIALTY STORES (4.1%)
60,000 Gap, Inc.......................... $ 2,760,000
-----------
Total Common Stocks
(Cost $40,802,916).............. 66,417,031
-----------
<CAPTION>
COMMERCIAL PAPER (1.7%)
<C> <S> <C>
FINANCIAL SERVICES (1.7%)
$ 551,000 Ford Motor Credit Corp.,
1.00%, 1/3/00................... $ 551,000
600,000 Household Finance Corp.,
4.00%, 1/3/00................... 600,000
-----------
Total Commercial Paper
(Cost $1,151,000)............... 1,151,000
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------
<C> <S> <C> <C>
Total Investments (Cost
$41,953,916) (a)......... 99.9% $67,568,031
Other assets in excess of
liabilities.............. 0.1% 86,856
----- -----------
Total Net Assets........... 100.0% $67,654,887
===== ===========
</TABLE>
(a) Aggregate cost for Federal income tax purposes is the same as for financial
reporting purposes. At December 31, 1999, the net unrealized appreciation
for tax purposes for all securities of $25,614,115 consists of gross
unrealized appreciation of $27,770,481 and gross unrealized depreciation of
$2,156,366.
* Non-income producing security.
- --------------------------------------------------------------------------------
See Accompanying Notes to Financial Statements.
6
<PAGE> 7
M.S.B. FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
ASSETS:
Investment in securities, at value (Cost $41,953,916)....... $67,568,031
Cash........................................................ 394
Dividends and interest receivable........................... 21,707
Prepaid expenses............................................ 72,232
-----------
Total assets.............................................. 67,662,364
LIABILITIES:
Accrued expenses payable.................................... 7,477
-----------
Total liabilities......................................... 7,477
-----------
NET ASSETS, applicable to 3,207,999 shares of Class A
$.001 par value stock, 5,000,000 shares authorized........ $67,654,887
===========
NET ASSETS:
Par value of capital shares................................. $ 3,208
Additional paid in capital.................................. 41,872,266
Accumulated net realized gains from investment
transactions.............................................. 165,298
Net unrealized appreciation on investments.................. 25,614,115
-----------
NET ASSETS.................................................. $67,654,887
===========
NET ASSET VALUE, offering and redemption price
per share ($67,654,887/3,207,999 shares).................. $ 21.09
===========
</TABLE>
- --------------------------------------------------------------------------------
See Accompanying Notes to Financial Statements.
7
<PAGE> 8
M.S.B. FUND, INC.
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
INVESTMENT INCOME:
Dividends................................................. $ 708,880
Interest.................................................. 141,091
-----------
Total investment income................................ 849,971
EXPENSES:
Investment advisory....................................... 504,642
Administration............................................ 80,400
Directors'................................................ 51,806
Transfer agent............................................ 58,468
Legal..................................................... 34,491
Printing.................................................. 24,018
Insurance................................................. 29,209
Audit..................................................... 24,808
Custodian................................................. 18,871
Registration.............................................. 13,665
Miscellaneous............................................. 9,823
-----------
Total expenses......................................... 850,201
Fee waivers............................................ (17,615)
-----------
Net expenses........................................... 832,586
-----------
Net investment income.................................. 17,385
REALIZED AND UNREALIZED GAIN (LOSSES) ON INVESTMENTS:
Net realized gain........................................... 5,015,586
Net change in unrealized appreciation/depreciation.......... (1,268,740)
-----------
Net realized and unrealized gain............................ 3,746,846
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 3,764,231
===========
</TABLE>
- --------------------------------------------------------------------------------
See Accompanying Notes to Financial Statements.
8
<PAGE> 9
M.S.B. FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 17,385 $ 13,653
Net realized gain on investments.......................... 5,015,586 5,141,955
Net change in unrealized appreciation/depreciation on
investments............................................ (1,268,740) 10,527,553
----------- -----------
Net increase in net assets resulting from operations........ 3,764,231 15,683,161
Distributions to shareholders:
From net investment income................................ (17,385) (13,653)
In excess of net investment income........................ (3,261) (5,934)
From net realized gains on investments.................... (4,847,027) (5,142,223)
----------- -----------
Total distributions to shareholders......................... (4,867,673) (5,161,810)
Net increase from capital share transactions (See Note 3)... 2,934,755 6,034,747
----------- -----------
Total increase in net assets................................ 1,831,313 16,556,098
NET ASSETS:
Beginning of year......................................... 65,823,574 49,267,476
----------- -----------
End of year............................................... $67,654,887 $65,823,574
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Accompanying Notes to Financial Statements.
