AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1995
REGISTRATION NO. 33-67652
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 4 x
Post-Effective Amendment No. ____
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 x
(Check appropriate box or boxes.)
THE SBI FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
One SBI Plaza, School of Business & Industry
Florida A&M University, Tallahassee, Florida 32307
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (904) 561-2661
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Darrell R. Williams copy to:
SBI Capital Management and --------
Research Corporation Eric S. Robinson, Esq.
One SBI Plaza Wachtell, Lipton, Rosen & Katz
School of Business & Industry 51 West 52nd Street
Florida A&M University New York, New York 10019
Tallahassee, Florida 32307
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after this Registration Statement is declared effective.<PAGE>
Registrant is registering an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. <PAGE>
CROSS-REFERENCE SHEET
Part A of
Form N-1A Caption Page
Item 1 Cover Page Cover
Item 2 Synopsis 1
Item 3 Condensed Financial Information NA
Item 4 General Description of Registrant 5
Item 5 Management of the Fund 11
Item 5A Management's Discussion of Fund
Performance NA
Item 6 Capital Stock and Other Securities 14
Item 7 Purchase of Securities Being Offered 16
Item 8 Redemption or Repurchase 18
Item 9 Pending Legal Proceedings NA
Part B of
Form N-1A Caption Page
Item 10 Cover Page B-1
Item 11 Table of Contents B-1
Item 12 General Information and History B-2
Item 13 Investment Objectives and Policies B-2
Item 14 Management of the Fund B-4
Item 15 Control Persons and Principal
Holders of Securities B-7
Item 16 Investment Advisory and Other Services B-7
Item 17 Brokerage Allocation B-9
Item 18 Capital Stock and Other Securities B-10
Item 19 Purchase, Redemption and Pricing of
Securities Being Offered B-10
Item 20 Tax Status B-11
Item 21 Underwriters B-13
Item 22 Calculation of Performance Data B-13
Item 23 Financial Statements NA
1<PAGE>
Part C of
Form N-1A Caption Page
Item 24 Financial Statements and Exhibits C-1
Item 25 Persons Controlled by or Under
Common Control with Registrant C-1
Item 26 Number of Holders of Securities C-2
Item 27 Indemnification C-2
Item 28 Business and Other Connections
of Investment Advisor C-3
Item 29 Principal Underwriters C-4
Item 30 Location of Accounts and Records C-4
Item 31 Management Services C-4
Item 32 Undertakings C-4
2<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 15, 1995
Information contained herein is subject to completion
or amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers to
buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
such state.
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PROSPECTUS ,1995
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THE SBI FUND, INC.
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The SBI Fund, Inc. (the "Fund") consists of two
series, Pool A and Pool B. The investment objective of Pool A
is to realize capital gains and income for its shareholders by
seeking to replicate the performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"). The
investment objective of Pool B is to achieve long-term capital
appreciation by investing in a diversified portfolio of stocks
of companies expected to achieve above average earnings growth.
Realization of current income is an incidental consideration.
In addition to its investment objectives on behalf of
its shareholders, the Fund was established to provide students
of the School of Business and Industry ("SBI") of the Florida
Agricultural and Mechanical University with the opportunity to
participate in the operation of a registered investment company
under the management and supervision of investment
professionals and SBI faculty, in a manner tailored to meet the
long-term performance objectives of institutional investors
while linking the students' finance and investment education
with "real world" investment applications.
SBI Capital Management and Research Corporation, a
Florida not-for-profit corporation (the "Investment Advisor"),
is the investment advisor to the Fund. State Street Bank and
Trust Company will serve as the Fund's transfer agent and
custodian and will provide administrative services to the Fund.
Payments for investment in Pool A will not be
accepted until subscriptions are received aggregating at least
$20 million. Payments for investment in Pool B will not be
accepted until subscriptions are received aggregating at least
$1 million. See "DESCRIPTION OF THE FUND -- Structure of the
Fund" below.<PAGE>
----------------
This Prospectus sets forth concisely the information
about the Fund that you should know before investing. It
should be read and retained for future reference.
Part B (also known as the Statement of Additional
Information), dated _______, 1995, which may be revised from
time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated
herein by reference. For a free copy, contact Lamaute Capital
Inc., 8383 Wilshire Boulevard, Suite 840, Beverly Hills,
California 90211, (213) 655-5013.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.<PAGE>
TABLE OF CONTENTS
HIGHLIGHTS 1
FEE TABLES 4
DESCRIPTION OF THE FUND 5
MANAGEMENT OF THE FUND 11
SHARES OF THE FUND 14
PURCHASE OF FUND SHARES 16
REDEMPTION OF FUND SHARES 18
PERFORMANCE INFORMATION 19
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HIGHLIGHTS
INVESTMENT
OBJECTIVES
AND POLICIES: The SBI Fund, Inc. (the "Fund") is an open-
end management company which consists of
two series, each of which is diversified:
Pool A, which will attempt to replicate the
performance of the Standard & Poor's 500
Composite Stock Price Index, an index
emphasizing large-capitalization stocks;
and Pool B, which will attempt to achieve
long-term capital appreciation by investing
in a diversified portfolio of stocks of
companies expected to achieve above average
earnings growth. Companies invested in by
Pool B will generally have a market
capitalization of at least $100 million and
must have an active trading market. There
can be no assurance that the Fund will, in
fact, achieve any of these objectives.
Pool A may purchase S&P 500 Index futures
contracts for temporary investment of funds
pending investment of such funds in stocks
comprising the Index. Each Pool may borrow
money and may invest a portion of its
assets in cash, cash equivalents or money
market instruments on a temporary basis.
Pool B may invest in high grade preferred
stocks and foreign stocks.
Pages 5-10
INVESTMENT
ADVISOR: SBI Capital Management and Research
Corporation (the "Investment Advisor"), a
not-for-profit Florida corporation
established by The School of Business and
Industry ("SBI") of Florida Agricultural
and Mechanical University ("Florida A&M"),
is the Fund's investment advisor.
Pages 11-13
EDUCATIONAL
OBJECTIVES: The educational objectives of the Fund are
to provide students at SBI with the<PAGE>
opportunity to participate in the operation
of a registered investment company.
Students will assist in a variety of
capacities in the operations of the
Investment Advisor, from clerical
assignments through supporting research and
strategy analysis.
Pages 5-6, 12-13
CERTAIN
CONSIDERATIONS: Neither the Fund nor the Investment Advisor
has any operating history or record of
performance that might assist investors in
their evaluation of the Fund. The
Investment Advisor has no prior experience
in advising a mutual fund or in using
futures.
As mutual funds investing primarily in
common stocks, both Pool A and Pool B are
subject to market risk, including the
possibility that common stock prices will
decline, sometimes substantially, over
short or extended periods. The purchase of
S&P 500 Index futures by Pool A and the
authority of Pool B to purchase foreign
stocks involves certain additional risks.
Pages 8-10
FEES AND
EXPENSES: The Fund will pay the Investment Advisor a
fee of 0.10% per annum of the average net
assets of Pool A and a fee of 0.50% per
annum of the average net assets of Pool B.
In addition, the Fund will bear its
operating expenses, including brokerage and
other costs incurred in connection with
portfolio transactions, and 12b-1 fees will
be charged.
Pages 4, 13-14
DIVIDEND POLICY: All dividend income and capital gains
generated by each Pool are distributed each
year to respective shareholders of such
Pool. Dividends and distributions will be
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paid in additional shares of each
respective Pool unless the stockholder
elects in writing not less than five
business days prior to the payment date to
receive such dividends and distributions in
cash.
Page 16
TAXES: Net income and gains distributed to
shareholders in the form of additional
shares of common stock of the Fund will be
taxable income or capital gains to the same
extent as if such distributions had been
made in cash. Shareholders will be
proportionately liable for taxes on income
and gains of the Fund, except for
shareholders that are not otherwise subject
to tax on their income.
Pages 15-16
PURCHASING
SHARES: Shares of the Fund will be offered for sale
on a continuous basis through Lamaute
Capital Inc. Shares may be purchased by
mail or wire. The minimum initial
investment is $250,000; the minimum for
subsequent investments is $50,000. No
sales commissions will be charged.
Payments for investment in Pool A will not
be accepted and will be returned to the
subscriber until subscriptions aggregating
at least $20 million are received.
Payments for investment in Pool B will not
be accepted and will be returned to the
subscriber until subscriptions aggregating
at least $1 million are received.
Subscriptions to either Pool may be
withdrawn, revoked or cancelled by written
request at any time prior to the time that
such Pool reaches the minimum levels as set
forth herein.
Share certificates will not be issued.
State Street Bank and Trust Company, the
Fund's transfer agent, will maintain a
record of ownership by shareholders and
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will send transaction confirmations and
account statements to each shareholder.
Pages 10-11, 16-18
REDEEMING
SHARES: Shares may be redeemed at any time by
submitting a written redemption request to
the Transfer Agent. The share price of
each Pool is expected to fluctuate and may
at redemption be more or less than at the
time of initial purchase, resulting in a
gain or loss.
Pages 18-19
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FEE TABLES
POOL A
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Shareholder Transaction Expenses (sales
load, redemption fees, exchange fees) None
Annual Fund Operating Expenses (as a
percentage of average net assets)
Management Fees 0.10%
12b-1 Fees 0.05%
Other Expenses 0.15%
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Total Fund Operating Expenses 0.30%
Example:
1 Year 3 Years
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You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period: $3.15 $9.90
POOL B
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Shareholder Transaction Expenses (sales
load, redemption fees, exchange fees) None
Annual Fund Operating Expenses (as a
percentage of average net assets)
Management Fees 0.50%
12b-1 Fees 0.05%
Other Expenses 0.30%
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Total Fund Operating Expenses 0.85%
Example:
1 Year 3 Years
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You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period: $8.93 $27.89
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THE AMOUNTS LISTED IN THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN. WHILE THE EXAMPLE ASSUMES
A 5% ANNUAL RATE OF RETURN, THE FUND'S ACTUAL PERFORMANCE WILL
VARY AND MAY RESULT IN AN ACTUAL RETURN OF GREATER OR LESS THAN
5%.
The purpose of the Tables is to help you to understand the
various costs and expenses that investors in the Fund will
bear, directly or indirectly, which will reduce the return
generated by the Fund on an annual basis. The expenses listed
in the Tables as "Other Expenses" are based on estimates for
the current fiscal year. See "MANAGEMENT OF THE FUND --
Expenses" below.
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DESCRIPTION OF THE FUND
The SBI Fund, Inc. (the "Fund") is a diversified,
open-end management company, incorporated in 1993 under the
laws of the State of Maryland. The Fund consists of two
series, each of which is diversified: Pool A, which will
attempt to replicate the performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"); and Pool
B, which will use more active investment portfolio strategies,
subject to investment guidelines and certain restrictions and
limitations. See "-- Investment Policies" and "-- Certain
Fundamental Policies."
INVESTMENT OBJECTIVES AND STRATEGIES
The investment objective of Pool A is to realize
capital gains and income for its shareholders by seeking to
replicate the performance of the S&P 500 Index. The investment
objective of Pool B is to achieve long-term capital
appreciation by investing in a diversified portfolio of stocks
of companies expected to achieve above average earnings growth.
Realization of current income is an incidental consideration.
There can be no assurance that the Fund will, in fact, achieve
any of these objectives.
Pool A will seek to replicate the performance of the
S&P 500 Index and thus will generally purchase and sell only
common stocks included in the S&P 500 Index and only in
connection with the addition or withdrawal of capital to or
from Pool A or for purposes of maintaining the portfolio
composition of the index. On a temporary basis, Pool A may
invest in cash, cash equivalents or money market instruments
and may purchase futures on the S&P 500 Index. See "--
Investment Policies." The Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation.
Pool B will be managed on an active basis by the
Investment Advisor, and will invest in common stocks and
preferred stocks. See "MANAGEMENT OF THE FUND -- The
Investment Advisor." The investment strategy used in Pool B
will generally focus on long-term capital appreciation with
current income as an incidental consideration. Companies and
industries will be evaluated for investment based on revenue
and earnings growth, balance sheet quality, new and innovative
products, improved efficiencies, changes in technology and
competitive conditions. All companies invested in by Pool B
will generally have a minimum aggregate market value of at
-7-<PAGE>
least $100 million and must have an active trading market.
Foreign stocks may be purchased if they are traded in U.S.
markets. Pool B will seek to maintain liquidity, quality and
broad diversification, and its performance will be evaluated on
a continuous basis using the S&P 500 Index as a benchmark.
EDUCATIONAL OBJECTIVES
The educational objectives of the Fund are to provide
students at SBI with the opportunity to participate in the
operation of a registered investment company. As part of its
curriculum and educational philosophy, SBI has developed
several companies, supervised by SBI faculty and staffed by SBI
students, in a variety of fields to expose SBI students to the
practical implications of classroom knowledge and to enhance
their interpersonal, managerial, organizational and technical
skills outside of the traditional learning environment. SBI
Investments, Inc. ("SBI Investments"), one of these SBI
companies, will further the educational objectives of SBI by
permitting students to assist in a variety of capacities in the
operations of the Investment Advisor, from clerical assignments
through supporting research and strategy analysis.
The educational objectives of the Fund include: (a)
inspiring students to pursue professional careers in investment
management; (b) developing SBI students' technical and non-
technical competencies, creating a competitive edge leading to
employment in investment management firms; (c) achieving a
stream of competent, experienced graduates who are able to
excel in an investment management environment; and (d)
providing needed financial support to the educational programs
of SBI.
S&P 500 Index
Pool A of the Fund will seek to replicate the
performance results of the S&P 500 Index by investing in all
500 stocks that comprise the S&P 500 Index in approximately the
same proportions as they are represented in the S&P 500 Index.
The S&P 500 Index is composed of 500 common stocks,
most of which are listed on the New York Stock Exchange, chosen
on a statistical basis by Standard & Poor's Corporation based
on the issuer's dominance in its industry group. The inclusion
of a stock in the S&P 500 Index is not based upon a judgement
as to the investment merit of the stock. The 500 securities
represents approximately two-thirds of the market value of all
U.S. common stocks.
-8-<PAGE>
The weightings of stocks in the S&P 500 Index are
based on each stock's relative total market value; that is, its
market price per share multiplied by the number of shares
outstanding. Due to the market-value weighting, the 50 largest
companies in the S&P 500 Index account for approximately 50% of
the Index.
No attempt will be made to manage Pool A's portfolio
in the traditional sense using economic, financial and market
analysis. Pool A will be managed using a computer program to
determine which stocks are to be purchased or sold to replicate
the S&P 500 Index to the extent feasible. Over time, the
correlation between the performance of the S&P 500 Index and
Pool A is expected to be at least 0.95. A correlation of 1.00
would indicate perfect correlation, which would be achieved
when the net asset value of Pool A, including the value of its
dividend and capital gains distributions, increases or
decreases in exact proportion to changes in the S&P 500 Index.
In an effort to maintain the highest possible correlation
between Pool A and the S&P 500 Index the Investment Advisor
will monitor the tracking accuracy of Pool A on at least a
monthly basis. See "-- Investment Considerations."
INVESTMENT POLICIES
The Fund may only invest, as described below, in
common and preferred stocks, certain related derivative
securities and temporarily in cash, cash equivalents or money
market instruments.
Neither Pool A nor Pool B may purchase or hold
securities which are illiquid except up to 15% of the net
assets of the Fund.
Common and Preferred Stocks. The stocks eligible for
purchase by the Fund consist exclusively of common and
preferred stocks that are listed on a national securities
exchange or are included in The Nasdaq Stock Market ("Nasdaq").
Pool A may not invest in any stocks other than common
stocks included in the S&P 500 Index. Pool B may invest in
common stocks and may invest up to 10% of its net assets in
preferred stocks that are rated within the three highest
generic rating categories by a nationally recognized
statistical rating organization ("high grade"). If the
-9-<PAGE>
rating of a preferred stock held by Pool B falls below "high
grade," it is the intention of the Fund to dispose of such
security.
Index Futures. The derivative securities eligible
for purchase by Pool A consist exclusively of futures on the
S&P 500 Index which are traded on a national exchange or board
of trade. Pool B will not buy, sell, write, or engage in any
activities involving options, futures or other derivative
securities.
Futures on the S&P 500 Index are contracts that
obligate the seller to deliver (and the purchaser to take) an
amount of cash equal to a specific dollar amount times the
difference between the value of the S&P 500 Index at the close
of the last trading day of the contract and the price at which
the agreement is made. No physical delivery of the underlying
stocks in the index is made.
S&P 500 Index futures may be used by Pool A only to
invest inflows of cash into Pool A on a temporary basis, until
investment of such funds may be made in the common stocks
comprising the S&P 500 Index. Futures contracts may typically
be purchased on margin, however Pool A will only purchase
futures contracts which are paid for in full. Pool A may elect
to close some or all of its futures positions at any time prior
to their expiration. Not more than 20% of the net assets of
Pool A will be invested in fully paid for futures at any time.
Foreign Securities. The portfolios of Pool A or Pool
B may contain common stocks of foreign issuers, but only to the
extent that such foreign stocks are traded in the United States
markets on a national securities exchange or are included in
Nasdaq. Stocks of foreign issuers may be purchased directly or
through American Depositary Receipts ("ADRs"). ADRs are
dollar-denominated receipts issued generally by domestic banks
and representing the deposit with the bank of a security of a
foreign issuer, which are publicly traded in the United States
on securities exchanges or in the over-the-counter market. In
the case of Pool A, common stocks of foreign issuers will be
purchased only if and to the extent that such stocks are
included in the S&P 500 Index. As of the date of this
Prospectus, there are ___ stocks in the S&P 500 Index which are
foreign companies. Common stocks of foreign issuers (not
including ADRs) purchased by Pool B will be limited to 20% of
the net assets of Pool B at the time of purchase. See "--
Investment Considerations".
