<PAGE> 1
As filed with the Securities and Exchange Commission on March 1, 2000
1933 ACT REGISTRATION NO. 002-22542
1940 ACT REGISTRATION NO. 811-1273
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 ........................ X
PRE-EFFECTIVE AMENDMENT NO. .....................
POST-EFFECTIVE AMENDMENT NO. 42 ................. X
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940..................... X
AMENDMENT NO. 42................................. X
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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, 2000 PURSUANT TO PARAGRAPH (a)(1)
_ 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
_ ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485.
If appropriate, check the following box:
_ THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE
DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
TITLE OF SECURITIES BEING REGISTERED: CLASS A STOCK, PAR VALUE $.001 PER SHARE
===============================================================================
<PAGE> 2
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES AND HAS NOT 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.
LOGO
PROSPECTUS
------------------
May 1, 2000
------------------
A NO-LOAD FUND
------------------
Investment Objective:
LONG-TERM GROWTH OF CAPITAL
You should read this Prospectus
and retain it for future reference.
<PAGE> 3
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Key Points............................ 2
Performance Summary................... 3
Fees and Expenses of the Fund......... 4
Investment Objective and Strategies... 5
Principal Risks....................... 5
Share Price -- Net Asset Value........ 6
Purchase of Fund Shares............... 6
Share Purchase Options................ 8
Redeeming Shares...................... 10
Understanding Performance............. 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Dividends, Distributions and Federal
Income Tax Status................... 13
Portfolio Management.................. 14
Administrator, Transfer Agent,
Dividend Paying Agent and
Custodian........................... 15
Distributor........................... 15
Financial Highlights.................. 15
Additional Information and Shareholder Back
Inquiries........................... Cover
</TABLE>
------------------------
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,
consisting primarily of securities of U.S.-based 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-capitalization
companies, i.e., companies with a market capitalization in excess of $5 billion.
There is no assurance that the Fund in fact will achieve this objective.
RISKS: All investments in equity mutual funds, like the Fund, 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.
- MARKET AND INVESTMENT RISKS. 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.
- 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 not match the performance of other
strategies at different times or 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.
2
<PAGE> 4
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. How the
Fund has performed in the past is not necessarily an indication of how the Fund
will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS (YEARS ENDED DECEMBER 31)
PERFORMANCE GRAPH
<TABLE>
<S> <C>
1990 (7.40%)
1991 16.97%
1992 10.66%
1993 20.64%
1994 (1.70%)
1995 24.97%
1996 21.16%
1997 28.88%
1998 31.45%
1999 5.79%
</TABLE>
<TABLE>
<S> <C> <C>
Best Quarter: 4th Quarter, 1998 +22.56%
Worst Quarter: 3rd Quarter, 1990 -16.93%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS (YEARS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
M.S.B. Fund, Inc..................................... 5.79% 21.47 22.10% 14.46%
S&P 500 Index*....................................... 21.04% 27.56 28.56% 18.21%
</TABLE>
- ---------------
* 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. Unlike the Fund's returns, index returns do not reflect any fees or
expenses.
3
<PAGE> 5
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.
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES (fees paid directly from your investment).......... NONE
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
Management Fees................................................... 0.75%*
Distribution or Service (12b-1) Fees.............................. NONE
Other Expenses.................................................... 0.51%
Administration, Transfer Agent and Custodian Fees...... 0.23%*
Professional and Directors' Expenses................... 0.17%
Insurance, Printing and Miscellaneous Expenses......... 0.11%
Total Annual Fund Operating Expenses.............................. 1.26%*
</TABLE>
- ---------------
* The preceding table is based on expenses incurred during the fiscal year
ended December 31, 1999, without giving effect to expense limitations that
were in effect during the year under the Fund's investment advisory
agreement and fee waivers by the Fund's Administrator and Transfer Agent,
and are expressed as a percentage of the Fund's average net assets. If the
effect of these expense limitations and fee waivers were included, the
Management Fees in the table would have been 0.75%, the Administration,
Transfer Agent and Custodian Fees in the preceding table would have been
0.21%, and Total Annual Fund Operating Expenses would have been 1.24%. The
Fund's investment advisory agreement does not provide for any expiration of
the expense limitation. The Administrator and Transfer Agent has
contractually agreed to continue the fee waiver through December 31, 2000,
subject to review at the end of each calendar year.
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.* Based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C>
$128 $400 $692 $1,523
</TABLE>
- ---------------
* 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 $126, $393, $681
and $1,500, respectively.
4
<PAGE> 6
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 long 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 U.S.-based 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-capitalization 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. 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 in
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 in equity mutual funds, like the Fund, 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
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, and it is possible to lose money as a result of your investment.
The Fund may invest up to 25% of its assets in the securities of companies
with market capitalizations 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 MANAGEMENT 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 Fund may not match the performance
of other strategies at different times or under different market or economic
conditions. Accordingly, the
5
<PAGE> 7
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
The Fund and its service providers do not appear to have been adversely
affected by computer problems related to the processing of date-related
information on or after January 1, 2000 (the "Year 2000 issue"). However, there
remains a risk that such problems could arise or be discovered in the future.
The Fund has taken steps it believes are reasonably designed to address the Year
2000 issue with respect to the computer system it uses, and the Fund's service
providers have informed the Fund that they intend to monitor and correct any
Year 2000 problems that may arise or be discovered affecting the computer
systems relied on by the Fund. However, there can be no assurance that the
operations of, and services provided to, the Fund and its shareholders will not
be adversely affected. The Fund also could be adversely affected if Year 2000
problems adversely affect any of the companies in which the Fund invests.
SHARE PRICE -- NET ASSET VALUE
The price of the Fund's shares is also referred to as its net asset value
or NAV per share. 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:
<TABLE>
<S> <C>
Net Asset Value = Total Assets - Liabilities
Number of Shares
Outstanding
</TABLE>
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. 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 on page
8 under the heading "Share Purchase Options." An Account Application may be
obtained separately from the Fund by calling 800-982-1846.
You will 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 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 application.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers certain tax-sheltered retirement plans through which you
may purchase shares, including traditional, SEP, Roth and Education IRAs. Call
the Fund at 800-982-1846 to obtain the appropriate forms.
6
<PAGE> 8
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 on page 8
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 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 Custodian. If it is not possible
to return the 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.
7
<PAGE> 9
SHARE PURCHASE OPTIONS
<TABLE>
<CAPTION>
INITIAL PURCHASE SUBSEQUENT INVESTMENT
---------------- ---------------------
<S> <C> <C>
MINIMUM $250 ($50 for investors enrolling in $50 ($25 for investments through the
INVESTMENT the Automatic Investment Plan) Automatic Investment Plan)
BY MAIL OR Complete and sign the application. Make your check payable to "M.S.B.
OVERNIGHT COURIER Make your check payable to "M.S.B. Fund, Inc." and send it to the address
Fund, Inc." and send the completed at the left. Put your name, address
application and check to: and M.S.B. Fund account number on your
check. Subsequent investment forms
By Mail: M.S.B. Fund, Inc. will be included with each shareholder
P.O. Box 182010 statement for your convenience.
Columbus, OH 43218-2010 Alternatively, include a note giving
your M.S.B. Fund account number, your
By Courier: M.S.B. Fund, Inc. name and your address.
c/o BISYS Fund Services
Attn: Shareholder
Services
3435 Stelzer Road
Columbus, OH 43219
BY TELEPHONE Telephone transactions may not be used If you want to make telephone
for initial purchases, unless the transactions, call 800-661-3938 to set
investor is an institution. If you up your account for this feature. All
want to make telephone transactions, purchases made by telephone must be
call 800-661-3938 to set up your paid by wire transfer.
account for this feature. All
purchases made by telephone must be
paid by wire transfer.
WIRE INSTRUCTIONS First, call 800-661-3938 to notify the Please carefully follow instructions
Fund that you intend to purchase at left and include the following
shares by wire and to verify wire information:
instructions. Then, wire funds care of
The Bank of New York, New York, NY Shareholder Account #
Shareholder Name/Registration
The Bank of New York Taxpayer Identification Number.
ABA 021000018
A/C 8900403179
Ref: M.S.B. Fund and(Shareholder Name
and Account
Number)
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
INITIAL PURCHASE SUBSEQUENT INVESTMENT
---------------- ---------------------
<S> <C> <C>
INSTITUTIONAL 1. Open an account by submitting a Follow the directions to the left.
INVESTORS -- completed Account Application by mail
NEXT-DAY or overnight courier. Authorize
SETTLEMENT 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, please call
1-800-661-3938 to obtain a fax number.
4. Wire funds using the wire
instructions above. Immediately
available 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 the Account Application which Follow the directions to the left.
INVESTMENT PLAN may be obtained separately from the
Fund. Send the completed application
and a voided personal check to the
Fund at the address provided on page 8
for delivery by mail or overnight
courier. Allow up to one month for
processing of your application.
PAYROLL DEDUCTION See your employer for information. See your employer for information.
PLANS
TO OBTAIN ACCOUNT (Call the Fund at 1-800-661-3938.) (Call the Fund at 800-982-1846.)
APPLICATIONS AND
OTHER FORMS
</TABLE>
9
<PAGE> 11
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:
- - the account number from which shares are to be redeemed,
- - the dollar value or number of shares to be redeemed,
- - the address the redemption proceeds should be mailed to,
- - the shareholder's daytime phone number,
- - the signatures of all account owners exactly as registered on the account,
- - signature guarantees (if required, as
described below under the heading "Signature Guarantees"),
- - any supporting legal documentation that may be required in the event of the
death or incapacity of a shareholder,
- - any certificates you are holding for the shares being redeemed.
You should direct redemption requests to M.S.B. Fund, Inc., P.O. Box
182010, Columbus, OH 43218-2010. Redemption requests sent by overnight courier
should be sent to M.S.B. Fund, Inc., c/o BISYS Fund Services, Attn: Shareholder
Services, 3435 Stelzer Road, Columbus, OH 43219.
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.
10
<PAGE> 12
<TABLE>
<CAPTION>
AMOUNT OF
REDEMPTION TYPE OF SIGNATURE GUARANTEE 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 are required if:
- - the proceeds of the redemption are to be paid to a person other than the
record owner,
- - the proceeds are to be sent to an address other than the address on the
records of the Fund's Transfer Agent,
- - 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:
- - for retirement account shares,
- - for shares purchased within 15 days prior to the redemption request,
- - for shares for which share certificates have been issued or
- - 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
11
<PAGE> 13
mail if you are unable to contact the Fund by telephone.
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 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:
- - trading on the New York Stock Exchange is suspended or restricted,
- - an emergency makes determination of net asset value or disposition of
portfolio securities not reasonably practicable, or
- - 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 (i.e., 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 investment 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 close
12
<PAGE> 14
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.
UNDERSTANDING PERFORMANCE
From time to time the Fund reports performance information in the form of
total return and average annual total return. See, for example, "Performance
Summary" at page 3 of this Prospectus. 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.
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 maximum tax rate
of 20%. 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
13
<PAGE> 15
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.
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 tax rate of 20% if the shares have been held for more than
one year. If the shares have been held for one year or less 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 $1.1 billion
at December 31, 1999, and as investment adviser to Institutional Investors
Capital Appreciation Fund, Inc., a registered investment company which had net
assets at December 31, 1999, of approximately $115 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
14
<PAGE> 16
any fiscal year. In 1999 the Fund's total payment
for investment advisory services was 0.75% 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 F. 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
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 BISYS Fund Services Ohio, Inc. ("BISYS" or the "Administrator"), 3435
Stelzer Road, Columbus, OH 43219, as its administrator effective August 1, 1999.
BISYS also serves as the transfer agent, registrar and dividend paying agent for
the Fund's shares.
Custodian. The Bank of New York ("BONY" or the "Custodian"), New York, New
York, is the custodian of the Fund's investments.
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, 1999 (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). The
information included in the financial highlights table for the year ended
December 31, 1999 was audited by Arthur Andersen LLP, whose report, along with
the Fund's financial statements, are included in the Annual Report, which is
available upon request. The financial highlights for prior periods were audited
by KPMG LLP.
15
<PAGE> 17
NOTES
16
<PAGE> 18
NOTES
17
<PAGE> 19
NOTES
18
<PAGE> 20
LOGO
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
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10005
LEGAL COUNSEL
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
INDEPENDENT AUDITORS
Arthur Andersen LLP
425 Walnut Street
Cincinnati, Ohio 45202
19
<PAGE> 21
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:
<TABLE>
<S> <C>
Call: 800-661-3938
Write to: M.S.B. Fund, Inc.
c/o Shay Financial Services, Inc.
230 West Monroe Street
Chicago, Illinois 60606
E-mail: Send your request to
[email protected]
</TABLE>
You may view and copy the SAI and other information about the Fund by visiting
the Securities and Exchange Commission's Public Reference Room in Washington,
DC, or by visiting the EDGAR Database on the Commission's Internet site at
http://www.sec.gov. Copies of this information may also be obtained, upon
payment of a duplicating fee, by electronic request at the following E-mail
address: [email protected], or by writing to the Commission's Public Reference
Section, Washington, DC 20549-0102. You may call the Commission at
1-202-942-8090 for information about the operation of the Public Reference Room.
LOGO
PROSPECTUS
------------------
May 1, 2000
------------------
A No-Load Fund
------------------
Investment Objective:
LONG-TERM GROWTH OF CAPITAL
Investment Company Act File No. 811-1273
<PAGE> 22
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, 2000
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,
2000. 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 without
charge at the above
address or by calling
800-661-3938.
---------------------------------------
<PAGE> 23
<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
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 Call 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 ......................................... 16
Compensation of Directors and Officers ........................................................ 16
Code of Ethics ..................................................................................... 17
Investment Advisory and Other Services ............................................................. 18
Investment Adviser ............................................................................ 18
Administrator, Transfer Agent and Custodian ................................................... 19
Distributor ................................................................................... 20
Independent Auditors ............................................................................... 20
Purchase and Sale of Portfolio Securities .......................................................... 20
Expenses of The Fund ............................................................................... 21
Description of Capital Stock ....................................................................... 22
General Information ................................................................................ 22
Financial Statements ............................................................................... 22
</TABLE>
<PAGE> 24
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
All investments in equity mutual funds, like the Fund, involve some
level of risk.
Market and Investment Risks. 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 market capitalizations 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 Management 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 Fund may not match the performance of other strategies at different times
or under different market or economic conditions.
1
<PAGE> 25
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.
Year 2000 Risks. The Fund and its service providers do not appear to
have been adversely affected by computer problems related to the processing of
date-related information on or after January 1, 2000 (the "Year 2000 issue").
However, there remains a risk that such problems could arise or be discovered in
the future. The Fund has taken steps it believes are reasonably designed to
address the Year 2000 issue with respect to the computer systems it uses and the
Fund's service providers have informed the Fund that they intend to monitor and
correct any Year 2000 problems that may arise or be discovered affecting the
computer systems relied on by the Fund. However, there can be no assurance that
the operations of, and services provided to, the Fund and its shareholders will
not be adversely affected. The Fund also could be adversely affected if Year
2000 problems adversely affect any of the companies in which the Fund invests.
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 Call 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
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
2
<PAGE> 26
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.
FUNDAMENTAL INVESTMENT POLICIES -- INVESTMENT RESTRICTIONS REGARDING PORTFOLIO
SECURITIES
As a matter of fundamental policy, the Fund may not:
- Purchase securities of an issuer (other than obligations of the United
States and its instrumentalities) if such purchase would cause more
than 5% of the Fund's total assets, taken at market value, to be
invested in the securities of such issuer;
- Purchase securities of an issuer if such purchase would cause more than
10% of any class of securities of such issuer to be held by the Fund;
- Purchase or retain securities of an issuer if, to the knowledge of the
Fund, the officers and directors of the Fund together own more than 5%
of any class of securities of such issuer or an officer, director or
employee of, or counsel for, the Fund is an officer or employee of the
issuer;
- Invest more than 25% of its assets in any one industry;
- Invest in securities whose sale by the Fund would be restricted under
the Securities Act of 1933 (letter stock);
- Invest in companies for the purpose of exercising control or
management;
- Purchase securities issued by another registered investment company;
- Buy or sell real estate, commodities or commodity contracts, unless
acquired as a result of ownership of securities;
- Make loans other than by the purchase of a portion of publicly
distributed debt securities;
- Underwrite securities issued by others;
- Make short sales of securities;
- Buy securities on margin;
- Buy or sell put options;
- Borrow money except for temporary administrative or liquidity (but not
leveraging) purposes, and then only from banks up to an amount not in
excess of 5% of the value of total assets at the time of the loan,
repayable in not more than 60 days; or
3
<PAGE> 27
- 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.
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,
as described above under "Fundamental Investment Policies -- Investment
Restrictions Regarding Portfolio Securities." 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 CALL 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, 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 likely not 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
4
<PAGE> 28
securities on which it has options outstanding it would execute a
closing purchase transaction prior to selling the securities. A profit or loss
may be realized on a closing purchase transaction if the amount paid to purchase
a call option previously written is less or more than the amount received from
its sale.
The writing of covered call options involves certain risks. An
option position may be closed out only on an exchange which provides a market
for an option of the same series. Although the Fund will generally write only
those call options for which there appears to be an active market, there is no
assurance that an active market on an exchange will exist for any particular
option at any particular time. If the Fund as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it would,
as a result, be subject to any price decline in the underlying security. If such
a situation were to arise, the Fund's Investment Adviser would determine whether
to hold the underlying securities and risk depreciation in their market value or
to sell the securities and substitute cash or other securities as collateral for
the option obligation.
In general, premiums received on options which are not exercised and
gains or losses realized on closing purchase transactions are treated as
short-term capital gains or losses. When an option is exercised the premium is
added to the exercise price and the resulting gain or loss is characterized as a
short- or long-term capital gain or loss depending on the holding period of the
underlying securities. In general, brokerage commissions associated with buying
and selling call options are higher than those associated with other securities
transactions.
The Board of Directors has directed the Fund's Investment Adviser to
write options only in situations where the exercise price plus the premium (less
transaction costs) would, at the time the option is written, equal a price at
which the Investment Adviser would recommend selling the underlying securities
because of fundamental investment considerations. 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.
PORTFOLIO TURNOVER
The Fund's annual portfolio turnover rate was 23%, 32% and 22% in
1997, 1998 and 1999, 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.
5
<PAGE> 29
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. Shares 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.
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
6
<PAGE> 30
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,
1999, and the average annual total return for such periods:
<TABLE>
<CAPTION>
M.S.B. FUND, INC. TOTAL RETURN DATA
PERIODS ENDED DECEMBER 31, 1999
----------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------- --------
<S> <C> <C> <C> <C>
Total Return.............................. 5.79% 79.22% 171.37% 285.85%
Average Annual Total Return............... 5.79% 21.47% 22.10% 14.46%
</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 22.10%
average annual rate of return would produce a total return of 171.37% 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.
7
<PAGE> 31
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 Subchapter
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 eight 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.
8
<PAGE> 32
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- -------------------------------- -----------------------------------------
<S> <C> <C>
JOSEPH R. FICALORA (Age 53)* President and Director (2002) Mr. Ficalora has been Chairman, President
38-25 Main Street and Chief Executive Officer of Queens County
Flushing, NY 11354 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 59)* First Vice President and Mr. Gagliardi is Executive Vice President of
36 Pacific Street Director (2002) Richmond County Savings Bank. From 1993
Newark, NJ 07105 through March 1999 he served as President,
Chief Executive Officer and a director of
Ironbound Bankcorp and its principal subsidiary,
Ironbound Bank located in Newark, NJ, and its
holding company, Ironbound Bankcorp, NJ, which
were acquired by Richmond County Financial Corp.
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.
- ---------------------------
* These directors are regarded as "interested persons" under the
Investment Company Act of 1940 because they are officers of the
Fund.
</TABLE>
9
<PAGE> 33
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- -------------------------------- -----------------------------------------
<S> <C> <C>
MALCOLM J. DELANEY (Age 73) Director (2001) Mr. Delaney is retired. From 1986 through
518A Heritage Hills 1992, Mr. Delaney served as President and
Somers, NY 10589 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 66) Director (2003) Mr. Dempsey serves as Chairman of the Board
18 Oakland Avenue and Chief Executive Officer of Warwick
Warwick, NY 10990-0591 Community Bancorp, Inc. Mr. Dempsey also
serves as Chairman of the Board and Chief
Executive Officer of its principal subsidiary,
The Warwick Savings Bank, since 1985. Since
January 1999, Mr. Dempsey has served as
Chairman of the Board of the Towne Center Bank
in Lodi, New Jersey. 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 57)** Director (2002) Mr. Doherty serves as Chairman and Chief
15 Beach Street Executive Officer and as a director of
Staten Island, New York 10304 Staten Island Bancorp, Inc. and has been
Chairman and Chief Executive Officer of its
principal subsidiary, Staten Island Savings
Bank, since 1990. Mr. Doherty also serves as a
director and as President of Institutional
Investors Capital Appreciation Fund, Inc.,
which is an investment company registered
under the Investment Company Act of 1940 for
which Shay Assets Management, Inc. 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
- ------------------------
** America's Community Bankers, of which Mr. Doherty is a director,
receives certain royalty and other payments from affiliates of
the Fund's Investment Adviser. See "-Certain Other Affiliations
and Business Relationships."
</TABLE>
10
<PAGE> 34
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- -------------------------------- -----------------------------------------
<S> <C> <C>
December 7, 1997. Mr. Doherty also is a
director of Community Bankers Association
of New York State.
DAVID FREER, JR. (Age 60) Director (2001) Since 1990, Mr. Freer has served as
Greatview Lane President, Treasurer and a director of
P.O. Box 732 Budget Payment Corporation, which until 1999
Highland, NY 12528 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 58) Director (2003) Mr. Holland has been Chief Executive Officer
17 New England Executive Park of Boston Federal Savings Bank since 1986
Burlington, Massachusetts 01803 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, 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. Mr.
Holland was also a director from 1990 through
1995 and the chairman from 1993 through 1994
of America's Community Bankers.
</TABLE>
11
<PAGE> 35
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- -------------------------------- -----------------------------------------
<S> <C> <C>
WILLIAM A. McKENNA, JR. (Age 63) Director (2001) Since January 1992, Mr. McKenna has served
71-02 Forest Avenue as Chairman, President and Chief Executive
Ridgewood, NY 11385 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
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.
RODGER D. SHAY (Age 63) Vice President and Assistant Mr. Shay has been Chairman and the sole
1000 Brickell Avenue Secretary director of the Fund's investment adviser,
Miami, FL 33131 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. Mr. Shay has been the Chairman,
sole director and President of Shay Investment
Services, Inc., an enterprise which owns 100%
of Shay Assets Management, Inc., and Shay
Financial Services, Inc., since 1990. He
serves or has previously served in the
following capacities: Chairman and a Director,
Asset Management Fund, a registered investment
company; Vice President and Assistant
Secretary of Institutional Investors Capital
Appreciation Fund, Inc., a registered
investment company; and Director, First Home
Savings Bank, S.L.A. since 1990. He previously
was employed by certain subsidiaries of
Merrill Lynch & Co. from 1955 to 1981, where
he served in various executive positions
including Chairman of the Board of Merrill
Lynch Government Securities, Inc., Chairman of
the Board of Merrill Lynch Money Market
Securities, Inc. and Managing Director of the
Debt Trading Division of Merrill Lynch,
Pierce, Fenner & Smith Inc.
</TABLE>
12
<PAGE> 36
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- -------------------------------- -----------------------------------------
<S> <C> <C>
EDWARD E. SAMMONS, JR. Vice President and Secretary Mr. Sammons has been President of the Fund's
(Age 60) investment adviser, Shay Assets Management,
230 West Monroe Street Inc., since November 1997 and previously served
Chicago, IL 60606 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.
Mr. Sammons has served as Executive Vice
President of Shay Investment Services, Inc.,
since September 1990. 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 56) Vice President Mr. McCabe has been a Senior Vice President
200 Park Avenue, 45th Floor of Shay Assets Management, Inc., since June
New York, New York 10166 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 the 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.
</TABLE>
13
<PAGE> 37
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- -------------------------------- -----------------------------------------
<S> <C> <C>
MARK F. TRAUTMAN (Age 34) Vice President Mr. Trautman has been a Vice President
200 Park Avenue, 45th Floor of Shay Assets Management, Inc.,
New York, New York 10166 since June 1995, and held the comparable
position with Shay Assets Management Co.
through December 1997. He has been Portfolio
Manager of the Fund since March 1993. From
March 1993 through May 1995, he served as
Director of Mutual Funds Investment of
Nationar. He also serves as a Vice President
and Portfolio Manager for Institutional
Investors Capital Appreciation Fund, Inc. From
January 1992 through March 1993 he served as
Senior Equity Analyst for the two funds. From
December 1988 through December 1991, Mr.
Trautman was a Senior Associate with Sterling
Manhattan Corporation. From June 1987 through
November 1988, Mr. Trautman held the position
of Treasury Analyst at Thomson McKinnon
Securities, Inc., a securities brokerage firm.
He is also a member of The New York Society of
Security Analysts and The Association for
Investment Management and Research.