9
<PAGE> 10
M.S.B. FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Selected Data for Each Share of Capital Stock
Outstanding throughout Each Year
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year.................. $21.49 $17.73 $14.60 $13.63 $13.39
INCOME FROM OPERATIONS:
Net investment income............................. 0.01 0.01 0.07 0.11 0.08
Net realized and unrealized gain on investments... 1.20 5.55 4.10 2.76 3.17
------ ------ ------ ------ ------
Total from investment operations............... 1.21 5.56 4.17 2.87 3.25
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net investment income........................ (0.01) (0.01) (0.07) (0.14) (0.08)
From net realized gains on investments............ (1.60) (1.79) (0.97) (1.76) (2.93)
------ ------ ------ ------ ------
Total distributions............................ (1.61) (1.80) (1.04) (1.90) (3.01)
------ ------ ------ ------ ------
NET ASSET VALUE, end of year........................ $21.09 $21.49 $17.73 $14.60 $13.63
====== ====== ====== ====== ======
Total return........................................ 5.79% 31.45% 28.88% 21.16% 24.97%
Ratio of net expenses to average net assets......... 1.24% 1.32% 1.41% 1.41% 1.69%
Ratio of net investment income to average net
assets............................................ 0.03% 0.02% 0.43% 0.71% 0.57%
Ratio of expenses to average net assets (1)......... 1.26% 1.39% 1.55% 1.61% 1.86%
Portfolio turnover rate............................. 22% 32% 23% 45% 68%
NET ASSETS, end of year (000's)..................... $67,655 $65,824 $49,267 $37,358 $32,509
</TABLE>
- --------------------------------------------------------------------------------
(1) During certain periods, certain fees were waived. If such fee waivers had
not occurred, the ratio would have been as indicated.
See Accompanying Notes to Financial Statements.
10
<PAGE> 11
M.S.B. FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
The M.S.B. Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as 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. The investment objective of the Fund is
to achieve long-term growth of capital for its shareholders.
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A--Security Valuation--Securities traded on national exchanges are valued at the
closing prices or, in the case of over-the-counter securities, at the mean
between closing bid and asked prices. Short-term instruments maturing within 60
days of the valuation date are valued at amortized cost.
B--Security Transactions and Related Investment Income--Security transactions
are accounted for on the trade date, dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. The
specific identification method is used in the determination of realized gains
and losses on the sale of securities.
C--Dividends to Shareholders--Dividends from net investment income are declared
and paid annually. Net short-term and long-term capital gains, if any, are
declared and paid annually.
Distributions from net investment income and from net realized capital gains are
determined in accordance with Federal income tax regulation, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature (i.e. reclass of market discounts,
gain/loss, paydowns and distributions) such amounts are reclassified within the
composition of net assets based on their Federal tax-basis treatment; temporary
differences do not require reclassification. Distributions to shareholders which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as distributions in
excess of net investment income or net realized gains. To the extent such
distributions exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of capital.
D--Federal Income Taxes--No provision has been made for Federal income tax,
since it is the intention of the Fund to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its ordinary taxable income and net capital gains to its
shareholders.
E--Management Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 2--FEES
Shay Assets Management, Inc. (the "Investment Adviser") is the investment
adviser to the Fund. The Investment Adviser is a wholly-owned subsidiary of Shay
Investment Services, Inc. ("SISI"), which is controlled by Rodger D. Shay, a
Vice President of the Fund.
The Investment Adviser receives fees from the Fund, computed at an annual rate
of 0.75% of the first $100,000,000 of the Fund's average daily net assets and
0.50% of 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 expenses
(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 for
11
<PAGE> 12
M.S.B. FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
any fiscal year during the term of the Fund's agreement with the Investment
Adviser. This limitation did not result in any waiver of the Investment
Adviser's fees during the year ended December 31, 1999.
Shay Financial Services, Inc. (the "Distributor") is the distributor for the
Fund. The Distributor is also a wholly-owned subsidiary of SISI. The Distributor
receives no compensation for its distribution services.