-10-<PAGE>
Short Sales Against the Box. Pool A may not sell
securities short. Pool B may sell securities short only in
transactions referred to as "short sales against-the-box." A
"short sale" is a sale of a security not owned by the seller
that must be borrowed to make delivery. This technique is
typically used (1) to take advantage of an anticipated decline
in the price or (2) to protect a profit in a long position. At
the time of a short sale the seller borrows stock for delivery
to the purchaser; if the seller can subsequently buy stock to
replace the borrowed stock to the lender at a lower price, a
profit results; however, if the price rises a loss results.
"Selling short against the box" is selling short stock actually
owned by the seller but held in safekeeping. This technique
may be used to protect a capital gain in the shares that are
owned, while deferring a long-term gain into another tax year.
In short sales against the box, while the short position is
open Pool B must own an equal amount of such securities, or by
virtue of ownership of securities have the right, without
payment of further consideration, to obtain an equal amount of
the securities sold short. No more than 15 percent of Pool
B's net assets will be held as collateral for such short sales
at any one time. See "-- Investment Considerations".
Money Market Instruments on a Temporary Basis. From
time to time, 5 percent or less of the net assets of Pool A,
and 25 percent or less of the net assets of Pool B, may be
invested in cash, cash equivalents or money market instruments
on a temporary basis, pending the investment of such capital in
stocks, pending the distribution of such capital in connection
with the Fund's regular distributions or the redemption of
shares, or for corporate purposes relating to the operation of
the Fund. Cash equivalents and money market instruments
include obligations of the U.S. government or its agencies;
obligations of banks and savings and loan associations insured
by the FDIC or the FSLIC, such as banker's acceptances and
certificates of deposit; commercial paper; and repurchase
agreements with recognized securities dealers and banks with
respect to any of the foregoing. Such obligations will
generally be rated in the two highest rankings by two rating
organizations (or one rating organization if only one
organization has rated the security). Upon receipt of
subscriptions for the initial minimum investments in Pool A and
Pool B and commencement of operations of such Pools,
respectively, the Fund may invest 100 percent of the net assets
of the Fund in such cash equivalents or money market
instruments on a temporary basis pending the investment of such
capital in stocks. The Fund will become invested in accordance
with its investment objectives and policies within six months
of starting operations.
-11-<PAGE>
In addition, Pool B may temporarily invest in cash,
cash equivalents or money market instruments (as described
above), without limit in amount, when the Investment Advisor
determines that significant adverse market, economic,
political, or other circumstances require immediate action to
avoid losses. To the extent that Pool B will engage in such
temporary defensive measures, Pool B will not be pursuing its
investment objectives. Pool A seeks to remain substantially
fully invested in a pool of securities which will duplicate the
investment characteristics of the S&P 500 Index and will not
reduce its investment in such securities to protect against
potential stock market declines.
CERTAIN FUNDAMENTAL POLICIES
Neither Pool A nor Pool B may: (i) borrow money
other than from banks for temporary or emergency purposes in an
amount not more than 5 percent of the market value of its total
assets (not including the amount borrowed); (ii) invest 25
percent or more of its total assets in a single industry; (iii)
invest more than 10 percent of its total assets in a single
issuer; (iv) pledge its assets, other than in an amount up to
10 percent of the market value of its total assets to secure
permitted borrowings for temporary or emergency purposes; or
(v) invest more than 10 percent of the market value of its
total assets in securities of companies that (including
predecessors or controlling persons) have not been in operation
for at least three consecutive years.
The foregoing describes certain fundamental policies
of Pool A and Pool B that cannot be changed without approval by
the holders of a majority (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")) of the outstanding
voting shares of Class A Common Stock or Class B Common Stock,
respectively. See "INVESTMENT OBJECTIVES AND POLICIES --
Investment Restrictions" in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS
Neither the Fund nor the Investment Advisor has any
operating history or record of performance that might assist
investors in their evaluation of the Fund. The Investment
Advisor has no prior experience in advising a mutual fund or in
using futures.
-12-<PAGE>
The Fund has been structured with a view toward
ensuring professional responsibility and prudent investment
decisions in accordance with the investment objectives
described under "Investment Objectives and Strategies."
Investors should recognize, however, that the Fund is designed
also as an educational opportunity for students at SBI.
Investors should be aware of the role students of SBI will
have, through the Investment Advisor, in assisting in its
operations. In particular, students at SBI who are involved in
the Fund will conduct research, analysis and evaluations of
companies. The professional staff of the Investment Advisor
will review such research, analyses and evaluations in making
investment decisions for the Fund. Investment strategies and
investment decisions formulated by the Chief Investment Officer
will be reviewed by the Advisory Board of the Investment
Advisor, which is comprised of investment professionals. See
"MANAGEMENT OF THE FUND -- The Investment Advisor."
The Chief Investment Officer of the Investment
Advisor will devote his full time to the operations of the Fund
(except to the extent that his oversight responsibilities over
the activities of the SBI students involved in the operation of
the Fund constitute educational activities). The other
officers of the Fund and of the Investment Advisor are faculty
members and administrators of SBI and will not devote their
full time to the business and operations of the Fund or of the
Investment Advisor, although they will devote as much of their
time to such activities as is reasonably required to fulfill
the duties of their offices. Members of the Advisory Board of
the Investment Advisor are investment professionals involved in
many activities other than the Fund and will not devote their
full time to Fund activities. See "MANAGEMENT OF THE FUND --
The Investment Advisor." Except for reimbursement of expenses
of persons not affiliated with SBI, none of the officers or
directors of the Fund or of the Investment Advisor, or members
of the Advisory Board of the Investment Advisor, will be
compensated for their services to the Fund and/or the
Investment Advisor other than the Chief Investment Officer.
Due to the fact that the officers and directors of
the Investment Advisor and the officers and a majority of the
directors of the Fund are members of the faculty and
administration of SBI, among other factors, SBI may be deemed
to control the Investment Advisor and the Fund. SBI is a part
of the Florida Agricultural and Mechanical University which is
an educational institution governed by the Board of Education
of the State of Florida. SBI has established the Fund as part
of its educational curriculum and neither Florida Agricultural
and Mechanical University nor the Board of Education of the
-13-<PAGE>
State of Florida has passed upon the terms of the Fund or this
prospectus.
As mutual funds investing primarily in common stocks,
both Pool A and Pool B are subject to market risk, including
the possibility that common stock prices may decline over short
periods and possibly over extended periods.
While Pool A will attempt to reflect the performance
of the S&P 500 Index, the relationship between the performance
of Pool A and the performance of the S&P 500 Index may be
imperfect. In addition to the expenses of the Fund (see
"MANAGEMENT OF THE FUND -- Expenses"), there may be other
factors leading to a discrepancy between the performance of
Pool A and the performance of the S&P 500 Index. Such factors
include, among others, risks such as illiquidity, imperfect
correlation with the index and the behavior of speculative
investors. Performance of Pool A in relation to the S&P 500
Index will also depend on the size of the Pool A portfolio and
the size and timing of cash flows into and out of Pool A.
Using futures involves certain risks. Although the
Fund intends to purchase futures contracts only if there is an
active market for such contracts, no assurance can be given
that a liquid market will exist when the Fund seeks to close
out a futures position. Because of the possibility of price
distortions in the futures market and the imperfect correlation
between movements in the S&P 500 Index and movements in the
price of futures on the S&P 500 Index, investments in futures
on the S&P 500 Index may not have the same investment results
as the S&P 500 Index itself.
The portfolios of Pool A or Pool B may contain common
stocks of foreign issuers. Additional investment risks of
investing in securities of foreign issuers beyond those
typically associated with investing in U.S. companies include:
future political and economic developments, the possible
imposition of withholding taxes on interest income payable on
the securities, the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions
which might adversely affect an investment in these securities
and the possible seizure or nationalization of foreign
deposits. In addition, foreign issuers are subject to
different accounting, auditing, and financial reporting
standards.
-14-<PAGE>
If a short sale against the box is effected, the
appreciation potential of the securities sold short is lost.
The need to maintain the underlying security while a short
position is open or to otherwise cover or maintain segregated
securities in connection with a hedging transaction may result
in the possible inability of the Fund to purchase or sell a
portfolio security at a time that otherwise would be favorable
for it to do so, or the possible need for the Fund to sell a
portfolio security at a disadvantageous time.
While shares of the Fund are freely transferable upon
written notice to the Fund, it is not expected that shares of
the Fund will be listed on any securities exchange or otherwise
easily transferable through an organized market. Consequently,
shareholders may have to request redemption of their shares by
the Fund to liquidate their holdings. See "SHARES OF THE FUND
-- Description of Shares" and "REDEMPTION OF FUND SHARES."
Pool B investment strategies may result in a
relatively high portfolio turnover. Higher turnover rates are
likely to result in comparatively greater brokerage expenses.
See "INVESTMENT OBJECTIVES AND POLICIES -- Portfolio Turnover"
and "BROKERAGE ALLOCATION AND OTHER TRANSACTIONS" in the
Statement of Additional Information.
STRUCTURE OF THE FUND
The Fund is comprised of two series: Pool A,
represented by Class A Common Stock of the Fund, par value
$.001 per share (the "Class A Common Stock"), and Pool B,
represented by Class B Common Stock of the Fund, par value
$.001 per share (the "Class B Common Stock").
The capital generated from the sale of Class A Common
Stock will be invested in Pool A and the capital generated from
the sale of Class B Common Stock will be invested in Pool B.
To ensure that expenses are not excessive in relation
to the size of the Fund, Pool A will not commence operations
until the capital invested in Pool A equals at least $20
million and Pool B will not commence operations until the
capital invested in Pool B equals at least $1 million. Until
subscriptions are received aggregating at least such minimum
amounts, respectively, no payments for investment will be
accepted and any purchase checks will be returned to the
subscriber. Subscriptions to either Pool may be withdrawn,
revoked or cancelled by written request at any time prior to
the time that
-15-<PAGE>
such Pool reaches the minimum level to begin operations. If,
however, the net assets of either of the Pools at any time
after commencement of operations falls below the minimum
amounts required for commencement, the Pools will continue to
operate at the lower asset levels. If commitments are not
received to reach the minimum with respect to each Pool,
respectively, within 180 days of commencing the offering of
shares, such offering will be cancelled. Neither the
commencement of operations of Pool A nor the cancellation of
the offering of shares of Class A Common Stock as a result of
failure to reach the minimum commitment level will affect the
commencement of operations of Pool B or the offering of shares
of Class B Common Stock and vice versa.
Shares of Class A Common Stock and Class B Common
Stock may each be redeemed, as set forth below. See
"REDEMPTION OF FUND SHARES."
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS OF THE FUND
The Board of Directors of the Fund is responsible for
the general policies of the Fund and for monitoring and
overseeing the activities of the Fund's officers and the
activities of the Investment Advisor pursuant to its investment
advisory agreement with the Fund.
The members of the Board of Directors consist of
administrators and faculty members of SBI, each of whom is a
director and officer of the Investment Advisor, and outside
individuals not affiliated with the Investment Advisor or with
SBI. The officers of the Fund are comprised of faculty members
and administrative personnel of SBI.
Certain matters, such as approval of the advisory
contract between the Fund and the Investment Advisor, approval
of the Fund's Rule 12b-1 Plan and approval of the distribution
agreement between the Fund and the Distributor, are required by
the 1940 Act to be approved by a majority of the Fund's
disinterested directors.
THE INVESTMENT ADVISOR
SBI Capital Management and Research Corporation, a
not-for-profit Florida corporation established by SBI, is the
Fund's investment advisor. The Investment Advisor is
responsible for determining investment strategies and managing
the investments of the Fund. The directors of the Investment
-16-<PAGE>
Advisor are comprised of the members of the SBI Executive
Committee, ex officio, and the Chief Investment Officer, each
of whom is also an officer of the Investment Advisor. The
offices of the Investment Advisor are located at One SBI Plaza,
School of Business & Industry, Florida A&M University,
Tallahassee, Florida 32307.
The Chief Investment Officer of the Investment
Advisor has the primary responsibility for managing the
investment portfolios of the Fund. As of the date of this
Prospectus, Darrell R. Williams serves as the Chief Investment
Officer and Chief Operating Officer and a director of the
Investment Advisor and serves as the President and Treasurer
and a director of the Fund. Prior to joining the Investment
Advisor in 1992, Mr. Williams was a Vice President for two
years at Precision Asset Management, Inc., a registered
investment advisor which managed institutional portfolios. For
the two years prior thereto, he was a Financial Consultant at
Shearson Lehman Hutton, Inc. Presently, Mr. Williams serves as
Chairman of the Leon County Investment Oversight Committee of
Leon County, Florida. Mr. Williams has been a member of such
Committee since 1994. See "MANAGEMENT OF THE FUND" in the
Statement of Additional Information.
Members of the Advisory Board of the Investment
Advisor (the "Advisory Board") are appointed by the Board of
Directors of the Investment Advisor. The Advisory Board is
comprised of outside executive investment management officials
with expertise in the areas of finance and investments and the
Chairman of the Investment Advisor. As of the date of this
Prospectus, the Advisory Board consists of Messrs. Leon G.
Cooperman, Dale F. Frey, Robert M. Gardiner, Robert G. Kirby
and Dean Sybil C. Mobley. The Advisory Board reviews and
advises on the investment strategies utilized in investing the
assets of the Fund, the universe of companies eligible for
investment by Pool B and the parameters within which such
investments may be made; and reviews the implementation of such
strategies on an ongoing basis. The Advisory Board meets
quarterly.
The activities of the Investment Advisor are the
principal mechanism by which the educational objectives of the
Fund are pursued, through the participation of the SBI student
company, SBI Investments, Inc. Undergraduate students at SBI
will perform mostly clerical work for SBI Investments, such as
accumulating information and maintaining files on companies for
possible investment, which will help them learn about the
process of making investment decisions and provide the
information necessary to allow research and analysis to be
conducted by graduate-level MBA candidates at SBI. Through a
-17-<PAGE>
graduate-level course at SBI, MBA students will conduct
research and perform analyses -- from broad market research to
industry group and individual company analysis -- to assist in
the formulation of investment recommendations for the Fund.
All student activity will be under the direction and
supervision of the Chief Investment Officer of the Investment
Advisor and SBI faculty members.
SBI students who participate in the operations of SBI
Investments will be selected by the Chief Investment Officer of
the Investment Advisor and SBI faculty members based on their
academic qualifications, previous experience in the SBI
Professional Development Program and internships, and faculty
recommendations. Student involvement in the operations of SBI
Investments will depend on individual educational level and
experience. Because many SBI students attend school in the
summer, student participation in SBI Investments will occur all
year-round.
Student involvement in the Fund through SBI
Investments will be a part of the curriculum of SBI; thus,
students will not be compensated by the Investment Advisor or
the Fund for work performed for the Investment Advisor or the
Fund. While student involvement in the operations of the Fund
and the Investment Advisor is the mechanism for achieving the
educational objectives of the Fund, all investment policies,
guidelines and strategies and decisions will be determined by
the professional staff of the Investment Advisor.
Pursuant to the Investment Advisory Agreement between
the Fund and the Investment Advisor, the Fund has agreed to pay
the Investment Advisor a fee of 0.10% per annum of the average
net assets of Pool A and a fee of 0.50% per annum of the
average net assets of Pool B, in each case payable by the Fund
quarterly in arrears. The fees payable to the Investment
Advisor accrue on a daily basis and, to the extent unpaid, will
be deducted from the net asset value of the applicable Pool for
purposes of determining the purchase price and the redemption
price for shares.
Income earned by the Investment Advisor will be used
to fund its operations. Excess net income retained by the
Investment Advisor will be distributed to SBI from time to time
to further its scholastic and educational programs. The
Investment Advisor has received from the Internal Revenue
Service recognition of its tax-exempt status as an organization
described in Section 501(c)(3) of the Internal Revenue Code.
-18-<PAGE>
ADMINISTRATIVE, TRANSFER AGENT AND CUSTODIAL SERVICES
State Street Bank and Trust Company ("State Street
Bank"), P.O. Box 1978, Boston, MA 02105-1978, with offices at
175 Newport Avenue, North Quincy, Massachusetts 02171, will
provide administrative services to the Fund and will act as its
custodian and transfer agent. The administrative services
provided by State Street Bank include bookkeeping services and
production of various reports, and calculation of net asset
value of each of Pool A and Pool B daily. Annual fees for such
services will be billed and payable monthly based on average
monthly net assets and reimbursement for out-of-pocket
expenses. Total compensation during the first year of
operation of the Fund for all services provided by State Street
Bank will not exceed .10% of the average net assets of the
Fund.
EXPENSES
In addition to the fees payable to the Investment
Advisor and to State Street Bank for the various services
provided to the Fund, the Fund will incur a variety of expenses
that will be paid out of the assets of the Fund. Such expenses
may include brokerage fees, fees payable to the Fund's
auditors, legal fees, postage and printing expenses, taxes, if
any, and other administrative expenses. The members of the
Board of Directors of the Fund who are unaffiliated with SBI
may be reimbursed by the Fund for any out-of-pocket expenses
incurred by them in connection with the performance of their
duties but will not otherwise be compensated by the Fund.
In addition, the Fund has adopted a Rule 12b-1 Plan
which provides for the payment by the Fund of expenses incurred
in connection with the distribution of the Fund's shares by the
distributor of the shares. The Plan provides that distribution
expenses incurred on behalf of the Fund, including any
advertising, printing, mailing, telephone and other costs, may
be paid by the Fund up to an amount equal to .05% of the
average net assets of Pool A and Pool B in any year. Expenses
paid pursuant to the Rule 12b-1 Plan will be allocated between
Pool A and Pool B based on the relative average net asset size
of each of the Pools and therefore Rule 12b-1 fees paid by Pool
A may be used to finance the distribution of shares of Pool B
or vice versa.