STEVEN D. PIERCE (Age 34) Treasurer Mr. Pierce has been Director of Financial
3435 Stelzer Road Services of BISYS Fund Services, Inc. since
Columbus, OH 43219 1998. Mr. Pierce 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
BISYS. From 1996 to 1998, Mr. Pierce was the
Manager of Financial Operations at CNA
Insurance. From 1994 to 1996, he was a Trust
Officer at First Chicago NBC Corporation.
From 1989 to 1994, he was a Senior Financial
Accountant at Kemper Financial Services.
ALAINA METZ (Age 32) Assistant Secretary Ms. Metz has been the Chief Administrative
3435 Stelzer Road Officer of the Blue Sky Compliance
Columbus, OH 43219 Department at BISYS Fund Services, Inc.
since 1995. From 1989 to 1995, Ms. Metz
served as Supervisor for Alliance Capital
Management, L.P.
</TABLE>
The Fund has an Executive Committee, composed of Messrs. Joseph R. Ficalora,
Michael J. Gagliardi, and David Freer, Jr., 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.
14
<PAGE> 38
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.
Harry P. Doherty, who is a director of the Fund, also is a
director of America's Community Bankers (the "Association"), which, prior to
December 1997, owned a 50% interest in the Fund's investment adviser. The
Association and its affiliates receive certain royalty and other payments from
SISI and its affiliates.
COMPENSATION OF DIRECTORS AND OFFICERS
Directors of the Fund receive compensation for their services as
directors of the Fund consisting of:
- a $3,000 annual retainer per director, payable in four
quarterly installments
- a per-meeting fee of $500 for each meeting of the Board of
Directors attended in person
- 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.
The Board of Directors holds its regular meetings quarterly. Directors do not
receive any additional fee for telephonic meetings. 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 1999 was $50,500. The total amount of expenses incurred
during 1999 for which the
15
<PAGE> 39
directors were reimbursed was $1,306. The Fund does not provide officers or
directors, directly or indirectly, with any pension or retirement benefits.
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 1999.
Such compensation does not include reimbursements to the directors for their
expenses incurred in connection with their activities as directors.
<TABLE>
<CAPTION>
COMPENSATION TABLE
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.............. $5,000 $10,000*
Harry P. Doherty................ $5,000 $12,000*
Joseph R. Ficalora.............. $6,500 $ 9,750*
David Freer, Jr................. $5,000 $ 5,000
Michael J. Gagliardi............ $4,500 $ 4,500
David F. Holland................ $5,000 $17,000*
William A. McKenna, Jr.......... $4,500 $ 9,500*
Norman W. Sinclair.............. $5,000 $ 5,000+
Ian D. Smith.................... $5,000 $ 5,000+
</TABLE>
* Includes compensation of $5,000, $3,250, $12,000 and $5,000 received by
Messrs. Dempsey, Ficalora, 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.
+ Retired as a director, effective April 20, 2000
As of March 31, 2000, all officers and directors of the Fund, as a
group, owned both of record or beneficially an aggregate of [ ] shares of the
Fund (approximately [ ]% of the [ ] shares outstanding on such date).
CODE OF ETHICS
Both the Fund and the Investment Adviser have adopted a joint Code of
Ethics that governs the conduct of employees of the Fund and the Investment
Adviser who may have access to information about the Fund's securities
transactions. The Code recognizes that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of their
own interests. Among other things, the Code requires pre-clearance
16
<PAGE> 40
of trading of initial public offerings and limited offerings and requires
reporting of personal securities transactions. Violations of the code are
subject to review by the directors and could result in severe penalties.
INVESTMENT ADVISORY AND OTHER SERVICES
Shay Assets Management, Inc. serves as the Investment Adviser of the
Fund; BISYS Fund Services Ohio, Inc. serves as its administrator, and transfer
agent; and The Bank of New York 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
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, 1997, 1998 and 1999 in respect
of investment advisory services were $294,823, $407,390 and $504,642,
respectively, representing 0.67%, 0.73% and 0.75% 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 to the extent not prepared by the
Fund's administrator.
The Investment Adviser is a registered investment adviser under the
Investment Advisers Act of 1940 and serves as investment adviser to Asset
Management Fund, a registered investment company comprising five fixed-income
portfolios with aggregate net assets of approximately $1.1 billion at December
31, 1999, and to Institutional Investors Capital Appreciation Fund, Inc., a
registered investment company with net assets of approximately $115 million as
of December 31, 1999.
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
17
<PAGE> 41
Investment Adviser's principal office is located at 230 West Monroe Street,
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) 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.
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 AND CUSTODIAN
Administrator and Transfer Agent. BISYS Fund Services Ohio, Inc.
("BISYS"), 3435 Stelzer Road, Columbus, Ohio 43219, is the Fund's administrator.
Pursuant to the terms of the Administration and Fund Accounting Agreements
between the Fund and BISYS, BISYS performs various administrative services for
the Fund, including: (i) maintenance of the Fund's books and records; (ii)
preparation of various filings, reports, statements and returns filed with
governmental authorities or distributed to shareholders of the Fund and (iii)
computation of the Fund's net asset value for purposes of sales and redemptions
of shares.
The Fund pays BISYS for its services 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. Prior to August 1999, PFPC Inc. ("PFPC") served as the
Fund's administrator. The amounts paid to PFPC for such services for the years
ended December 31, 1997 and 1998 were $60,300 and $60,300 after the fee waivers.
The amount paid to PFPC during 1999 was $39,420. The amount paid to BISYS for
the period ended December 31, 1999 was $27,865 after the fee waivers described
below.
18
<PAGE> 42
BISYS has served as the Fund's administrator and fund accountant since
August 1, 1999, and as the Fund's transfer agent since August 9, 1999. Certain
employees of BISYS also are officers of the Fund. See "Officers and Directors of
the Fund."
Custodian. The Bank of New York ("BONY"), One Wall Street, New York,
New York, is the custodian of the Fund's investments. BONY has served as the
Fund's custodian since July 30, 1999.
Fee Waiver. The Fund's transfer agent agreed to waive a portion (25%)
of its fees during the first calendar year (which ended December 31, 1999) of
its agreement with the Fund. Transaction charges, miscellaneous fees and
out-of-pocket expenses are billed as they are incurred. The Fund's administrator
agreed to waive a portion (25%) of its minimum fees (the "adjusted minimum fee")
during the first calendar year (which ended December 31, 1999) of its agreement
with the Fund. The greater of the adjusted minimum fee or the calculated asset
based fee will be charged to the Fund on a monthly basis. BISYS has agreed to
continue these waivers through the end of the year 2000. This arrangement is
reviewed by the Fund and BISYS at the end of each calendar year.
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 the Distributor is 230 West Monroe Street, Chicago, Illinois 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
Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, serves as
the Fund's independent auditors, and in that capacity audited the Fund's annual
financial statements 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
19
<PAGE> 43
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 1999 through a total of 2 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. 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.
In 1999, brokerage commissions of $11,675 (attributable to purchases
of $4,084,498.05 and proceeds from sales of $9,774,773.54) 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
1997, 1998 and 1999 were $26,700, $31,426 and $19,460, 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 1999 than in 1998 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,
administrator, transfer 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
20
<PAGE> 44
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 administrator; and any
extraordinary expenses incurred by the Fund. Annual and semi-annual reports to
shareholders include 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
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, 1999, including the notes thereto and the report of Arthur Andersen
LLP, contained in the Fund's Annual Report to shareholders for the year ended
December 31, 1999
21
<PAGE> 45
(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. Arthur Andersen LLP has audited such financial
statements, and the financial statements are incorporated by reference in
reliance on the report of Arthur Andersen 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, Chicago, Illinois 60606, or by telephone
at 800-982-1846.
22
<PAGE> 46
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
(c) Instruments Defining Rights of Security Holders
(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
C-1
<PAGE> 47
(g) Custodian Agreements
(1) Custodian Services Agreement dated as of
July 30, 1999, between the Registrant and
The Bank of New York.
(2) Domestic Custodian Fee Schedule dated as of
August 25, 1999,
(3) Cash Management Agreement dated as of July
30, 1999, between the Registrant and The
Bank of New York.
(h) Other Material Contracts
(1) Administration Agreement dated as of August
1, 1999, between the Registrant and BISYS
Fund Services Ohio, Inc.
(2) Transfer Agency Agreement dated as of August
9, 1999, between the Registrant and BISYS
Fund Services Ohio, Inc.
(3) Fund Accounting Agreement dated as of August
1, 1999, between the Registrant and BISYS
Fund Services Ohio, Inc.
(4) Omnibus Fee Agreement dated as of August 1,
1999, between the Registrant and BISYS Fund
Services Ohio, Inc.
(5) Fee Waiver Letter dated as of August 1,
1999, between the Registrant and BISYS Fund
Services Ohio, Inc.
(i) Legal Opinion and Consent of Hughes Hubbard & Reed LLP
(j) (1) Consent of Arthur Andersen LLP
(2) Consent of KPMG LLP. To be filed by amendment.
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(o) Not Applicable
(p) Power of Attorney and Resolutions
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUND
Not Applicable
C-2
<PAGE> 48
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, 1999 to July 31, 2000.
Such policy insures against loss which any directors or officers of the
Registrant are obligated to pay by reason of claims based on actual or alleged
breach of duty, neglect, error, misstatement, misleading statement, omission or
other act done or wrongfully attempted or any matter claimed against them solely
by reason of their being directors or officers. The policy does not protect or
purport to protect any director or officer against any loss arising from fines
or penalties imposed by law or matters which may be deemed uninsurable under the
law.
C-3
<PAGE> 49
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 ("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. ("SAMC"), 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.
C-4
<PAGE> 50
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 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 Messrs. Shay and 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 Officer of the Principal Business Address Positions and Offices with
Distributor Distributor
- ----------------------------------- -------------------------- --------------------------
<S> <C> <C>
Robert T. Podraza 230 West Monroe Street Chief Financial Officer and Chief
Chicago, IL 60606 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 BISYS Fund
Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219.
ITEM 29. MANAGEMENT SERVICES
Not Applicable
ITEM 30. UNDERTAKINGS
Not Applicable
C-5
<PAGE> 51
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. 42 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 March 1, 2000.
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:
<TABLE>
<S> <C> <C>
/s/ JOSEPH R. FICALORA * President and Director February 28, 2000
- -------------------------------------------- (Principal Executive Officer)
(Joseph R. Ficalora)
/s/ STEVEN D. PIERCE * Treasurer (Principal Financial February 28, 2000
- -------------------------------------------- Officer)
(Steven D. Pierce)
/s/ MALCOLM J. DELANEY * Director February 28, 2000
- --------------------------------------------
(Malcolm J. Delaney)
/s/ TIMOTHY A. DEMPSEY * Director February 28, 2000
- --------------------------------------------
(Timothy A. Dempsey)
/s/ HARRY P. DOHERTY * Director February 28, 2000
- --------------------------------------------
(Harry P. Doherty)
/s/ DAVID FREER, JR. * Director February 28, 2000
- --------------------------------------------
(David Freer, Jr.)
/s/ MICHAEL J. GAGLIARDI * Director February 28, 2000
- --------------------------------------------
(Michael J. Gagliardi)
/s/ DAVID F. HOLLAND * Director February 28, 2000
- --------------------------------------------
(David F. Holland)
/s/ WILLIAM A. MCKENNA, JR. * Director February 28, 2000
- --------------------------------------------
(William A. McKenna, Jr.)
/s/ NORMAN W. SINCLAIR * Director February 28, 2000
- --------------------------------------------
(Norman W. Sinclair)
/s/ IAN D. SMITH * Director February 28, 2000
- --------------------------------------------
(Ian D. Smith)
*By: /s/ JOHN J. MCCABE *
------------------------------------
John J. McCabe
Attorney-in-Fact
</TABLE>
<PAGE> 1
EXHIBIT (b)
By-Laws of the Registrant
C-8
<PAGE> 2
BYLAWS
OF
M.S.B. FUND, INC.
(As Amended to February 14, 2000, effective April 20, 2000)
<PAGE> 3
BYLAWS
OF
M.S.B. FUND, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I......................................................Offices 1
Section 1.....................................................Location 1
ARTICLE II....................................Meetings of Stockholders 1
Section 1.............................................Place of Meeting 1
Section 2...............................................Annual Meeting 1
Section 3.............................................Special Meetings 1
Section 4...........................................Notice of Meetings 1
Section 5.......................................................Quorum 2
Section 6.................................................Organization 2
Section 7.......................................................Voting 3
Section 8...................................................Inspectors 3
Section 9..............................List of Stockholders at Meeting 3
ARTICLE III.........................................Board of Directors 4
Section 1....................Number, Qualifications and Term of Office 4
Section 2....................................................Vacancies 5
Section 3........................Resignations and Removal of Directors 5
Section 4........................Increase or Decrease in Size of Board 6
Section 5.............................................Place of Meeting 6
Section 6...............................................Annual Meeting 6
Section 7.............................................Regular Meetings 6
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8.............................................Special Meetings 6
Section 9...................................Notice of Special Meetings 6
Section 10........................................Organization; Quorum 7
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 8
ARTICLE IV..................................................Committees 8
Section 1.....................Executive Committee and Other Committees 8
ARTICLE V.....................................................Officers 9
Section 1.......................................Number and Description 9
Section 2...............................................Term of Office 9
Section 3..................................................Resignation 9
Section 4....................................................Vacancies 9
Section 5................................................The President 9
Section 6.....................................The First Vice President 10
Section 7....................................The Second Vice President 10
Section 8................................................The Secretary 10
Section 9........................................Assistant Secretaries 11
Section 10...................................................Treasurer 11
Section 11................................................Compensation 11
ARTICLE VI............................................................ 11
Section 1............................Representation of Shares of Stock 11
Section 2................................................Open Accounts 12
Section 3........................................Certificates of Stock 12
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.............Lost, Destroyed or Wrongfully Taken Certificates 12
Section 5..................................................Record Date 12
Section 6.......................................Record of Stockholders 13
ARTICLE VII.................Determination of Sale and Redemption Price 13
ARTICLE VIII......................................Redemption of Shares 14
ARTICLE IX....................................................Reserved 17
ARTICLE X..................................Restrictions on Investments 17
ARTICLE XI.........Investment Policy and Objectives of the Corporation 20
ARTICLE XII..................................................Custodian 20
Section 1.....................................Appointment of Custodian 20
Section 2....................................Agreements with Custodian 20
ARTICLE XIII........................................Investment Adviser 21
Section 1............................Appointment of Investment Adviser 21
Section 2...........................Agreements with Investment Adviser 21
ARTICLE XIV..........................Bonding of Officers and Employees 22
ARTICLE XV...................Indemnification of Directors and Officers 22
Section 1.....Actions by or in the Right of the Corporation to Procure
a Judgment in its Favor 22
Section 2.................................Other Actions or Proceedings 23
Section 3........ Payment of Indemnification Other Than by Court Award 23
Section 4...................................Indemnification by a Court 24
Section 5.............................................Other Provisions 24
Section 6..............Limitations and Restrictions of Indemnification 25
ARTICLE XVI.......................................Interested Directors 25
ARTICLE XVII......................................................Seal 26
ARTICLE XVIII............................................Miscellaneous 26
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 1...................................................Fiscal Year 26
Section 2...................................Reports to the Stockholders 26
ARTICLE XIX..................................................Amendments 26
</TABLE>
<PAGE> 7
BYLAWS
OF
M.S.B. FUND, INC.
ARTICLE I.
Offices.
Section 1. Location. The principal office of the Corporation
shall be in the City of New York, County and State of New York. The Corporation
shall also have offices or agencies at such other places, either within or
without the State of New York, as the Board of Directors from time to time may
designate, or as the business of the Corporation may require.
ARTICLE II.
Meetings of Stockholders.
Section 1. Place of Meeting. All meetings of the stockholders
shall be held at the principal office of the Corporation in the City of New
York, or at such other place as may be fixed by the Board of Directors.
Section 2. Annual Meeting. The annual meeting of
stockholders for the election of directors and the transaction of other
business as may properly come before the meeting shall be held at such time as
the Board of Directors may specify by resolution.1
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.2
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
1. Amended on January 24, 1991 and amended April 8, 1991.
2. Amended May 26, 1994.
<PAGE> 8
2
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.3
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
3. Amended March 8, 1991 and January 22, 1998.
<PAGE> 9
3
represented by proxy, shall act as chairman of the meeting. The Secretary, or
in his absence, the Assistant Secretary, or in the absence of both the
Secretary and the Assistant Secretary, any person designated by the chairman,
shall act as secretary of the meeting.
Section 7. Voting. Each outstanding share of stock shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. A stockholder may vote either in person or by proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Every
proxy shall be revocable at the pleasure of the stockholder executing it, except
in those cases where an irrevocable proxy is provided by law.
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.
<PAGE> 10
4
ARTICLE III.
Board of Directors.
Section 1. Number, Qualifications and Term of Office.4 The
business of the corporation shall be managed by a Board of Directors. The number
of directors constituting the entire Board of Directors shall be the number
established from time to time by vote of a majority of the entire Board of
Directors pursuant to Section 4 of this Article. Each director shall
(a) be at least twenty-one years of age,
(b) be a stockholder of the Corporation,
(c) not have been convicted within ten years of any felony or
misdemeanor involving the purchase or sale of any security or arising
out of conduct as an underwriter, broker, dealer, or investment
adviser, or as an affiliated person, salesman, or employee of any
investment company, bank, or insurance company,
(d) not be, by reason of any misconduct, permanently or
temporarily enjoined by order, judgment, or decree of any court of
competent jurisdiction from acting as an underwriter, broker, dealer,
or investment adviser, or as an affiliated person, salesman, or
employee of any investment company, bank, or insurance company, or from
engaging in or continuing any conduct or practice in connection with
any such activity or in connection with the purchase or sale of any
security, and
(e) not remain in office if he fails to attend at least 50% of
the meetings of the Board of Directors in any twelve-month period
commencing on January 1, of each year and continuing through December
31 of that year; provided, however, that the provisions of this clause
(e) may be waived by a resolution adopted by the Board of Directors for
good cause shown.5
Such directors shall be divided into three classes, all of
which shall be as nearly equal in number as possible. 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
4. Amended November 11, 1971; February 28, 1985; February 22, 1990,
effective March 22, 1990; October 25, 1990; amended February 28, 1991;
April 8, 1991; January 27, 1994, effective March 24, 1994; April 26,
1995, effective June 6, 1995; January 18, 1996; effective March 21,
1996; April 18, 1996.
5. Adopted September 25, 1975; amended September 23, 1976; October 25,
1984, July 25, 1991 and February 14, 2000. Former paragraph (g) was
adopted on February 13, 1974 and deleted November 14, 1991. Former
paragraphs (e) and (f) were deleted February 14, 2000.
<PAGE> 11
5
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.6
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.7
No director shall continue to serve as a director after the
first Annual Stockholders' Meeting next following such director's seventy-fifth
birthday8 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.9
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.10
6. Amended February 15, 1972, January 18, 1996 and February 14, 2000.
7. Amended January 7, 1965. The paragraph that formerly followed this
one was deleted February 14, 2000.
8. Adopted October 9, 1969.
9. Adopted February 25, 1993.
10. Amended May 26, 1994.
<PAGE> 12
6
Section 4. Increase or Decrease in Size of Board. The number
of directors that shall constitute the entire Board of Directors may be
established by the vote of a majority of the entire Board of Directors from time
to time but shall not be more than twenty-four or less than five. 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.11
Section 5. Place of Meeting. The Board of Directors may
hold its meetings at such place or places within or without the State of New
York as it may from time to time determine.12
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.13
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.14
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.
11. Amended February 14, 2000, effective April 20, 2000.
12. Amended February 14, 2000.
13. Amended April 18, 1996.
14. Amended March 8, 1991.
<PAGE> 13
7
Section 10. Organization; Quorum. Unless the Board of
Directors shall, by resolution, otherwise provide, the President, or in his
absence the First Vice President, shall act as chairman at all meetings of the
Board of Directors; and the Secretary, or in his absence the Assistant
Secretary, or in the absence of both the Secretary and the Assistant Secretary,
such person as may be designated by the chairman, shall act as secretary at all
such meetings.
A majority of the entire Board of Directors shall constitute a
quorum necessary for the transaction of business or of any specified item of
business, and, except as otherwise provided by law, the vote of a majority of
directors present at any meeting at which a quorum is present, shall be the act
of the Board of Directors. If at any meeting of the Board of Directors a quorum
is not present, a majority of the directors present may adjourn the meeting from
time to time.
Section 11. Compensation and Reimbursement of Expenses. The
Board of Directors, by resolution, may authorize the Corporation to compensate
each director for his services as a director of the Corporation, and each
director, as such, shall be entitled to reimbursement for his reasonable
expenses incurred in attending meetings or otherwise in connection with his
attention to the affairs of the Corporation.15
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.16 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
15. Amended March 24, 1994.
16. Adopted September 12, 1974.
<PAGE> 14
8
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.17
Any one or more members of the Board of Directors or any committee thereof may
participate in a meeting of such Board or committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE IV.
Committees.
Section 1. Executive Committee and Other Committees. The Board
of Directors of the Corporation, by resolution adopted by a majority of the
entire Board of Directors, may designate from among its members an executive
committee and other committees, each consisting of three or more directors, and
each of which, to the extent provided in the resolution, shall have all the
authority of the Board of Directors, except that no such committee shall have
authority as to the following matters:
(1) The submission to stockholders of any action that needs
stockholder authorization,
(2) The filling of vacancies in the Board of Directors or in
any committee,
(3) The fixing of compensation of the directors for serving on
the Board of Directors or on any committee,
(4) The amendment or repeal of any resolution of the Board of
Directors which by its terms shall not be so amendable or repealable,
and
(5) The amendment or repeal of these bylaws, or the adoption
of new bylaws.
Each such committee shall serve at the pleasure of the Board
of Directors and may adopt its own rules of procedure and shall keep regular
minutes of its proceedings and report the same to the Board of Directors.
17. Adopted September 25, 1975.
<PAGE> 15
9
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,
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.
<PAGE> 16
10
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.
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
<PAGE> 17
11
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.18
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.
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.19
ARTICLE VI.20
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.
18. Amended March 8, 1991.
19. Amended March 24, 1994.
20. Amended July 8, 1971.
<PAGE> 18
12
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.21
The name and address of the persons to whom certificates for
shares of stock are issued and the number of shares represented by and the date
of issue and transfer of each certificate, shall be entered on books of the
Corporation kept for that purpose. The stock record and transfer books and the
blank stock certificates shall be kept by such transfer agent or by the
Secretary or such other officer as shall be designated by the Board of Directors
for that purpose. Every certificate surrendered to the Corporation for
redemption, transfer, exchange, or credit to an open account shall be cancelled
and shall show thereon the date of cancellation.
Section 4. Lost, Destroyed or Wrongfully Taken Certificates.
The Board of Directors of the Corporation may direct a new certificate to be
issued in place of any certificate theretofore issued by the Corporation alleged
to have been lost, apparently destroyed or wrongfully taken. When authorizing
such issue of a new certificate the Board of Directors, in its discretion and as
a condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient, and may require such indemnities as it deems
adequate, to protect the Corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost, destroyed or
wrongfully taken.
Section 5. Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent or to dissent from any proposal
without a meeting or for the purpose of determining the stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
21. Amended April 18, 1996.
<PAGE> 19
13
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.22
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.23
The asset value of each share of stock shall be obtained as of
any given time by dividing the net value of the assets of the Corporation by the
total number of shares then outstanding, including all shares which the
Corporation has sold, whether or not paid for and issued, and all shares which
have been surrendered to the Corporation for redemption or which the Corporation
has elected to redeem upon their having been offered to the Corporation prior to
transfer and the redemption price of which has not been determined.
The net value of the assets of the Corporation shall be
determined as of any given time in accordance with sound accounting practice by
deducting from the gross value of the assets of the Corporation at such time the
amount of all expenses incurred and accrued and unpaid, such reserves as may be
set up to cover taxes and any other liabilities, and such other deductions as in
the opinion of the Board of Directors are in accordance with sound accounting
practice.
22. Amended January 22, 1998.
23. Amended December 9, 1971 and April 18, 1996.
<PAGE> 20
14
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.24
(c) The market value of securities which are neither listed
nor admitted to trading privileges on any exchange or dealt in in an
over-the-counter market shall be determined in such manner as the Board
of Directors shall prescribe from time to time.
(d) Any person making any determination of the market value of
securities hereunder may rely on any source of quotations or basis for
ascertaining quotations believed by him to be reliable.
ARTICLE VIII.
Redemption of Shares.