Effective August 1, 1999, administration services to the Fund changed from PFPC
Inc. to BISYS Fund Services Ohio, Inc. (Administrator, Transfer Agent) (BISYS,
Ohio). BISYS, Ohio is a subsidiary of The BISYS Group, Inc. As compensation for
its administrative services, the Fund pays the administrator a minimum monthly
fee of $6,700 (exclusive for out-of-pocket expenses). The administrator waived
approximately 16% of its administrative fee for the year ended December 31,
1999. The waiver amounted to $13,115.
Effective August 9, 1999, transfer agency services to the Fund changed from PFPC
Inc. to BISYS, Ohio. As compensation for its services as transfer agent, the
Fund pays the transfer agent a minimum monthly fee of $1,500 (exclusive of
out-of-pocket expenses). The transfer agent waived approximately 8% of its fee
for the year ended December 31, 1999. The waiver amounted to $4,500.
NOTE 3--CAPITAL STOCK
At December 31, 1999, there were 5,000,000 shares of $.001 par value capital
stock authorized. Transactions in capital stock for the years ended December 31,
1999 and 1998, respectively, were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
(000) ($000)
----------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shares sold................................................. 266 280 $ 5,808 $ 5,638
Shares issued in reinvestment of dividends.................. 194 195 4,000 4,169
--- ---- ------- -------
460 475 9,808 9,807
Shares redeemed............................................. 316 (191) (6,873) (3,772)
--- ---- ------- -------
Net increase................................................ 144 284 $ 2,935 $ 6,035
=== ==== ======= =======
</TABLE>
NOTE 4--PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of investments, exclusive of
short-term investments, for the year ended December 31, 1999, were $13,965,882
and $14,843,821, respectively.
NOTE 5--FEDERAL INCOME TAX INFORMATION (UNAUDITED)
During the year ended December 31, 1999, the Fund declared long-term capital
gain (20%) distributions of $4,660,872. For the taxable year ended December 31,
1999, 100% of income dividends paid by the Fund qualify for the dividends
received deduction available to corporations.
12
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of M.S.B. Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of M.S.B.
Fund, Inc. (a New York corporation), including the schedule of portfolio
investments, as of December 31, 1999, and the related statement of operations,
statement of changes in net assets, and financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The financial statements as of December 31, 1998 and for the year then
ended and the financial highlights for each of the four years in the period
ended December 31, 1998 were audited by other auditors whose report thereon
dated February 5, 1999, expressed an unqualified opinion on those statements and
financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights audited by us
and referred to above present fairly, in all material respects, the financial
position of M.S.B. Fund, Inc. as of December 31, 1999, the results of its
operations, the changes in its net assets, and its financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States.
Cincinnati, Ohio,
February 10, 2000
13
<PAGE> 14
CHANGE IN INDEPENDENT AUDITOR
In January 1999, KPMG LLP (KPMG) was terminated as independent accountant of
M.S.B. Fund, Inc. (the Fund) and Arthur Andersen LLP (Arthur Andersen) was
selected as the Fund's independent auditor. The Fund's selection of Arthur
Andersen as its independent auditor was recommended by the Fund's audit
committee and was approved by the Fund's Board of Directors and shareholders.
The reports on the financial statements prepared by KPMG for the years ended
December 31, 1998 and 1997 for the Fund did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Fund's two most recent fiscal
years and up to and including January 1999, there were no disagreements between
the Fund and KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of KPMG, would have caused it to make reference
to the subject matter of the disagreements in connection with its reports on the
financial statements for such years.
14
<PAGE> 15
M.S.B.
FUND, INC.
OFFICERS
Joseph R. Ficalora
President
Michael J. Gagliardi
First Vice President
Norman W. Sinclair
Second Vice President
Rodger D. Shay
Vice President and Assistant
Secretary
Edward E. Sammons, Jr.
Vice President and Secretary
John J. McCabe
Vice President
Mark F. Trautman
Vice President
Steven D. Pierce
Treasurer
Alaina V. Metz
Assistant Secretary
BOARD OF DIRECTORS
Malcolm J. Delaney
Timothy A. Dempsey
Harry P. Doherty
Joseph R. Ficalora
David Freer, Jr.
Michael J. Gagliardi
David F. Holland
William A. McKenna, Jr.
Norman W. Sinclair
Ian D. Smith
<PAGE> 16
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.
200 Park Avenue
45th Floor
New York, New York 10166
DISTRIBUTOR
Shay Financial Services, Inc.
230 West Monroe Street
Chicago, Illinois 60606
ADMINISTRATOR, TRANSFER AGENT,
REGISTRAR AND DIVIDEND PAYING AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
The Bank of New York
100 Church Street
New York, New York 10286
LEGAL COUNSEL
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
425 Walnut Street
Cincinnati, Ohio 45202
ANNUAL REPORT
December 31, 1999