To the extent that particular expenses incurred by
the Fund relate specifically to activities of Pool A or Pool B,
such expenses are allocated to, and deducted from the assets
of, such Pool. Those expenses which cannot be so allocated are
-19-<PAGE>
allocated between Pool A and Pool B in proportion to the
relative average net assets of Pool A and Pool B during the
period in which the expenses are incurred or pursuant to such
other allocation determined by the Board of Directors to be
fair and equitable. Each Pool of the Fund may create reserves
for its anticipated expenses, which will reduce the net asset
value of shares of that Pool when such reserves are created.
The expenses relating to the educational objectives
of the Fund, including the costs associated with the education
of the students of SBI and their participation in the
operations of the Fund through SBI Investments, will be borne
by SBI and will not constitute expenses of the Fund or the
Investment Advisor. SBI has paid the Fund's initial
organizational expenses, including the initial registration fee
with the Securities and Exchange Commission. Members of the
faculty and administration of SBI will not be compensated by
the Fund for their activities in connection with the Fund or
the Investment Advisor. In particular, the salary of the Chief
Investment Officer of the Investment Advisor is not an expense
of the Fund.
The Fund may utilize the brokerage services of Dean
Witter Reynolds, Inc. ("DWR"), and pay brokerage commissions to
DWR, in accordance with applicable rules and regulations under
the 1940 Act and with the Fund's policies with respect to
brokerage allocation. See "BROKERAGE ALLOCATION AND OTHER
TRANSACTIONS" in the Statement of Additional Information. Dean
Mobley, Chairman of the Fund and of the Investment Advisor and
a member of the Advisory Board of the Investment Advisor, is a
director of Dean Witter Discover & Co., the parent corporation
of DWR.
SHARES OF THE FUND
DESCRIPTION OF SHARES
The Class A Common Stock and Class B Common Stock
together constitute the common stock of the Fund and are the
only authorized capital stock of the Fund. Each share is
entitled to one vote in corporate matters submitted to the
Fund's shareholders, including the election of each director of
the Fund. Generally, the approval of any matter submitted to
the Fund's shareholders that affects each class of common
stock, including the approval or termination of the advisory
contract between the Fund and the Investment Advisor, requires
the approval of the holders of a majority of the outstanding
shares of each of the Class A Common Stock and Class B Common
Stock, voting as two separate classes. In any instance in
which either class would not be affected by a matter requiring
-20-<PAGE>
a shareholder vote, the vote of the shareholders of such class
will not be required. For certain matters, such as the
election of directors of the Fund and the selection of the
Fund's independent public accountants, the holders of Class A
Common Stock and of Class B Common Stock will vote together as
one class, with each share having the same voting power,
regardless of the respective net asset values represented by
such shares.
There normally will be no annual meetings of
shareholders for the purpose of electing directors unless and
until such time as less than a majority of the directors
holding office have been elected by the shareholders of the
Fund, nor for the purpose of taking other action unless and
until such action is required by the 1940 Act or state law.
Shareholders may remove a director with or without cause by the
affirmative vote of a majority of the outstanding shares of
common stock of the Fund, voting together as a single class.
The Class A Common Stock is entitled to a preference
over the Class B Common Stock with respect to the assets of
Pool A, and the Class B Common Stock is entitled to a
preference over the Class A Common Stock with respect to the
assets of Pool B. Notwithstanding these preferences, the total
assets of the Fund are available to satisfy the claims of any
creditors of the Fund, regardless of whether such claims arise
in connection with activities relating to Pool A or Pool B.
Shareholders of the Fund may freely transfer their
shares, upon written notice to the Fund. It is not expected,
however, that shares of the Fund will be listed on any
securities exchange or otherwise easily transferable through an
organized market. Consequently, shareholders may have to
request redemption of their shares by the Fund to liquidate
their holdings. See "REDEMPTION OF FUND SHARES." Shareholders
are entitled to redeem shares of Class A Common Stock in
exchange for shares of Class B Common Stock, and vice versa, at
prices based upon the relative net asset value per share of
Pool A and Pool B, respectively.
DISTRIBUTIONS AND DIVIDENDS
All dividend income and capital gains payable in
respect of Class A Common Stock (i.e., dividend income and
capital gains generated by Pool A) are distributed each year to
shareholders of Class A Common Stock. Similarly, all dividend
income and capital gains payable in respect of Class B Common
Stock (i.e., dividend income and capital gains generated by
Pool B) are distributed each year to shareholders of Class B
Common Stock.
-21-<PAGE>
Dividends and distributions will be paid in
additional shares of Class A Common Stock or Class B Common
Stock, as the case may be, based on the net asset value on the
payment date, or such other date as the Fund may determine,
unless the stockholder elects in writing not less than five
business days prior to the payment date to receive such
dividends and distributions in cash. Such election should be
submitted to the Transfer Agent. For federal and state income
tax purposes, however, distributions of additional shares of
the Fund made to shareholders in respect of dividend income and
capital gains will constitute taxable income to the
shareholders of the Fund to the same extent as if such
distributions were made in cash. See "-- Certain Tax
Consequences" and "DESCRIPTION OF THE FUND -- Investment
Considerations."
CERTAIN TAX CONSEQUENCES
The following is only a general summary of certain
tax considerations affecting each series of the Fund and its
shareholders. No attempt is made to present a detailed
explanation of the tax treatment of the series or of their
shareholders, and the discussion here is not intended as a
substitute for careful tax planning. The Fund is not managed
with respect to tax outcomes for its shareholders.
The Fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). Under the Code, each series is treated
as a separate entity for tax purposes. Each series intends to
qualify as a regulated investment company under Subchapter M of
the Code. If a series so qualifies, that series will not be
subject to federal income taxes on its net investment income
and capital gains, if any, which such series distributes to its
shareholders, provided that at least 90 percent of such series'
"investment company taxable income" (generally, net investment
income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year is distributed,
and provided that such series meets certain other requirements
imposed by the Code.
THE FUND WILL DISTRIBUTE ALL OF ITS NET INCOME AND
GAINS TO SHAREHOLDERS IN THE FORM OF ADDITIONAL SHARES OF
COMMON STOCK OF THE FUND OR IN CASH, AT THE ELECTION OF THE
SHAREHOLDER, AND SUCH DISTRIBUTIONS WILL BE TAXABLE INCOME OR
CAPITAL GAINS TO THE SAME EXTENT AS IF SUCH DISTRIBUTIONS HAD
BEEN MADE IN CASH, REGARDLESS OF THE MANNER IN WHICH THEY ARE
MADE. SHAREHOLDERS WILL BE PROPORTIONATELY LIABLE FOR TAXES ON
INCOME AND GAINS OF THE FUND, EXCEPT FOR SHAREHOLDERS THAT ARE
NOT OTHERWISE SUBJECT TO TAX ON THEIR INCOME.
-22-<PAGE>
All dividends paid or distributed, or deemed to be
paid or distributed (in the form of additional shares of common
stock of the Fund), out of investment company taxable income
will be taxable as ordinary income to the shareholders. Any
"net capital gain" (the excess of net long-term capital gain
over net short-term capital loss) actually distributed to a
shareholder in cash or deemed distributed to a shareholder in
the form of additional shares of common stock of the Fund is
taxable as long-term capital gain to such shareholder,
regardless of the length of time such shareholder has owned the
shares. Generally, such dividends and distributions are
taxable in the year in which received, but dividends and
distributions declared in October, November or December of any
year to shareholders of record on a date in such month are
treated as paid on December 31 of such year if they are paid
during January of the following calendar year.
A four percent nondeductible federal excise tax is
imposed on a regulated investment company that fails to
distribute substantially all of its ordinary income and capital
gain net income for each calendar year. Currently, both Pool A
and Pool B intend to make sufficient distributions of their
ordinary income and capital gain net income prior to the end of
each calendar year to avoid liability for this excise tax.
Future legislative changes may materially affect the
tax consequences of investing in the Fund. Shareholders are
urged to consult their tax advisors for the application of
these rules (and other potentially relevant rules) to their
particular circumstances. Shareholders are also urged to
consult their tax advisors concerning the application of state
and local income taxes and of foreign taxes to investments in
the Fund, which may differ from the United States federal
income tax consequences described above.
OTHER INFORMATION
The Fund may be deemed to be controlled by SBI or the
Investment Advisor may be deemed to control the Fund as a
result of its influence over the management and operations of
the Fund.
As of October 31, 1995, the Investment Advisor is the
sole shareholder of the Fund and holds 100 shares of Class A
Common Stock and 100 shares of Class B Common Stock.
Shareholder inquiries regarding the Fund should be
made in writing to the offices of the Investment Advisor, SBI
Capital Management and Research Corporation, at One SBI Plaza,
School of Business & Industry, Florida A&M University,
-23-<PAGE>
Tallahassee, Florida 32307, or by telephone during regular
business hours at (904) 561-2661.
PURCHASE OF FUND SHARES
Shares of Class A Common Stock and of Class B Common
Stock are offered for sale by Lamaute Capital Inc., 8383
Wilshire Boulevard, Suite 840, Beverly Hills, California 90211
(the "Distributor") on a continuous basis.
Initial purchases of shares of the Fund must be
accompanied by an SBI Fund Account Application and any required
legal documentation. Copies of SBI Fund Account Applications
are available from the Distributor. Payments for shares of the
Fund may be made by check or by wire transfer. Investors
should mail a completed SBI Fund Account Application and any
required legal documentation and accompanying payment by check,
payable to The SBI Fund, to: The SBI Fund, c/o State Street
Bank and Trust Company, P.O. Box 1978, Boston, MA 02105-1978.
Hand-delivered SBI Fund Applications and payments by check will
be accepted at State Street Bank and Trust Company, 175 Newport
Avenue, North Quincy, MA 02171, during normal business hours.
If payments will be made by wire transfer, send the completed
SBI Fund Account Application and any required legal
documentation to The SBI Fund c/o State Street Bank and Trust
Company at the address above and wire funds as follows:
Receiving Bank
Information: State Street Bank and Trust
Company
225 Franklin Street
Boston, Massachusetts 02110
ABA No.: 01100028
For subscriptions in Pool A:
For Account of: BNF=AC-59845909
Mutual Funds F/B/O
The SBI Fund, Inc. - Pool A
For Subaccount of: OBI=The SBI Fund, Inc. - Pool A
Shareholder Name/Account Number
For subscription in Pool B:
For Account of: BNF=AC-59845917
Mutual Funds F/B/O
The SBI Fund, Inc. - Pool B
-24-<PAGE>
For Subaccount of: OBI=The SBI Fund, Inc. - Pool B
Shareholder Name/Account Number
Before wiring any funds, please contact the Fund at
(904) 561-2661.
Federal regulations require that you provide a
certified taxpayer identification number upon opening your
account. See the SBI Fund Account Application for further
information.
Shareholders who already own shares of the Fund may
purchase additional shares by sending a completed SBI Fund
Additional Investment Application and check, or wire transfer,
to The SBI Fund, c/o State Street Bank and Trust Company, as
described above.
The minimum initial investment in either Pool A or
Pool B is $250,000, and incremental investments in Pool A or
Pool B must be at least $50,000. The Fund reserves the right,
in its sole discretion, to waive the minimum investment of
certain investors without limitation.
The Fund reserves the right to reject any application
for a purchase of shares of the Fund.
Share certificates will not be issued. State Street
Bank and Trust Company, the Fund's transfer agent, will
maintain a record of ownership by shareholders and will send
transaction confirmations and account statements to each
shareholder.
The share price for Class A Common Stock and Class B
Common Stock will equal the per share net asset value of Pool A
and Pool B, respectively, next determined after a subscription
is received which is complete, is accompanied by any required
legal documentation and includes payment, and will therefore
fluctuate over time. The Fund does not charge any "load" or
sales commission.
The net asset value of Pool A and Pool B is
determined once daily as of the close of every day that the New
York Stock Exchange is open for trading. Net asset value of a
Pool is determined by subtracting the liabilities of such Pool
from the value of the total assets of such Pool and dividing
the resulting amount by the number of shares and fractional
shares outstanding which constitute an interest in such Pool.
In determining net asset value, the Fund values its securities
daily on the basis of the closing sales price or, if no sale
-25-<PAGE>
occurred, at the last price traded on the New York Stock
Exchange, other national securities exchange or the over-the-
counter market. See the section entitled "PURCHASE, REDEMPTION
AND PRICING OF SECURITIES -- Pricing" in the Statement of
Additional Information for further information.
The Fund will pay expenses incurred in connection
with the distribution of the shares of the Fund pursuant to a
Rule 12b-1 Plan. See "MANAGEMENT OF THE FUND -- Expenses."
The Board of Directors of the Fund may, in its
discretion, suspend the sale of additional shares in the Fund,
at any time or from time to time, if it determines that such a
suspension would be in the best interests of the Fund and its
shareholders.
REDEMPTION OF FUND SHARES
A shareholder may request redemption of its shares of
Class A Common Stock or Class B Common Stock at any time.
Redemption requests should be made by written request
referencing the Fund and transmitted to the Transfer Agent,
State Street Bank and Trust Company, at P.O. Box 1978, Boston,
MA 02105-1978. When a request to redeem shares of the Fund is
received by the Transfer Agent in proper form, the Fund will
redeem the shares at their net asset value at the close of
business on the day such request is received (or, if such
notice is received after the close of business on any day, at
their net asset value at the close of business on the day
following the day such notice is received). The Fund
ordinarily will make payment for all redeemed shares within
seven days after receipt by the Transfer Agent of a redemption
request, except as provided by applicable securities laws,
rules and regulations.
Shareholders may redeem shares of Class A Common
Stock or Class B Common Stock in exchange for shares of Class B
Common Stock or Class A Common Stock, respectively, instead of
for cash. Any such redemption and exchange must meet the
applicable minimum initial investment level or minimum
incremental investment level described above, provided,
however, that the Fund may, in its sole discretion, waive the
minimum investment of certain investors without limitation.
Any shareholder requesting to redeem shares of one class of
common stock of the Fund in exchange for shares of the other
class should specify this clearly in the redemption request.
If a redemption request does not specify the manner of
redemption, or if it requests an exchange transaction but fails
to meet the applicable minimum investment levels described
-26-<PAGE>
above, it will be treated as a request to redeem the shares for
cash. While the Fund is authorized to pay certain redemptions
in assets of the Fund other than cash, the Fund, in the case of
a redemption and exchange, will not use such assets as payment
(in whole or in part) for such redemption.
The Fund will not mail redemption checks (or
otherwise deliver payment for such redemption) to shareholders
who redeem shares that were recently purchased by check until
the clearance of such check and the receipt by the Fund of the
funds represented thereby. The redemption proceeds, in such
cases, may be delayed up to 15 calendar days from the purchase
date.
SHARES OF CLASS A COMMON STOCK AND SHARES OF CLASS B
COMMON STOCK ARE SEPARATELY REDEEMABLE. THEREFORE, ANY
REDEMPTION REQUEST SHOULD SPECIFY CLEARLY THE NUMBER OF SHARES
AND THE CLASS OF SHARES OF COMMON STOCK FOR WHICH REDEMPTION IS
BEING REQUESTED.
Redemption requests may be made by mail or delivered
by hand. A request to redeem shares must be signed by each
holder of such shares, including each owner of a joint account.
Each signature must be guaranteed by a commercial bank or trust
company located or having a correspondent in New York City or
by a member firm of a national securities exchange. If a
shareholder wants redemption proceeds to be wired, the
redemption request must so state and must include wiring
instructions.
PERFORMANCE INFORMATION
For the purpose of advertising, performance will be
calculated on the basis of average annual total return.
Advertisements also may include performance calculated on the
basis of total return.
Average annual total return is calculated pursuant to
a standardized formula which assumes that an investment in the
Fund was purchased with an initial payment of $1,000 and that
the investment was redeemed at the end of a stated period of
time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis,
would result in the redeemable value of the investment at the
end of the period. Advertisements of the Fund's performance
will include the Fund's average annual total return for one,
five and ten year periods, or for shorter time periods
-27-<PAGE>
depending upon the length of time during which the Fund has
operated. Computations of average annual total return for
periods of less than one year represent an annualization of the
actual total return for the applicable period.
Total return is computed on a per share basis and
assumes the reinvestment of dividends and distributions. Total
return generally is expressed as a percentage rate which is
calculated by combining the income and principal changes for a
specified period and dividing by the net asset value per share
at the beginning of the period. Advertisements may include the
percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return.
Performance will vary from time to time and past
results are not necessarily representative of future results.
Performance information, such as that described above, may not
provide a basis for comparison with other investments or other
investment companies using a different method of calculating
performance.
Comparative performance information may be used from
time to time in advertising the Fund's shares, including data
from Standard & Poor's 400 MidCap Index, Standard & Poor's 500
Composite Stock Price Index, Lipper Analytical Services, Inc.,
and other industry publications. The Fund may cite in its
advertisements or in reports or other communications to
shareholders, historical performance of unmanaged indexes as
reported in Ibbotson, Roger G. and Rex A. Sinquefield, Stocks,
Bonds, Bills and Inflation (SBBI), 1982, updated annually in
the SBBI Yearbook, Ibbotson Associates, Chicago. In its
advertisements, the Fund also may cite the aggregate amount of
assets committed to index investing by pension funds and/or
other institutional investors and may refer to or discuss then
current or past economic or financial conditions, developments
or events.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFERING OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
-28-<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 15, 1995
Information contained herein is subject to completion
or amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the registration
statement becomes effective. This Statement of Additional
Information does not constitute a prospectus.
---------------------------------------------------------------
THE SBI FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
_________, 1995
---------------------------------------------------------------
This Statement of Additional Information, which is
not a prospectus, supplements and should be read in conjunction
with the current Prospectus of The SBI Fund, Inc. (the "Fund"),
dated _______, 1995, as it may be revised from time to time.
To obtain a copy of the Fund's Prospectus, please contact
Lamaute Capital Inc., 8383 Wilshire Boulevard, Suite 840,
Beverly Hills, California 90211, (213) 655-5013.