Each stockholder of the Corporation shall have the right to
require the Corporation to redeem all or any part of his shares of stock in
accordance with the following:
1. Such right shall be exercised in each instance by the
delivery to the Corporation or its transfer agent during usual business
hours of a request for redemption. Such request shall (A) consist of an
irrevocable written offer addressed to the Corporation duly executed by
such holder to sell each of such shares to the Corporation at the
24. Amended April 18, 1996.
<PAGE> 21
15
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.25
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.26
3. The redemption price shall be paid by the Corporation
within seven days after receipt of the request for redemption, except
that any such payment may be postponed or the right of redemption
suspended
(i) for any period during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings or during which trading on the New York Stock
Exchange is restricted;
(ii) for any period during which the Board of Directors
determines that an emergency exists as the result of which
disposal by the Corporation of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Corporation fairly to determine the value of its net
assets;
(iii) for such other period as the Securities and
Exchange Commission may by order permit for the protection
of security holders of the Corporation;
provided that applicable rules and regulations of the Securities and
Exchange Commission (or any succeeding governmental authority) shall
govern as to the existence of restricted trading under (i) above or the
emergency under (ii) above.
25. Amended July 8, 1971 and April 18, 1996.
26. Amended March 13, 1969.
<PAGE> 22
16
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.27
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:28
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 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.
27. Amended July 8, 1971 and April 18, 1996.
28. Adopted March 27, 1986. Amended January 21, 1999, effective May 1,
1999.
<PAGE> 23
17
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.29
Reserved.
ARTICLE X.30
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.31
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
29. Deleted March 27, 1986.
30. Amended October 8, 1964.
31. Deleted March 25, 1982.
<PAGE> 24
18
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.32
3. The Corporation shall not underwrite the securities of
other issuers.
4. The Corporation shall not buy or sell real estate, but may
retain or sell real estate acquired as a result of the ownership of
securities. Securities shall not be purchased for the purpose of
acquiring real estate.
5. The Corporation may not buy or sell any commodities or
commodity contracts, but may retain or sell commodities or commodity
contracts acquired as a result of the ownership of securities.
Securities shall not be purchased for the purpose of acquiring
commodities or commodity contracts.
6. The Corporation shall not make loans to other persons. For
these purposes the purchase of a portion of an issue of publicly
distributed bonds, debentures or other debt securities of the type
customarily purchased by institutional investors, whether or not the
purchase was made on the original issue of securities, shall not be
considered the making of a loan.
7. The Corporation shall not purchase the securities of any
issuer if such purchase, at the time thereof, would cause more than
five percent (5%) of the total assets of the Corporation (taken at
market value) to be invested in the securities of such an issuer. This
limitation shall not apply to obligations of the Government of the
United States or of any corporation which is an instrumentality of the
United States.
8. The Corporation shall not purchase the securities of any
issuer if such purchase at the time thereof would cause more than ten
percent (10%) of any class of securities of such an issuer to be held
by the Corporation. For the purpose of this limitation all outstanding
debt of an issuer having maturity of more than one year shall be
treated as one class.
9. The Corporation shall not purchase securities issued by any
other investment company or investment trust registered under the
Investment Company Act of 1940.
10. The Corporation shall not sell or contract to sell any
security which it does not own unless by virtue of its ownership of
other securities it has at the time of sale a right to obtain
securities equivalent in kind and amount to the securities sold and if
such right is conditional the sale shall be made only upon the same
conditions. The Corporation shall not buy any securities or other
property on margin and shall not buy or sell "puts" or "calls," except
that the Corporation may write (sell) call options, which are listed on
an organized securities exchange, on securities which are owned by the
32. Amended March 8, 1988.
<PAGE> 25
19
Corporation, and may buy options for the purpose of effecting closing
purchase transactions relating to such options.33
11. The Corporation shall not knowingly either purchase or
retain in its portfolio securities issued by an issuer if an officer,
director, or employee of, or counsel for, the Corporation is an officer
or employee of such an issuer.
12. The Corporation shall not knowingly either purchase or
retain in its portfolio securities issued by an issuer if the officers
and directors of the Corporation, together, own of record or
beneficially more than five percent (5%) of any class of the securities
of such an issuer.
13. The Corporation shall not pledge, mortgage or hypothecate
any assets of the Corporation except as may be necessary to borrow
money temporarily for administrative or liquidity (but not leveraging)
purposes pursuant to subparagraph 2 hereof and except that securities
owned by the Corporation on which an option may have been written may
be pledged, placed in escrow or otherwise segregated in accordance with
the applicable requirements of any organized securities exchange in
order that such securities remain available for delivery in case the
option is exercised.34
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 1933.35
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.
33. Amended March 24, 1977.
34. Amended March 24, 1977 and March 8, 1988.
35. Adopted March 30, 1972.
<PAGE> 26
20
ARTICLE XI.36
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.37
While the Corporation shall not be restricted in the
proportion of assets which may be held in cash, government securities or other
nonequity type securities, the policy of the Corporation shall be to limit such
holdings to the liquid reserves appropriate to redeem shares of stock of the
Corporation or for other purposes determined desirable by the management of the
Corporation. If in the opinion of the Board of Directors of the Corporation,
market conditions shall be unfavorable for common stocks and other equity type
securities, the Corporation may for defensive purposes temporarily retain part
or all of its assets or invest part or all of its assets in investment grade
bonds, government securities and obligations of any corporation organized under
the laws of any state of the United States maturing within 270 days provided
that such obligations receive the highest rating of an independent rating
service designated by the Banking Board. Continuous supervision shall be given
to investments of the Corporation to attain, through suitable shifts in
portfolio securities when required, the Corporation's investment objectives.
Transactions involving portfolio turnover shall be limited to those incidental
in the ordinary course of business and for the objective of the Corporation as
stated.38
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:
36. Amended October 8, 1964.
37. Amended January 21, 1999, effective May 1, 1999.
38. Amended September 12, 1968.
<PAGE> 27
21
(a) The custodian shall receive and hold as custodian for the
Corporation all securities delivered to the custodian and all moneys
paid to the custodian by or for the account of the Corporation;
(b) All securities purchased for the account of the
Corporation shall be paid for by the custodian upon substantially
contemporaneous receipt of such securities by the custodian in
transferable form;
(c) The custodian shall deliver securities owned by the
Corporation only (i) upon sale of such securities for the account of
the Corporation and receipt of payment therefor by the custodian, (ii)
when such securities are called, redeemed, retired, or otherwise become
payable, (iii) in exchange for or upon conversion into other securities
or other securities and cash, whether pursuant to their terms or to any
plan of merger, reorganization, readjustment, liquidation or otherwise,
or (iv) for other proper corporate purposes;
(d) The custodian agreement shall be subject to termination by
the Corporation without the consent of the custodian upon written
notice within such time as may be specified in the agreement, not,
however, exceeding sixty days.
ARTICLE XIII.
Investment Adviser.
Section 1. Appointment of Investment Adviser. The Board of
Directors may appoint an investment adviser to furnish to the Corporation,
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, upon such terms and conditions as the
Board of Directors may determine. The investment adviser and custodian may be
one and the same person.
Section 2. Agreements with Investment Adviser.39 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;
39. Amended June 10, 1971.
<PAGE> 28
22
(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.40
Bonding of Officers and Employees.
All officers and employees of the Corporation who may singly
or jointly with others have access to securities or funds of the Corporation,
either directly or through authority to draw upon such funds or to direct
generally the disposition of such securities, shall be bonded by a reputable
fidelity insurance company against larceny and embezzlement in such reasonable
amounts as a majority of the Board of Directors of the Corporation who are not
such officers and employees shall determine with due consideration to the value
of the aggregate assets of the Corporation to which such persons shall have
access, the type and terms of the arrangements made for the custody and
safekeeping of such assets, and the nature of securities in the Corporation's
portfolio. Such determination shall be made at least once a year.
The Secretary of the Corporation shall make all the filings
and give all the notices required by Rule l7g-1 promulgated under the Investment
Company Act.
ARTICLE XV.
Indemnification of Directors and Officers.
Section 1. Actions by or in the Right of the Corporation to
Procure a Judgment in its Favor. The Corporation shall indemnify any person
made, or threatened to be made, a party to an action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he,
his testator or intestate, is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of any other corporation of any type or kind, domestic or foreign, of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with the defense or
40. Amended October 8, 1964.
<PAGE> 29
23
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.41
Section 2. Other Actions or Proceedings. The Corporation shall
indemnify any person made, or threatened to be made, a party to an action or
proceeding (other than one by or in the right of the Corporation to procure a
judgment in its favor), whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he, his
testator or intestate, was a director or officer of the Corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the Corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.
The termination of any such civil or criminal action or
proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create a presumption that any
such director or officer did not act, in good faith, for a purpose which he
reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the Corporation or that
he had reasonable cause to believe that his conduct was unlawful.42
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.
41. Amended April 18, 1996.
42. Amended April 18, 1996.
<PAGE> 30
24
Except as provided in the paragraph above, any indemnification
under Section 1 or Section 2 hereof, unless ordered by a court under Section 4
hereof, shall be made by the Corporation, only if authorized in the specific
case:
(a) By the Board acting by a quorum consisting of directors
who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in
Section 1 or Section 2, as the case may be; or
(b) If such a quorum is not obtainable with due diligence or
even if obtainable, a quorum of disinterested directors so directs:
(i) By the Board upon the opinion in writing of
independent legal counsel that indemnification is proper in
the circumstances because the applicable standard of conduct
set forth in such Sections has been met by such director or
officer; or
(ii) By the stockholders upon a finding that the
director or officer has met the applicable standard of conduct
set forth in such Sections.
Expenses incurred in defending a civil or criminal action or
proceeding may be paid by the Corporation in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount as, and to the extent, required by the
first paragraph of Section 5 of this Article.
Section 4. Indemnification by a Court. Notwithstanding any
failure of the Corporation to provide indemnification, and despite any contrary
resolution of the Board or of the stockholders in the specific case under
Section 3, indemnification shall be awarded by a court to the extent authorized
under Section 1, Section 2 and the first paragraph of Section 3.
Where indemnification is sought by judicial action, the court
may allow a person such reasonable expenses, including attorneys' fees, during
the pendency of the litigation as are necessary in connection with his defense
therein, if the court shall find that the defendant has by his pleadings or
during the course of the litigation raised genuine issues of fact or law.
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:
<PAGE> 31
25
(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.
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
<PAGE> 32
26
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 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,
<PAGE> 33
27
amended or repealed, together with a precise statement of changes made.
Bylaws adopted by the Board of Directors may be amended or repealed by the
stockholders.
<PAGE> 1
EXHIBIT (g)(1)
CUSTODY AGREEMENT
Agreement made as of this 30 day of July, 1999, between M.B.S. FUND, INC., a
Maryland corporation organized and existing under the laws of the State of
Maryland, having its principal office and place of business at 230 W. Monroe
Street, Chicago ILL 60606 (hereinafter called the "Fund"), and THE BANK OF NEW
YORK, a New York corporation authorized to do a banking business, having its
principal office and place of business at One Wall Street, New York, New York
10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether or not
such person is an officer or employee of the Fund, duly authorized by the Board
of Directors of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system
for United States and federal agency securities, its successor or successors and
its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to Securities
other than Stock Index Options, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities.
4. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received by the Custodian and signed on behalf of the Fund by
any two Authorized Persons, and the term Certificate shall also include
Instructions.
5. "Clearing Member" shall mean a registered broker-dealer which is a clearing
member under the rules of O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated which is
specifically allocated to a Series and pledged to the Custodian as security for,
and in consideration of, the Custodian's issuance of (a) any Put Option
guarantee letter or similar document described in paragraph 8 of Article V
herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or any other
composite unit consisting of the aggregate of specified amounts of specified
Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any country
or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing
agency registered with the Securities and Exchange Commission, its successor or
successors and its nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution of the
Fund's Board of Directors specifically approving deposits therein by the
Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy or sell
fixed income securities including, without limitation, U.S. Treasury Bills, U.S.
Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at an agreed
<PAGE> 2
upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a Futures
Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one party of
an agreed amount in one Currency against the sale by it to the other party of an
agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted by
electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a broker,
dealer, futures commission merchant, or a Clearing Member, or in the name of the
Fund for the benefit of a broker, dealer, futures commission merchant, or
Clearing Member, or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant or a Clearing
Member (a "Margin Account Agreement"), separate and distinct from the custody
account, in which certain Securities and/or money of the Fund shall be deposited
and withdrawn from time to time in connection with such transactions as the Fund
may from time to time determine. Securities held in the Book-Entry System or the
Depository shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in its books
and records.
17. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index Option
and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually received by the
Custodian from an Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with respect to Securities
other than Stock Index Options, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer thereof for the
exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which the
Fund sells Securities and agrees to repurchase such Securities at a described or
specified date and price.
23. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures
Contracts, Stock Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks
and other securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and specifically
allocated to a Series under the terms of this Agreement as a segregated account,
by recordation or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically allocated to such Series
shall be deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such transactions as
the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund listed on
Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of capital stock of the Fund, each of which
is, in the case of a Fund having Series, allocated to a particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
stock index at the close of the last business day of the contract and the
<PAGE> 3
price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of the
Securities and money at any time owned by the Fund during the period of this
Agreement. 2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in Article
VIII, the Fund will deliver or cause to be delivered to the Custodian all
Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Directors, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the name of
each Series, and shall credit to the separate account for each Series all money
received by it for the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed by the Custodian
only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of the person to
whom the payment is to be made, the Series account from which payment is to be
made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and liabilities
of the Custodian attributable to such Series.
<PAGE> 4
3. Promptly after the close of business on each day, the Custodian shall furnish
the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in Article
VIII, all Securities held by the Custodian hereunder, which are issued or
issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) collect all income, dividends and distributions due or payable;
(b) give notice to the Fund and present payment and collect the amount payable
upon such Securities which are called, but only if either (i) the Custodian
receives a written notice of such call, or (ii) notice of such call appears in
one or more of the publications listed in Appendix C annexed hereto, which may
be amended at any time by the Custodian without the prior notification or
consent of the Fund;
(c) present for payment and collect the amount payable upon all Securities which
mature;
(d) surrender Securities in temporary form for definitive Securities;
(e) execute, as custodian, any necessary declarations or certificates of
ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the Depository with
respect to Securities therein deposited, for the account of a Series, all rights
and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) deliver to the Fund all notices, proxies, proxy soliciting materials,
consents and other written information (including, without limitation, notices
of tender offers and exchange offers, pendency of calls, maturities of
Securities and expiration of rights) relating to Securities held pursuant to
this Agreement which are actually received by the Custodian, such proxies and
other similar materials to be executed by the registered owner (if Securities
are registered otherwise than in the name of the Fund), but without indicating
the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or
through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such
persons as may be designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the authority of the Fund as
owner of any Securities held by the Custodian hereunder for the Series specified
in such Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically allocated to
such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the
<PAGE> 5
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold hereunder specifically allocated
to such Series such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series specified in
such Certificate, and take such other steps as shall be stated in such
Certificate to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) present for payment and collect the amount payable upon Securities not
described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian shall
not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a purchase
of an Option, a Futures Contract, or a Futures Contract Option, the Fund shall
deliver to the Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, a Certificate, and (ii) with respect to each
purchase of Money Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such purchase: (a) the Series to which such
Securities are to be specifically allocated; (b) the name of the issuer and the
title of the Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of purchase and settlement;
(e) the purchase price per unit; (f) the total amount payable upon such
purchase; (g) the name of the person from whom or the broker through whom the
purchase was made, and the name of the clearing broker, if any; and (h) the name
of the broker to whom payment is to be made. The Custodian shall, upon receipt
of Securities purchased by or for the Fund, pay to the broker specified in the
Certificate out of the money held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
2.Promptly after each sale of Securities by the Fund, other than a sale of any
Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver to the Custodian (i) with respect to each sale
of Securities which are not Money Market Securities, a Certificate, and (ii)
with respect to each sale of Money Market Securities, a Certificate or Oral
Instructions, specifying with
<PAGE> 6
respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per unit; (f) the
total amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the Securities
are to be delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate against
payment of the total amount payable to the Fund upon such sale, provided that
the same conforms to the total amount payable as set forth in such Certificate
or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall deliver
to the Custodian a Certificate specifying with respect to each Option purchased:
(a) the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the name of the issuer and the title and number of
shares subject to such Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; (h) the name of the Clearing Member through whom such Option
was purchased; and (i) the name of the broker to whom payment is to be made. The
Custodian shall pay, upon receipt of a Clearing Member's statement confirming
the purchase of such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the Custodian) as
custodian for the Fund, out of money held for the account of the Series to which
such Option is to be specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was made, provided
that the same conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Call Option: (a) the Series to which
such Call Option was specifically allocated; (b) the name of the issuer and the
title and number of shares subject to the Call Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per share; (f)
the total amount to be paid by the Fund upon such exercise; and (g) the name of
the Clearing Member through whom such Call Option was exercised. The Custodian
shall, upon receipt of the Securities underlying the Call Option which was
exercised, pay out of the money held for the account of the Series to which such
Call Option was specifically allocated the total amount payable to the Clearing
Member through whom the Call Option was exercised, provided that the same
conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Put Option: (a) the Series to which
such Put Option was specifically allocated; (b) the name of the issuer and the
title and number of shares subject to the Put Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per share; (f)
the total amount to be paid to the Fund upon such exercise; and (g) the name of
the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or
<PAGE> 7
direct the Depository to deliver the Securities specifically allocated to such
Series, provided the same conforms to the amount payable to the Fund as set
forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Stock Index Option: (a)
the Series to which such Stock Index Option was specifically allocated; (b) the
type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts as are
required in accordance with the customs prevailing among Clearing Members
dealing in Covered Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Certificate specifically
allocated to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series for which such Put Option was written; (b) the name of the issuer and the
title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding
paragraph is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to the Put Option;
(c) the Clearing Member from whom the underlying Securities are to be received;
(d) the total amount payable by the Fund upon such delivery; (e) the amount of
cash and/or the amount and kind of Securities specifically allocated to such
Series to be withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, specifically allocated
to such Series, if any, to be withdrawn from the Senior Security Account. Upon
the return and/or cancellation of
<PAGE> 8
any Put Option guarantee letter or similar document issued by the Custodian in
connection with such Put Option, the Custodian shall pay out of the money held
for the account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate against delivery of such
Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Collateral Account for such
Series; and (k) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in a Margin Account,
and the name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in the
Certificate, and either (1) deliver such receipts, if any, which the Custodian
has specifically agreed to issue, which are in accordance with the customs
prevailing among Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2) make the
deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously written
Option described in paragraphs, 6, 8 or 10 of this Article in a transaction
expressly designated as a "Closing Purchase Transaction" in order to liquidate
its position as a writer of an Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Option being purchased:
(a) that the transaction is a Closing Purchase Transaction; (b) the Series for
which the Option was written; (c) the name of the issuer and the title and
number of shares subject to the Option, or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Options held; (d)
the exercise price; (e) the premium to be paid by the Fund; (f) the expiration
date; (g) the type of Option (put or call); (h) the date of such purchase; (i)
the name of the Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Collateral Account, a specified Margin Account, or the Senior Security
Account for such Series. Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant to paragraphs 6, 8 or
10 of this Article with respect to the Option being liquidated through the
Closing Purchase Transaction, the Custodian shall remove, or direct the
Depository to remove, the previously imposed restrictions on the Securities
underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI.
<PAGE> 9
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall deliver
to the Custodian a Certificate specifying with respect to such Futures Contract,
(or with respect to any number of identical Futures Contract(s)): (a) the Series
for which the Futures Contract is being entered; (b) the category of Futures
Contract (the name of the underlying stock index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) on such Futures Contract(s); (g) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in the Senior Security Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to be paid and
the name of the broker, dealer, or futures commission merchant to whom such
amount is to be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the money specifically
allocated to such Series of the fee or commission, if any, specified in the
Certificate and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required to be made by
the Fund to a broker, dealer, or futures commission merchant with respect to an
outstanding Futures Contract, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement. (b) Any variation
margin payment or similar payment from a broker, dealer, or futures commission
merchant to the Fund with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained by
the Fund until delivery or settlement is made on such Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a Futures
Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the contrary, the
Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such futures commission merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
<PAGE> 10
1. Promptly after the purchase of any Futures Contract Option by the Fund, the
Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant through
whom such option was purchased; and (i) the name of the broker, or futures
commission merchant, to whom payment is to be made. The Custodian shall pay out
of the money specifically allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set forth
in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the Custodian
a Certificate specifying with respect to each such sale: (a) the Series to which
such Futures Contract Option was specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the date of sale; (e) the sale price; (f) the date
of settlement; (g) the total amount payable to the Fund upon such sale; and (h)
the name of the broker or futures commission merchant through whom the sale was
made. The Custodian shall consent to the cancellation of the Futures Contract
Option being closed against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount payable as set forth
in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e)the name of
the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the Series for which such Futures Contract Option was
written; (b) the type of Futures Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call is
exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits,
<PAGE> 11
if any, to be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and which is
a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction with
respect to, any Futures Contract Option written or purchased by the Fund and
described in this Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and, (b) make such withdrawals from and/or in the case of an
exercise such deposits into the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures
Contract Option described in this Article shall be subject to Article VI hereof.
10. Notwithstanding any other provision in this Agreement to the contrary, the
Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such futures commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a) the Series for
which such short sale was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of
<PAGE> 12
Securities, if any, to be deposited in a Senior Security Account, and (i) the
name of the broker through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming such sale and that
the total amount credited to the Fund upon such sale, if any, as specified in
the Certificate is held by such broker for the account of the Custodian (or any
nominee of the Custodian) as custodian of the Fund, issue a receipt or make the
deposits into the Margin Account and the Senior Security Account specified in
the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to each such
closing out: (a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number of shares or
the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the money held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in preceding
paragraph 1 of this Article, the Fund shall promptly deliver a Certificate or,
in the event such Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions to the Custodian specifying: (a) the Reverse
Repurchase Agreement being terminated and the Series for which same was entered;
(b) the total amount payable by the Fund in connection with such termination;
(c) the amount and kind of Securities to be received by the Fund and
specifically allocated to such Series in connection with such termination; (d)
the date of termination; (e) the name of the broker or dealer with or through
whom the Reverse Repurchase Agreement is to be terminated; and (f) the amount of
cash and/or the amount and kind of Securities to be withdrawn from the Senior
Securities Account for such Series. The Custodian shall, upon receipt of the
amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated to a
Series held by the Custodian hereunder, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with
<PAGE> 13
respect to each such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities, (c) the number of shares or the principal amount loaned, (d) the
date of loan and delivery, (e) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of cash collateral and
the premium, if any, separately identified, and (f) the name of the broker,
dealer, or financial institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the Book-
Entry System or Depository only in the form of a certified or bank cashier's
check payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance with the customs
prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund, the
Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or withdrawals
from, a Senior Security Account as specified in a Certificate received by the
Custodian. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account to the
broker, dealer, futures commission merchant or Clearing Member in whose name, or
for whose benefit, the account was established as specified in the Margin
Account Agreement.
3. Amounts received by the Custodian as payments or distributions with respect
to Securities deposited in any Margin Account shall be dealt with in accordance
with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and to
any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a statement
with respect to each Margin Account in which money or Securities are held
specifying as of the close of business on the previous business day: (a) the
name of the Margin Account; (b) the amount and kind of Securities held therein;
and (c) the amount of money held therein. The Custodian shall make available
upon request to any broker, dealer, or futures commission merchant specified in
the name of a Margin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
<PAGE> 14
6. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the Board
of Directors of the Fund, certified by the Secretary or any Assistant Secretary,
either (i) setting forth with respect to the Series specified therein the date
of the declaration of a dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution, Oral Instructions or
Certificate, as the case may be, the Custodian shall pay out of the money held
for the account of each Series the total amount payable to the Dividend Agent
and any sub-dividend agent or co-dividend agent of the Fund with respect to such
Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the Custodian a
Certificate duly specifying: (a) the Series, the number of Shares sold, trade
date, and price; and (b) the amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate account in
the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian to
make payment out of the money held by the Custodian hereunder in connection with
a redemption of any Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the Series
and number of Shares received by the Transfer Agent for redemption and that such
Shares are in good form for redemption, the Custodian shall make payment to the
Transfer Agent out of the money held in the separate account in the name of the
Series the total amount specified in the Certificate issued pursuant to the
foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any Shares,
whenever any Shares are redeemed pursuant to any check redemption privilege
which may from time to time be offered by the Fund, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of an advice from the
Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege
<PAGE> 15
out of the money held in the separate account of the Series of the Shares being
redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS 1. If the Custodian should in its sole discretion
advance funds on behalf of any Series which results in an overdraft because the
money held by the Custodian in the separate account for such Series shall be
insufficient to pay the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a Certificate or Oral
Instructions, or which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other reason indebted to
the Custodian with respect to a Series, including any indebtedness to The Bank
of New York under the Fund's Cash Management and Related Services Agreement
(except a borrowing for investment or for temporary or emergency purposes using
Securities as collateral pursuant to a separate agreement and subject to the
provisions of paragraph 2 of this Article), such overdraft or indebtedness shall
be deemed to be a loan made by the Custodian to the Fund for such Series payable
on demand and shall bear interest from the date incurred at a rate per annum
(based on a 360- day year for the actual number of days involved) equal to 1/2%
over Custodian's prime commercial lending rate in effect from time to time, such
rate to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien, security
interest, and security entitlement in and to any property including any
investment property or any financial asset specifically allocated to such Series
at any time held by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank (including,
if the borrowing is pursuant to a separate agreement, the Custodian) from which
it borrows money for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against delivery of a
stated amount of collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a) the Series to
which such borrowing relates; (b) the name of the bank, (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan agreement,(d)
the time and date, if known, on which the loan is to be entered into, (e) the
date on which the loan becomes due and payable, (f) the total amount payable to
the Fund on the borrowing date, (g) the market value of Securities to be
delivered as collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any particular
Securities, and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's prospectus.
The Custodian shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. The Custodian
shall deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Fund fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of
<PAGE> 16
any particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in order for
the Fund to transmit Instructions to the Custodian (the "Software"), the
Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund shall use the Software solely for its own internal and
proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Fund acknowledges that the Custodian
and its suppliers have title and exclusive proprietary rights to the Software,
including any trade secrets or other ideas, concepts, know how, methodologies,
or information incorporated therein and the exclusive rights to any copyrights,
trademarks and patents (including registrations and applications for
registration of either) or statutory or legal protections available with respect
thereof. The Fund further acknowledges that all or a part of the Software may be
copyrighted or trademarked (or a registration or claim made therefor) by the
Custodian or its suppliers. The Fund shall not take any action with respect to
the Software inconsistent with the foregoing acknowledgments, nor shall the Fund
attempt to decompile, reverse engineer or modify the Software. The Fund may not
copy, sell, lease or provide, directly or indirectly, any of the Software or any
portion thereof to any other person or entity without the Custodian's prior
written consent. The Fund may not remove any statutory copyright notice, or
other notice including the software or on any media containing the Software. The
Fund shall reproduce any such notice on any reproduction of the Software and
shall add statutory copyright notice or other notice to the Software or media
upon the Bank's request. Custodian agrees to provide reasonable training,
instruction manuals and access to Custodian's "help desk" in connection with the
Fund's user support necessary to use of the Software. At the Fund's request,
Custodian agrees to permit reasonable testing of the Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and expense all equipment
and services, including but not limited to communications services, necessary
for it to utilize the Software and transmit Instructions to the Custodian. The
Custodian shall not be responsible for the reliability, compatibility with the
Software or availability of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases made available to the
Fund by utilizing the Software (other than data bases relating solely to the
assets of the Fund and transactions with respect thereto), and any proprietary
data, processes, information and documentation (other than which are or become
part of the public domain or are legally required to be made available to the
public) (collectively, the "Information"), are the exclusive and confidential
property of the Custodian. The Fund shall keep the Information confidential by
using the same care and discretion that the Fund uses with respect to its own
confidential property and trade secrets and shall neither make nor permit any
disclosure without the prior written consent of the Custodian. Upon termination
of this Agreement or the Software license granted hereunder for any reason, the
Fund shall return to the Custodian all copies of the Information which are in
its possession or under its control or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the Software
from time to time without prior notice and the Fund shall install new releases
of the Software as the Custodian may direct. The Fund agrees not to modify or
attempt to modify the Software without the Custodian's prior written consent.
The Fund acknowledges that any modifications to the Software, whether by the
Fund or the Custodian and whether with or without the Custodian's consent, shall
become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no warranties or
representations of any kind with regard to the Software or the method(s) by
which the Fund may transmit Instructions to the Custodian, express or implied,
including but not limited to any implied warranties of merchantability or
fitness for a particular purpose.
<PAGE> 17
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED STATES
LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT,
TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO
ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND OUTSIDE
THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
7. Where the method for transmitting Instructions by the Fund involves an
automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian Instructions
hereunder, it shall be the Fund's sole responsibility to ensure that only
persons duly authorized by the Fund transmit such Instructions to the Custodian.
The Fund will cause all persons transmitting Instructions to the Custodian to
treat applicable user and authorization codes, passwords and authentication keys
with extreme care, and irrevocably authorizes the Custodian to act in accordance
with and rely upon Instructions received by it pursuant hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is fully
informed of the protections and risks associated with the various methods of
transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian that this
Agreement has been duly approved by a resolution of its Board of Directors, and
that its transmission of Instructions pursuant hereto shall at all times comply
with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
11. Custodian will indemnify and hold harmless the Fund with respect to any
liability, damages, loss or claim incurred by or brought against Fund by reason
any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Fund's use of the Software in the
form provided under this Section. Custodian at its own expense will defend such
action or claim brought against Fund to the extent that it is based on a claim
that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that Custodian is provided
with reasonable written notice of such claim, provided that the Fund has not
settled, compromised or confessed any such claim without the Custodian's written
consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Fund cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Fund to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to Customer.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
<PAGE> 18
1. The Custodian is authorized and instructed to employ, as sub-custodian for
each Series' Securities for which the primary market is outside the United
States ("Foreign Securities") and other assets, the foreign banking institutions
and foreign securities depositories and clearing agencies designated on Schedule
I hereto ("Foreign Sub-Custodians"). The Fund may designate any additional
foreign sub-custodian with which the Custodian has an agreement for such entity
to act as the Custodian's agent, as its sub-custodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of a
Certificate from the Fund, the Custodian shall cease the employment of any one
or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and
such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with a
transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Fund that its Board of Directors, or its
third party foreign custody manager as defined in Rule 17f-5 under the
Investment Company Act of 1940, as amended, if any, has determined that use of
such Foreign Sub-Custodian satisfies the requirements of such Investment Company
Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each Series of the
Fund the Foreign Securities of such Series held by each Foreign Sub-Custodian.
At the election of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims by the Fund or any Series against a
Foreign Sub-Custodian as a consequence of any loss, damage, cost, expense,
liability or claim sustained or incurred by the Fund or any Series if and to the
extent that the Fund or such Series has not been made whole for any such loss,
damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms of
the applicable Foreign Sub-Custodian agreement, use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and records
relate to the performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and other assets of each Series
held by Foreign Sub-Custodians, including but not limited to an identification
of entities having possession of each Series' Foreign Securities and other
assets, and advices or notifications of any transfers of Foreign Securities to
or from each custodial account maintained by a Foreign Sub-Custodian for the
Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices, reports or
other written information received pertaining to the Fund's Foreign Securities,
including without limitation, notices of corporate action, proxies and proxy
solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary, settlement
and payment for securities received for the account of any Series and delivery
of securities maintained for the account of such Series may be effected in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the contrary, with
respect to any losses or damages arising out of or relating to any actions or
omissions of any Foreign Sub-Custodian the sole responsibility and liability of
the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall promptly
deliver to the Custodian a Certificate or Oral Instructions specifying with
respect to such FX Transaction: (a) the Series to which such FX Transaction is
specifically allocated; (b) the type and amount of Currency to be purchased by
the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
<PAGE> 19
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as the
Currency to be purchased, as specified in the Certificate or Oral Instructions,
the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing from time to time
among brokers or dealers in Currencies, and such receipt and delivery may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with such receipts and deliveries, which
responsibility and liability shall continue until the Currency to be received by
the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws, rules, regulations
or orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another currency. The Custodian shall
not be obligated to substitute another Currency for a Currency (including a
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI, neither the
Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no event
shall the Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Custodian
may, with respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to the
Fund, or of its own counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or written by
or for the Fund, the legality of the purchase, sale or writing thereof, or the
propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the propriety of
the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend by the Fund;
(d) the legality of any borrowing by the Fund using Securities as collateral;
(e) the legality of any loan of portfolio Securities, nor shall the Custodian be
under any duty or obligation to see to it that any cash collateral delivered to
it by a broker, dealer, or financial institution or held by it at any time as a
result of such loan of portfolio Securities of the Fund is adequate collateral
for the Fund against any loss it might sustain as a result of such loan. The
Custodian specifically, but not by way of limitation, shall not be under any
duty or obligation periodically to check or notify the Fund that the amount of
such cash collateral held by it for the Fund is sufficient collateral for the
Fund, but such duty or
<PAGE> 20
obligation shall be the sole responsibility of the Fund. In addition, the
Custodian shall be under no duty or obligation to see that any broker, dealer or
financial institution to which portfolio Securities of the Fund are lent
pursuant to Article X of this Agreement makes payment to it of any dividends or
interest which are payable to or for the account of the Fund during the period
of such loan or at the termination of such loan, provided, however, that the
Custodian shall promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) the sufficiency or value of any amounts of money and/or Securities held in
any Margin Account, Senior Security Account or Collateral Account in connection
with transactions by the Fund. In addition, the Custodian shall be under no duty
or obligation to see that any broker, dealer, futures commission merchant or
Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian of,
any money, whether or not represented by any check, draft, or other instrument
for the payment of money, received by it on behalf of the Fund until the
Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action, suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
5. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount due to the Fund from the Transfer Agent of the
Fund nor to take any action to effect payment or distribution by the Transfer
Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign Sub-Custodians
pursuant to Article XVI appoint one or more banking institutions as Depository
or Depositories, as Sub-Custodian or Sub- Custodians, or as Co-Custodian or
Co-Custodians including, but not limited to, banking institutions located in
foreign countries, of Securities and money at any time owned by the Fund, upon
such terms and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it or by any Foreign
Sub-Custodian, for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay to the
Custodian all out-of-pocket expenses and such compensation as may be agreed upon
from time to time between the Custodian and the Fund. The Custodian may charge
such compensation and any expenses with respect to a Series incurred by the
Custodian in the performance of its duties pursuant to such agreement
<PAGE> 21
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series, net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions actually received by the Custodian hereinabove provided
for. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not
received, or that contrary instructions are received, by the Custodian shall in
no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument, instruction or
notice received by the Custodian and reasonably believed by the Custodian to be
given in accordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing, the Custodian shall
be under no duty to inquire into, and shall not be liable for, the accuracy of
any statements or representations contained in any such instrument or other
notice including, without limitation, any specification of any amount to be paid
to a broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in the possession of
the Custodian shall be the property of the Fund. Such books and records shall be
prepared and maintained as required by the Investment Company Act of 1940, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records during the Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
the Custodian to the Fund or the Fund's authorized representative, and the Fund
shall reimburse the Custodian its expenses of providing such copies. Upon
reasonable request of the Fund, the Custodian shall provide in hard copy or on
micro-film, whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc, or are
similarly maintained, and the Fund shall reimburse the Custodian for its
expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book- Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the Custodian
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or non-payment of checks
pursuant to paragraph 6 of Article XIII as part of any check redemption
privilege program of the Fund, except for any such liability, claim, loss and
demand arising out of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement, including, without
limitation, those contained in Article XVI and XVII the Custodian may deliver
and receive Securities, and receipts with respect to such Securities, and
arrange for payments to be made and received by the Custodian in accordance with
the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment
<PAGE> 22
therefore may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
the Custodian's delivery of Securities pursuant to instructions of the Fund,
which responsibility and liability shall continue until final payment in full
has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to the
other party a notice in writing specifying the date of such termination, which
shall be not less than ninety (90) days after the date of giving of such notice.
In the event such notice is given by the Fund, it shall be accompanied by a copy
of a resolution of the Board of Directors of the Fund, certified by the
Secretary or any Assistant Secretary, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Custodian a copy of a
resolution of the Board of Directors of the Fund, certified by the Secretary or
any Assistant Secretary, designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and money then owned by the
Fund and held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian in
accordance with the preceding paragraph, the Fund shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and money then owned by the Fund be
deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the present
Authorized Persons of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons of the Fund. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the event that any
such present Authorized Person ceases to be an Authorized Person of the Fund, or
in the event that other or additional Authorized Persons are elected or
appointed. Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement or Oral
Instructions upon the signatures of the Authorized Persons as set forth in the
last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, shall be sufficiently given if addressed
to the Custodian and mailed or delivered to it at its offices at 90 Washington
Street, New York, New York 10286, or at such other place as the Custodian may
from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Fund shall be sufficiently given if addressed to
the Fund and mailed or delivered to it at its office at the address for the Fund
first above written, or at such other place as the Fund may from time to time
designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties hereto,
and their respective
<PAGE> 23
successors and assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the Custodian, or by the
Custodian without the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of the State of
New York without giving effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute arising hereunder and
hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers, thereunto duly authorized and their respective
seals to be hereunto affixed, as of the day and year first above written.
M.B.S. FUND, INC.
[SEAL]
By:
Attest:
THE BANK OF NEW YORK
[SEAL]
By:
Name:
Title:
Attest:
APPENDIX A
I, , and I, , of M.B.S.
FUND, INC., a Maryland corporation (the "Fund"), do hereby certify that:
The following persons have been duly authorized in conformity with the Fund's
Declaration of Trust and By-Laws to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund, and the signatures set forth opposite
their respective names are their true and correct signatures:
Name
Position
Signature
- --------------------
- -------------------
- -----------------
APPENDIX B
SERIES
APPENDIX C
I, , a Vice President with THE BANK OF NEW YORK do hereby
------------
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
<PAGE> 24
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of M.B.S. FUND, INC., a Maryland corporation (the "Fund"),
and further certifies that the following resolution was adopted by the Board of
Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 1999, (the
"Custody Agreement") is authorized and instructed on a continuous and ongoing
basis to deposit in the Book-Entry System, as defined in the Custody Agreement,
all securities eligible for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the Book-Entry System to the
extent possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of M.B.S. FUND,
INC., as of the day of , 1999.
[SEAL]
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of M.B.S. FUND, INC., a Maryland corporation (the "Fund"),
and further certifies that the following resolution was adopted by the Board of
Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 1999,
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Depository, as defined in
the Custody Agreement, all securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of M.B.S. FUND,
INC., as of the day of , 1999.
[SEAL]
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected
and acting of M.B.S. FUND, INC., a Maryland corporation (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 1999, (the
"Custody Agreement") is authorized and instructed on a continuous and ongoing
basis until such time as it receives a Certificate, as defined in the Custody
Agreement, to the contrary to deposit in the Participants Trust Company as
Depository, as
<PAGE> 25
defined in the Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated, and to
utilize the Participants Trust Company to the extent possible in connection with
its performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of M.B.S. FUND,
INC. , as of the day of , 1999.
[SEAL]
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected
and acting of M.B.S. FUND, INC., a Maryland corporation (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 1999, (the
"Custody Agreement") is authorized and instructed on a continuous and ongoing
basis until such time as it receives a Certificate, as defined in the Custody
Agreement, to the contrary, to accept, utilize and act with respect to Clearing
Member confirmations for Options and transaction in Options, regardless of the
Series to which the same are specifically allocated, as such terms are defined
in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of M.B.S. FUND,
INC., as of the day of , 1999.
[SEAL]
EXHIBIT D
The undersigned, , hereby certifies that he or she is the duly elected
and acting of M.B.S. FUND, INC., a Maryland corporation (the "Fund"), further
certifies that the following resolutions were adopted by the Board of Directors
of the Fund at a meeting duly held on , 1999, at which a quorum was at all times
present and that such resolutions have not been modified or rescinded and are in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of , 1999 (the
"Custody Agreement") is authorized and instructed on a continuous and ongoing
basis to act in accordance with, and to rely on Instructions (as defined in the
Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to Authorized Persons of the Fund as defined in the Custody
Agreement, shall establish internal safekeeping procedures to safeguard and
protect the confidentiality and availability of user and access codes, passwords
and authentication keys, and shall use Instructions only in a manner that does
not contravene the Investment Company Act of 1940, as amended, or the rules and
regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of M.B.S. FUND,
INC., as of the day of , 1999.
[SEAL]
??
<PAGE> 1
EXHIBIT (g)(2)
THE BANK OF NEW YORK Securities Processing Services
Mutual Funds
DOMESTIC CUSTODIAN FEE SCHEDULE
FOR
MSB FUND, INC.
SAFEKEEPING/INCOME COLLECTION/REPORTING/AFFIRMATIONS
1 basis point on the first $250 million in average net assets for each
portfolio.
3/4 basis point on the next $250 million in average net assets for each
portfolio.
1/2 basis point on the excess over $500 million in average net assets for
each portfolio.
CUSTODIAN TRANSACTION CHARGES
$6 Book Entry Settlements/Paydowns - DTC/FRB/PTC
$15 Physicals, options, futures
$40 Eurodollar C/D's
MISCELLANEOUS TRANSACTION CHARGES
$6 Federal Reserve Wires not related to securities transactions, and
official check requests.
EARNINGS CREDIT ON BALANCES/INTEREST FOR OVERDRAFTS
Earnings credits are provided to each Fund on 100% of the daily balance in the
domestic custodian accounts after reduction for Federal Reserve requirements,
computed at the Federal Reserve Funds rate, less 1/2% on the day of the balance.
Overdrafts, excluding bank errors will cause a reduction of earnings credits
daily, computed at 1/2% above the Federal Funds rate on the day of the
overdraft.
Credits and debits will be accumulated daily and offset monthly against the
Bank's domestic custodian fees. To the extent a net debit is accumulated, each
fund will be billed for the expense. To the extent a net earnings credit is
generated, such excess earnings credit can be carried forward to the next
succeeding month. However, no earnings credit will be carried forward after the
Fund's fiscal year-end.
OUT-OF-POCKET EXPENSES
Out-of-Pocket Expenses traditionally include, but are not limited to, Federal
Reserve charges related to securities transactions, postage and insurance on
physical transfer items, attendance at closings, telecommunication charges, etc.
These expenses will be billed as they are incurred with no mark-up.
BILLING CYCLE
The above fees are billed monthly.
MSB FUND, INC. THE BANK OF NEW YORK
Approved by: ? Submitted by: ?
---------------------- -----------------------
Date: Aug. 28, 1999 Date: July 30, 1999
----------------------------- -------------------------------
<PAGE> 1
CASH MANAGEMENT AND RELATED SERVICES AGREEMENT, dated as of July 30,
1999 between each mutual fund and/or portfolio series of each mutual fund listed
on Schedule A hereto (each a "Fund", collectively the "Funds"), and The Bank of
New York (the "Bank").
W I T N E S S E T H :
That in consideration of the mutual agreements and covenants herein
contained, the Bank and each Fund hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, unless the context otherwise requires,
the following words shall have the meanings set forth below:
1. Account" shall mean an account in the name of a Fund or such Fund's
transfer agent for the benefit of such Fund for receiving and disbursing money
as provided in this Agreement.
2. "Account Available Balance" shall mean with respect to an Account
for any given day during a calendar month a positive or negative dollar amount
equal to (A) if such day is a Business Day, the Account Available Balance as of
the close of the last preceding Business Day plus a positive or negative dollar
amount equal to the difference, if any, between the Chargeable Credits with
respect to such day and such Account and the Chargeable Debits with respect to
such day and such Account, and (B) if such day is not a Business Day, the
Account Available Balance as of close of the last preceding Business Day, except
that both (A) and (B) shall be reduced by the United States Federal Reserve
reserve requirements then applicable to the Bank with respect to such Account.
The Account Available Balance of an Account shall be zero on the date
immediately preceding the first date on which an entry, consisting of either a
Chargeable Credit or Chargeable Debit, is first made to such Account hereunder.
3. "ACCESS" shall mean any on-line communication system provided by the
Bank hereunder whereby either the receiver of such communication is able to
verify by codes or otherwise with a reasonable degree of certainty the identity
of the sender of such communication, or the sender is required to provide a
password or other identification code.
4. "Authorized Person" shall mean either (A) any person duly authorized
by corporate resolutions of the board of directors or board of trustees of a
Fund (each, a "Board") to give Oral and/or Written Instructions on behalf of
such Fund, such persons to be designated in a certificate, substantially in the
form of Exhibit A, which contains a specimen signature of such person, or (B)
any person sending or transmitting any instruction or direction through ACCESS.
5. "Business Day" shall mean any day on which the Federal Reserve Bank
of New York is open for business, except for any such day on which the Bank is
required by law or regulation to be closed, or elects to be closed.
6. "Calendar Month Earnings Credit" shall mean with respect to an
Account for any calendar month the dollar amount, whether positive or negative,
equal to the sum of the Gross Calendar Month Earnings Credit with respect to
such Account for such calendar month and the Monthly Overdraft Charges with
respect to such Account for such calendar month.
7. "Chargeable Credits" shall mean with respect to an Account for any
given day during a calendar month a positive amount of dollars equal to the sum,
if any, of (A) the aggregate dollar amount of Federal Funds credited to such
Account by the Bank in accordance with the then applicable availability schedule
of the Federal Reserve Bank of New York, and (B) the aggregate dollar amount of
Bank internal transfers of Federal Funds to such Account.
8. "Chargeable Debits" shall mean with respect to an Account for any
given day during a calendar month a negative
<PAGE> 2
-2-
dollar amount equal to the sum, if any, of (A) the aggregate dollar amount of
Federal Funds relating to such Account charged against the Bank by the Federal
Reserve Bank of New York on or as of such day, and (B) the aggregate dollar
amount of drafts drawn on such Account which are deposited in the Bank by
customers of the Bank on such day, or Bank internal transfers from, or charges
to, such Account.
9. "Daily Earnings" shall mean with respect to an Account for any day
during a calendar month a positive dollar amount equal to the product of (A) the
positive Account Available Balance, if any, of such Account for such day,
multiplied by (B) the Daily Earnings Rate for such day. The Daily Earnings with
respect to an Account for any day during a calendar month on which the Account
Available Balance of such Account is negative shall be zero.
10. "Daily Earnings Rate" shall mean for any day during a calendar
month one three hundred and sixty-fifth of the 91 day U.S. Treasury Bill
discount rate of the Monday auction first preceding such day (whether or not
such day is a Monday, and whether or not such Monday auction was in the
immediately prior month), as such Monday auction 91 day U.S. Treasury Bill
discount rate is reported in The Wall Street Journal.
11. "Daily Overdraft Charges" shall mean with respect to an Account for
any day during any calendar month a negative dollar amount equal to the product,
if any, of (A) the negative Account Available Balance, if any, with respect to
such Account for such day during such calendar month, multiplied by (B) the
Overdraft Rate.
12. "Federal Funds" shall mean immediately available same day funds.
13. "Gross Calendar Month Earnings Credit" shall mean with respect to
an Account for any calendar month a positive dollar amount equal to the
aggregate sum of the Daily Earnings of such Account for such calendar month.
14. "Monthly Overdraft Charges" shall mean with respect to an Account
for any calendar month a negative dollar amount equal to the aggregate sum of
the Daily Overdraft Charges with respect to such Account for such calendar month
which have not been previously paid to the Bank by the Fund to which such
Account relates.
15. "Omnibus Account" shall mean an account at the Bank for the benefit
of the Funds into which money (A) to be deposited into an Account is initially
credited pending its transfer to such Account pursuant to Article III hereof, or
(B) transferred from an Account pursuant to Article III is deposited pending its
disbursement pursuant to Article III.
16. "Oral Instructions" shall mean verbal instructions actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person.
17. "Overdraft Rate" shall mean with respect to an Account for any
calendar day during any calendar month a rate equal to one three hundred and
sixtieth of the fed funds rate on such date plus 100 basis points (1.00
percent).
18. "Shareholder" shall mean any record holder of any Shares, as
identified to the Bank from time to time pursuant to this Agreement.
19. "Shares" shall mean all or any part of each class of the shares of
capital stock, beneficial interest, or limited partnership interest of a Fund,
as the case may be, which are authorized and/or issued from time to time.
20. "Written Instructions" shall mean written instructions actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person by letter, memorandum, telegram,
cable, telex, facsimile or through ACCESS.
ARTICLE II
APPOINTMENT OF BANK; REPRESENTATIONS AND WARRANTIES
1. Appointment; Establishment of Accounts. Each Fund hereby appoints
the Bank as its agent for the term of this Agreement to perform the cash
management services set forth herein and in Schedule I attached hereto and made
a part hereof (as such Schedule may be amended or supplemented from time to time
by mutual agreement) which are selected by such Fund from time to time. The Bank
hereby accepts appointment as such agent for each Fund and agrees to establish
and maintain one or more Accounts and/or Omnibus Accounts as the parties shall
determine are necessary to receive and disburse money as provided in this
Agreement.
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2. Representations and Warranties. Each Fund hereby represents and
warrants only as to itself, and not jointly, to the Bank, which representations
and warranties shall be deemed to be continuing and to be reaffirmed upon
delivery to the Bank of any Oral or Written Instructions, that:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power to carry on its business as
now conducted, to enter into this Agreement and to perform its obligations
hereunder;
(b) This Agreement has been duly authorized, executed and delivered by
the Fund in accordance with all requisite corporate action and constitutes a
valid and legally binding obligation of the Fund enforceable in accordance with
its terms, except to the extent such enforcement may be limited by general
equity principles or bankruptcy principles; and
(c) It is conducting its business in compliance with all applicable
laws and regulations in all material respects, both state and federal, and has
obtained all regulatory licenses, approvals and consents necessary to carry on
its business as now conducted; there is no statute, regulation, rule, order or
judgment binding on it and no provision of its charter or by-laws, nor of any
mortgage, indenture, credit agreement or other contract binding on it or
affecting its property which would prohibit its execution or performance of this
Agreement.