Capitalized terms used herein without definition have
the same meanings as in the Fund's Prospectus.
TABLE OF CONTENTS
General Information and History......................... B-2
Investment Objectives and Policies...................... B-2
Management of the Fund.................................. B-4
Control Persons and Principal Holders of Securities..... B-7
Investment Advisory and Other Services.................. B-7
Brokerage Allocation and Other Transactions............. B-9
Capital Stock........................................... B-10
Purchase, Redemption and Pricing of Securities.......... B-10
Tax Status.............................................. B-11
Distributor............................................. B-13
Performance Data........................................ B-13
B-1<PAGE>
GENERAL INFORMATION AND HISTORY
The SBI Fund, Inc. (the "Fund") is a diversified,
open-end management company, incorporated in 1993 under the
laws of the State of Maryland. The Fund consists of two
series, each of which is diversified: Pool A, which will
attempt to replicate the performance of the S&P 500 Index;
and Pool B, which will involve more active investment
portfolio strategies, subject to a number of restrictions and
limitations. See "DESCRIPTION OF THE FUND -- Investment
Policies" and "-- Certain Fundamental Policies" in the Fund's
Prospectus. Neither the Fund nor the Investment Advisor has
any operating history or record of performance that might
assist investors in their evaluation of the Fund.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements and should be
read in conjunction with the section in the Fund's Prospectus
entitled "DESCRIPTION OF THE FUND."
INVESTMENT RESTRICTIONS
(1) The Fund has adopted the following investment
restrictions as fundamental policies for each of its series.
If a fundamental policy affects Pool A or Pool B, it may not
be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the holders of the Fund's Class A Common
Stock, par value $.001 per share (the "Class A Common
Stock"), or the holders of the Fund's Class B Common Stock,
par value $.001 per share (the "Class B Common Stock"),
respectively. Neither Pool A nor Pool B may:
(a) Purchase securities in an amount or a manner
that would cause such series not to be a "diversified,"
"non-concentrated" fund under the 1940 Act or would
cause such series not to be a "regulated investment
company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), or change the
subclassification of such series from "diversified" to
"non-diversified."
(b) Invest 25 percent or more of such series'
total assets in any single industry, or 10 percent or
more of such series' total assets in any single issuer.
B-2<PAGE>
(c) Borrow money, except from banks for temporary
or emergency purposes in an amount not in excess of 5
percent of the market value of its total assets (not
including the amount borrowed).
(d) Pledge any of its assets, except that up to 10
percent of the market value of its total assets may be
pledged in connection with borrowings permitted by
clause (c) above.
(e) Purchase securities on margin, except such
short-term credits as are necessary for the clearance of
transactions.
(f) Effect a short sale of any security other than
a short sale "against the box" or otherwise write put or
call options.
(g) Lend any of its assets other than (i) through
the purchase of a portion of publicly distributed notes,
bonds, negotiable certificates of deposit or other debt
securities for purposes of temporary cash investments,
or (ii) loans of securities held by such series to
brokers, dealers and other financial institutions,
provided that such loans are collateralized in
accordance with applicable regulatory requirements.
(h) Underwrite or participate in any underwriting
of securities, except to the extent that, in connection
with the disposition of portfolio investments, such
series may be deemed to be an underwriter under the
federal securities law.
(i) Buy securities of any company that (including
its predecessors or controlling persons) has not been in
business at least three continuous years if such
investment at the time of purchase would cause more than
10 percent of the total assets of such series (at market
value) to be invested in securities of such companies.
(j) Buy or hold securities of any issuer if, to
the knowledge of the Fund, any officer or director of
the Fund's investment advisor owns individually 0.5
percent or more of a class of securities of such issuer.
(k) Purchase securities of any other investment
company registered under the 1940 Act or exempt from
registration under the 1940 Act other than money market
funds subject to restrictions under the 1940 Act, except
as part of a merger, consolidation or other
reorganization.
B-3<PAGE>
(l) Participate on a joint or joint and several
basis in any trading account in securities.
(m) Buy or sell any real estate or real estate
mortgage, commodities or commodity contracts (other than
futures on the S&P 500 Index to the extent permitted
below), except indirectly through investment in publicly
traded equity securities of real estate investment
trusts or similar entities.
(n) Issue senior securities (other than to the
extent that borrowings permitted by clause (c) above
result in the issuance of senior securities).
(o) Invest in securities the disposition of which
would be subject to legal restriction.
(p) Engage in arbitrage or trade for the control
or management of another company.
(q) Purchase securities (including derivative
securities) that are not listed or admitted to trading
on a nationally recognized securities exchange in the
United States or included in Nasdaq.
(r) Purchase debt securities or securities other
than equity securities, except for (i) debt securities
that are purchased in connection with temporary
investments in cash equivalents or money market
instruments and (ii) futures on the S&P 500 Index.
(s) Purchase securities of any company in which
the Board of Directors has expressly prohibited
investment by such series.
(2) The following are significant investment
policies of the Registrant which are not deemed fundamental
and which may be changed without shareholder approval:
(a) The Fund is permitted to lend its portfolio
securities provided that (i) the Fund receives at least
100 percent cash collateral from the borrower; (ii) the
borrower adds to such collateral whenever the price of
the securities rises (i.e., marked-to-market on a daily
basis); (iii) the Fund may terminate the loan at any
time; (iv) the Fund receives reasonable interest on such
loan and any dividends, interest or other distributions
on the loaned securities, and any increase in the market
B-4<PAGE>
value of the loaned securities; (v) the Fund is not
required to pay any service, placement or other fees in
connection with such loan; and (vi) while voting rights
on the loaned securities may pass to the borrower, the
Fund will terminate the loan and regain the right to
vote the securities if a material event adversely
affecting the investment occurs. Up to 30% of the
assets of the Fund may be loaned; however, due to the
size of the Fund, the Fund has no intention of engaging
in securities loans in the foreseeable future.
(b) Although the Fund is permitted in invest its
assets in shares of money market funds, the Fund will
not purchase shares of money market funds in the
foreseeable future.
PORTFOLIO TURNOVER
The investment strategy of Pool A is not expected
to exceed an annual portfolio turnover rate of 10 percent.
Pool B will employ multiple investment strategies, some of
which may involve high portfolio turnover. Consequently, the
portfolio turnover of Pool B is expected to be higher than
that of Pool A but is not expected to exceed 100 percent
annually. See "BROKERAGE ALLOCATION AND OTHER TRANSACTIONS."
MANAGEMENT OF THE FUND
Initial members of the Board of Directors of the
Fund and officers of the Fund, together with information as
to their principal occupations during at least the last five
years, are shown below.
B-5<PAGE>
(1) (2) (3)
Name, Address Positions Held Principal Occupation(s)
and Age with the Fund During Past 5 Years
------------- -------------- -----------------------
Amos Bradford (49)* Director Program Director,
Professor and Member of
Executive Committee, SBI
from before 1990 to
present; Director of
Investment Advisor since
1989; and President and
Treasurer of Investment
Advisor since July, 1993.
Vivian Carpenter (42)* Director Director of Academic
Affairs, Professor and
Member of Executive
Committee, SBI from
August, 1992 to present;
Assistant Professor, Wayne
State University, from
before 1990 to 1992;
Visiting Assistant
Professor, University of
Michigan, from 1990 to
1992; Director of
Investment Advisor since
August, 1992; and
Executive Vice President
and Secretary of
Investment Advisor since
July, 1993.
Marx Cazenave (55) Director President and Chief
Executive Officer,
Progress Investment
Management Co. (a
registered investment
advisor), 1990 to present;
President, Cazenave &
Company (a registered
broker-dealer), 1986 to
present; President of the
National Investment
Managers Association (a
trade organization).
B-6<PAGE>
Lucille Dabney (41) Director Director, The Cultural
Arts Council of Houston,
from September, 1992 to
present; Professional
Development Associate,
SBI, from November, 1991
to August, 1992; Director
of Marketing, Madison
International
(architecture and
engineering), from
January, 1990 to November,
1991.
Sybil Mobley (69)* Director Dean of SBI from before
1990 to the present;
Director of Investment
Advisor since February,
1989; Chairman of
Investment Advisor since
July, 1993; Director of
Anheuser Busch Companies,
Inc., Champion
International Corp., Dean
Witter Discover & Co.,
Hershey Foods Corporation,
Sears, Roebuck and Co.,
and Southwestern Bell
Corporation.
Craig Washington (35) Director Controller and U.S. Field
Procurement Manager,
Hewlett-Packard Co., from
before 1990 to the
present; President,
CompuKids (computer
education) from September,
1990 through July, 1991.
Darrell Williams (38)* Director, Chief Operating Officer
President and Chief Investment
and Officer of Investment
Treasurer Advisor since July, 1993;
Director of Investment
Advisor since September,
1992; Vice President,
Precision Asset
Management, from March,
1990 to July, 1992;
Chairman of the Leon
B-7<PAGE>
County Investment
Oversight Committee and a
member of such Committee
from 1994 to present.
In May, 1992, Mr. Williams
consented, for purposes of
such proceeding only,
without admitting or
denying any allegations,
to a violation of the NASD
Rules of Fair Practice
relating to his failure to
pay an arbitration award
of $4,000 which resulted
from a dispute between Mr.
Williams and a brokerage
firm at which he was
employed. The NASD fined
Mr. Williams and
prohibited Mr. Williams
from association with any
member firm; provided,
however, that the NASD
provided that the
prohibition would be
lifted upon Mr. Williams
satisfying such
arbitration award. Mr.
Williams is presently
paying the arbitration
award.
Marion Sillah (50) Vice Assistant Professor of
President Business Administration,
and SBI, from August, 1994 to
Secretary present; Associate
Professor of Business
Administration, Morehouse
College, Department of
Economics and Business,
from before 1990 to
August, 1994.
----------
* indicates a director who is an "interested person" of the
Fund, as defined in the 1940 Act.
B-8<PAGE>
The address of all Fund officers and directors is
c/o One SBI Plaza, School of Business and Industry, Florida
A&M University, Tallahassee, Florida 32307. Directors and
officers of the Fund do not own any shares of common stock of
the Fund as of October 31, 1995. Neither officers nor
directors of the Fund will be compensated for their service
in such capacities; however, directors who are not affiliated
with SBI may be reimbursed for their out-of-pocket expenses.
The following information supplements and should be
read in conjunction with the section in the Fund's Prospectus
entitled "MANAGEMENT OF THE FUND."
There normally will be no meetings of shareholders
for the purpose of electing directors unless and until such
time as less than a majority of the directors holding office
have been elected by the shareholders of the Fund.
Shareholders may remove a director by the affirmative vote of
a majority of the outstanding shares of common stock of the
Fund, voting together as a single class. In addition, the
Board of Directors is required to call a meeting of
shareholders for the purpose of voting upon the question of
removal of any director when requested in writing to do so by
the shareholders of record of not less than 10 percent of the
Fund's outstanding voting securities.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
SBI or the Investment Advisor (SBI Capital
Management and Research Corporation, a Florida not-for-profit
corporation) may be deemed to control the Fund as a result of
its influence over the management and operations of the Fund.
SBI and the Investment Advisor are located at One SBI Plaza,
School of Business and Industry, Florida A&M University,
Tallahassee, Florida 32307. See "INVESTMENT ADVISORY AND
OTHER SERVICES -- Investment Advisor." As of October 31,
1995, the Investment Advisor is the sole shareholder of the
Fund and holds 100 shares of Class A Common Stock and 100
shares of Class B Common Stock of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
The following information supplements and should be
read in conjunction with the sections in the Fund's
Prospectus entitled "MANAGEMENT OF THE FUND -- The Investment
Advisor," "--Administrative, Transfer Agent and Custodial
Services" and "--Expenses."
B-9<PAGE>
INVESTMENT ADVISOR
SBI Capital Management and Research Corporation, a
Florida not-for-profit corporation, acts as the Fund's
Investment Advisor. The following persons control or may be
deemed to control the Investment Advisor:
SBI, through the ex officio memberships on the
Board of the Investment Advisor of the members of
the Executive Committee of SBI and other
relationships, may be deemed to control the
Investment Advisor; Amos Bradford, Vivian
Carpenter, Sybil Mobley and Darrell Williams, each
as a director of the Investment Advisor may be
deemed to control the Investment Advisor.
The following persons are directors of both the
Fund and of the Investment Advisor: Amos Bradford, Vivian
Carpenter, Sybil Mobley and Darrell Williams. In addition,
Darrell Williams, Chief Investment Officer and Chief
Operating Officer of the Investment Advisor, is the President
and Treasurer of the Fund.
The advisory fees payable by the Fund to the
Investment Advisor are 0.10% per annum of the average net
assets of Pool A (to be paid out of the total assets in Pool
A) and 0.50% per annum of the average net assets of Pool B
(to be paid out of the total assets in Pool B), in each case
payable by the Fund quarterly in arrears. The fees payable
to the Investment Advisor accrue on a daily basis and, to the
extent unpaid, will be deducted from the net asset value of
the applicable Pool for purposes of determining the purchase
price and the redemption price for shares.
The fees payable to the Investment Advisor by the
Fund will be applied to meeting the operating expenses of the
Investment Advisor, and any profits realized by the
Investment Advisor will be distributed to SBI at least
annually to further its scholastic and educational programs.
The Investment Advisor performs the following
services for the Fund in accordance with its investment
advisory contract: investment advice, research, office
facilities (which may be in the Investment Advisor's own
offices) and supplies, and certain internal executive and
administrative services; compilation and maintenance of such
records with respect to its operations as may reasonably be
required; and general assistance in all aspects of the Fund's
operations. Under the investment advisory contract, the
Investment Advisor bears all expenses in connection with the
performance of its services in return for its advisory fees.
B-10<PAGE>
SBI has borne the organizational costs of the Fund
and fees and expenses incident to the filing of the initial
registration statement under federal law covering the shares
of the Fund for public sale. All other expenses of the Fund
will be borne by the Fund. If in any fiscal year the
aggregate expenses of the Fund (including fees pursuant to
the Investment Advisory Agreement, but excluding taxes,
brokerage and, with the prior written consent of the
necessary state securities commission, extraordinary
expenses) exceed the expense limitations of any state having
jurisdiction over the Fund, the Fund may deduct from the fees
to be paid hereunder, to the extent required by state law,
the amount of such excess. The Investment Advisor's
obligation pursuant to this provision is limited to the
amount of its fees under the Investment Advisory Agreement.
The Advisory Board of the Investment Advisor
reviews and advises on the investment strategies utilized in
investing the assets of the Fund, the universe of companies
eligible for investment by Pool B and the parameters within
which such investments may be made prior to their
implementation; and reviews the implementation of such
strategies on an ongoing basis. As of the date of this
Statement of Additional Information, the Advisory Board
consists of Messrs. Leon G. Cooperman, Dale F. Frey, Robert
M. Gardiner, Robert G. Kirby and Dean Sybil C. Mobley.
Members of the Advisory Board are appointed by the
Board of Directors of the Investment Advisor. No member of
the Advisory Board is compensated for serving in such
capacity; however, such members of the Advisory Board who are
not affiliated with SBI may be reimbursed for their out-of-
pocket expenses.
ADMINISTRATIVE, TRANSFER AGENT AND CUSTODIAL AND OTHER
SERVICES
State Street Bank and Trust Company ("State Street
Bank") acts as the Fund's transfer agent and custodian, in
which capacities it holds the Fund's common stock on deposit
for shareholders of the Fund, acts as the Fund's agent for
the redemption of shares, holds the securities purchased by
the Fund and the cash, cash equivalents or money market
instruments of the Fund in safekeeping, performs securities
clearance services and other administrative services on
behalf of the Fund and will send each shareholder of the Fund
confirmations and statements with respect to such
shareholder's investment in the Fund. State Street Bank will
prepare and maintain certain books and records on behalf of
the Fund, including ledgers and capital stock accounts, trial
B-11<PAGE>
balances, ledger reports, portfolio transaction, position and
income reports, and calculation of net asset values daily.
State Street Bank receives annual compensation for its
services pursuant to its agreement with the Fund which is
billed and payable monthly based upon average monthly net
assets of each of Pool A and Pool B, plus reimbursement for
out-of-pocket expenses. State Street Bank has agreed that
its total compensation for the first year of operation of the
Fund will not exceed .10% of average net assets.
The Fund has selected McQuay and Company, certified
public accountants of Tampa, Florida, as the Fund's
independent auditors.
The salaries of the administrative personnel of the
Fund, as well as the expenses of the faculty and other
individuals related to the educational objectives of the
Fund, will not be expenses of the Fund.
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan which
provides for the payment of distribution expenses by the
Fund. The Plan authorizes the Fund to make quarterly
payments to the distributor of shares of the Fund, not
exceeding in the aggregate a maximum annual amount equal to
0.05% of the average daily net asset value of Pool A and of
Pool B during each fiscal year of the Fund, as agreed to
pursuant to the terms of the Distribution Agreement entered
into between the Fund and the distributor of its shares to
reimburse the distributor for its costs incurred in
connection with the distribution of shares of the Fund,
including but not limited to, advertising, printing and
mailing promotional literature, telephone calls and lines,
computer terminals and personnel. Pursuant to the terms of
the Plan, the distributor may compensate other qualified
recipients (as described in the Plan) for providing
distribution assistance with respect to shares of the Fund.
BROKERAGE ALLOCATION AND OTHER TRANSACTIONS
The Investment Advisor has general responsibility
for placing orders on behalf of the Fund for the purchase or
sale of portfolio securities. Allocation of brokerage
transactions, including their frequency, is made in the best
judgment of the Investment Advisor and in a manner deemed to
obtain, at reasonable expense, the best execution of the
Fund's portfolio transactions. The primary consideration is
the prompt execution of orders at the most favorable net
price. However, brokers may also be selected because of
B-12<PAGE>
their ability to provide investment information or research
that will be of assistance to the performance by the
Investment Advisor of its investment management services to
the Fund. The types of research received from brokers will
include company and industry reports, earnings estimates and
revisions, and performance ratings of companies. The
research and other investment information received from
brokers (other than information with respect to changes in
the S&P Index) will be used only by the Investment Advisor in
making investment decisions for Pool B, although transactions
for both Pools may be effected through brokers providing such
research.