3. Board Resolutions. Each Fund shall provide the Bank with a certified
copy of a resolution of its Board appointing the Bank as its agent to act
hereunder and providing for the creation of such Fund's Account(s), the
utilization by such Fund of one or more Omnibus Accounts and the execution by
such Fund of this Agreement, it being understood that receipt of the same by the
Bank shall be a condition precedent to the Bank's establishing an Account for
such Fund or such Fund's utilization of an Omnibus Account.
ARTICLE III
CASH MANAGEMENT SERVICES
1. Receipt of Money. The Bank shall receive money for credit to an
Account only:
(i) by personal presentment by a Fund, but not by a Shareholder of
such Fund, of drafts at the branch or branches in Manhattan
identified from time to time by the Bank to such Fund,
provided such presentment is in accordance with the time
frames specified by the Bank to such Fund;
(ii) by mailing of drafts to a post office box designated by the
Bank for such purpose, provided such drafts are accompanied by
a properly completed investment stub;
(iii) by wire transfer to an account maintained at the Federal
Reserve Bank of New York as identified in writing by the Bank
to a Fund;
(iv) by transfer to an account identified in writing by the Bank to
a Fund through the New York Automated Clearing House;
(v) by transfer from another Account maintained by such Fund with
the Bank under this Agreement;
(vi) by transfer from another account maintained by such Fund with
the Bank, including such Fund's custodian account under its
Custody Agreement with the Bank as Custodian; or
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(vii) by transfer from any other account maintained with the Bank.
All money received by the Bank shall be credited upon receipt, but subject to
final payment and receipt by the Bank of immediately available funds, and
receipt by the Bank of such forms, documents and information previously
specified to the Funds as reasonably required by the Bank from time to time and
received in the appropriate time frames. If an Omnibus Account has been
established for the Funds, such money shall be initially credited to the Omnibus
Account pending its allocation to, and deposit in, an Account. The Bank shall be
entitled to reverse any credits previously made to a Fund's Account or an
Omnibus Account where money is not finally collected or where a credit to such
account was in error.
2. Disbursement of Money. The Bank shall disburse money credited to an
Account only:
(i) pursuant to Written Instructions of such Fund transmitted
through ACCESS (except as otherwise provided in Article V,
Section 7 hereof), to transfer funds as directed by such Fund
(including transfers through the Federal Reserve Bank of New
York transfer wire and the New York Automated Clearing House);
(ii) in payment of drafts drawn by an Authorized Person or
Shareholder (as appropriate for the particular Account),
subject to the terms hereof; or
(iii) in payment of charges to such Account representing amounts
payable to the Bank, and chargeable against such Account, as
provided in this Agreement.
The Bank shall be required to disburse money in accordance with the foregoing
only insofar as such money is immediately available and on deposit with the
Bank. If an Omnibus Account has been established for the Funds, such money shall
be credited to the Omnibus Account pending such disbursement. All instructions
directing the disbursement of money credited to an Account or Omnibus Account
under this Agreement (whether through ACCESS or by Oral Instructions pursuant to
Article V hereof) must identify an account to which such money shall be
transferred, and include all other information previously specified to the Funds
as reasonably required by the Bank from time to time. It is understood and
agreed that with respect to any such instructions, when instructed to credit or
pay a party by both name and a unique numeric or alpha-numeric identifier (e.g.,
ABA number or account number), the Bank and any other financial institution
participating in the funds transfer may rely solely on the unique identifier,
even if it identifies a party different than the party named. Such reliance on a
unique identifier shall apply to beneficiaries named in such instructions as
well as any financial institution which is designated in such instruction to act
as an intermediary in a funds transfer.
3. Redemption Drafts; Shareholder Information. (a) Each Fund shall be
entitled to supply its Shareholders with redemption drafts, but only in a form
and substance agreed to by the Bank. The Bank agrees to give each Fund sixty
(60) days prior notice of any changes to the form or substance of redemption
drafts required by the Bank, provided that if such change is required by
applicable rules or procedures of the Federal Reserve or any clearinghouse
through which such drafts may be presented, the Bank may give less than sixty
(60) days prior notice of such change. Any such notice shall be given promptly
by the Bank.
(a) Each Fund which has elected to permit redemption drafts will
promptly furnish to the Bank (i) the name, mailing address and telephone number
of each Shareholder of such Fund, and (ii) specimen signatures for all
individuals authorized to draw redemption drafts (whether on their own behalf or
on behalf of third parties). Each Fund will promptly advise the Bank of
individuals no longer authorized to draw redemption drafts, and those
individuals newly authorized. Such information shall be provided to the Bank in
a mutually agreed upon format.
4. Redemption Draft Returns. A Fund may give the Bank Oral or Written
Instructions from time to time to return unpaid redemption drafts of the Fund to
the presenting financial institution for any reason, and the Bank shall use
reasonable efforts to comply with such Oral or Written Instructions provided
that such compliance would not prejudice or impair any rights or privileges of
the Bank under prevailing draft return procedures and would not be contrary to
prevailing industry rules, procedures, customs or practices. Notwithstanding the
foregoing, or any other provision in this Agreement or Schedule I hereto, the
Bank (i) may return
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redemption drafts with unauthorized or missing signatures to the presenting
financial institution in accordance with prevailing banking industry draft
return procedures, and (ii) shall have no obligation to request Oral or Written
Instructions from a Fund with respect to any redemption drafts.
ARTICLE IV
ADVANCES, OVERDRAFTS OR INDEBTEDNESS
1. If the Bank in its sole discretion advances funds, or if there shall
arise for whatever reason an overdraft or other indebtedness in connection with
any Account or Omnibus Account, such advance, overdraft or indebtedness shall be
deemed a loan made by the Bank to the Fund to which the Account relates, or in
the case of an Omnibus Account, to which such advance, overdraft or indebtedness
relates, payable on demand and bearing interest from the date incurred at the
Overdraft Rate, such Overdraft Rate to be adjusted on the effective date of any
change in the fed funds rate constituting a part thereof. In the event of any
advance, overdraft or other indebtedness in connection with an Omnibus Account,
the Bank shall be furnished promptly (and in any event by 12:00 noon on the next
Business Day after such advance, overdraft or indebtedness) with Written
Instructions identifying each Fund to which such advance, overdraft or
indebtedness relates, and the amount allocable to such Fund(s).
2. Each Fund hereby agrees with respect to its Account(s), any Omnibus
Account(s) and any advances, overdrafts or other indebtedness that the Bank
shall have a continuing lien and security interest in and to any property at any
time held by it for the benefit of the Fund either hereunder or under such
Fund's Custody Agreement with the Bank, or in which the Fund may have an
interest which is then in the Bank's possession or control or in possession or
control of any third party acting in the Bank's behalf, including in its behalf
as Custodian under the Fund's Custody Agreement with the Bank. Each Fund
authorizes the Bank, in its sole discretion, at any time to charge any advance,
overdraft or indebtedness together with interest due thereon at the Overdraft
Rate against any balance standing to the Fund's credit on the books of the Bank,
including those books maintained by the Bank in its capacity as Custodian for
the Fund under its Custody Agreement with the Fund.
3. Each Fund agrees that upon allocation of all advances, overdrafts or
indebtedness to its account pursuant to paragraph 1 above, its total borrowings
from all sources (including the Bank) shall be in conformity with the
requirements and limitations set forth in the Investment Company Act of 1940, as
amended, and the Fund's Prospectus. Each Fund shall promptly (and in any event
within one Business Day) notify the Bank in writing whenever it fails to comply
with any of the foregoing requirements.
ARTICLE V
ACCESS; CALL-BACK SECURITY PROCEDURE
1. Services Generally. Each Fund shall be permitted to utilize ACCESS
to obtain direct on-line access to its Accounts and Omnibus Accounts. ACCESS
shall permit each Fund at the times mutually agreed upon by the Bank and such
Fund to receive reports, make inquiries, instruct the Bank to disburse money in
accordance with Article III, and perform such other functions as are more fully
set forth in Schedule I hereto.
2. Permitted Use; Proprietary Information; Equipment. (a) Upon delivery
to a Fund of software enabling such Fund to utilize ACCESS (the "Software"), the
Bank grants to the Fund a personal, nontransferable and nonexclusive license to
use the Software solely for the purpose of transmitting Written Instructions,
receiving reports, making inquiries or otherwise communicating with the Bank in
connection with the Account(s) or the Omnibus Account. Each Fund shall use the
Software solely for its own internal and proper business purposes and not in the
operation of a service bureau. Except as set forth herein, no license or right
of any kind is granted to any Fund with respect to the Software. Each Fund
acknowledges that the Bank and its suppliers retain and have title and exclusive
proprietary rights to the Software, including any trade secrets or other ideas,
concepts, know-how, methodologies, or information incorporated therein and the
exclusive rights to any copyrights, trademarks and patents (including
registrations and applications for registration of either), or other statutory
or legal protections available in respect thereof. Each Fund further
acknowledges that all or a part of the Software may be copyrighted or
trademarked (or a registration or claim made therefor) by the Bank or its
suppliers. No Fund shall take any action with respect to the Software
inconsistent with the foregoing acknowledgments, nor shall any Fund attempt to
decompile, reverse engineer or modify the Software. No Fund may copy, sell,
lease
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or provide, directly or indirectly, any of the Software or any portion thereof
to any other person or entity without the Bank's prior written consent. No Fund
may remove any statutory copyright notice or other notice included in the
Software or on any media containing the Software. Each Fund shall reproduce any
such notice on any reproduction of the Software and shall add any statutory
copyright notice or other notice to the Software or media upon the Bank's
request.
(b) Each Fund acknowledges that all data bases made available as part
of, or through ACCESS, and any proprietary data, processes, information and
documentation (other than any such which are or become part of the public domain
or are legally required to be made available to the public and other than
information concerning any Fund) (collectively, the "Information"), are the
exclusive and confidential property of the Bank. Each Fund shall keep the
Information confidential by using the same care and discretion that each Fund
uses with respect to its own confidential property and trade secrets, and shall
neither make nor permit any disclosure without the express prior written consent
of the Bank, provided that nothing herein shall limit the right of each Fund to
make such disclosure of Information as may be required by statute, rule,
regulation or judicial process. The Bank acknowledges that all information
concerning the Funds ("Fund Information") is the exclusive and confidential
property of the Fund to which it pertains. The Bank shall keep the Fund
Information confidential by using the same care and discretion that the Bank
uses with respect to its own confidential property and trade secrets, and shall
not authorize any disclosure without the express prior written consent of such
Fund, provided that the Bank may without any prior consent disclose the same to
its internal and external accountants, auditors, and counsel, to its and each
respective Fund's regulators, and to any other person or entity whenever the
Bank is advised by its counsel that it may be liable for a failure to make such
disclosure.
(c) Each Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize ACCESS and receive the services thereby, and the
Bank shall not be responsible for the reliability or availability of any such
equipment or any services used in connection with ACCESS.
(d) Upon termination of this Agreement for any reason, each Fund shall
return to the Bank any and all copies of the Information which are in such
Fund's possession or under its control, or distributed to third parties. The
provisions of this Article shall not affect the copyright status of any of the
Information which may be copyrighted and shall apply to all Information whether
or not copyrighted.
3. Modifications. The Bank reserves the right to modify ACCESS or the
Software from time to time without notice to any Fund. Each Fund agrees not to
modify or attempt to modify ACCESS or the Software without the Bank's prior
written consent. Each Fund acknowledges that ACCESS and the Software are the
property of the Bank and, accordingly, each Fund agrees that any modifications
to ACCESS or the Software, whether by such Fund or the Bank and whether with or
without the Bank's consent, shall become the property of the Bank.
4. No Representations or Warranties. The Bank and its manufacturers and
suppliers make no warranties or representations, express or implied, in fact or
in law, including but not limited to warranties of merchantability and fitness
for a particular purpose, in connection with any Fund's use of ACCESS or the
Software, except that the Bank represents and warrants that the execution and
delivery and performance of this Agreement have been duly authorized by the
Bank, that it has the right to use and grant to each Fund the license to use
ACCESS and the Software granted under this Agreement, and that the use by each
Fund in accordance with such license will not constitute an infringement or a
misappropriation of any copyright, patent, trade secret or any other
intellectual property rights of any third party.
5. Security; Reliance; Unauthorized Use. Each Fund will, and will cause
all persons utilizing ACCESS to, treat the user and authorization codes,
passwords and authentication keys applicable to ACCESS with extreme care. The
Bank is hereby irrevocably authorized to act in accordance with and rely on
Written Instructions received by it through ACCESS subject, however, to the
right of a Fund to timely give countermanding Written Instructions. Each Fund
acknowledges that it is its sole responsibility to assure that only Authorized
Persons use ACCESS and that the Bank shall not be responsible nor liable for any
unauthorized use thereof, and agrees that the security procedures to be followed
in connection with the Fund's transmission of Written Instructions through
ACCESS provide to it a commercially reasonable degree of protection in light of
its particular needs and circumstances.
6. Limitations of Liability. (a) Except as otherwise specifically
provided in Section 6(b) below, the Bank shall have no liability for any losses,
damages, injuries, claims, costs or expenses of a Fund arising out of or in
connection with any failure, malfunction or other problem relating to any Fund's
use of ACCESS, except for money damages suffered as the direct result of the
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negligence of the Bank in an amount not exceeding, in the aggregate for all such
losses, damages, injuries, claims, costs and expenses of a Fund arising during
any month, the total charges paid by such Fund to the Bank for ACCESS and
services hereunder which caused such loss, damage, injury, claim, cost or
expense during the 12 months preceding the month in question, or such lesser
number of months as a Fund has used ACCESS if such Fund has not received 12
months use of ACCESS; provided however, that the Bank shall have no liability
under this Section 6(a) if a Fund fails to comply with the provisions of Section
6(d), except to the extent of losses arising prior to the date the Fund should
have complied with said Section 6(d) which could not have been mitigated if such
Fund had complied.
(b) The Bank's liability for its negligence in executing or failing to
execute a Fund's Written Instructions received through ACCESS shall be only with
respect to a transfer, or failure to transfer, funds not in accordance with such
Written Instructions after such instructions have been duly acknowledged by the
Bank, and shall be contingent upon the Fund complying with the provisions of
Section 6(d) below, and shall be limited to (i) restoration of the principal
amount mistransferred, if and to the extent that the Bank would be required to
make such restoration under applicable law, and (ii) the lesser of (A) a Fund's
actual pecuniary loss incurred by reason of its loss of use of the
mistransferred funds or the funds which were not transferred, as the case may
be, or (B) compensation for the loss of the use of the mistransferred funds or
the funds which were not transferred, as the case may be, at a rate per annum
equal to the average Federal Funds rate as computed from the Federal Reserve
Bank of New York's daily determination of the effective rate for Federal Funds,
for the period during which a Fund has lost use of such funds. In no event shall
the Bank have any liability for failing to execute Written Instructions for the
transfer of funds which are received by it through ACCESS other than through the
applicable transfer module for the particular instructions.
(c) Without limiting the generality of the foregoing, it is hereby
agreed that in no event shall the Bank or any manufacturer or supplier of its
computer equipment, software or services be responsible for any special,
indirect, incidental or consequential damages which a Fund may incur arising out
of or in connection with ACCESS or the services provided thereby, even if the
Bank or such manufacturer or supplier has been advised of the possibility of
such damages and regardless of the form of action.
(d) Each Fund shall notify the Bank of any errors, omissions or
interruptions in, or delay or unavailability of, ACCESS as promptly as
practicable, and in any event within one Business Day after the earliest of (i)
discovery thereof, (ii) the date discovery should have occurred through the
exercise of reasonable care, and (iii) in the case of any error, the date of the
earliest notice to such Fund which reflects such error.
(e) ACCESS is designed to promptly and automatically acknowledge the
Bank's receipt of each Written Instruction communicated through ACCESS, and in
the absence of such acknowledgement the Bank shall not be liable for any failure
to act in accordance with such Written Instruction and the Funds may not claim
that such Written Instruction was received by the Bank.
7. Funds Transfer Back-Up Procedure. (a) In the event ACCESS is
inoperable and a Fund is unable to utilize ACCESS for the transmission of
Written Instructions to the Bank to transfer funds, the Fund may give Oral
Instructions or Written Instructions regarding funds transfers, it being
expressly understood and agreed that the Bank's acting pursuant to such Oral
Instructions shall be contingent upon the Bank's verification of the
authenticity thereof pursuant to the Call-Back Security Procedure set forth on
Schedule III hereto (the "Procedure"). In this regard, each Fund shall deliver
to the Bank a Funds Transfer Telephone Instruction Authorization in the form of
Schedule III-A hereto, identifying the individuals authorized to deliver and/or
confirm all such Oral Instructions. Each Fund understands and agrees that the
Procedure is intended to determine whether Oral Instructions received pursuant
to this Section are authorized but is not intended to detect any errors
contained in such instructions. Each Fund hereby accepts the Procedure and
confirms its belief that the Procedure is commercially reasonable.
(b) The Bank shall have no liability whatsoever for any funds transfer
executed in accordance with Oral Instructions delivered and confirmed pursuant
to this Section 7 and Schedule III hereto. The Bank's liability for its
negligence in executing or failing to execute any such Oral Instructions shall
be determined by reference to Section 6(b) of this Article.
(c) The Bank reserves the right to suspend acceptance of Oral
Instructions pursuant to this Section 7 if conditions exist which the Bank, in
its sole discretion, believes have created an unacceptable security risk.
8. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. EACH FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE BANK DELIVERED THE SOFTWARE TO ANY FUND
OUTSIDE OF THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES
IN ACCORDANCE WITH THE EXPORT ADMINISTRATION REGULATIONS. DIVERSION
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CONTRARY TO U.S. LAW IS PROHIBITED. Each Fund hereby authorizes the Bank to
report its name and address to government agencies to which the Bank is required
to provide such information by law.
9. ENCRYPTION. Customer acknowledges and agrees that encryption may not
be available for every communication through ACCESS, or for all data. Customer
agrees that Custodian may deactivate any encryption features at any time,
without notice or liability to Customer, for the purpose of maintaining,
repairing or troubleshooting ACCESS or the Software.
ARTICLE VI
CONCERNING THE BANK
1. Standard of Care; Presentment of Claims. Except as otherwise
provided herein, the Bank shall not be liable for any costs, expenses, damages,
liabilities or claims (including attorney's fees) incurred by a Fund, except
those costs, expenses, damages, liabilities or claims arising out of the Bank's
own negligence, bad faith or willful misconduct. Notwithstanding the foregoing
or anything contained in Schedule I hereto, the Bank shall not be liable for any
loss or damage, including attorney's fees, resulting from the Bank paying any
redemption draft containing a forged drawer signature, unless such loss or
damage arises out of the Bank's negligence, bad faith or willful misconduct. All
claims against the Bank hereunder shall be made by the respective Fund as
promptly as practicable, and in any event within 6 months from the date of the
action or inaction on which such claim is based, and shall include reasonable
documentation evidencing such claim and loss.
2. No Liability. The Bank shall have no obligation hereunder for costs,
expenses, damages, liabilities or claims, including attorney's fees, which are
sustained or incurred by reason of any action or inaction by the Federal Reserve
wire transfer system or the New York Automated Clearing House. Notwithstanding
any other provision elsewhere contained in this Agreement, in no event shall the
Bank be liable to any Fund or any third party for special, indirect or
consequential damages, or lost profits or loss of business, arising under or in
connection with this Agreement, even if previously informed of the possibility
of such damages and regardless of the form of action.
3. Indemnification. Each Fund shall indemnify and exonerate, save and
hold harmless the Bank from and against any and all costs, expenses, damages,
liabilities or claims, including reasonable attorney's fees and expenses, which
the Bank may sustain or incur or which may be asserted against the Bank by
reason of or as a result of any action taken or omitted by the Bank in
connection with its performance under this Agreement with respect to a Fund,
except those costs, expenses, damages, liabilities or claims arising out of the
Bank's own negligence, bad faith or wilful misconduct. This indemnity shall be a
continuing obligation of each Fund notwithstanding the termination of this
Agreement, any Account or Omnibus Account with respect to a Fund.
4. No Obligation to Inquire. Without limiting the generality of the
foregoing, the Bank shall in no event be under any obligation to inquire into,
and shall not be liable for:
(a) the due authority of any Authorized Person acting on behalf of a
Fund in connection with this Agreement;
(b) the genuineness of any drawer signature on any draft deposited in
any Account or Omnibus Account, or whether such signature is a forgery, other
than the signature of the drawer of any draft drawn on the Bank;
(c) the existence or genuineness of any endorsement or any marking
purporting to be an endorsement on any draft deposited in any Account or Omnibus
Account, or whether such endorsement or marking is a forgery, it being expressly
understood that all risks associated with the acceptance by the Bank of any
draft payable to a payee other than a Fund for deposit in any Account or Omnibus
Account pursuant to Oral or Written Instructions by the Fund shall be borne by
such Fund;
(d) any discrepancy between the pre-printed investment stub (other than
a substitute stub created by the Bank) and the payee either named on a draft or
written on the face thereof, provided the Bank has acted in accordance with the
investment stub;
(e) any discrepancy between the written amount for which any draft is
drawn and the Magnetic Incription Character Recognition ("MICR") code enscribed
thereon by any bank other than the Bank on any draft presented, provided the
Bank has acted
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in accordance with the MICR code;
(f) any disbursement directed by a Fund, regardless of the purpose
therefor;
(g) any determination of the Share balance of any Shareholder whose
name is signed on any redemption draft;
(h) any determination of length of time any Shares have been owned by
any Shareholder or the method of payment utilized to purchase such Shares by
such Shareholder;
(i) any claims, liens, attachments, stays or stop payment orders with
respect to any Shares, proceeds, or money, other than a stop payment order
placed by a Fund on a draft drawn by such Fund on its Account or an Omnibus
Account;
(j) the propriety and/or legality of any transaction in any Account or
Omnibus Account;
(k) the lack of authority of any person signing as a drawer of a draft,
provided such person and his specimen signature are specified in the certificate
of authorized signatures last received by the Bank; or
(l) whether any redemption draft equals or exceeds any minimum amount.
5. Reliance Upon Instructions. The Bank shall be entitled to rely upon
any Written or Oral Instructions received by the Bank. Each Fund agrees, except
as otherwise provided in any Schedule attached hereto, to forward to the Bank
Written Instructions confirming Oral Instructions in such manner so that such
Written Instructions are received by the Bank by the close of business on the
same day that such Oral Instructions are given to the Bank. Each Fund agrees
that the fact that such confirming Written Instructions are not timely received
or that contrary Written Instructions are received by the Bank shall in no way
affect the validity or enforceability of transactions previously authorized.
6. Force Majeure. The Bank shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
control, including acts of God; earthquakes; fires; floods; wars; civil or
military disturbances; sabotage; epidemics; riots; interruptions, loss or
malfunctions of utilities, computers (hardware or software), transportation, or
communications service; mechanical breakdowns; interruption or loss of ACCESS
(except as otherwise provided in Section 7 of Article V); accidents; acts of
civil or military authority; governmental actions; labor disputes; or inability
to obtain labor, material, equipment or transportation.
7. No Implied Duties; Performance According To Applicable Law. The Bank
shall have no duties or responsibilities except such duties and responsibilities
as are specifically set forth in this Agreement and Schedule I hereto, and no
covenant or obligation shall be implied against the Bank. The Bank's duties and
responsibilities hereunder shall be performed in accordance with applicable
laws, regulations and rules, including but not limited to Federal Reserve
Regulation CC and the Operating Rules of the New York Automated Clearing House,
and the Bank shall have no obligation to take actions which in the reasonable
opinion of the Bank are either inconsistent with, or prejudice or impair the
Bank's rights under, any such laws, regulations and rules.
8. Requests for Instructions. At any time the Bank may apply to an
officer of a Fund for Oral or Written Instructions with respect to any matter
arising in connection with the Bank's duties and obligations hereunder, and the
Bank shall not be liable for any action taken or permitted by it in good faith
in accordance with such Oral or Written Instructions. Such application for Oral
or Written Instructions may, at the option of the Bank, set forth in writing any
action proposed to be taken or omitted by the Bank with respect to its duties or
obligations hereunder and the date on or after which such action shall be taken,
and the Bank shall not be liable for any action taken or omitted in accordance
with a proposal included in any such application on or after the date specified
therein (which shall be at least 5 days after the date of such Fund's receipt of
such application) unless, prior to taking or omitting any such action, the Bank
has received Oral or Written Instructions in response to such application
specifying the action to be taken or omitted. The Bank may apply for and obtain
the advice and opinion of counsel to the Fund or of its own counsel, at the
expense of the Fund, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with such advice or opinion.
9. Delegation of Duties. The Bank may delegate any of its duties and
obligations hereunder to any delegee and may employ agents or attorneys-in-fact;
provided however, that no such delegation or employment by the Bank shall
discharge the Bank from its obligations hereunder. The Bank shall have no
liability or responsibility whatsoever if any delegee, agent or attorney-in-fact
shall have been selected by a Fund and approved by a resolution of its board.
Notwithstanding the foregoing, nothing contained in this paragraph shall
obligate the Bank to effect any delegation or to employ any agent or
attorney-in-fact.