The overall reasonableness of brokerage commissions
paid is evaluated by the Investment Advisor on the basis of
all relevant factors and considerations, including, insofar
as feasible, the execution capabilities required by the
transaction, the ability and willingness of the broker to
facilitate the Fund's portfolio transactions by participating
therein for its own account, the importance to the Fund of
speed, efficiency or confidentiality, the broker's apparent
familiarity with sources from or to whom particular
securities might be purchased or sold, the provision of
investment information or research and other relevant
matters. Accordingly, the Investment Advisor is not
obligated to obtain the lowest brokerage commission rates
available or to combine or arrange orders to obtain the
lowest brokerage commission rates available on transactions.
Portfolio turnover rates may vary from year to
year, as well as within a year and, based on the contemplated
investment strategies, the turnover rate of Pool B is
expected to be higher than that of Pool A. Higher turnover
rates are likely to result in comparatively greater brokerage
expenses.
The Fund may utilize the brokerage services of Dean
Witter Reynolds, Inc. ("DWR"), and pay brokerage commissions
to DWR, in accordance with applicable rules and regulations
under the 1940 Act and with the Fund's policies with respect
to brokerage allocation. Dean Mobley, Chairman of the Fund
and of the Investment Advisor and a member of the Advisory
Board of the Investment Advisor, is a director of Dean Witter
Discover & Co., the parent corporation of DWR. The Fund will
not engage in principal transactions with DWR or with any
other broker or person which is an affiliate of the Fund or
an affiliate of an affiliate of the Fund.
B-13<PAGE>
CAPITAL STOCK
The Fund's only securities are the Class A Common
Stock and the Class B Common Stock. Neither class of common
stock has any preemptive rights. For a full discussion of
the characteristics of each class of common stock, including
dividend rights, voting rights, liquidation rights,
conversion rights and redemption provisions, see the section
entitled "SHARES OF THE FUND" in the Fund's Prospectus.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
The following information supplements and should be
read in conjunction with the sections in the Fund's
Prospectus entitled "SHARES OF THE FUND," "PURCHASE OF FUND
SHARES" and "REDEMPTION OF FUND SHARES."
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and offering
price per share ($1,000/100 shares
issued and outstanding) $10.00
======
Class B Shares
Net asset value and offering
price per share ($1,000/100 shares
issued and outstanding) $10.00
======
REDEMPTION
A shareholder's right to redeem its shares may be
suspended or the date of payment postponed (a) during any
period when the New York Stock Exchange is closed, (b) when
trading in the markets the Fund normally utilizes is
restricted, or when an emergency exists as determined by the
Securities and Exchange Commission (the "Commission") so that
disposal of the Fund's investments or determination of net
asset value is not reasonably practicable or (c) for such
periods as the Commission by order may permit to protect the
Fund's shareholders.
B-14<PAGE>
Redemption in Kind. If the Board of Directors
determines that it would be detrimental to the best interests
of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption
price in whole or in part by a distribution in kind of
securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Commission. The
Fund, however, has elected to be governed by Rule 18f-1 under
the 1940 Act pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or
one percent of the net asset value of the Fund during any 90-
day period for any one shareholder. Should redemptions by
any shareholder exceed such limitation, the Fund will have
the option of redeeming the excess in cash or in kind. If
shares are redeemed in kind, the redeeming shareholder might
incur brokerage costs in converting the assets into cash.
PRICING
Net asset value of a Pool is determined by
subtracting the liabilities of such Pool (including reserves
for anticipated expenses) from the value of the total assets
of such Pool and dividing the resulting amount by the number
of shares and fractional shares outstanding which constitute
an interest in such Pool. In determining net asset value,
securities for which current market quotations are readily
available are valued, as of the close of each day of trading
on the New York Stock Exchange, in the following manner:
securities traded on national exchanges are valued at the
closing sales price or, if no sale occurred, at the last
price traded. Over-the-counter securities for which no sales
are reported on a particular day are valued at the last
closing price or, if unavailable, at the average of the bid
and the ask prices. In the unlikely event that no market
quotations are available for a security held by the Fund,
such security shall be valued according to the good faith
judgment of the Fund's Board of Directors. Net asset value
will be calculated once daily at the close of regular trading
on the NYSE (generally at 4:00 p.m. Eastern Standard Time)
except on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
TAX STATUS
The following information supplements and should be
read in conjunction with the section in the Fund's Prospectus
entitled "SHARES OF THE FUND -- Certain Tax Consequences."
B-15<PAGE>
The following is only a summary of certain
additional tax considerations generally affecting the Fund
and its shareholders that are not fully described in the
Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its
shareholders, and the discussion here and in the Fund's
Prospectus is not intended as a substitute for careful tax
planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
As a regulated investment company under Subchapter
M of the Code, each series of the Fund is exempt from federal
income tax on its net investment income and capital gains
which it distributes to shareholders, provided that it
distributes at least 90 percent of its investment company
taxable income (generally, net investment income and the
excess of net short-term capital gain over net long-term
capital loss) for the year (the "Distribution Requirement")
and satisfies certain other requirements of the Code that are
described below. Distributions of investment company taxable
income made during the taxable year or, under specified
circumstances, within twelve months after the close of the
taxable year, including distributions made in the form of
additional shares of common stock of the Fund, will satisfy
the Distribution Requirement.
In addition to satisfaction of the Distribution
Requirement, each series of the Fund must derive at least 90
percent of its gross income from the sale or other
disposition of stocks, securities or foreign currencies, or
from other income derived with respect to its business of
investing in such stock, securities or currencies, and derive
less than 30 percent of its gross income from the sale or
other disposition of stocks, securities and certain other
investments held for less than three months. Moreover, at
the close of each quarter of its taxable year, at least 50
percent of the value of a series' assets must consist of cash
and cash items, government securities, securities of other
regulated investment companies, and securities of other
issuers (as to which such series has not invested more than 5
percent of the value of its total assets in any one issuer
and as to which such series does not hold more than 10
percent of the outstanding voting securities of any one
issuer), and no more than 25 percent of the value of its
total assets may be invested in the securities of any one
issuer (other than government securities and securities of
other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the
same or similar trades or businesses or related trades or
businesses.
B-16<PAGE>
Due to the limitation that less than 30 percent of
gross income of the Fund may be derived from gains realized
on the sale of securities held for less than three months,
the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them:
(i) selling investments, including stock index futures, held
for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii)
writing calls on investments held less than three months;
(iii) purchasing calls or puts which expire in less than
three months; (iv) effecting closing transactions with
respect to calls or puts purchased less than three months
previously; and (v) exercising puts or calls held by the Fund
for less than three months.
Generally, the Fund is required for federal income
tax purposes to recognize as income for each taxable year its
net unrealized gains and losses on futures contracts as of
the end of the year as well as those actually realized during
the year. Gain or loss recognized with respect to a futures
contract will generally be 60 percent long-term capital gain
or loss and 40 percent short-term capital gain or loss,
without regard to the holding period of the contract.
The foregoing requirements of the Code may inhibit
Pool A and Pool B in their efforts to achieve their
investment objectives.
FUND DISTRIBUTIONS
Investors should be careful to consider the tax
implications of buying shares of a series of the Fund just
prior to the record date of a deemed ordinary income dividend
or capital gain distribution. The price of shares purchased
at that time may reflect the amount of the forthcoming deemed
ordinary income dividend or capital gain distribution. Those
purchasing just prior to a deemed ordinary income dividend or
capital gain distribution will nevertheless be taxed on the
entire amount of the distribution received.
The Code allows a 70 percent dividends-received
deduction (the "Deduction") to corporate shareholders of any
series of the Fund. Special provisions are contained in the
Code as to the eligibility of payments to such shareholders
for the Deduction. The extent to which the deemed ordinary
income dividends paid by a series of the Fund are eligible
for the Deduction is determined by the ratio of the aggregate
dividends received by such series from domestic corporations
in any fiscal year to the deemed ordinary income dividends
paid by such series for that year. For purposes of
B-17<PAGE>
determining the Deduction, a series of the Fund may not take
into account any amount received as a dividend with respect
to any security unless such series has held the security with
respect to which the dividend has been paid for a minimum
period, generally 46 days. Moreover, corporate taxpayers
will have to take into account the entire amount of any
deemed dividend received from a series of the Fund for
purposes of the alternative minimum tax. Deemed capital
gains distributions are not eligible for the Deduction.
OTHER CONSIDERATIONS
A four percent nondeductible excise tax is imposed
on regulated investment companies that fail to distribute in
each calendar year an amount equal to 98 percent of their
ordinary income for the calendar year and 98 percent of their
"capital gain net income" (excess of capital gains over
capital losses) for the one-year period ending on October 31
of such calendar year, even if they satisfy the Distribution
Requirement. The balance of such income must be distributed
during the next calendar year. Both Pool A and Pool B
currently intend to make sufficient deemed distributions of
their ordinary income and capital gain net income prior to
the end of each calendar year to avoid liability for this
excise tax.
Rules of state and local taxation of ordinary
income dividends and capital gain distributions from
regulated investment companies often differ from the rules
for federal income taxation described above. Shareholders
are urged to consult their tax advisors for the application
of the federal rules outlined above to their particular
circumstances and for the application of state and local tax
rules affecting investment in the Fund. Foreign shareholders
are urged to consult their own tax advisors concerning the
applicability of the United States withholding tax.
DISTRIBUTOR
Shares of Pool A and Pool B will be distributed on
a continuous basis by Lamaute Capital Inc. (the
"Distributor"). The Distributor will act as agent for the
distribution of such shares and will transmit promptly any
orders received for purchase of shares to the Transfer Agent
and Custodian.
B-18<PAGE>
PERFORMANCE DATA
The following information supplements and should be
read in conjunction with the section in the Fund's Prospectus
entitled "PERFORMANCE INFORMATION."
Average annual total return is calculated by
determining the ending redeemable value of an investment
purchased with a hypothetical $1,000 payment made at the
beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the
initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and
subtracting 1 from the result.
Total return is calculated by subtracting the
amount of the Fund's net asset value per share at the
beginning of a stated period from the net asset value per
share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the
period), and dividing the result by the net asset value per
share at the beginning of the period.
B-19<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements:
None.
(b) Exhibits:
(1) Articles of Incorporation*
(2) Bylaws*
(5) Form of Investment Advisory Agreement*
(6) Form of Distribution Agreement**
(8) Form of Custody Agreement
(9) Form of Administration Agreement
(10) Opinion and Consent of Ober, Kaler, Grimes &
Shriver**
(13) Form of Agreement with Initial Investor
(15) Form of Rule 12b-1 Plan*
* Electronic restatement of previously-filed exhibit.
** To be filed by amendment.
C-1<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT
State of % of Voting
Name Organization Securities
---- ------------ -----------
SBI Capital Management
and Research Corporation Florida 100%
Due to the fact that the officers and directors of
the Investment Advisor and the officers and a majority of the
directors of the Fund are members of the faculty and
administration of SBI, among other factors, SBI may be deemed
to control the Investment Advisor and the Fund. SBI is a
part of the Florida Agricultural and Mechanical University,
which is an educational institution governed by the Board of
Education of the State of Florida. SBI has established the
Fund as part of its educational curriculum and neither
Florida A&M University nor the Board of Education of the
State of Florida has passed upon the terms of the Fund or the
prospectus relating to the Fund. SBI does not own any voting
securities of the Fund.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
Number of Record
Holders as of
Title of Class November 30, 1995
-------------- -----------------
Class A Common Stock,
par value $.001 per share 1
Class B Common Stock,
par value $.001 per share 1
ITEM 27. INDEMNIFICATION
The following is a summary of various provisions
included in the Fund's Articles of Incorporation and By-laws,
and is qualified in its entirety by reference to such documents
in the respective forms filed as exhibits hereto.
Reference is made to Section 2-418 of the Maryland
General Corporation Law (the "MGCL"), which provisions
authorize a corporation subject to the MGCL to indemnify
directors, officers, employees, and agents. In addition,
C-2<PAGE>
reference is made to Article EIGHTH of the Registrant's
Articles of Incorporation filed as Exhibit 1 hereto, which
provisions include, among others, the following: (i) no
director or officer of the Registrant shall have any liability
to the Fund or its stockholders for damages; (ii) the Fund
shall indemnify and advance expenses to its currently acting
and former officers and directors to the fullest extent that
indemnification is permitted by the Maryland General Corporate
Law; (iii) the provisions of Article EIGHTH shall not apply to
any liability of an officer or director by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office; (iv) all
references to the MGCL are to the law as from time to time
amended.
The application of these provisions is subject to (i)
Article VIII of the Registrant's By-Laws filed as Exhibit 2
hereto, which provides for the procedures to be followed by any
person requesting indemnification from the Fund and by the
Board of Directors, and by (ii) the following undertaking set
forth in the rules promulgated by the Securities and Exchange
Commission:
Insofar as indemnification for liability 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 Act 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 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 as to whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
C-3<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS
OF INVESTMENT ADVISOR
SBI Capital Management and Research Corporation, the
investment advisor of the Registrant, has had no other business
in the past two fiscal years.
The following individuals serve as directors and
officers of SBI Capital Management and Research Corporation:
Amos Bradford - President and Treasurer and a Director; Vivian
Carpenter - Executive Vice President, Secretary and a Director;
Sybil Mobley - Chairman of the Board and a Director; and
Darrell Williams - Chief Operating Officer and Chief Investment
Officer and a Director. For information about each of these
individuals and their principal occupations in the past two
fiscal years, see the section entitled "MANAGEMENT OF THE FUND"
in the Statement of Additional Information. In addition, Sybil
Mobley is a director of Anheuser Busch Companies Inc., Champion
International Corp., Dean Witter Discover & Co., Hershey Foods
Corporation, Sears, Roebuck and Co., Southwestern Bell
Corporation and the not-for-profit organizations One to One,
the Points of Light Foundation and the International
Association of Black Business Educators.
ITEM 29. PRINCIPAL UNDERWRITERS
Lamaute Capital Inc. does not act as principal
underwriter, depositor or investment advisor for any other
registered investment companies.
The following information is provided with respect to
each director and officer of Lamaute Capital Inc.:
Positions and Offices
Name with Lamaute Capital Inc.
Daniel Lamaute Chairman and Chief Executive Officer
Denise Lamaute President
The business address of each such director and officer is:
8383 Wilshire Boulevard, Suite 840, Beverly Hills, California
90211. None of such persons holds any position or office with
the Fund.
C-4<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
SBI Capital Management and Research Corporation, One
SBI Plaza, School of Business & Industry, Florida A&M
University, Tallahassee, Florida 32307, and the offices of the
custodian and transfer agent of the Fund, State Street Bank and
Trust Company, 175 Newport Avenue, North Quincy, MA 02171.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a)(1) to file an amendment to this registration
statement with certified financial statements
showing the initial capital received before
accepting subscriptions from any persons in
excess of twenty-five;
(b)(1) to file a post-effective amendment, using
financial statements which need not be
certified, within four to six months from the
effective date of Registrant's 1933 Act
Registration Statement;
(c)(1) to provide assistance to the shareholders
concerning the removal of any Director of the
Fund in accordance with the provisions of
Section 16(c) of the 1940 Act as though that
Section applied to the Registrant.
C-5<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has
duly caused this amendment to registration statement to be
signed on its behalf by the undersigned, thereto duly
authorized, in the City of Tallahassee, and State of Florida
on the 15th day of December, 1995.
THE SBI FUND, INC.
By /s/Darrell Williams
----------------------
Darrell Williams,
President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to registration statement has been signed
below by the following persons in the capacities and on the
15th day of December, 1995.
*
-------------------------------
Sybil Mobley, Director
*
-------------------------------
Amos Bradford, Director
*
-------------------------------
Vivian Carpenter, Director
*
-------------------------------
Marx Cazenave, Director
*
-------------------------------
Lucille Dabney, Director
*
-------------------------------
Craig Washington, Director
C-6<PAGE>
/s/Darrell Williams
-------------------------------
Darrell Williams, Director
/s/Darrell Williams
-------------------------------
Darrell Williams, as attorney-
in-fact for the above directors
marked by an asterisk
C-7<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
(1) Articles of Incorporation*
(2) Bylaws*
(5) Form of Investment Advisory Agreement*
(6) Form of Distribution Agreement**
(8) Form of Custody Agreement
(9) Form of Administration Agreement
(10) Opinion and Consent of Ober, Kaler,
Grimes & Shriver**
(13) Form of Agreement with Initial Investor
(15) Form of Rule 12b-1 Plan*
-------------
* Electronic restatement of previously-filed exhibit.
** To be filed by amendment.
C-8
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
THE SBI FUND, INC.
FIRST: The undersigned, Sherri D. Reiss, whose ad-
dress is 299 Park Avenue, NY 10171, being at least eighteen
years of age, hereby forms a corporation under the Maryland
General Corporation Law.
SECOND: The name of the corporation (hereinafter
called the "Corporation") is The SBI Fund, Inc.
THIRD: The Corporation is formed for the following
purpose or purposes:
(a) to conduct, operate and carry on the business
of an investment company;
(b) to subscribe for, invest in, reinvest in, pur-
chase or otherwise acquire, hold, pledge, sell, assign,
transfer, lend, write options on, exchange, distribute
or otherwise dispose of and deal in and with securities
of every nature, kind, character, type and form, includ-
ing without limitation of the generality of the forego-
ing, all types of stocks, shares, futures contracts,
bonds, debentures, notes, bills and other negotiable or
nonnegotiable instruments, obligations, evidences of in-
terest, certificates of interest, certificates of par-
ticipation, certificates, interests, evidences of owner-
ship, guarantees, warrants, options or evidences of in-
debtedness issued or created by or guaranteed as to
principal and interest by any state or local government
or any agency or instrumentality thereof, by the United
States Government or any agency, instrumentality, terri-
tory, district or possession thereof, by any foreign
government or any agency, instrumentality, territory,
district or possession thereof, by any corporation orga-
nized under the laws of any state, the United States or
any territory or possession thereof or under the laws of
any foreign country; commodities of every nature, kind,
character, type and form, including without limitation
of the generality of the foregoing, tangible or intan-
gible, which is, or contracts relating to which are,
traded on any commodities exchange, and any contract, <PAGE>
certificate, receipt or other instruments representing
rights to receive, purchase, sell or subscribe for the
same, or evidencing or representing any other rights or
interests therein; bank certificates of deposit, bank
time deposits, bankers' acceptances and commercial pa-
per; to pay for the same in cash or by the issue of
stock, including treasury stock, bonds or notes of the
Corporation or otherwise; and to exercise any and all
rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind
and description, including without limitation, the right
to consent and otherwise act with respect thereto, with
power to designate one or more persons, firms, associa-
tions or corporations to exercise any of said rights,
powers and privileges in respect of any said instru-
ments;
(c) to borrow money or otherwise obtain credit and
to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Corporation;
(d) to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in, shares of stock of the
Corporation, including shares of stock of the Corpora-
tion in fractional denominations, and to apply to any
such repurchase, redemption, retirement, cancellation or
acquisition of shares of stock of the Corporation any
funds or property of the Corporation, whether capital or
surplus or otherwise, to the full extent now or hereaf-
ter permitted by the laws of the State of Maryland;
(e) to conduct its business, promote its purposes
and carry on its operations in any and all of its
branches and maintain offices both within and without
the State of Maryland, in any States of the United
States of America, in the District of Columbia and in
any other parts of the world; and
(f) to do all and everything necessary, suitable,
convenient, or proper for the conduct, promotion and at-
tainment of any of the businesses and purposes herein
specified or which at any time may be incidental thereto
or may appear conducive to or expedient for the ac-
complishment of any of such businesses and purposes and
which might be engaged in or carried on by a corporation
incorporated or organized under the Maryland General
Corporation Law, and to have and exercise all of the
powers conferred by the laws of the State of Maryland
-2-<PAGE>
upon corporations incorporated or organized under the
Maryland General Corporation Law.
The foregoing provisions of this Article THIRD
shall be construed both as purposes and powers and each as an
independent purpose and power. The foregoing enumeration of
specific purposes and powers shall not be held to limit or
restrict in any manner the purposes and powers of the Corpo-
ration nor shall the expression of any thing be deemed to ex-
clude another, though it be of like nature, not expressed,
and the purposes and powers herein specified shall, except
when otherwise provided in this Article THIRD, be in no wise
limited or restricted by reference to, or inference from, the
terms of any provision of this or any other Article of these
Articles of Incorporation; provided, however, that the Corpo-
ration shall not conduct any business, promote any purpose,
or exercise any power or privilege within or without the
State of Maryland which, under the laws thereof, the Corpora-
tion may not lawfully conduct, promote, or exercise.
FOURTH: The post office address of the principal
office of the Corporation within the State of Maryland, and
of the resident agent of the Corporation within the state of
Maryland, is The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock
which the Corporation has authority to issue is twenty mil-
lion (20,000,000) shares of Common Stock, all of which are of
the par value of one tenth of one cent ($.001) each, of which
ten million (10,000,000) shares are designated as Class A
Common Stock and ten million (10,000,000) shares are desig-
nated as Class B Common Stock.
(2) The aggregate par value of all the authorized
shares of stock is twenty thousand ($20,000) dollars.
(3) The Board of Directors of the Corporation is
authorized, from time to time, to fix the price or the mini-
mum price or the consideration or minimum consideration for,
provided the manner of fixing such price or consideration is
not inconsistent with any provision of the Investment Company
Act of 1940 (the "Investment Company Act"), and to issue, the
shares of stock of the Corporation.
(4) The Board of Directors of the Corporation is
authorized, from time to time, to classify or to reclassify,
as the case may be, any unissued shares of stock of the Cor-
poration.
-3-<PAGE>
(5) Subject to the power of the Board of Directors
to reclassify unissued shares, the shares of each class of
stock of the Corporation shall have the following prefer-
ences, conversion and other rights, voting powers, restric-
tions, limitations as to dividends, qualifications and terms
and conditions of redemption:
(i) The "assets belonging to" a class of stock of
the Corporation, subject only to the rights of credi-
tors, shall consist of all consideration received by the
Corporation for the issuance or sale of shares of such
class of stock and all net income, earnings and profits
thereof, net of redemptions and distributions with re-
spect to such shares.
(ii) The assets belonging to a class shall be
charged with the liabilities of the Corporation in re-
spect of such class and with such class' share of the
general liabilities of the Corporation, in the latter
case in the proportion that the net asset value of such
class bears to the net asset value of all classes. The
determination of the Board of Directors shall be conclu-
sive as to the allocation of liabilities, including ac-
crued expenses and reserves, to a class.
(iii) Dividends or distributions on shares of each
class, whether payable in stock of the class or any
other class of stock of the Corporation or cash, shall
be paid only out of earnings, surplus or other assets
belonging to such class.
(iv) In the event of the liquidation or dissolution
of the Corporation, stockholders of each class shall be
entitled to receive, as a class, out of the assets of
the Corporation available for distribution to stockhold-
ers, the assets belonging to such class and the assets
so distributable to the stockholders of such class shall
be distributed among such stockholders in proportion to
the number of shares of such class held by them.
(v) On each matter submitted to a vote of the
stockholders, each holder of a share of stock shall be
entitled to one vote for each such share of stock stand-
ing in his name on the books of the Corporation ir-
respective of the class thereof; provided, however, that
to the extent class voting is required by the Investment
Company Act or Maryland law as to any such matter, those
requirements shall apply.
-4-<PAGE>
Except as provided above, all provisions of the Articles of
Incorporation relating to stock of the Corporation shall ap-
ply to shares of, and to the holders of, all classes of
stock.
(6) Notwithstanding any provisions of the Maryland
General Corporation Law requiring a greater proportion than a
majority of the votes of stockholders entitled to be cast in
order to take or authorize any action, any such action may be
taken or authorized upon the concurrence of a majority of the
aggregate number of votes entitled to be cast thereon.
(7) The presence in person or by proxy of the
holders of one-third of the shares of stock of the Corpora-
tion entitled to vote (without regard to class) shall consti-
tute a quorum at any meeting of the stockholders, except with
respect to any matter which, under applicable statutes or
regulatory requirements, requires approval by a separate vote
of one or more classes of stock, in which case the presence
in person or by proxy of the holders of one-third of the
shares of stock of each class required to vote as a class on
the matter shall constitute a quorum.
(8) The Corporation may issue shares of stock in
fractional denominations to the same extent as its whole
shares, and shares in fractional denominations shall be
shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole shares,
including, without limitation, the right to vote, the right
to receive dividends and distributions and the right to par-
ticipate upon liquidation of the Corporation.
(9) No holder of any shares of any class of the
Corporation shall be entitled as of right to subscribe for,
purchase, or otherwise acquire any shares of any class which
the Corporation proposes to issue, or any rights or options
which the Corporation proposes to issue or to grant for the
purchase of shares of any class or for the purchase of any
shares, bonds, securities, or obligations of the Corporation
which are convertible into or exchangeable for, or which
carry any rights to subscribe for, purchase, or otherwise ac-
quire shares of any class of the Corporation; and any and all
of such shares, bonds, securities or obligations of the Cor-
poration, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have
been reacquired and have treasury status, and any and all of
such rights and options may be granted by the Board of Direc-
tors to such persons, firms, corporations and associations,
and for such lawful consideration, and on such terms, as the
-5-<PAGE>
Board of Directors in its discretion may determine, without
first offering the same, or any thereof, to any said holder.
SIXTH: (1) Any holder of shares of stock of the
Corporation may require the Corporation to redeem and the
Corporation shall be obligated to redeem at the option of
such holder all or any part of the shares of the Corporation
owned by said holder, at the redemption price, pursuant to
the method, upon the terms and subject to the conditions
hereinafter set forth:
(a) The redemption price per share shall be
the net asset value per share determined at such
time or times as the Board of Directors of the Cor-
poration shall designate in accordance with the
provisions of the Investment Company Act.
(b) Payment of the redemption price by the
Corporation may be made either in cash or in secu-
rities or other assets at the time owned by the
Corporation or partly in cash and partly in securi-
ties or other assets at the time owned by the Cor-
poration, as the Board of Directors may deem advis-
able. The value of any part of such payment to be
made in securities or other assets of the Corpora-
tion shall be the value employed in determining the
redemption price.
(c) Except as otherwise permitted by the In-
vestment Company Act, payment of the redemption
price shall be made on or before the seventh day
following the day on which the shares are properly
presented for redemption hereunder, except that de-
livery of any securities included in any such pay-
ment shall be made as promptly as any necessary
transfers on the books of the issuers whose securi-
ties are to be delivered may be made.
(d) The right of any holder of shares of
stock redeemed by the Corporation as provided in
this Article SIXTH to receive dividends or distri-
butions thereon and all other rights of such holder
with respect to such shares shall terminate at the
time as of which the redemption price of such
shares is determined, except the right of such
holder to receive (i) the redemption price of such
shares from the Corporation in accordance with the
provisions hereof, and (ii) any dividend or distri-
bution to which such holder had previously become
-6-<PAGE>
entitled as the record holder of such shares on the
record date for such dividend or distribution.
(e) Redemption of shares of stock by the Cor-
poration is conditional upon the Corporation having
funds or property legally available therefor.
(2) Net asset value shall be determined as pro-
vided in the Investment Company Act, and, except as so pro-
vided, shall be computed in accordance with the following
rules:
Net asset value per share of a class shall be determined
by dividing:
(i) The total value of the assets belonging to
such class determined as provided in Subsection (3)
below less, to the extent determined by or pursuant
to the direction of the Board of Directors, all
debts, obligations and liabilities of such class
(which debts, obligations and liabilities shall in-
clude, without limitation of the generality of the
foregoing, any and all debts, obligations, li-
abilities, or claims, of any and every kind and na-
ture, fixed, accrued and otherwise, including the
estimated accrued expenses of management and super-
vision, administration and distribution and any re-
serves or charges for any or all of the foregoing,
whether for taxes, expenses or otherwise) but ex-
cluding such class' liability upon its shares and
its surplus, by
(ii) The total number of shares of such class
outstanding.
The assets and liabilities of the Corporation shall
be determined in accordance with generally accepted ac-
counting principles; provided, however, that in deter-
mining the liabilities, there shall be included such re-
serves for taxes or contingent liabilities as may be au-
thorized or approved by the Board of Directors, and pro-
vided further that in connection with the accrual of any
fee or refund payable to or by an investment adviser of
the Corporation, the amount of which accrual is not
definitely determinable as of any time at which the net
asset value of each share of the capital stock of the
Corporation is being determined due to the contingent
nature of such fee or refund, the Board of Directors is
authorized to establish formulae from time to time for
-7-<PAGE>
such accrual, on the basis of the contingencies in ques-
tion to the date of such determination, or on such other
basis as the Board of Directors may establish.
The Board of Directors is empowered, in its abso-
lute discretion, to establish other methods for deter-
mining such net asset value whenever such other methods
are deemed by it to be necessary in order to enable the
Corporation to comply with, or are deemed by it to be
desirable provided they are not inconsistent with, any
provision of the Investment Company Act.
(3) In determining for the purposes of these Ar-
ticles of Incorporation the total value of the assets of the
Corporation at any time, investments and any other assets of
the Corporation shall be valued in such manner as may be de-
termined from time to time by the Board of Directors.
(4) The Corporation, either directly or through an
agent, may repurchase its shares, out of funds legally avail-
able therefor, upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable,
by agreement with the owner at a price not exceeding the net
asset value per share as determined by the Corporation at
such time or times as the Board of Directors of the Corpora-
tion shall designate, and take all other steps deemed neces-
sary or advisable in connection therewith.
(5) The Corporation, pursuant to resolution of the
Board of Directors, may cause the redemption, upon the terms
set forth in such resolution and in subsections (1) - (3) and
(7) of this Article SIXTH, of shares of stock owned by any or
all stockholders whose shares have an aggregate net asset
value of one thousand dollars ($1,000) or less. Notwith-
standing any other provision of this Article SIXTH, if cer-
tificates representing such shares have been issued, the re-
demption price need not be paid by the Corporation until such
certificates are presented in proper form for transfer to the
Corporation; however, the redemption shall be effective, in
accordance with the resolution of the Board of Directors, re-
gardless of whether or not such presentation has been made.
(6) The obligations set forth in this Article
SIXTH may be suspended or postponed as may be permissible un-
der the Investment Company Act.
(7) The Board of Directors may establish other
terms and conditions and procedures for redemption, including
requirements as to delivery of certificates evidencing
shares, if issued.
-8-<PAGE>
(8) Whenever under these Articles of Incorpora-
tion, the Board of Directors of the Corporation is permitted
or required to place a value on assets of the Corporation,
such action may be delegated by the Board, and/or determined
in accordance with a formula determined by the Board, to the
extent permitted by the Investment Company Act.
SEVENTH: (1) The number of directors of the Cor-
poration, until such number shall be increased or decreased
pursuant to the by-laws of the Corporation, is seven (7).
The number of directors shall never be less than the minimum
number prescribed by the Maryland General Corporation Law.
However, the by-laws of the Corporation may fix the number of
directors at a number greater or lesser than that named in
these Articles of Incorporation and may authorize the Board
of Directors, by the vote of a majority of the entire Board
of Directors, to increase or decrease the number of directors
fixed by these Articles of Incorporation or by the by-laws
within a limit specified in the by-laws, provided that in no
case shall the number of directors be less than the minimum
number required by the laws of Maryland and provided further
that the tenure of office of a director shall not be affected
by any decrease in the number of directors, and to fill the
vacancies created by any such increase in the number of di-
rectors. Unless otherwise provided by the by-laws of the
Corporation, the directors of the Corporation need not be
stockholders therein.
(2) The names of the persons who shall act as di-
rectors of the Corporation until the first annual meeting or
until their successors are duly chosen and qualify are as
follows:
Dean Sybil Mobley
Dr. Amos Bradford
Dr. Vivian Carpenter
Mr. Marx Cazenave
Ms. Lucille Dabney
Mr. Irwin Loud III
Mr. Darrell Williams
(3) The initial by-laws of the Corporation shall
be adopted by the directors at their organizational meeting
or by their informal written action, as the case may be.
Thereafter, the power to make, alter, and repeal the by-laws
of the Corporation shall be vested in the Board of Directors
of the Corporation.
(4) Any determination made in good faith by or
pursuant to the direction of the Board of Directors, as to:
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the amount of the assets, debts, obligations, or liabilities
of the Corporation; the amount of any reserves or charges set
up and the propriety thereof; the time of or purpose for cre-
ating such reserves or charges; the use, alteration or can-
cellation of any reserves or charges (whether or not any
debt, obligation or liability for which such reserves or
charges shall have been created shall have been paid or dis-
charged or shall be then or thereafter required to be paid or
discharged); the value of any investment or fair value of any
other asset of the Corporation; the amount of net investment
income; the number of shares of stock outstanding; the esti-
mated expense in connection with purchases or redemptions of
the Corporation's stock; the ability to liquidate investments
in orderly fashion; the extent to which it is practicable to
deliver a cross-section of the portfolio of the Corporation
in payment for any shares; or as to any other matters relat-
ing to the issue, sale, purchase, redemption and/or other ac-
quisition or disposition of investments or shares of the Cor-
poration, or the determination of the net asset value of
shares of the Corporation, shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its
shares, past, present and future, and shares of the Corpora-
tion are issued and sold on the condition and understanding
that any and all such determinations shall be binding as
aforesaid.
EIGHTH: (1) To the fullest extent that limita-
tions on the liability of directors and officers are permit-
ted by the Maryland General Corporation Law, no director or
officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation
on liability applies to events occurring at the time a person
serves as a director or officer of the Corporation whether or
not such person is a director or officer at the time of any
proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to
the fullest extent that indemnification of directors is per-
mitted by the Maryland General Corporation Law. The Corpora-
tion shall indemnify and advance expenses to its officers to
the same extent as its directors and to such further extent
as is consistent with law. The Board of Directors may,
through a by-law, resolution or agreement, make further pro-
visions for indemnification of directors, officers, employees
and agents to the fullest extent permitted by the Maryland
General Corporation Law.
(3) No provision of this Article EIGHTH shall be
effective to protect or purport to protect any director or
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officer of the Corporation against any liability to the Cor-
poration or its stockholders 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.
(4) References to the Maryland General Corporation
Law in this Article EIGHTH are to the law as from time to
time amended. No amendment to the Articles of Incorporation
of the Corporation shall affect any right of any person under
this Article EIGHTH based on any event, omission or proceed-
ing prior to such amendment.
NINTH: The following provisions are hereby
adopted for the purpose of defining and regulating the powers
of the Corporation and the directors and stockholders.
(1) The by-laws of the Corporation may divide the
directors of the Corporation into classes and prescribe the
tenure of office of the several classes, but no class shall
be elected for a period shorter than that from the time of
the election following the division into classes until the
next annual meeting and thereafter for a period shorter than
the interval between annual meetings or for a period longer
than five years, and the term of office of at least one class
shall expire each year. Notwithstanding the foregoing, no
such division into classes shall be made prior to the first
annual meeting of stockholders of the Corporation.
(2) The holders of shares of the Corporation shall
have only such rights to inspect the records, documents, ac-
counts and books of the Corporation as are provided by Mary-
land law, subject to reasonable regulations of the Board of
Directors, not contrary to Maryland law, as to whether and to
what extent, and at which times and places, and under what
conditions and regulations such rights shall be exercised.