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10. Fees; Invoices. (a) For its services hereunder, each Fund agrees to
pay the Bank with respect to the Bank's services to such Fund (i) its reasonable
out-of-pocket expenses, (ii) the monthly fees and compensation set forth on
Schedule II attached hereto, and (iii) any negative Calendar Month Earnings
Credits, and such other amounts as may be mutually agreed upon from time to
time. The Bank shall provide each Fund with a monthly activity analysis
detailing service volumes, and including average Account Available Balances and
average ledger balances, and all fees owing for such month.
(b) The Bank shall monthly submit periodic detailed invoices specifying
the amount of all out-of-pocket expenses, fees, compensation and negative
Calendar Month Earnings Credits then due hereunder. The Bank may, and is hereby
authorized by each Fund, to charge such amounts to an Omnibus Account or the
appropriate Fund's Account(s), but only if such amounts remain unpaid for
fifteen (15) days after the end of the period to which such amounts relate.
11. Application of Calendar Month Earnings Credits. (a) Any positive
Calendar Month Earnings Credit for a calendar month shall be applied only as
follows and only in the specified order:
(i) First, applied against such compensation, fees, but not
out-of-pocket expenses, payable by such Fund to the Bank under
this Agreement for such month; and
(ii) Second, applied against such compensation, fees, and negative
Calendar Month Earnings Credits, but not out-of-pocket
expenses, payable by such Fund to the Bank under this
Agreement for any subsequent month in the same calendar year.
(b) Except as provided above, in no event may any Calendar Month
Earnings Credit be applied to any month other than the month in which it was
earned. Calendar Month Earnings Credits may not be transferred to, or utilized
by, any other Fund, person or entity. The portion, if any, of any Calendar Month
Earnings Credit not used by a Fund may be carried, but only forward; provided,
however, that in no event may any Calendar Month Earnings Credit, including
those earned during the fourth calendar quarter, be carried beyond the end of
the calendar year in which earned.
ARTICLE VII
TERMINATION
1. Notice. This Agreement may be terminated as to any Fund by either
the Bank giving to such Fund, or such Fund giving to the Bank, a notice in
writing specifying the date of such termination, which date shall be not less
than 90 days after the date of the giving of such notice. Notwithstanding the
foregoing, the Bank reserves the right to terminate this Agreement as to any
Fund (a) at any time upon 30 days prior written notice if the condition
precedent set forth in Article II, paragraph 3 is unfulfilled with respect to
such Fund, and (b) upon notice if such Fund either (i) fails to comply with
Article IV, Section 3, or (ii) borrows funds from the Bank in an amount
exceeding the Bank's legal lending limit. Any Fund may terminate this Agreement
with respect to such Fund at any time upon not less than 30 days' prior written
notice to the Bank and, in the event of a material breach of this Agreement by
the Bank, may terminate this Agreement with 10 days' prior written notice.
2. Obligations Upon Termination. Upon termination, with respect to a
Fund, the Bank's sole obligations, which shall arise only after, and not before,
such Fund which is the subject of such termination has paid to the Bank all
out-of-pocket expenses, fees, compensation, negative Calendar Month Earnings
Credits and other amounts owed by such Fund to the Bank, shall be (i) to deliver
to the affected Fund(s) such records, if any, as may be owned by such Fund(s),
in the form and manner kept by the Bank on such date of termination, and (ii) to
pay to the affected Fund(s) any monies held for their account hereunder.
Notwithstanding any such termination, this Agreement shall continue in full
force and effect as to all transactions whose processing has been commenced by
the Bank prior to such termination until the completion of such processing.
ARTICLE VIII
MISCELLANEOUS
<PAGE> 11
-11-
1. Certificates of Authorized Persons. Each Fund agrees to furnish to
the Bank a new certificate of Authorized Persons in the event that any present
Authorized Person of such Fund ceases to be an Authorized Person or in the event
that any other Authorized Persons are appointed and authorized. Until such new
certificate is received, the Bank shall be fully protected in acting under the
provisions of this Agreement upon Oral or Written Instructions or signatures of
the present Authorized Persons as set forth in the last delivered certificate.
2. Notices. (a) Any notice or other instrument in writing, authorized
or required by this Agreement to be given to the Bank, shall be sufficiently
given if addressed to the Bank and received by it at its offices at 90
Washington Street, 22nd Floor, New York, New York 10286, Attention: Division
Manager - Mutual Funds, or at such other place as the Bank may from time to time
designate in writing.
(b) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to a Fund shall be sufficiently given if addressed
to a Fund and received by it at c/o Shay Assets Management Inc., 230 West Monroe
Street, Chicago, Ill. 60606, or at such other place as such Fund may from time
to time designate in writing.
3. Cumulative Rights and No Waiver. Each and every right granted to the
Bank hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of the Bank to exercise, and
no delay in exercising, any right will operate as a waiver thereof, nor will any
single or partial exercise by the Bank of any right preclude any other or future
exercise thereof or the exercise of any other right.
4. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or obligations
shall not in any way be affected or impaired thereby, and if any provision is
inapplicable to any person or circumstances, it shall nevertheless remain
applicable to all other persons and circumstances.
5. Amendments. This Agreement may not be amended or modified in any
manner except by a written agreement executed by the Bank and each Fund to be
bound thereby, and, except in the case of an amendment to Schedule I hereto,
authorized or approved by a resolution of each Fund's Board.
6. Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provisions hereof.
7. Applicable Law; Consent to Jurisdiction; Jury Trial Waiver. This
Agreement shall be construed in accordance with the laws of the State of New
York without giving effect to conflict of laws principles thereof. Each party
hereby consents to the jurisdiction of a state or federal court situated in New
York City, New York in connection with any dispute arising hereunder and hereby
waives its right to trial by jury.
8. No Third Party Beneficiaries. The provisions of this Agreement are
intended to benefit only the Bank and each Fund and their respective permitted
successors and assigns, and no right shall be granted to any other person by
virtue of this Agreement.
9. Successors and Assigns. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by either party
without the written consent of the other party and in the case of an assignment
by any Fund, such assignment must be authorized or approved by a resolution of
such Fund's Board. No merger, reorganization or consolidation by the Bank shall
be deemed to constitute an assignment.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
11. Several Obligations. The parties acknowledge that the obligations
of the Funds are several and not joint, that no Fund shall be liable for any
amount owing by another Fund and that the Funds have executed one instrument for
convenience only.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective corporate officers, thereunto duly authorized, as of the day
and year first above written.
By:___________________________________
on behalf of each Fund identified
on Schedule A attached hereto
THE BANK OF NEW YORK
By:___________________________________
Title:
<PAGE> 13
SCHEDULE A
Name of Fund
M.S.B. Fund, Inc.
<PAGE> 14
EXHIBIT A
I, of M.S.B. Fund, Inc. (the "Fund"), a New York
corporation do hereby certify that:
The following individuals have been duly authorized by the Board of
Directors of the Fund in conformity with the Fund's Certificate of Incorporation
and By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund for purposes of the Fund's Cash Management and Related Services Agreement,
and the signatures set forth opposite their respective names are their true and
correct signatures.
Name Signature
- ------------------------------------ -------------------------------------
- ------------------------------------ -------------------------------------
- ------------------------------------ -------------------------------------
- ------------------------------------ -------------------------------------
- ------------------------------------ -------------------------------------
-------------------------------------
[Title of Officer]
<PAGE> 1
EXHIBIT (h)(1)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1999, by and
between M.S.B. FUND, INC., (the "Company"), a New York corporation having its
principal place of business at 230 West Monroe Street Chicago, Illinois 60606,
and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Company desires BISYS to perform certain services, and
BISYS is willing to provide such services, for the current investment portfolio
of the Company and any additional investment portfolios that may hereafter be
created (individually, the "Portfolio," and collectively, the "Portfolios"), on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and BISYS hereby agree as follows:
ARTICLE 1. Retention of BISYS. The Company hereby retains BISYS to act
as Administrator of the Portfolios and to furnish the Portfolios with the
management and administrative services as set forth in Article 2 below. BISYS
hereby accepts such employment to perform the duties set forth below.
BISYS shall, for all purposes herein, be deemed to be an independent
contractor and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Company in any way and shall not be deemed
an agent of the Company.
ARTICLE 2. Administrative Services. BISYS shall perform or supervise
the performance by others of other administrative services in connection with
the operations of the Portfolios, and, on behalf of the Company, will
investigate, assist in the selection of and conduct relations with custodians,
depositories, accountants, legal counsel, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and persons in any other capacity deemed
to be necessary or desirable for the Portfolios' operations. BISYS shall provide
the Board of Directors of the Company (hereafter referred to as the "Directors")
with such reports regarding investment performance as they may reasonably
request but shall have no responsibility for supervising the performance by any
investment adviser or sub-adviser of its responsibilities.
BISYS agrees to perform the services described herein in accordance
with all applicable laws, rules and regulations (including, where applicable,
Generally Accepted Accounting Principles) and in accordance with any reasonable
instructions of the Company and the Company's Certificate of Incorporation,
Bylaws, Prospectus and Statement of Additional Information.
<PAGE> 2
BISYS shall provide the Company with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Directors' meetings) for handling
the affairs of the Company and such other services as BISYS shall, from time to
time, determine to be necessary to perform its obligations under this Agreement.
In addition, at the request of the Directors, BISYS shall make reports to the
Company's Directors concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, BISYS shall:
(a) calculate contractual Company expenses and control all
disbursements for the Company, and as appropriate compute the
Company's yields, total return, expense ratios, portfolio
turnover rate and, if required, portfolio average
dollar-weighted maturity;
(b) assist Company counsel with the preparation of
prospectuses, statements of additional information,
registration statements and proxy materials;
(c) prepare such reports, applications and documents
(including reports regarding the sale and redemption of shares
of common stock of the Company ("Shares") as may be required
in order to comply with Federal and state securities law) as
may be necessary or desirable to register the Company's Shares
with state securities authorities, monitor the sale of Company
Shares for compliance with state securities laws, and prepare
and file with the appropriate state securities authorities the
registration statements and reports for the Company and the
Company's Shares and all amendments thereto, as may be
necessary or convenient to register and keep effective the
Company and the Company's Shares with state securities
authorities to enable the Company to make a continuous
offering of its Shares;
(d) develop and prepare, with the assistance of the Company's
investment adviser, communications to Shareholders, including
the annual report to Shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other
reports to Company Shareholders, and supervise and facilitate
the proxy solicitation process for all shareholder meetings,
including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among
others, the Company's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Company's transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
2
<PAGE> 3
(g) calculate performance data of the Portfolios for
dissemination to information services covering the investment
company industry;
(h) coordinate, provide the necessary financial/tax data for
and supervise, the preparation of the Company's tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Company,
including, without limitation, the Company's investment
adviser, distributor, custodian, fund accountant, transfer
agent, outside legal counsel and independent public
accountants, including monitoring of all applicable
contractual fee or expense limitations and at the request of
the Directors, report to the Board on the performance of
organizations;
(j) assist with the layout and printing of publicly
disseminated prospectuses and assist with and coordinate
layout and printing of the Company's semi-annual and annual
reports to Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to the Company's
Directors to serve as officers of the Company, (without
compensation, reimbursement of expenses or indemnification
from the Company, other than as set forth in this Agreement),
who will be responsible for the management of certain of the
Company's affairs as determined by the Company's Directors;
(m) advise the Company and its Directors on matters concerning
the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the
Company in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Company's Directors and make all necessary
filings with the SEC;
(o) monitor and advise the Company and its Portfolios on their
registered investment company status under the Internal
Revenue Code of 1986, as amended;
(p) perform all administrative services and functions of the
Company to the extent administrative services and functions
are not provided to the Company pursuant to the Company's
investment advisory agreement, distribution agreement,
custodian agreement, transfer agent agreement and fund
accounting agreement;
3
<PAGE> 4
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Company and BISYS shall determine desirable; and
(r) prepare and file with the SEC in a timely manner (in order
to avoid interest charges) the semi-annual report for the
Company on Form N-SAR and all required notices pursuant to
Rule 24f-2.
Without limiting the foregoing, the services to be provided by BISYS
hereunder shall include the services listed in the detailed service listing
attached hereto as Schedule B. BISYS shall perform such other services for the
Company that the Company may from time to time reasonably request; provided,
however, that, to the extent that the performance of any of such other services
requires BISYS to incur material additional costs, and BISYS notifies the
Company thereof promptly after such request, such services shall be provided in
exchange for such additional compensation that is agreed upon by the parties.
Such services may include performing internal audit examinations; mailing the
annual reports of the Portfolios; preparing an annual list of Shareholders; and
mailing notices of Shareholders' meetings, proxies and proxy statements, for all
of which the Company will pay BISYS's out-of-pocket expenses.
BISYS shall enter into and shall maintain in effect with appropriate
parties one or more agreements making reasonable provisions for emergency use of
electronic data processing equipment and shall, at no additional expense to the
Company, take reasonable steps to minimize service interruptions.
BISYS shall provide on a timely basis to the Company's investment
adviser, transfer agent, accounting agent, distributor and custodian and other
persons providing services to the Company such information as such persons may
reasonably request in connection with the performance of their respective duties
and obligations with respect to the Company. BISYS will report to the Board of
Directors of the Company at each meeting of the Board of Directors and will keep
the Board of Directors informed of material developments affecting the Company.
BISYS will comply with any performance standards that may be agreed to
by BISYS and the Company from time to time.
ARTICLE 3. Allocation of Charges and Expenses.
(A) BISYS. BISYS shall furnish at its own expense the executive,
supervisory and clerical personnel necessary to perform its obligations under
this Agreement. BISYS shall also provide the items which it is obligated to
provide under this Agreement, and shall pay all compensation, if any, of
officers of the Company as well as all Directors of the Company who are
affiliated persons of BISYS or any affiliated corporation of BISYS; provided,
however, that unless otherwise specifically provided, BISYS shall not be
obligated to pay the compensation of any employee of the Company retained by the
Directors of the Company to perform services on behalf of the Company.
4
<PAGE> 5
(B) The Company. The Company assumes and shall pay or cause to be paid
all other expenses of the Company not otherwise allocated herein, including,
without limitation, organization costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Directors
who are not affiliated persons of BISYS or the Investment Adviser to the Company
or any affiliated corporation of BISYS or the Investment Adviser, insurance,
interest, brokerage costs, litigation and other extraordinary or nonrecurring
expenses, and all fees and charges of investment advisers to the Company.
ARTICLE 4. Compensation of BISYS.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by BISYS pursuant to this Agreement, the
Company shall pay to BISYS compensation at an annual rate specified in the
Omnibus Fee Agreement between the Company and BISYS dated as of August 1, 1999
(the "Fee Agreement"). Such compensation shall be calculated and accrued daily,
and paid to BISYS monthly. The Company shall also reimburse BISYS for its
reasonable out-of-pocket expenses, including the travel and lodging expenses
incurred by officers and employees of BISYS in connection with attendance at
Board meetings.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, BISYS's compensation for
that part of the month in which this Agreement is in effect shall be prorated in
a manner consistent with the calculation of the fees as set forth above. Payment
of BISYS's compensation for the preceding month shall be made promptly.
(B) Survival of Compensation Rights. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Standard of Care; Reliance on Records and Instructions;
Indemnification. BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS' actions taken or nonactions with respect
to the performance of services under this Agreement or based, if applicable,
upon reasonable reliance on information, records, instructions or requests given
or
5
<PAGE> 6
made to BISYS by the Company or an investment adviser of the Company and on
any records provided by any fund accountant or custodian thereof; provided,
however, that BISYS shall not be protected in relying on any information,
records, instructions or requests given, made or prepared by BISYS or any
affiliate of BISYS or any officer of the Company that is an officer or employee
of BISYS or any affiliate of BISYS; and provided, further, that this
indemnification shall not apply to actions or omissions of BISYS in cases of its
own bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties; and further provided that prior to confessing any
claim against it which may be the subject of this indemnification, BISYS shall
give the Company written notice of and a reasonable opportunity to defend
against said claim in its own name or in the name of BISYS.
Notwithstanding the foregoing, BISYS agrees to indemnify and hold
harmless the Company, its employees, agents, directors, officers and nominees
from and against any and all actions, suits, demands and claims, whether
groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses of every nature and character arising out of or in any way relating to
BISYS's bad faith, willful malfeasance or misfeasance, negligence, or reckless
disregard by it of its obligations and duties, with respect to the performance
of services under this Agreement.
The indemnifying party shall be entitled to participate at its own
expense or, if it acknowledges its responsibility to indemnify the other party,
it may elect to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the indemnifying party elects to assume
the defense of any such claim, the defense shall be conducted by counsel chosen
by the indemnifying party and satisfactory to the indemnified party, whose
approval shall not be unreasonably withheld. In the event that the indemnifying
party elects to assume the defense of any suit and retain counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it. If the indemnifying party does not elect to assume the defense
of a suit, it will reimburse the indemnified party for the reasonable fees and
expenses of any counsel retained by the indemnified party.
ARTICLE 6. Activities of BISYS. The services of BISYS rendered to the
Company are not to be deemed to be exclusive. BISYS is free to render such
services to others and to have other businesses and interests. It is understood
that directors, officers, employees and Shareholders of the Company are or may
be or become interested in BISYS, as officers, employees or otherwise and that
partners, officers and employees of BISYS and its counsel are or may be or
become similarly interested in the Company, and that BISYS may be or become
interested in the Company as a Shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto. In the event either party gives notice of
the termination of this Agreement as provided in Schedule A, BISYS will
cooperate and use all reasonable efforts to assist with the conversion of the
data and records maintained by it hereunder to, and the assumption of the
services provided by it hereunder by, a replacement provider of administrative
services.
6
<PAGE> 7
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party, nor may BISYS subcontract or delegate any of its duties hereunder,
without the written consent of the other party; provided, however, that BISYS
may, at its expense, with the prior written consent of the Company subcontract
with any entity or person concerning the provision of the services contemplated
hereunder. BISYS shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that BISYS shall be responsible, to the extent provided in Article 5 hereof, for
all acts of such subcontractor as if such acts were its own. This Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto and
their respective successors and permitted assigns. BISYS will give the Company
prompt written notice of the appointment of any such subcontractor. Any
assignment not in compliance with this Agreement shall be void.
ARTICLE 9. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Directors of the Company, and (ii) by the vote of a majority of
the Directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a Directors meeting called for the
purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and
BISYS may conclusively assume that any special procedure which has been approved
by the Company does not conflict with or violate any requirements of its
Certificate of Incorporation or then current prospectuses, or any rule,
regulation or requirement of any regulatory body.
ARTICLE 10. Certain Records. BISYS shall maintain customary records in
connection with its duties as specified in this Agreement, and, without limiting
the foregoing, BISYS shall maintain such books and records as the Company may be
required to maintain under the 1940 Act and the rules and regulations thereunder
that are not required to be maintained by the Company's investment adviser,
distributor, transfer agent, fund accountant or custodian, including, without
limitation, books and records relating to the operations of the Company prior to
the date of this Agreement, to the extent provided to BISYS. All such records,
including any records required to be maintained and preserved pursuant to Rules
31a-1 and 31a-2 under the 1940 Act, which are prepared or maintained by BISYS on
behalf of the Company shall be prepared and maintained at the expense of BISYS,
but shall be the property of the Company and will be made available to or
surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, BISYS shall notify the Company and follow the Company's
instructions as to permitting or refusing such inspection; provided that BISYS
may exhibit such records to any person in any case where it is advised by its
counsel that it may be held liable for failure to do so, unless (in cases
involving potential exposure only to civil liability) the Company has agreed to
indemnify BISYS against such liability. BISYS will promptly notify the Company
of any such request.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the
7
<PAGE> 8
1940 Act and the rules and regulations thereunder, subject to such exemptions as
may be granted by the Securities and Exchange Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the following address: if to the Company at 230 West Monroe
Street, Chicago, Illinois, 60606; if to BISYS at 3435 Stelzer Road, Columbus,
Ohio 43219; or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
ARTICLE 13. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act or the rules and regulations thereunder. To the extent that the
applicable laws of the State of Ohio, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, or such rules and regulations
the latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 15. Instructions, Approval or Consent by the Company;
Imputation. Any reference herein to any instructions, approval or consent of the
Company shall not include any instructions, approval or consent given by any
officer of the Company that is an officer, employee or agent of BISYS or any
affiliate of BISYS, unless specifically authorized by the Board of Directors of
the Company. No information known to any such officer of the Company shall be
imputed to the Company for purposes of this Agreement.
ARTICLE 16. Year 2000. BISYS agrees to perform comprehensive tests on
the systems it utilizes to provide the services hereunder to identify any
operational issues caused by the century change. BISYS agrees to use all
commercially reasonable efforts to implement by December 31, 1999, all necessary
updates and changes to such systems, if any, to accommodate the turn of the
century. BISYS agrees to provide to the Company monthly updates on the status of
its Year 2000 readiness project and to make its personnel reasonably available
to address any questions. In particular and, without limiting the foregoing,
BISYS shall notify the Company of any circumstances known to BISYS which are
likely to cause BISYS's systems to be Year 2000 non-compliant and which would
likely have an adverse effect on the Portfolios.
In the event that the Company reasonably determines that any of the
systems BISYS utilizes to perform services hereunder will not be Year 2000
compliant and that such lack of compliance will have an adverse effect on the
Company, the Company shall provide written notice to BISYS describing, in
reasonable detail, any defect or problem relating to such system(s) promptly
upon becoming aware of any such defect or problem. BISYS agrees to use all
commercially reasonable efforts to cure any defect or deficiency that relates to
the turn of the century in any system that BISYS utilizes to provide services
hereunder. This paragraph does not alter the obligations of BISYS under the
preceding paragraph.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
M.S.B. FUND, INC.
By: /s/ M.S.B. Fund, Inc.
-----------------------------------
Title: Vice President
--------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ BISYS Fund Services Ohio, Inc.
-----------------------------------
Title: President
--------------------------------
9
<PAGE> 10
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF AUGUST 1, 1999
BETWEEN
M.S.B. FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
Portfolios: This Agreement shall apply to all Portfolios of M.S.B. Fund,
Inc., either now or hereafter created (individually, the
"Portfolio", and collectively, the "Portfolios").
Term: Pursuant to Article 7, the term of this Agreement shall
commence on August 1, 1999, and shall remain in effect through
July 31, 2004 ("Initial Term"). Thereafter, unless otherwise
terminated as provided herein, this Agreement shall be renewed
automatically for successive one-year periods ("Rollover
Periods"). This Agreement may be terminated without penalty
(i) by provision of 90 days advance written notice of
nonrenewal prior to the end of the Initial Term or any
Rollover Period, as the case may be, (ii) by mutual agreement
of the parties or (iii) for "cause," as defined below, upon
the provision of 90 days advance written notice by the party
alleging cause. Notwithstanding the foregoing, after July 31,
2001, either party may terminate this Agreement at any time
and without penalty, upon the provision of 90 days advance
written notice to the other party.
For purposes of this Agreement, "cause" shall mean (a) a
material breach of this Agreement that has not been remedied
for thirty (30) days following written notice of such breach
from the non-breaching party; (b) a series of negligent acts
or omissions or breaches of this Agreement which, in the
aggregate, constitute, in the reasonable judgment of the
Company's Directors, a serious failure to perform
satisfactorily BISYS's obligations hereunder, (c) a service
standard deficiency (as defined by the parties in the service
standards that are agreed to by BISYS and the Company from
time to time); (d) a final, unappealable judicial, regulatory
or administrative ruling or order in which the party to be
terminated has been found guilty of criminal or unethical
behavior in the conduct of its business; or (e) financial
difficulties on the part of the party to be terminated which
are evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title
11 of the United States Code, as from time to time is in
effect, or any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or reorganization
of debtors or to the modification or alteration of the rights
of creditors.
A-1
<PAGE> 11
Notwithstanding the foregoing, after such termination for so
long as BISYS, with the written consent of the Company, in
fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit
hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall
continue in full force and effect. Compensation due BISYS and
unpaid by the Company upon such termination shall be
immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the
Company, in addition to the compensation described in this
Schedule A, the amount of all of BISYS's cash disbursements
for services in connection with BISYS's activities in
effecting such termination, including without limitation, the
delivery to the Company and/or its designees of the Company's
property, records, instruments and documents.
If, for any reason other than nonrenewal, mutual agreement of
the parties or "cause," as defined above, during the first two
years of the Initial Term of this Agreement, BISYS is replaced
as administrator, then the Company shall make a one-time cash
payment, in consideration of the fee structure and services to
be provided under this Agreement, and not as a penalty, to
BISYS equal to the balance due BISYS for the remainder of such
two-year period, assuming for purposes of calculation of the
payment that such balance shall be based upon the average
amount of the Company's assets for the twelve months prior to
the date BISYS is replaced.
In the event the Company is merged into another legal entity
in part or in whole pursuant to any form of business
reorganization (including without limitation a purchase of
assets) or is liquidated in part or in whole prior to the
expiration of the then-current term during the first two years
of the Initial Term of this Agreement, the parties acknowledge
and agree that the Company shall be entitled to terminate this
Agreement; provided, however, that the liquidated damages
provision set forth above shall be applicable in those
instances in which BISYS is not retained by the other party to
such business reorganization or any successor entity to
provide administration services consistent with this
Agreement. The one-time cash payment referenced above shall be
due and payable on the day prior to the first day in which
BISYS is replaced.
The parties further acknowledge and agree that, in the event
BISYS is replaced, as set forth above, (i) a determination of
actual damages incurred by BISYS would be extremely difficult,
and (ii) the liquidated damages provision contained herein is
intended to adequately compensate BISYS for damages incurred
and is not intended to constitute any form of penalty.
A-2
<PAGE> 12
SCHEDULE B
TO THE ADMINISTRATION AGREEMENT
DATED AS OF AUGUST 1, 1999
BETWEEN
M.S.B. FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
DETAILED SERVICE LISTING
ADMINISTRATION
1. Maintain and manage annual regulatory filing calendar.
2. Manage the process of printing and distributing prospectuses and prospectus
supplements. This includes, but is not limited to, decisions regarding
quantities and layout, price negotiation, invoice control and management of
the mailing process.
3. Manage the process of printing and distributing proxy materials. This
includes, but is not limited to, decisions regarding quantities,
compilation of shareholder data, price negotiation and management of the
mailing process.
4. Prepare and file Form N24-F2.
5. Obtain tax identification numbers from the IRS for each Fund portfolio.
6. Assist Fund in obtaining Fund ratings from NRSROs.
7. Obtain Fund CUSIPs.
8. Assist in the completion of trustee/officer questionnaires.
9. Assist the Fund in the preparation of appropriate documentation and records
relating to the contribution of seed money capital.
10. Maintain books and records on behalf of the Fund, as agreed upon by the
parties.
11. Make available persons to serve as officers of the Fund.
COMPLIANCE
1. Review monthly compliance reports that are prepared by the investment
adviser(s).
2. Perform independent monthly portfolio compliance testing.
3. Prepare quarterly tax compliance checklist for use by investment
adviser(s).
4. Notify appropriate Fund officers of mark-to-market issues pursuant to
Board-approved procedures.
5. Provide appropriate assistance with respect to SEC inspections including
(i) rendering advice regarding proposed responses (ii) compiling data and
other information in response to SEC requests for information and (iii)
communicating with SEC staff members, as necessary.
B-1
<PAGE> 13
6. Provide appropriate assistance with respect to audits conducted by the
Fund's independent accountants including (i) compiling data and other
information and (ii) communicating with independent accountants, as
necessary.
7. Consult with and advise, on a proactive basis, Fund portfolio managers with
respect to compliance matters.
8. Prepare quarterly brokerage allocation compliance checklist and supporting
documentation for use by investment adviser(s).
9. Provide on-site compliance training for investment advisory personnel, as
requested.
10. Preparation of Fund-specific compliance manual.
TAX AND FINANCIAL SERVICES
1. Prepare semi-annual/annual financial statements.
2. Prepare and file Form N-SAR
3. Calculate/distribute all standard performance information
4. Prepare annual Fund expense budget and monthly accrual analyses
5. Validate/approve Fund expenses to be paid
6. Register Fund portfolios with NASDAQ
7. Prepare financial materials for Board books.
8. Calculate declaration of income/capital gain distributions in compliance
with income/excise tax distribution requirements.
9. Review all dividend declarations to ensure that such distributions are not
"preferential" under the Internal Revenue Code.
10. Review and file federal and state income tax returns and federal excise tax
returns within statutory deadlines.
11. Prepare/distribute year-end shareholder tax information letters and Forms
1099-MISC for trustee fees/vendor payments within 30 days of calendar
year-end.
12. Provide on-site compliance/consulting for portfolio managers focused on the
impact of changes in tax laws and managing a tax-efficient mutual fund.
13. Provide on-site consulting services for conversions.
14. Provide expense budgeting consulting to review expense ratios/fee waivers.
15. Leverage BISYS' relationships with all "Big 5" accounting firms for
clients' benefit.
16. Produce and coordinate the printing and distribution of semi-annual/annual
reports.
17. Calculate Funds performance information.
BLUE SKY
1. Qualify the Fund and its shares with appropriate state blue sky authorities
upon client authorization.
2. Amend and renew sales permits as required.
3. Monitor the sales of shares in individual states on a daily basis upon
receipt of sales information and, when required, report sales to
appropriate states.
B-2
<PAGE> 14
4. Maintain Fund blue sky filing calendars.
5. Address all blue sky audit and examination issues.
6. Conduct blue sky fee analysis, upon request.
7. Produce checks required for state filing fees.
LEGAL SERVICES
GENERAL
-------
1. Maintain files of registration statements, Fund contracts, Fund proxies and
other Fund legal documents.
2. Provide legal consultation with respect to product development issues.
3. Provide assistance concerning matters pertaining to Federal securities
laws, bank regulatory issues, tax-related issues and ERISA issues.
4. Provide information concerning current legal and regulatory developments.
5. Provide comments, as appropriate, concerning regulatory agency proposals.
6. Maintain appropriate insurance coverage on behalf of the Fund in the form
of (i) a Directors & Officers/Errors & Omissions professional liability and
(ii) a Fidelity Bond.
7. Prepare memoranda and other correspondence that outlines the terms and
conditions of the insurance policies described in item 6 above.
BOARD MEETING MATTERS
---------------------
1. Maintain calendar and files for all Board meetings, including the
maintenance of Fund minute books and corporate records (e.g., Articles of
Incorporation/Declaration of Trust, Bylaws).
2. Provide appropriate personnel to attend Board meetings.
3. Produce and distribute Board books.
4. Prepare relevant sections of Board materials.
5. Record minutes of Board meetings. (Counsel to the Fund will prepare agendas
and resolutions.)
REGISTRATION STATEMENTS
-----------------------
1. Manage the process of updating the registration statement by (i) reviewing
or recommending proposed disclosure changes, (ii) compiling data for
purposes of updating information, (iii) receiving disclosure comments and
communicating them to counsel to the Fund and to the financial printer and
(iv) overseeing the printing process and approving revisions that are made
by the financial printer. (Counsel to the Fund will draft and file the
registration statement.)
2. Prepare periodic supplements to Fund prospectuses or, if the parties agree,
review such supplements that are prepared by counsel to the Fund.
PROXY MATERIALS
---------------
1. Review proxy statements that are prepared by counsel to the Fund.
B-3
<PAGE> 1
EXHIBIT (h)(2)
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 9th day of August, 1999, by and
between M.S.B. FUND, INC. (the "Company"), a New York corporation having its
principal place of business at 230 West Monroe Street, Chicago, Illinois 60606
and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain services for
the current investment portfolio of the Company and any additional investment
portfolios that may hereafter be created (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
BISYS shall perform for the Company the transfer agent services
set forth in Schedule A hereto. BISYS also agrees to perform for the Company
such additional services that the Company may from time to time reasonably
request; provided, however, that, to the extent that the performance of any of
such other services requires BISYS to incur material additional costs, and BISYS
notifies the Company thereof promptly after such request, such services shall be
provided in exchange for such additional compensation that is agreed upon by the
parties.
BISYS agrees to perform the services described herein in
accordance with all applicable laws, rules and regulations (including, where
applicable, Generally Acceptable Accounting Principles) and in accordance with
any reasonable instructions of the Company and the Company's Certificate of
Incorporation, Bylaws, Prospectus and Statement of Additional Information.
BISYS may, with the prior written consent of the Company,
appoint in writing other parties qualified to perform transfer agency services
reasonably acceptable to the Company (individually, a "Sub-transfer Agent") to
carry out some or all of its responsibilities under this Agreement with respect
to a Fund; provided, however, that the Sub-transfer Agent shall be the agent of
BISYS and not the agent of the Company or such Fund, and that BISYS shall be
fully responsible for the acts of such Sub-transfer Agent as if such acts were
its own and shall not be relieved of any of its responsibilities hereunder by
the appointment of such Sub-transfer Agent.
<PAGE> 2
BISYS shall provide on a timely basis to the Company's
investment adviser, administrator, accounting agent, distributor and custodian
and other persons providing services to the Company such information as such
persons may reasonably request in connection with the performance of their
respective duties and obligations with respect to the Company. BISYS will report
to the Board of Directors of the Company at each meeting of the Board of
Directors and will keep the Board of Directors informed of material developments
affecting the Company.
BISYS will comply with any performance standards that may be
agreed to by BISYS and the Company from time to time.
2. Fees.
The Company shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in
the Omnibus Fee Agreement between the Company and BISYS dated as of August 1,
1999 (the "Fee Agreement"). Fees for any additional services to be provided by
BISYS pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
3. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 2
hereof, the Company agrees to reimburse BISYS for BISYS' out-of-pocket expenses
in providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Company and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by
BISYS in communication with the Company, the Company's
investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be
provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other forms of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) Sales taxes paid on behalf of the Company;
2
<PAGE> 3
(f) Expenses associated with the tracking of "as-of" trades;
(g) All systems-related expenses associated with the provision
of special reports and services pursuant to Schedule B
attached hereto; and
(h) Any expenses BISYS shall incur at the written direction of
an officer of the Company thereunto duly authorized.
4. Effective Date.
This Agreement shall become effective as of the date first
written above (the "Effective Date").
5. Term.
This Agreement shall continue in effect unless earlier
terminated by either party hereto as provided hereunder, until August 8, 2004
(the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one-year
periods ("Rollover Periods"). This Agreement may be terminated without penalty
(i) by provision of 90 days advance written notice of nonrenewal prior to the
end of the Initial Term or any Rollover Period, as the case may be, (ii) by
mutual agreement of the parties or (iii) for "cause," as defined below, upon the
provision of 90 days advance written notice by the party alleging cause.
Notwithstanding the foregoing, after August 8, 2001, either party may terminate
this Agreement, at any time and without penalty, upon the provision of 90 days
advance written notice to the other party.
For purposes of this Agreement, "cause" shall mean (a) a
material breach of this Agreement that has not been remedied for thirty (30)
days following written notice of such breach from the non-breaching party; (b) a
series of negligent acts or omissions or other breaches of this Agreement which,
in the aggregate, constitutes, in the reasonable judgment of the Company's
Directors, a serious failure to perform satisfactorily BISYS's obligations
hereunder; (c) a service standard deficiency (as defined by the parties in the
service standards that are agreed to by BISYS and the Company from time to
time); (d) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; or (e) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading, answer,
consent or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors.
After such termination, for so long as BISYS, with the written
consent of the Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and
3
<PAGE> 4
effect. Fees and out-of-pocket expenses incurred by BISYS but unpaid by the
Company upon such termination shall be immediately due and payable upon and
notwithstanding such termination. BISYS shall be entitled to collect from the
Company, in addition to the fees and disbursements provided by Sections 2 and 3
hereof, the amount of all of BISYS' cash disbursements in connection with BISYS'
activities in effecting such termination, including without limitation, the
delivery to the Company and/or its distributor or investment adviser and/or
other parties, of the Company's property, records, instruments and documents.
If, for any reason other than nonrenewal, mutual agreement of
the parties or "cause," as defined above, during the first two years of the
Initial Term of this Agreement, BISYS is replaced as transfer agent, then the
Company shall make a one-time cash payment, in consideration of the fee
structure and services to be provided under this Agreement, and not as a
penalty, to BISYS equal to the balance due BISYS for the remainder of such
two-year period assuming for purposes of calculation of the payment that such
balance shall be based upon the average number of Company shareholder accounts
for the twelve months prior to the date BISYS is replaced.
In the event the Company is merged into another legal entity in
part or in whole pursuant to any form of business reorganization (including
without limitation a purchase of assets) or is liquidated in part or in whole
prior to the expiration of the first two years of the Initial Term of this
Agreement, the parties acknowledge and agree that the Company shall be entitled
to terminate this Agreement; provided, however, that the liquidated damages
provision set forth above shall be applicable in those instances in which BISYS
is not retained by the other party to such business reorganization or any
successor entity to provide transfer agency services consistent with this
Agreement. The one-time cash payment referenced above shall be due and payable
on the day prior to the first day in which BISYS is replaced.
The parties further acknowledge and agree that, in the event
BISYS is replaced as set forth above, (i) a determination of actual damages
incurred by BISYS would be extremely difficult, and (ii) the liquidated damages
provision contained herein is intended to adequately compensate BISYS for
damages incurred and is not intended to constitute any form of penalty.
In the event that either party gives notice of the termination
of this Agreement as provided in this Section, BISYS will cooperate and use all
reasonable efforts to assist with the conversion of the data and records
maintained by it hereunder to, and the assumption of the services provided by it
hereunder by, a replacement provider of transfer agency services.
6. Uncontrollable Events.
BISYS shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment and shall, at no
additional expense to the Company, take reasonable steps to minimize service
interruptions.
4
<PAGE> 5
BISYS assumes no responsibility hereunder, and shall not be
liable for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control; provided that such damage, loss, delay
or other loss is not caused by BISYS' own willful misfeasance, bad faith,
negligence or reckless disregard of its obligations under, or other
noncompliance with this Agreement.
7. Legal Advice.
BISYS shall notify the Company at any time BISYS believes that
it is in need of the advice of counsel (other than counsel in the regular employ
of BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Company, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing and BISYS shall in no event be liable to the Company or
any Fund or any shareholder or beneficial owner of the Company for any action
reasonably taken pursuant to such advice.
8. Instructions.
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
BISYS shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by BISYS to be genuine and to have been properly
made, signed or authorized by an officer or other authorized agent of the
Company (other than BISYS or any of its affiliates or an officer of the Company
that is an officer or employee of BISYS or any of its affiliates), or by the
shareholder or shareholder's agent, as the case may be, and shall be entitled to
receive as conclusive proof of any fact or matter required to be ascertained by
it hereunder a certificate signed by an officer of the Company (other than an
officer of the Company that is an officer or employee of BISYS or any of its
affiliates) or any other person authorized by the Company's Board of Directors
(hereafter referred to as the "Directors") or by the shareholder or
shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS will comply
with the terms of the Prospectuses and the Statement of Additional Information
of the Company to the extent such terms address the manner in which the services
described herein are performed unless BISYS receives written instructions to the
contrary in a timely manner from the Company.
9. Standard of Care; Reliance on Records and Instructions;
Indemnification.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other
5
<PAGE> 6
expenses of every nature and character arising out of or in any way relating to
BISYS' actions taken or nonactions with respect to the performance of services
under this Agreement or based, if applicable, upon reasonable reliance on
information, records, instructions or requests given or made to BISYS by the
Company, the investment adviser and on any records provided by any fund
accountant (other than BISYS) or custodian thereof; provided, however, that
BISYS shall not be protected in relying on any information, records,
instructions or requests given or made to or prepared by BISYS or any affiliate
of BISYS or any officer of the Company that is an officer or employee of BISYS
or any affiliate of BISYS; and provided, further, that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Company written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
Notwithstanding the foregoing, BISYS agrees to indemnify and
hold harmless the Company, its employees, agents, directors, officers and
nominees from and against any and all actions, suits, demands and claims,
whether groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses of every nature and character arising out of or in any way relating to
BISYS's bad faith, willful malfeasance or misfeasance, negligence, or reckless
disregard by it of its obligations and duties with respect to the performance of
services under this Agreement.
The indemnifying party shall be entitled to participate at its
own expense or, if it acknowledges its responsibility to indemnify the other
party, it may elect to assume the defense of any suit brought to enforce any
claims subject to this indemnity provision. If the indemnifying party elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the indemnifying party and satisfactory to the indemnified party,
whose approval shall not be unreasonably withheld. In the event that the
indemnifying party elects to assume the defense of any suit and retain counsel,
the indemnified party shall bear the fees and expenses of any additional counsel
retained by it. If the indemnifying party does not elect to assume the defense
of a suit, it will reimburse the indemnified party for the reasonable fees and
expenses of any counsel retained by the indemnified party.
10. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Company all books
and records which the Company or BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended (the "1940 Act"), relating to the maintenance of books and
records in connection with the services to be provided hereunder. BISYS further
agrees that all such books and records shall be the property of the Company and
to make such books and records available for inspection by the Company or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Company and its shareholders, except when requested to divulge
such information by duly-constituted authorities
6
<PAGE> 7
or court process, or requested by a shareholder or shareholder's agent with
respect to information concerning an account as to which such shareholder has
either a legal or beneficial interest or when requested by the Company, the
shareholder, or shareholder's agent, or the dealer of record as to such account.
BISYS will promptly notify the Company of any such requests by duly constituted
authorities or court process.
11. Reports.
BISYS will furnish to the Company and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Company in writing,
such reports at such times as are prescribed in Schedule B attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
B. The Company agrees to examine each such report or copy promptly and will
report or cause to be reported any errors or discrepancies therein of which the
Company is aware.
12. Rights of Ownership.
All computer programs and procedures developed to perform
services required to be provided by BISYS under this Agreement are the property
of BISYS. All records and other data except such computer programs and
procedures are the exclusive property of the Company and all such other records
and data will be furnished to the Company in appropriate form as soon as
practicable after termination of this Agreement for any reason.
13. Return of Records.
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Company, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Company unless the Company authorizes in writing the destruction of such
records and documents.
14. Bank Accounts.
The Company and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Company, as are
necessary in order that BISYS may perform the services required to be performed
hereunder. To the extent that the performance of such services shall require
BISYS directly to disburse amounts for payment of dividends, redemption proceeds
or other purposes, the Company and Funds shall provide such bank or banks with
all instructions and authorizations necessary for BISYS to effect such
disbursements.
7
<PAGE> 8
15. Representations of the Company.
The Company certifies to BISYS that: (a) by virtue of its
Certificate of Incorporation, shares of each Fund which are redeemed by the
Company may be sold by the Company from its treasury, and (b) this Agreement has
been duly authorized by the Company and, when executed and delivered by the
Company, will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
16. Representations of BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and
shall continue to be in, substantial compliance with all provisions of law,
including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of its duties under
this Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Company and BISYS' records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
BISYS agrees to perform comprehensive tests on the systems it
utilizes to provide the services hereunder to identify any operational issues
caused by the century change. BISYS agrees to use all commercially reasonable
efforts to implement by December 31, 1999, all necessary updates and changes to
such systems, if any, to accommodate the turn of the century. BISYS agrees to
provide to the Company monthly updates on the status of its Year 2000 readiness
project and to make its personnel reasonably available to address any questions.
In particular and, without limiting the foregoing, BISYS shall notify the
Company of any circumstances known to BISYS which are likely to cause BISYS's
systems to be year 2000 non-compliant and which would likely have an adverse
effect on the Funds.
In the event that the Company reasonably determines that any of
the systems BISYS utilizes to perform services hereunder will not be Year 2000
compliant and that such lack of compliance will have an adverse effect on the
Company, the Company shall provide written notice to BISYS describing, in
reasonable detail, any defect or problem relating to such system(s) promptly
upon becoming aware of any such defect or problem. BISYS agrees to use all
commercially reasonable efforts to cure any defect or deficiency that relates to
the turn of the century in any system that BISYS utilizes to provide services
hereunder. This paragraph does not alter the obligations of BISYS under the
preceding paragraph.
17. Insurance.
BISYS shall notify the Company should its insurance coverage
with respect to professional liability or errors and omissions coverage be
canceled or reduced. Such notification
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<PAGE> 9
shall include the date of change and the reasons therefor. BISYS shall notify
the Company of any material claims against it with respect to services performed
under this Agreement, whether or not they may be covered by insurance, and shall
notify the Company from time to time as may be appropriate of the total
outstanding claims made by BISYS under its insurance coverage.
18. Information to be Furnished by the Company and Funds.
The Company has furnished to BISYS the following:
(a) Copies of the Certificate of Incorporation of the Company
and of any amendments thereto, certified by the proper
official of the state in which such Certificate has been
filed.
(b) Copies of the following documents:
1. The Company's Bylaws and any amendments thereto;
2. Certified copies of resolutions of the Directors
covering the following matters:
A. Approval of this Agreement and authorization
of a specified officer of the Company to
execute and deliver this Agreement and
authorization for specified officers of the
Company to instruct BISYS hereunder; and
B. Authorization of BISYS to act as Transfer
Agent for the Company on behalf of the Funds.
(c) A list of all officers of the Company, together with
specimen signatures of those officers, who are authorized
to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Company):
1. Prospectuses and Statement of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Company or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest or
common stock of the Company authorized, issued, and
outstanding as of the Effective Date of BISYS' appointment
as Transfer Agent (or as of the date on which BISYS'
9
<PAGE> 10
services are commenced, whichever is the later date) and
as to receipt of full consideration by the Company for all
shares outstanding, such statement to be certified by the
Treasurer of the Company.
19. Information Furnished by BISYS.
BISYS has furnished to the Company the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the
following matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement;
2. Authorization of BISYS to act as Transfer Agent for
the Company.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed
with the Commission pursuant to Rule 17Ad-13 under the
Exchange Act.
20. Amendments to Documents.
The Company shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Company
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Company which might have the effect of changing
the procedures employed by BISYS in providing the services agreed to hereunder
or which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Company pursuant to Sections 18
and 20 of this Agreement and the Company hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Company first obtains
BISYS' written consent to and approval of such amendments or changes.
10
<PAGE> 11
22. Compliance with Law.
Except for the obligations of BISYS set forth in Sections 1, 10
and 11, hereof, BISYS bears no responsibility under this Agreement for the
preparation, contents, and distribution of each prospectus of the Company as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended (the "1933 Act"), the 1940 Act, and any other laws, rules and
regulations of governmental authorities having jurisdiction. BISYS shall have no
obligation to take cognizance of any laws relating to the sale of the Company's
shares. The Company represents and warrants that no shares of the Company will
be offered to the public until the Company's registration statement under the
1933 Act and the 1940 Act has been declared or becomes effective.
23. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice at the following address: if to the Company at 230 West Monroe
Street, Chicago, Illinois 60606; if to BISYS at 3435 Stelzer Road, Columbus,
Ohio 43219; or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
24. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns. Any assignment not
in compliance with this Agreement shall be void.
26. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
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<PAGE> 12
27. Instructions, Approval or Consent by the Company; Imputation.
Any reference herein to any instructions, approval or consent of the
Company shall not include any instructions, approval or consent given by any
officer of the Company that is an officer, employee or agent of BISYS or any
affiliate of BISYS, unless specifically authorized by the Board of Directors of
the Company. No information known to any such officer of the Company shall be
imputed to the Company for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
M.S.B. FUND, INC.
By: /s/ M.S.B. Fund, Inc.
----------------------------------------
Title: Vice President
-------------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ BISYS Fund Services Ohio, Inc.
----------------------------------------
Title: President
-------------------------------------
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<PAGE> 13
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
DATED AS OF AUGUST 9, 1999
BETWEEN
M.S.B. FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
A-1
<PAGE> 14
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the
Company.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE> 15
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
DATED AS OF AUGUST 9, 1999
BETWEEN
M.S.B. FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
8. Such special reports and additional information that the parties may
agree upon, from time to time.
B-1
<PAGE> 1
EXHIBIT (h)(3)
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1999, by and between
M.S.B. FUND, INC. (the "Company"), a New York corporation having its principal
place of business at 230 West Monroe Street, Chicago, Illinois 60606 and BISYS
FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its principal
place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain fund accounting
services for the current investment portfolio of the Company, and any additional
investment portfolio that may hereafter be created (individually referred to
herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
BISYS agrees to perform the services described herein in accordance
with all applicable laws, rules and regulations (including, where applicable,
Generally Acceptable Accounting Principles), and in accordance with any
reasonable instructions of the Company and the Company's Certificate of
Incorporation, Bylaws, Prospectus and Statement of Additional Information.
(a) Maintenance of Books and Records. BISYS will keep and maintain
the following books and records of each Fund pursuant to Rule
31a-1 under the Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record
in detail of all purchases and sales of
securities, all receipts and disbursements
of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income
and expense accounts, including interest
accrued and interest received, as required
by subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection
(b)(2) (ii) and (iii) of the Rule; and
<PAGE> 2
(iv) A monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition to the
maintenance of the books and records specified above, BISYS shall
perform the following accounting services daily for each Fund:
(i) Calculate the net asset value per share
utilizing prices obtained from the
sources described in subsection 1(b)(ii)
below;
(ii) Obtain security prices from independent
pricing services, or if such quotes are
unavailable, then obtain such prices from
each Fund's investment adviser or its
designee, as approved by the Company's Board
of Directors (hereafter referred to as
"Directors");
(iii) Verify and reconcile with the Funds'
custodian all daily trade activity;
(iv) Compute, as appropriate, each Fund's net
income and capital gains, dividend payables,
dividend factors, 7-day yields, 7-day
effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation
and dividend factor (if any) for each Fund
prior to release to shareholders, check and
confirm the net asset values and dividend
factors for reasonableness and deviations,
and distribute net asset values and yields
to NASDAQ;
(vi) Report to the Company the daily market
pricing of securities in any money market
Funds, with the comparison to the amortized
cost basis;
(vii) Determine unrealized appreciation and
depreciation on securities held in variable
net asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than
face value, if requested by the Company;
(ix) Update fund accounting system to reflect
rate changes, as received from a Fund's
investment adviser, on variable interest
rate instruments;
(x) Post Fund transactions to appropriate
categories;
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<PAGE> 3
(xi) Accrue expenses of each Fund according to
instructions received from the Company's
Administrator;
(xii) Determine the outstanding receivables and
payables for all (1) security trades,
(2) Fund share transactions and
(3) income and expense accounts;
(xiii) Provide accounting reports in connection
with the Company's regular annual audit and
other audits and examinations by regulatory
agencies; and
(xiv) Provide such periodic reports as the parties
shall agree upon, as set forth in a separate
schedule.