(3) Any officer elected or appointed by the Board
of Directors or any committee of said Board or by the stock-
holders or otherwise, may be removed at any time with or
without cause, in such lawful manner as may be provided in
the by-laws of the Corporation. A director may be removed
only as permitted by Maryland law.
(4) Unless the by-laws provide otherwise, the
Board of Directors of the Corporation shall have power to
hold their meetings, to have an office or offices and, sub-
ject to the provisions of the laws of Maryland, to keep the
books of the Corporation, outside of said State at such
places as may from time to time be designated by them.
-11-<PAGE>
(5) In addition to the powers and authority here-
inbefore or by statute expressly conferred upon them, the
Board of Directors may exercise all such powers and do all
such acts and things as may be exercised or done by the Cor-
poration, subject, nevertheless, to the express provisions of
the laws of Maryland, of these Articles of Incorporation and
of the by-laws of the Corporation.
(6) The Corporation may enter into a management or
investment advisory contract or underwriting contract and
other contracts with, and may otherwise do business with any
manager or investment adviser for the Corporation and/or
principal underwriter of the Corporation or any subsidiary or
affiliate of any such manager or investment adviser and/or
principal underwriter and may permit any such firm or corpo-
ration to enter into any contracts or other arrangements with
any other firm or corporation relating to the Corporation in
accordance with the provisions of the Investment Company Act
notwithstanding that the Board of Directors of the Corpora-
tion may be composed in part of partners, directors, officers
or employees of any such firm or corporation and officers of
the Corporation may have been or may be or become partners,
directors, officers or employees of any such firm or corpora-
tion; and in the absence of fraud the Corporation and any
such firm or corporation may deal freely with each other, and
no such contract or transaction between the Corporation and
any such firm or corporation shall be invalidated or in any
way adversely affected thereby, nor shall any director or of-
ficer of the Corporation be liable to the Corporation or to
any stockholder or creditor thereof or to any other persons
for any loss incurred by it or him solely because of the ex-
istence of any such contract or transaction; provided that
nothing herein shall 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.
(7) Whenever any action is taken under these Ar-
ticles of Incorporation under any authorization to take ac-
tion which is permitted by the Investment Company Act, such
action shall be deemed to have been properly taken if such
action is in accordance with the construction of the Invest-
ment Company Act then in effect as expressed in "no action"
letters of the staff of the Securities and Exchange Commis-
sion or any release, rule, regulation or order under the In-
vestment Company Act or any decision of a court of competent
jurisdiction notwithstanding that any of the foregoing shall
-12-<PAGE>
later be found to be invalid or otherwise reversed or modi-
fied by any of the foregoing.
(8) Each prospectus of the Corporation (which term
"prospectus" as used herein shall include any related state-
ment of additional information which is in effect from time
to time) relating to its shares under the Securities Act of
1933 shall be considered as part of the minutes of the pro-
ceedings of the Board of Directors of the Corporation and as
reflective of action required or permitted to be taken by
such Board under these Articles of Incorporation or by the
by-laws of the Corporation, whether or not copies of such
prospectus are included in the minute book(s) of the Corpora-
tion; provided, however, that nothing herein contained shall
affect the liability of any director under the Securities Act
of 1933 and/or the Investment Company Act.
TENTH: All persons who shall acquire stock or
other securities of the Corporation shall acquire the same
subject to the provisions of the Corporation's Articles of
Incorporation, as from time to time amended.
ELEVENTH: From time to time any of the provisions
of the Articles of Incorporation of the Corporation may be
amended, altered or repealed, including amendments which al-
ter the contract rights of any class of stock outstanding,
and other provisions authorized by the Maryland General Cor-
poration Law at the time in force may be added or inserted in
the manner and at the time prescribed by law, and all rights
at any time conferred upon the stockholders of the Corpora-
tion by its Articles of Incorporation are granted subject to
the provisions of this Article.
IN WITNESS WHEREOF, I have adopted and signed these
Articles of Incorporation and do hereby acknowledge that the
adoption and signing are my act.
Dated: August 6, 1993
Sherri D. Reiss, Incorporator
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EXHIBIT 2
AMENDED AND RESTATED BYLAWS
OF
THE SBI FUND, INC.
(A Maryland Corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. No stock cer-
tificates will be issued. Shares of stock of the Corporation
will be evidenced by statements issued by the Corporation or
a duly appointed agent thereof.
2. SHARE TRANSFERS. Upon compliance with provi-
sions restricting the transferability of shares of stock, if
any, transfers of shares of stock of the Corporation shall be
made only on the stock transfer books of the Corporation by
the record holder thereof or by his attorney thereunto autho-
rized by power of attorney duly executed and filed with the
Secretary of the Corporation or with the transfer agent, if
any.
3. RECORD DATE FOR STOCKHOLDERS. The Board of Di-
rectors may fix, in advance, a date as the record date for
the purpose of determining stockholders entitled to notice
of, or to vote at, any meeting of stockholders, or stockhold-
ers entitled to receive payment of any dividend or the allot-
ment of any rights or in order to make a determination of
stockholders for any other proper purpose. Such date, in any
case, shall be not more than 90 days, and in case of a meet-
ing of stockholders not less than 10 days, prior to the date
on which the meeting or particular action requiring such de-
termination of stockholders is to be held or taken.
In lieu of fixing a record date, the Board of Di-
rectors may provide that the stock transfer books shall be
closed for a stated period but not to exceed 20 days. If the
stock transfer books are closed for the purpose of determin-
ing stockholders entitled to notice of, or to vote at, a
meeting of stockholders, such books shall be closed for at
least 10 days immediately preceding such meeting. <PAGE>
If no record date is fixed and the stock transfer
books are not closed for the determination of stockholders:
(1) the record date for the determination of stockholders en-
titled to notice of, or to vote at, a meeting of stockholders
shall be at the close of business on the day on which the no-
tice of meeting is mailed or the day 30 days before the meet-
ing, whichever is the closer date to the meeting; and (2) the
record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any rights
shall be at the close of business on the day on which the
resolution of the Board of Directors declaring the dividend
or allotment of rights is adopted, provided that the payment
or allotment date shall not be more than 60 days after the
date on which the resolution is adopted.
4. MEANING OF CERTAIN TERMS. As used herein in
respect of the right to notice of a meeting of stockholders
or a waiver thereof or to participate or vote thereat or to
consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share of stock" or "shares of stock"
or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record
of outstanding shares of stock when the Corporation is autho-
rized to issue only one class of shares of stock and said
reference also is intended to include any outstanding share
or shares of stock and any holder or holders of record of
outstanding series of stock of any class or series upon which
or upon whom the Articles of Incorporation confers such
rights where there are two or more classes or series of
shares or upon which or upon whom the Maryland General Corpo-
ration Law confers such rights notwithstanding that the Ar-
ticles of Incorporation may provide for more than one class
or series of shares of stock, one or more of which are lim-
ited or denied such rights thereunder.
5. STOCKHOLDER MEETINGS.
(a) ANNUAL MEETINGS. If a meeting of the stock-
holders of the Corporation is required by the Investment Com-
pany Act of 1940, as amended, the rules and regulations
thereunder or interpretations thereof by the Securities and
Exchange Commission (collectively, the "Act"), to elect the
directors, then there shall be submitted to the stockholders
at such meeting the question of the election of directors,
and a meeting called for that purpose shall be designated the
annual meeting of stockholders for that year. In other years
in which no action by stockholders is required for the afore-
said election of directors, no annual meeting need be held.
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(b) SPECIAL MEETINGS. Special stockholder meet-
ings for any purpose may be called by the Board of Directors
or the President and shall be called by the Secretary for the
purpose of removing a Director whenever the holders of shares
entitled to at least ten percent of all the votes entitled to
be cast at such meeting shall make a duly authorized request
that such meeting be called.
The Secretary shall call a special meeting of
stockholders for all other purposes whenever the holders of
shares entitled to at least twenty-five percent of all the
votes entitled to be cast at such meeting shall make a duly
authorized request that such meeting be called. Such request
shall state the purpose of such meeting and the matters pro-
posed to be acted on thereat, and no other business shall be
transacted at any such special meeting. The Secretary shall
inform such stockholders of the reasonably estimated costs of
preparing and mailing the notice of the meeting, and upon
payment to the Corporation of such costs, the Secretary shall
give notice in the manner provided for below.
Notwithstanding the foregoing, unless requested by
stockholders entitled to cast a majority of the votes en-
titled to be cast at the meeting, a special meeting of the
stockholders need not be called at the request of stockhold-
ers to consider any matter that is substantially the same as
a matter voted on at any special meeting of the stockholders
held during the preceding twelve (12) months.
(c) PLACE AND TIME. Stockholder meetings shall be
held at such place, either within the State of Maryland or at
such other place within the United States, and at such date
or dates as the directors from time to time may fix.
(d) QUORUM, ADJOURNMENT OF MEETINGS. The presence
in person or by proxy of the holders of one-third of the
shares of stock of the Corporation entitled to vote (without
regard to class) shall constitute a quorum at any meeting of
the stockholders, except with respect to any matter which,
under applicable statutes or regulatory requirements, re-
quires approval by a separate vote of one or more classes of
stock, in which case the presence in person or by proxy of
the holders of one-third of the shares of stock of each class
required to vote as a class on the matter shall constitute a
quorum. If at any meeting of the stockholders there shall be
less than a quorum present, the stockholders present at such
meeting may, without further notice, adjourn the same from
time to time until a quorum shall attend, but no business
-3-<PAGE>
shall be transacted at any such adjourned meeting except such
as might have been lawfully transacted had the meeting not
been adjourned.
(e) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF
NOTICE. Written or printed notice of all meetings shall be
given by the Secretary and shall state the time and place of
the meeting. The notice of a special meeting shall state in
all instances the purpose or purposes for which the meeting
is called. Written or printed notice of any meeting shall be
given to each stockholder either by mail or by presenting it
to him personally or by leaving it at his residence or usual
place of business not less than ten days and not more than
ninety days before the date of the meeting, unless any pro-
visions of the Maryland General Corporation Law shall pre-
scribe a different elapsed period of time, to each stock-
holder at his address appearing on the books of the Corpora-
tion or the address supplied by him for the purpose of no-
tice. If mailed, notice shall be deemed to be given when de-
posited in the United States mail addressed to the stock-
holder at his post office address as it appears on the
records of the Corporation with postage thereon prepaid.
Whenever any notice of the time, place or purpose
of any meeting of stockholders is required to be given under
the provisions of these bylaws or of the Maryland General
Corporation Law, a waiver thereof in writing, signed by the
stockholder and filed with the records of the meeting,
whether before or after the holding thereof, or actual at-
tendance or representation at the meeting shall be deemed
equivalent to the giving of such notice to such stockholder.
The foregoing requirements of notice also shall apply, when-
ever the Corporation shall have any class of stock which is
not entitled to vote, to holders of stock who are not en-
titled to vote at the meeting, but who are entitled to notice
thereof and to dissent from, any action taken thereat.
(f) STATEMENT OF AFFAIRS. The President of the
Corporation or, if the Board of Directors shall determine
otherwise, some other executive officer thereof, shall pre-
pare or cause to be prepared annually a full and correct
statement of the affairs of the Corporation, including a bal-
ance sheet and a financial statement of operations for the
preceding fiscal year, which shall be filed at the principal
office of the Corporation in the State of Maryland within 120
days after the end of the fiscal year.
(g) CONDUCT OF MEETING. Meetings of the stock-
holders shall be presided over by one of the following offi-
cers in the order of seniority and if present and acting:
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the President, the Chairman of the Board, a Vice President
or, if none of the foregoing is in office and present and
acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation or, in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present
the chairman of the meeting shall appoint a secretary of the
meeting.
(h) PROXY REPRESENTATION. Every stockholder may
authorize another person or persons to act for him by proxy
in all matters in which a stockholder is entitled to partici-
pate, whether for the purposes of determining his presence at
a meeting, or whether by waiving notice of any meeting, vot-
ing or participating at a meeting, expressing consent or dis-
sent without a meeting or otherwise. Every proxy shall be
executed in writing by the stockholder or by his duly autho-
rized attorney-in-fact and filed with the Secretary of the
Corporation. No unrevoked proxy shall be valid after eleven
months from the date of its execution, unless a longer time
is expressly provided therein.
(i) INSPECTORS OF ELECTION. The directors, in ad-
vance of any meeting, may, but need not, appoint one or more
inspectors to act at the meeting or any adjournment thereof.
If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as
an inspector fails to appear or act, the vacancy may be
filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath to exe-
cute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability.
The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares repre-
sented at the meeting, the existence of a quorum and the va-
lidity and effect of proxies, and shall receive votes, bal-
lots or consents, hear and determine all challenges and ques-
tions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result
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, the in-
spector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or
them and execute a certificate of any fact found by him or
them.
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(j) VOTING. Each share of stock shall entitle the
holder thereof to one vote, except in the election of direc-
tors, at which each said vote may be cast for as many persons
as there are directors to be elected. Except for election of
directors, a majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present,
shall be sufficient to take or authorize action upon any mat-
ter which may come before a meeting, unless more than a ma-
jority of votes cast is required by the Corporation's Ar-
ticles of Incorporation, provided however, that the vote re-
quired for the removal of a director shall not exceed two-
thirds of the outstanding shares. A plurality of all the
votes cast at a meeting at which a quorum is present shall be
sufficient to elect a director.
6. INFORMAL ACTION. Except for matters which re-
quire a meeting of stockholders under the Act, any action re-
quired or permitted to be taken at a meeting of stockholders
may be taken without a meeting if a consent in writing, set-
ting forth such action, is signed by all the stockholders en-
titled to vote on the subject matter thereof and any other
stockholders entitled to notice of a meeting of stockholders
(but not to vote thereat) have waived in writing any rights
which they may have to dissent from such action and such con-
sent and waiver are filed with the records of the Corpora-
tion.
ARTICLE II
BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and af-
fairs of the Corporation shall be managed under the direction
of a Board of Directors. The use of the phrase "entire
board" herein refers to the total of directors which the Cor-
poration would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director shall
be a natural person of full age. A director need not be a
stockholder, a citizen of the United States or a resident of
the State of Maryland. The initial Board of Directors shall
consist of seven (7) persons. Thereafter, the number of di-
rectors constituting the entire board shall never be less
than three or the number of stockholders, whichever is less.
At any regular meeting or any special meeting called for that
purpose, a majority of the entire Board of Directors may in-
crease or decrease the number of directors, provided that the
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number thereof shall never be less than three or the number
of stockholders, whichever is less, nor more than twelve and
further provided that the tenure of office of a director
shall not be affected by any decrease in the number of direc-
tors. At least 40 percent of the Board shall be persons who
are not "interested persons" (as defined in the Act), pro-
vided, however, that if the Corporation is in compliance with
the provisions of Section 10(d) of the Act, only one (or
more) member(s) of the Board shall not be an "interested
person" (as defined in the Act).
3. ELECTION AND TERM. The first Board of Direc-
tors shall consist of the directors named in the Articles of
Incorporation and each such director shall hold office until
the first meeting of stockholders or until his successor has
been elected and qualified. Thereafter, directors who are
elected at a meeting of stockholders, and directors who are
elected in the interim to fill vacancies and newly created
directorships, shall hold office until their successors have
been elected and qualified.
4. VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Newly created directorships and any vacancies in the Board of
Directors, other than vacancies resulting from the removal of
directors by the stockholders, may be filled by the Board of
Directors, subject to the provisions of the Act. Newly cre-
ated directorships filled by the Board of Directors shall be
by action of a majority of the entire Board of Directors.
All other vacancies to be filled by the Board of Directors
may be filled by a majority of the remaining members of the
Board of Directors, although such majority is less than a
quorum thereof.
5. MEETINGS.
(a) TIME. Meetings shall be held at such time as
the Board shall fix, except that the first meeting of a newly
elected Board shall be held as soon after its election as the
directors conveniently may assemble.
(b) PLACE. Meetings shall be held at such place
within or without the State of Maryland as shall be fixed by
the Board.
(c) CALL. No call shall be required for regular
meetings for which the time and place have been fixed. Spe-
cial meetings may be called by or at the direction of the
President or of a majority of the directors in office.
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(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER.
Whenever any notice of the time, place or purpose of any
meeting of directors or any committee thereof is required to
be given under the provisions of the Maryland General Corpo-
ration Law or of these bylaws, a waiver thereof in writing,
signed by the director or committee member entitled to such
notice and filed with the records of the meeting, whether be-
fore or after the holding thereof, or actual attendance at
the meeting shall be deemed equivalent to the giving of such
notice to such director or such committee member, provided,
however, that a notice of the time, place or purpose of any
meeting of directors or any committee thereof shall not be
waived if the directors are to vote on a matter upon which
they are required to vote upon under the Act.
(e) QUORUM AND ACTION. A majority of the entire
Board of Directors shall constitute a quorum except when a
vacancy or vacancies prevents such majority, whereupon a ma-
jority of the directors in office shall constitute a quorum,
provided such majority shall constitute at least one-third of
the entire Board unless there are only two or three direc-
tors, in which case not less than two shall constitute a quo-
rum, or there is only one director, in which case that one
director shall constitute a quorum. A majority of the direc-
tors present, whether or not a quorum is present, may adjourn
a meeting to another time and place. Except as otherwise
specifically provided by the Act, the Articles of Incorpora-
tion, the Maryland General Corporation Law or these bylaws,
the action of a majority of the directors present at a meet-
ing at which a quorum is present shall be the action of the
Board of Directors.
(f) CHAIRMAN OF THE MEETING. The Chairman of the
Board, if any and if present and acting, or the President or
any other director chosen by the Board, shall preside at all
meetings.