(c) Special Reports and Services.
(i) BISYS shall provide additional special
reports and other similar services upon the
request of the Company or the Company's
investment adviser.
(ii) To the extent that the provision of any such
reports or services requires BISYS to incur
material additional costs and BISYS notifies
the Company thereof promptly after such
requests, such reports or services shall be
provided in exchange for such additional
compensation that is agreed upon by the
parties.
(d) Additional Accounting Services. BISYS shall also
perform the following additional accounting
services for each Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements
described below, upon request of the
Company. The download will include the
following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information (including
financial statements and schedules and
pertinent statistical information) for the
following:
3
<PAGE> 4
(A) federal and state income tax returns
and federal excise tax returns;
(B) the Company's semi-annual reports
with the Securities and Exchange
Commission ("SEC") on Form N-SAR;
(C) the Company's annual, semi-annual
and quarterly (if any) shareholder
reports;
(D) registration statements on Form N-1A
and other filings relating to the
registration or sale of shares;
(E) the Administrator's monitoring of
the Company's status as a regulated
investment company under Subchapter
M of the Internal Revenue Code, as
amended;
(F) annual audit by the Company's
auditors; and
(G) examinations performed by the SEC.
BISYS shall provide on a timely basis to the Company's investment
adviser, administrator, transfer agent, distributor and custodian and other
persons providing services to the Company such information as such persons may
reasonably request in connection with the performance of their respective duties
and obligations with respect to the Company. BISYS will report to the Board of
Directors of the Company at each meeting of the Board of Directors and will keep
the Board of Directors informed of material developments affecting the Company.
BISYS will comply with any performance standards that may be agreed to
by BISYS and the Company from time to time.
2. Subcontracting.
BISYS may, at its expense, with the prior written consent of the
Company, subcontract with any entity or person concerning the provision of the
services contemplated hereunder; provided, however, that BISYS shall not be
relieved of any of its obligations under this Agreement by the appointment of
such subcontractor and provided further, that BISYS shall be responsible, to the
extent provided in Section 7 hereof, for all acts of such subcontractor as if
such acts were its own; and provided, further, that no such services shall be
subcontracted without the prior written consent of the Company.
3. Compensation.
The Company shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in the
Omnibus Fee Agreement between the Company and BISYS dated as of August 1, 1999
(the "Fee Agreement").
4
<PAGE> 5
4. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 3 hereof,
the Company agrees to reimburse BISYS for its out-of-pocket expenses in
providing services hereunder, including without limitation the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Company;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Company, the Company's investment
adviser or custodian, dealers or others as required for BISYS
to perform the services to be provided hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other materials;
(e) All systems-related expenses associated with the provision of special
reports and services pursuant to Section 1(c) herein;
(f) Any expenses BISYS shall incur at the written direction of an officer
of the Company thereunto duly authorized; and
(g) Any additional expenses reasonably incurred by BISYS in the
performance of its duties and obligations under this Agreement.
5. Effective Date.
This Agreement shall become effective with respect to a Fund as of the
date first written above (the "Effective Date").
6. Term.
This Agreement shall continue in effect with respect to a Fund, unless
earlier terminated by either party hereto as provided hereunder, until July 31,
2004 (the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one-year
periods ("Rollover Periods"). This Agreement may be terminated without penalty
(i) by provision of 90 days advance written
5
<PAGE> 6
notice of nonrenewal prior to the end of the Initial Term or any Rollover
Period, as the case may be, (ii) by mutual agreement of the parties or (iii) for
"cause," as defined below, upon the provision of 90 days advance written notice
by the party alleging cause. Notwithstanding the foregoing, after July 31, 2001,
either party may terminate this Agreement, at any time and without penalty, upon
the provision of 90 days advance written notice to the other party.
For purposes of this Agreement, "cause" shall mean (a) a material
breach of this Agreement that has not been remedied for thirty (30) days
following written notice of such breach from the non-breaching party; (b) a
series of negligent acts or omissions or other breaches of this Agreement which,
in the aggregate, constitute, in the reasonable judgment of the Company's
directors, a serious failure to perform satisfactorily BISYS's obligations
hereunder; (c) a service standard deficiency (as defined by the parties in the
service standards that are agreed to by BISYS and the Company from time to
time); (d) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated had been found guilty of criminal
or unethical behavior in the conduct of its business; or (e) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading, answer,
consent or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors.
After such termination for so long as BISYS, with the written consent
of the Company, in fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit hereto, the provisions
of this Agreement, including without limitation the provisions dealing with
indemnification, shall continue in full force and effect. Compensation due BISYS
and unpaid by the Company upon such termination shall be immediately due and
payable upon and notwithstanding such termination. BISYS shall be entitled to
collect from the Company, in addition to the compensation described under
Sections 3 and 4 hereof, the amount of all of BISYS's cash disbursements for
services in connection with BISYS's activities in effecting such termination,
including without limitation, the delivery to the Company and/or its designees
of the Company's property, records, instruments and documents.
If, for any reason other than nonrenewal, mutual agreement of the
parties or "cause," as defined above, during the first two years of the Initial
Term of this Agreement, BISYS is replaced as fund accountant, then the Company
shall make a one-time cash payment, in consideration of the fee structure and
services to be provided under this Agreement, and not as a penalty, to BISYS
equal to the balance due BISYS for the remainder of such two-year period
assuming for purposes of calculation of the payment that such balance shall be
based upon the average amount of the Company's assets for the twelve months
prior to the date BISYS is replaced..
In the event the Company is merged into another legal entity in part
or in whole pursuant to any form of business reorganization (including without
limitation a purchase of assets) or is liquidated in part or in whole prior to
the expiration of the first two years of the Initial Term of this Agreement, the
parties acknowledge and agree that the Company shall be entitled to terminate
6
<PAGE> 7
this Agreement; provided, however, that the liquidated damages provision set
forth above shall be applicable in those instances in which BISYS is not
retained by the other party to such business reorganization or any successor
entity to provide fund accounting services consistent with this Agreement. The
one-time cash payment referenced above shall be due and payable on the day prior
to the first day in which BISYS is replaced or a third party is added.
The parties further acknowledge and agree that, in the event BISYS is
replaced, as set forth above, (i) a determination of actual damages incurred by
BISYS would be extremely difficult, and (ii) the liquidated damages provision
contained herein is intended to adequately compensate BISYS for damages incurred
and is not intended to constitute any form of penalty.
In the event either party gives notice of the termination of this
Agreement as provided in this Section, BISYS will cooperate and use all
reasonable efforts to assist with the conversation of the data and records
maintained by it hereunder to, and the assumption of the services provided by it
hereunder by, a replacement provider of fund accounting services.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
BISYS shall use its best efforts to insure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS's actions taken or nonactions with
respect to the performance of services under this Agreement with respect to such
Fund or based, if applicable, upon reasonable reliance on information, records,
instructions or requests with respect to such Fund given or made to BISYS by a
duly authorized representative of the Company; provided, however, that BISYS
shall not be protected in relying on any information, records, instructions or
requests given or made to or prepared by BISYS or any affiliate of BISYS or any
officer of the Company that is an officer or employee of BISYS or any affiliate
of BISYS; and provided, further, that this indemnification shall not apply to
actions or omissions of BISYS in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against it which
may be the subject of this indemnification, BISYS shall give the Company written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of BISYS.
Notwithstanding the foregoing, BISYS agrees to indemnify and hold
harmless the Company, its employees, agents, directors, officers and nominees
from and against any and all actions, suits, demands and claims, whether
groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses of every
7
<PAGE> 8
nature and character arising out of or in any way relating to BISYS's bad faith,
willful malfeasance or misfeasance, negligence, or reckless disregard by it of
its obligations and duties with respect to the performance of services under
this Agreement.
The indemnifying party shall be entitled to participate at its own expense
or, if it acknowledges its responsibility to indemnify the other party, it may
elect to assume the defense of any suit brought to enforce any claims subject to
this indemnity provision. If the indemnifying party elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
indemnifying party and satisfactory to the indemnified party, whose approval
shall not be unreasonably withheld. In the event that the indemnifying party
elects to assume the defense of any suit and retain counsel, the indemnified
party shall bear the fees and expenses of any additional counsel retained by it.
If the indemnifying party does not elect to assume the defense of a suit, it
will reimburse the indemnified party for the reasonable fees and expenses of any
counsel retained by the indemnified party.
8. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company and BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Company and to make such
books and records available for inspection by the Company or by the Securities
and Exchange Commission at reasonable times and otherwise to keep confidential
all books and records and other information relative to the Company and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process. BISYS will promptly notify the
Company of any such request.
9. Uncontrollable Events.
BISYS shall enter into and shall maintain in effect with appropriate
parties one or more agreements making reasonable provisions for emergency use of
electronic data processing equipment and shall, at no additional expense to the
Company, take reasonable steps to minimize service interruptions. BISYS assumes
no responsibility hereunder, and shall not be liable, for any damage, loss of
data, delay or any other loss whatsoever caused by events beyond its reasonable
control; provided that such damage, delay or other loss is not caused by BISYS'
own willful misfeasance, bad faith, negligence reckless disregard of its
obligations under, or other noncompliance with this Agreement.
8
<PAGE> 9
10. Reports.
BISYS will furnish to the Company and to its properly authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Company in writing,
such reports and at such times as are prescribed pursuant to the terms and the
conditions of this Agreement to be provided or completed by BISYS, or as
subsequently agreed upon by the parties pursuant to an amendment hereto. The
Company agrees to examine each such report or copy promptly and will report or
cause to be reported any errors or discrepancies therein of which the Company is
aware.
11. Rights of Ownership.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Company and all such other records and data will be
furnished to the Company in appropriate form as soon as practicable after
termination of this Agreement for any reason.
12. Return of Records.
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain BISYS's files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Company, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Company unless the Company authorizes in writing the destruction of such
records and documents.
13. Representations of the Company.
The Company certifies to BISYS that this Agreement has been duly
authorized by the Company and, when executed and delivered by the Company, will
constitute a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. Representations of BISYS.
BISYS represents and warrants that: (1) the various procedures and
systems which BISYS has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Company and BISYS's records, data, equipment
9
<PAGE> 10
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of its obligations hereunder,
and (2) this Agreement has been duly authorized by BISYS and, when executed and
delivered by BISYS, will constitute a legal, valid and binding obligation of
BISYS, enforceable against BISYS in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
BISYS agrees to perform comprehensive tests on the systems it utilizes to
provide the services hereunder to identify any operational issues caused by the
century change. BISYS agrees to use all commercially reasonable efforts to
implement by December 31, 1999, all necessary updates and changes to such
systems, if any, to accommodate the turn of the century. BISYS agrees to provide
to the Company monthly updates on the status of its Year 2000 readiness project
and to make its personnel reasonably available to address any questions. In
particular and, without limiting the foregoing, BISYS shall notify the Company
of any circumstances known to BISYS which are likely to cause BISYS's systems to
be Year 2000 non-compliant and which would likely have an adverse effect on the
Funds.
In the event that the Company reasonably determines that any of the systems
BISYS utilizes to perform services hereunder will not be Year 2000 compliant and
that such lack of compliance will have an adverse effect on the Company, the
Company shall provide written notice to BISYS describing, in reasonable detail,
any defect or problem relating to such system(s) promptly upon becoming aware of
any such defect or problem. BISYS agrees to use all commercially reasonable
efforts to cure any defect or deficiency that relates to the turn of the century
in any system that BISYS utilizes to provide services hereunder. This paragraph
does not alter the obligations of BISYS under the preceding paragraph.
15. Insurance.
BISYS shall notify the Company should any of its insurance coverage be
canceled or reduced. Such notification shall include the date of change and the
reasons therefor. BISYS shall notify the Company of any material claims against
it with respect to services performed under this Agreement, whether or not they
may be covered by insurance, and shall notify the Company from time to time as
may be appropriate of the total outstanding claims made by BISYS under its
insurance coverage.
16. Information to be Furnished by the Company and Funds.
The Company has furnished to BISYS the following:
10
<PAGE> 11
(a) Copies of the Certificate of Incorporation of the
Company and of any amendments thereto, certified by
the proper official of the state in which such
document has been filed.
(b) Copies of the following documents:
(i) The Company's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Directors
covering the approval of this Agreement, authorization
of a specified officer of the Company to execute and
deliver this Agreement and authorization for specified
officers of the Company to instruct BISYS thereunder.
(c) A list of all the officers of the Company, together with
specimen signatures of those officers who are authorized to
instruct BISYS in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
17. Information Furnished by BISYS.
(a) BISYS has furnished to the Company the following:
(i) BISYS's Articles of Incorporation; and
(ii) BISYS's Bylaws and any amendments thereto.
(b) BISYS shall, upon request, furnish certified copies of
corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement; and
(ii) Authorization of BISYS to act as fund accountant for the
Company and to provide accounting services for the
Company.
18. Amendments to Documents.
The Company shall furnish BISYS written copies of any to, or changes
in, any of the items referred to in Section 16 hereof forthwith upon such
amendments or changes becoming effective. In addition, the Company agrees that
no amendments will be made to the Prospectuses or Statements of Additional
Information of the Company which might have the effect
11
<PAGE> 12
of changing the procedures employed by BISYS in providing the services agreed to
hereunder or which amendment might affect the duties of BISYS hereunder unless
the Company first obtains BISYS's approval of such amendments or changes.
19. Compliance with Law.
Except for the obligations of BISYS set forth in Sections 1, 2, 7, 8
and 10 hereof, BISYS bears no responsibility under this Agreement for the
preparation, contents and distribution of each prospectus of the Company as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the 1940 Act and any other laws, rules and
regulations of governmental authorities having jurisdiction. The Company
represents and warrants that no shares of the Company will be offered to the
public until the Company's registration statement under the Securities Act and
the 1940 Act has been declared or becomes effective.
20. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice at the following address: if to the Company at 230 West Monroe
Street, Chicago Illinois, 60606 if to BISYS at 3435 Stelzer Road, Columbus, Ohio
43219; or at such other address as such party may from time to time specify in
writing to the other party pursuant to this Section.
21. Headings.
Paragraph headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
22. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Any assignment not in compliance with this
Agreement shall be void.
23. Governing Law.
This Agreement shall be governed by and provisions shall be construed
in accordance with the laws of the State of Ohio.
12
<PAGE> 13
24. Instructions, Approval or Consent by the Company; Imputation.
Any reference herein to any instructions, approval or consent of the
Company shall not include any instructions, approval or consent given by any
officer of the Company that is an officer, employee or agent of BISYS or any
affiliate of BISYS, unless specifically authorized by the Board of Directors of
the Company. No information known to any such officer of the Company shall be
imputed to the Company for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed all as of the day and year first above written.
M.S.B. FUND, INC.
By: /s/ M.S.B. Fund, Inc.
--------------------------------------
Title: Vice President
-----------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ BISYS Fund Services Ohio, Inc.
-------------------------------------
Title: President
----------------------------------
13
<PAGE> 1
EXHIBIT (h)(4)
OMNIBUS FEE AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1999, by and
between M.S.B. FUND, INC. (the " Company"), a New York corporation having its
principal place of business at 230 West Monroe Street, Chicago Illinois 60606
and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company and BISYS have entered into an Administration
Agreement dated as of August 1, 1999, a Fund Accounting Agreement dated as of
August 1, 1999 and a Transfer Agency Agreement dated as of August 9, 1999,
concerning the provision of administration, fund accounting and transfer agency
services, respectively, for the current investment portfolio of the Company and
any additional investment portfolios that may hereafter be created (individually
referred to herein as a "Fund" and collectively as the "Funds"); and
WHEREAS, the parties desire to set forth the compensation payable to
BISYS by the Company under the Administration Agreement, Fund Accounting
Agreement and Transfer Agency Agreement (collectively the "Service Agreements")
in a separate written document.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. The parties have agreed that a single integrated fee shall be paid
by the Company as compensation to BISYS for such services performed under the
Service Agreements. The aggregate amount of the compensation due and payable to
BISYS for such services is set forth in Schedule A hereto. Such compensation
shall be payable during the term of the Service Agreements. In addition to the
foregoing, BISYS shall be reimbursed for certain out-of-pocket expenses, as more
fully set forth in the Service Agreements.
2. This Agreement shall be governed by, and its provisions shall be
construed in accordance with, the laws of the State of Ohio.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
fully executed as of the day and year first written above.
M.S.B. FUND, INC.
By: /s/ M.S.B. Fund, Inc.
-----------------------------------
Title: Vice President
--------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ BISYS Fund Services Ohio, Inc.
-----------------------------------
Title: President
--------------------------------
2
<PAGE> 3
SCHEDULE A
TO THE OMNIBUS FEE AGREEMENT
DATED THIS 1ST DAY OF AUGUST, 1999
BETWEEN
M.S.B. FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
FEES
1. Asset-Based Fees
The Company shall pay to BISYS on the first business day of each month,
or at such time(s) as BISYS shall request and the parties hereto shall agree, a
fee computed daily at the annual rate of:
Ten one-hundredths of one percent (.10%) of each Fund's
average daily net assets up to $200 million;
Seven and one-half one-hundredths of one percent (.075%)
of each Fund's average daily net assets in excess of $200
million up to $400 million;
Five one-hundredths of one percent (.05%) of each Fund's
average daily net assets in excess of $400 million up to
$600 million; and
Three one-hundredths of one percent (.03%) of each Fund's
average daily net assets in excess of $600 million.
2. Annual Minimum Fees
The asset-based fees described herein shall be subject to the following
per Fund annual minimum fee of $80,400.
3. Per Account Fees
BISYS shall be entitled to receive a $15.00 per account per Fund annual
processing fee. Such fee shall be subject to a monthly minimum fee of $1,500.
The per account fees will not begin to accrue until August 9, 1999.
A-1
<PAGE> 4
4. Reimbursement of Expenses
The fees set forth above shall be in addition to the payment of
out-of-pocket expenses, as provided for in the Service Agreements.
A-2
<PAGE> 1
EXHIBIT (h)(5)
[BISYS LETTERHEAD]
August 1, 1999
M.S.B. Fund, Inc.
c/o Shay Assets Management, Inc.
230 West Monroe Street, Suite 2810
Chicago, IL 60606
Re: Administration and Transfer
Agency Fee Waiver
Dear Sir or Madam:
BISYS Fund Services Ohio, Inc. ("BISYS") agrees to waive certain fees under
an Administration Agreement and under a Transfer Agency Agreement between BISYS
and the M.S.B. Fund, Inc. (the "Fund"), dated August 1, 1999, and August 9,
1999, respectively. This fee waiver arrangement is to be reviewed by BISYS and
the Fund at the end of each calendar year.
BISYS shall waive 25% of the monthly minimum fee under the Administration
Agreement. The greater of the adjusted monthly minimum fee or the corresponding
asset based fee will be accrued on a monthly basis.
BISYS shall waive 25% of the monthly minimum fee under the Transfer Agency
Agreement, inclusive of per account charges. Transaction charges, miscellaneous
fees and out-of-pocket expenses will be billed as they are incurred.
The parties acknowledges that BISYS will not be entitled to collect on or
make a claim for waived fees at any time in the future.
<PAGE> 2
Further, the parties understand that the fees waived in connection with
this Agreement do not represent a "proprietary interest", as defined in the
Internal Revenue Code.
Very truly yours,
BISYS Fund Services Ohio, Inc.
By: /s/ BISYS Fund Services Ohio, Inc.
------------------------------------------
Title: Managing Director
---------------------------------------
Acknowledged:
M.S.B. Fund, Inc.
By: /s/ M.S.B. Fund, Inc.
------------------------------------------
Title: V.P. and Secretary
---------------------------------------
<PAGE> 1
EXHIBIT (i)
Opinion and Consent of Hughes Hubbard & Reed LLP
<PAGE> 2
Hughes Hubbard & Reed LLP One Battery Park Plaza
New York, New York 10004-1482
Telephone: 212-837-6000
Facsimile: 212-422-4726
February 28, 2000
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. 42 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 document 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. 42, 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. 42 to Registration Statement No. 2-22542.
Very truly yours,
/s/ HUGHES HUBBARD & REED LLP
<PAGE> 1
EXHIBIT (j)(1)
Consent of Arthur Andersen LLP
<PAGE> 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the incorporation by
reference in this Post Effective Amendment No. 42 Form N-1A filing of M.S.B.
Fund, Inc. of our auditors' report on the financial statements of M.S.B. Fund,
Inc. dated February 10, 2000 and to all references to our Firm included in or
made a part of this Post Effective Amendment No. 42 Form N-1A.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
February 28, 2000
<PAGE> 1
3
EXHIBIT (p)
POWER OF ATTORNEY
The undersigned does hereby appoint Joseph R. Ficalora, John J. McCabe
and Mark F. Trautman, and each of them severally, his true and lawful attorneys
to execute in his name, place and stead (whether on behalf of M.S.B. Fund, Inc.
(the "Fund") or as an officer or director thereof) Post-Effective Amendment No.
42 and any and all further amendments to Registration Statement No. 2-22542 on
Form N-1A in connection with the registration of shares of the Fund and to file
the same, with any exhibits thereto, with the Securities and Exchange
Commission; each of said attorneys shall have the power to act hereunder with or
without the others.
<TABLE>
<CAPTION>
Signature Date
--------- ----
<S> <C>
/S/ MALCOLM J. DELANEY February 18 , 2000
--------------------------------------------------------------------------- -------
(Malcolm J. Delaney)
/S/ TIMOTHY A. DEMPSEY February 18 , 2000
--------------------------------------------------------------------------- -------
(Timothy A. Dempsey)
/S/ HARRY P. DOHERTY February 18 , 2000
--------------------------------------------------------------------------- -------
(Harry P. Doherty)
/S/ JOSEPH R. FICALORA February 18 , 2000
--------------------------------------------------------------------------- -------
(Joseph R. Ficalora)
/S/ DAVID FREER, JR. February 18 , 2000
--------------------------------------------------------------------------- -------
(David Freer, Jr.)
/S/ MICHAEL J. GAGLIARDI February 22 , 2000
--------------------------------------------------------------------------- -------
(Michael J. Gagliardi)
/S/ DAVID F. HOLLAND February 18 , 2000
--------------------------------------------------------------------------- -------
(David F. Holland)
/S/ WILLIAM A. McKENNA, JR. February 18 , 2000
--------------------------------------------------------------------------- -------
(William A. McKenna, Jr.)
/S/ NORMAN W. SINCLAIR February 19 , 2000
--------------------------------------------------------------------------- -------
(Norman W. Sinclair)
/S/ IAN D. SMITH February 22 , 2000
--------------------------------------------------------------------------- -------
(Ian D. Smith)
/S/ STEVEN D. PIERCE February 23 , 2000
--------------------------------------------------------------------------- --------
(Steven D. Pierce)
</TABLE>
<PAGE> 2
M.S.B FUND, INC.
Secretary's Certificate
The undersigned Edward E. Sammons, Jr., Secretary of M.S.B. Fund, Inc., a
New York corporation (the "Fund") hereby certifies that:
Attached hereto is a true and correct copy of a resolution duly adopted by
the Board of Directors of the Fund at the January 20, 2000 meeting of the Board
of Directors which was duly called and held, and at which a quorum was present
and acting throughout, which resolution has not been modified, amended or
rescinded and is in full force and effect on the date hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and delivered
this certificate this 27th day of February, 2000.
/s/ EDWARD E. SAMMONS, JR.
---------------------------------
Edward E. Sammons, Jr.
Secretary
<PAGE> 3
RESOLUTION
Adopted by the Board of Directors of M.S.B. Fund, Inc.
on January 20, 2000
RESOLVED, that each officer and director of the Fund who may be
required to execute one or more Post-Effective Amendments to the Fund's
Registration Statement on Form N-1A under the Investment Company Act of 1940
and the Securities Act of 1933 (whether on behalf of the Fund or in his
capacity as an officer or director of the Fund), be and each of them hereby is
authorized to execute and deliver a power of attorney appointing Joseph R.
Ficalora, John J. McCabe and Mark Trautman, and each of them severally, his
true and lawful attorney in fact to execute in his name, place and stead
(whether on behalf of the Fund or in his capacity as an officer or director of
the Fund) such Post-Effective Amendment to the Registration Statement, and to
file the same with the Securities and Exchange Commission, each of said
attorneys (acting with or without the others) to have full power and authority
to do and perform in the name and on behalf of each of said officers and
directors (whether on behalf of the Fund or as an officer or director thereof
or by attesting the seal of the Fund or otherwise) each and every act
whatsoever which such attorney or agent may deem necessary, appropriate or
desirable to be done in connection with such Post-Effective Amendment to the
Registration Statement as fully as any such officer or trustee might or could
do in person.