6. REMOVAL OF DIRECTORS. Any or all of the direc-
tors may be removed for cause or without cause by the stock-
holders, who may elect a successor or successors to fill any
resulting vacancy or vacancies for the unexpired term of the
removed director or directors.
7. COMMITTEES. The Board of Directors may appoint
from among its members a committee or committees composed of
two or more directors and may delegate to such committee or
committees, in the intervals between meetings of the Board of
Directors, any or all of the powers of the Board of Directors
in the management of the business and affairs of the Corpora-
tion, except the power to amend the bylaws, to approve any
-8-<PAGE>
consolidation, merger, share exchange or transfer of assets,
to declare dividends, to issue stock or to recommend to
stockholders any action requiring the stockholders' approval.
In the absence of any member of any such committee, the mem-
bers thereof present at any meeting, whether or not they con-
stitute a quorum, may appoint a member of the Board of Direc-
tors to act in the place of such absent member.
8. INFORMAL ACTION. Except for matters which re-
quire a meeting of the Board of Directors under the Act, any
action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be
taken without a meeting, if a written consent to such action
is signed by all members of the Board of Directors or any
such committee, as the case may be, and such written consent
is filed with the minutes of the proceedings of the Board or
any such committee.
Members of the Board of Directors or any committee
designated thereby may participate in a meeting of such Board
or committee by means of a conference telephone or similar
communications equipment by means of which all persons par-
ticipating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence
in person at a meeting, except for meetings required under
the Act to be held in person.
9. ACTION REQUIRED TO BE TAKEN BY THE BOARD OR BY
DISINTERESTED DIRECTORS THEREOF. Approval by the Board of
Directors of certain matters concerning the Corporation is
specifically required by the Act. Those matters include:
adoption of a Rule 12b-1 plan;
any custody arrangements with a member of a national se-
curities exchange;
the deposit of any of the Corporation's securities with
a securities depository;
any custody arrangements with a foreign custodian;
adoption of a code of ethics with respect to transac-
tions by access persons of the Corporation in securities
in which the Corporation is trading;
the annual determination of the specific time of day at
which the net asset value will be computed.
-9-<PAGE>
Any matter requiring approval by the Board of Directors under
the Act (as then in effect) shall be approved by the Board in
accordance with the requirements of the Act.
In addition, certain matters are required by the
Act to be approved by a majority of the Corporation's disin-
terested directors. Those matters include:
the terms of any investment advisory contract between
the Corporation and the Investment Advisor and the an-
nual continuance of such agreement beyond its initial
two year term;
the annual continuance of any underwriting contract af-
ter its initial two year term;
the selection of the independent public accountant for
the Corporation, annually;
procedures governing brokerage transactions with a bro-
ker which is "affiliated" with the Corporation, review-
ing such procedures annually and making determinations
of compliance with such procedures quarterly;
arrangements with respect to the Corporation's fidelity
bond and any other liability insurance policies of the
Corporation, on an annual basis;
advances to directors or officers seeking indemnifica-
tion (if such advance is not covered by a security
posted by the party requesting such advance or insurance
or the subject of an opinion of counsel), provided such
disinterested directors are not party to the action or
claim with respect to which the request for indemnifica-
tion is made;
any agreement with respect to any activities of the Cor-
poration as an underwriter of securities of an issuer
which is not an investment company;
procedures governing the acquisition of securities by
the Corporation during the existence of an underwriting
syndicate, reviewing such procedures annually and making
determinations of compliance with such procedures quar-
terly.
Any matter requiring approval by the disinterested directors
of the Board under the Act (as then in effect) shall be ap-
proved by a majority of such disinterested directors in ac-
cordance with the requirements of the Act.
-10-<PAGE>
ARTICLE III
OFFICERS
1. OFFICERS, ELECTION AND TERM. The Corporation
may have a Chairman of the Board and shall have a President,
a Secretary, a Treasurer, and a Chief Investment Officer, and
may have such other officers, assistant officers and agents
as the Board of Directors shall authorize from time to time.
All officers shall be elected or appointed by the Board of
Directors and shall hold office for such terms as may be pre-
scribed by the Board of Directors. Each officer shall hold
office until his successor has been elected or appointed and
qualified or his earlier death or resignation or removal in
the manner hereinafter provided.
Any two or more offices, except those of President
and Vice President, may be held by the same person, but no
person shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by
law, to be executed, acknowledged or verified by two or more
officers.
2. REMOVAL OF OFFICERS. Any officer or agent may
be removed by the Board of Directors whenever, in its judg-
ment, the best interests of the Corporation will be served
thereby.
3. RESIGNATION. Any officer may resign at any
time by giving written notice to the President of the Corpo-
ration, provided that the President may resign at any time by
giving written notice to the Board of Directors. Any such
resignation shall take effect at the time specified therein
or, if the time when it shall become effective is not speci-
fied therein, at the time it is accepted by action of the
Board of Directors. Except as aforesaid, the acceptance of
such resignation shall not be necessary to make it effective.
4. CHAIRMAN OF THE BOARD. The Chairman of the
Board shall preside at meetings of the Board of Directors at
which he is present. Together with the President, he shall
have general and active management and control of the busi-
ness and affairs of the Corporation subject to the control of
the Board of Directors and shall see that all orders and
resolutions of the Board of Directors are carried into ef-
fect. He shall perform such other duties as the Board of Di-
rectors may from time to time determine.
-11-<PAGE>
5. PRESIDENT. The President shall be the chief
executive officer of the Corporation and if the Chairman of
the Board is not present, unless the Board of Directors has
provided otherwise by resolution, shall preside at all meet-
ings of the Board of Directors at which he is present. To-
gether with the Chairman of the Board, the President shall
have general and active management and control of the busi-
ness and affairs of the Corporation subject to the control of
the Board of Directors and shall see that all orders and
resolutions of the Board are carried into effect.
6. VICE PRESIDENT(S). Vice Presidents shall per-
form such duties and exercise such powers as the Board of Di-
rectors shall prescribe. In the absence or disability of the
President, any Vice President shall perform the duties and
exercise the powers of the President.
7. SECRETARY. The Secretary shall have custody
of, and maintain, all of the corporation records except the
financial records; shall record the minutes of all meetings
of the Board of Directors; send out all notices of meetings;
and shall perform such other duties as may be prescribed by
the Board of Directors or the President. The Secretary shall
keep in safe custody the seal of the Corporation and affix
the same to any duly authorized instrument requiring it and,
when so affixed, it shall be attested by the signature of the
Secretary or the Treasurer.
8. TREASURER. The Treasurer shall have custody
of all corporate funds and other valuable effects and finan-
cial records for the Corporation; shall keep full and accu-
rate accounts of receipts and disbursements and render ac-
counts thereof as required by the Board of Directors or the
President; and shall perform such other duties as may be pre-
scribed by the Board of Directors or the President.
9. CHIEF INVESTMENT OFFICER. The Chief Invest-
ment Officer shall have responsibility for managing the in-
vestment portfolios of the Corporation, including the making
of investment decisions and the execution or directing the
execution of securities transactions, which activities may be
delegated to an investment advisor registered under the In-
vestment Advisers Act of 1940 pursuant to and in accordance
with the terms of an investment advisory agreement entered
into between the Corporation and such investment advisor; and
the chief Investment Officer shall perform such other duties
as may be prescribed by the Board of Directors or the Presi-
dent.
-12-<PAGE>
10. EXECUTION OF DOCUMENTS. The Chairman of the
Board, the President, or any Vice President, unless some
other person is specifically authorized by the Board of Di-
rectors, shall be authorized to execute and deliver all writ-
ten documents or instruments for and in the name of the Cor-
poration.
ARTICLE IV
PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the principal office of the Corpora-
tion in the State of Maryland prescribed by the Maryland Gen-
eral Corporation Law is 32 South Street, c/o The Corporation
Trust Incorporated, Baltimore, Maryland 21202. The name and
address of the resident agent in the State of Maryland pre-
scribed by the General Corporation Law are: The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland
21202.
The Corporation shall maintain, at its principal
office in the State of Maryland prescribed by the General
Corporation Law or at the business office or an agency of the
Corporation, an original or duplicate stock ledger containing
the names and addresses of all stockholders and the number of
shares of each class held by each stockholder. Such stock
ledger may be in written form or any other form capable of
being converted into written form within a reasonable time
for visual inspection.
The Corporation shall keep at said principal office
in the State of Maryland the original or a certified copy of
the bylaws, including all amendments thereto, and shall duly
file thereat the annual statement of affairs of the Corpora-
tion referred to above.
ARTICLE V
CORPORATE SEAL
The corporate seal shall have inscribed thereon the
name of the Corporation and shall be in such form and contain
such other words and/or figures as the Board of Directors
shall determine or the law require.
-13-<PAGE>
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed,
and shall be subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BYLAWS
The power to make, alter, amend and repeal the
bylaws is vested in the Board of Directors of the
Corporation.
ARTICLE VIII
INDEMNIFICATION
1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify its directors to the fullest ex-
tent that indemnification of directors is permitted by the
law. The Corporation shall indemnify its officers to the
same extent as its directors and to such further extent as is
consistent with law. The Corporation shall indemnify its di-
rectors and officers who while serving as directors or of-
ficers also serve at the request of the Corporation as a di-
rector, officer, partner, trustee, employee, agent or fidu-
ciary of another corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan to the same
extent as its directors and, in the case of officers, to such
further extent as is consistent with law. The indemnifica-
tion and other rights provided by this Article shall continue
as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and admin-
istrators of such a person. Neither this Article, nor any
insurance purchased by the Corporation on behalf of any per-
son, shall protect any such person against any liability to
the Corporation or any stockholder thereof to which such per-
son would otherwise be subject by reason of willful misfea-
sance, bad faith, gross negligence or reckless, disregard of
the duties involved in the conduct of his office ("disabling
conduct").
-14-<PAGE>
2. ADVANCES. Any current or former director or
officer of the Corporation seeking indemnification within the
scope of this Article shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred
by him in connection with the matter as to which he is seek-
ing indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation Law. The
person seeking indemnification shall provide to the Corpora-
tion a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the Cor-
poration has been met and a written undertaking to repay any
such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least
one of the following additional conditions shall be met: (a)
the person seeking indemnification shall provide a security
in form and amount acceptable to the Corporation for his un-
dertaking; (b) the Corporation is insured against losses
arising by reason of the advance; or (c) a majority of a quo-
rum of directors of the Corporation who are neither "inter-
ested persons" (as defined in the Act) nor parties to the
proceeding ("disinterested non-party directors"), or indepen-
dent legal counsel, in a written opinion, shall have deter-
mined, based on a review of facts readily available to the
Corporation at the time the advance is proposed to be made,
that there is reason to believe that the person seeking in-
demnification will ultimately be found to be entitled to in-
demnification.
3. PROCEDURE. At the request of any person claim-
ing indemnification under this Article, the Board of Direc-
tors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, whether
the standards required by this Article have been met. Indem-
nification shall be made only following: (a) a final deci-
sion on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was
not liable by reason of disabling conduct or (b) in the ab-
sence of such a decision, a reasonable determination, based
upon a review of the facts, that the person to be indemnified
was not liable by reason of disabling conduct by (i) the vote
of a majority of a quorum of disinterested non-party direc-
tors or (ii) an independent legal counsel in a written opin-
ion.
4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Em-
ployees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may
be advanced to such employees or agents, as may be provided
by action of the Board of Directors or by contract, subject
to any limitations imposed by the Act.
-15-<PAGE>
5. OTHER RIGHTS. The Board of Directors may make
further provision consistent with law for indemnification and
advance of expenses to directors, officers, employees and
agents by resolution, agreement or otherwise. The indemnifi-
cation provided by this Article shall not be deemed exclusive
of any other right, with respect to indemnification or other-
wise, to which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested non-party directors or other-
wise.
6. AMENDMENTS. References in this Article are to
the Maryland General Corporation Law and to the Act as from
time to time amended. No amendment of the bylaws shall af-
fect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
ARTICLE IX
VOTING OF PROXIES
Shares of stock in other corporations shall be
voted by the President or Vice President, or such officer or
officers of the Corporation or such other person or persons
as the Board of Directors shall designate for the purpose, or
by a proxy or proxies thereunto duly authorized by the Board
of Directors, except as otherwise ordered by vote of the
holders of a majority of the shares of the capital stock of
the Corporation outstanding and entitled to vote in respect
thereto.
March 1994
-16-
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the _____ day of __________, 1995, by and
between THE SBI FUND, INC., a Maryland corporation (the
"Fund"), and SBI CAPITAL MANAGEMENT AND RESEARCH CORPORATION,
a Florida not-for-profit corporation ("SBICMRC").
WHEREAS, SBICMRC has been established by the School of
Business and Industry ("SBI") of the Florida Agricultural and
Mechanical University ("Florida A&M") to provide students of
SBI, as part of their curriculum, with the opportunity to
participate in the operation of a registered investment
company under the management and supervision of SBI faculty
and investment professionals;
WHEREAS, the Fund is an open-end, diversified series manage-
ment investment company registered as such with the Securi-
ties and Exchange Commission (the "Commission") pursuant to
the Investment Company Act of 1940 (the "Investment Company
Act"), and SBICMRC is an investment adviser registered as
such with the Commission under the Investment Advisers Act of
1940 (the "Investment Advisers Act");
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, it is agreed by and between
the parties, as follows:
1. DUTIES OF SBICMRC
The Fund hereby employs SBICMRC and SBICMRC hereby
undertakes to act as the investment adviser of the Fund
and to perform for the Fund such other duties and
functions as are hereinafter set forth. Subject to the
direction and control of the Fund's Board of Directors,
SBICMRC will provide investment management of each of
the Fund's portfolios in accordance with the Fund's
investment objectives and policies as stated in its
Prospectus and Statement of Additional Information as
from time to time in effect. In connection therewith,
SBICMRC will make determinations of what investments
shall be made by each portfolio of the Fund and when,
and will arrange for the purchase of securities and
other investments for the Fund and the sale of
securities and other investments held in the portfolios
of the Fund. SBICMRC shall furnish to the Fund such
information, with respect to the investments which the
Fund may hold or contemplate purchasing, as the Fund may
reasonably request. The Fund wishes to be informed of<PAGE>
important developments materially affecting its
portfolio and shall expect SBICMRC, on its own
initiative, to furnish to the Fund from time to time
such information as SBICMRC may believe appropriate for
this purpose.
In addition, SBICMRC agrees to provide to the Fund
office facilities (which may be in SBICMRC's own
offices) and supplies, and certain internal executive
and administrative services; to compile and maintain
such records with respect to its operations as may
reasonably be required; and generally assist in all
aspects of the Fund's operations.
SBICMRC shall exercise its best judgment in rendering
the services to be provided to the Fund hereunder.
SBICMRC shall not be liable hereunder for any error of
judgment or mistake of law or for any loss suffered by
the Fund, provided that nothing herein shall be deemed
to protect or purport to protect SBICMRC against any
liability to the Fund or to its security holders to
which SBICMRC would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder, or by reason of
SBICMRC's reckless disregard of its obligations and
duties hereunder.
2. RELATIONSHIP WITH SBI, SBICMRC PERSONNEL AND EDUCATIONAL
PURPOSES OF SBICMRC
It is understood that SBICMRC was established by SBI as
part of its Professional Development program, to provide
students of SBI with the opportunity to participate in
the operation of a registered investment company under
the management and supervision of investment
professionals and SBI faculty, and that students of SBI
will participate in the operations of SBICMRC under the
management and supervision of SBI faculty and SBICMRC
personnel. Upon the direction and close monitoring by
the officers of SBICMRC and by other SBI faculty
members, SBI students will assist in all capacities
involved in the management of SBICMRC, from clerical
assignments through supporting research and strategy
recommendations. SBICMRC will determine from time to
time which students and SBI faculty will be assigned to
participate in SBICMRC's operations and which tasks each
will perform.
-2-<PAGE>
It is understood that the persons employed by SBICMRC,
including students and faculty of SBI, will not devote
their full time to activities on behalf of SBICMRC and/
or the Fund and nothing contained herein shall be deemed
to limit or restrict the right of SBICMRC or any of its
affiliates or employees to engage in and devote time and
attention to other businesses or activities.
Any person, even though also an officer, director,
employee or agent of SBICMRC, who may be or become an
officer, director, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting
on any business of the Fund, to be rendering such
services to or acting solely for the Fund and not as an
officer, director, employee or agent, or under the
control or direction of, SBICMRC even if paid by
SBICMRC.
The Fund agrees that the term "SBI" in its name is
derived from the School of Business and Industry, which
established SBICMRC, and further agrees that, in the
event that SBICMRC ceases to be the Fund's investment
advisor for any reason, the Fund will promptly take all
necessary action to change its name to a name not
including the words SBI or any other reference to the
School of Business and Industry of Florida A&M.
3. CUSTODY OF ASSETS
The assets of the Fund will be held in an account with
State Street Bank and Trust Company or any such other
brokerage firm or bank which the Fund may hereinafter
select (the "Custodian"). SBICMRC shall not act as
custodian but may issue such instructions to the
Custodian as may be appropriate in connection with the
settlement of transactions effected by SBICMRC pursuant
hereto. SBICMRC shall not be responsible for any loss
incurred by reason of any act or omission of the
Custodian.
4. COMPENSATION
The Fund agrees to pay SBICMRC and SBICMRC agrees to
accept as full compensation for the performance of all
functions and duties on its part to be performed
pursuant to the provisions hereof, a fee calculated
daily and paid quarterly in arrears at the annual rate
of 0.10% of the value of the Fund's average daily net
-3-<PAGE>
assets in Pool A of the Fund ("Pool A") and a fee
calculated daily and paid quarterly in arrears at the
annual rate of 0.50% of the value of the Fund's average
daily net assets in Pool B of the Fund ("Pool B"). Net
asset value shall be computed on such days and at such
time or times as described in the Fund's then-current
Prospectus and Statement of Additional Information and
in the manner specified in the Fund's Articles of
Incorporation for the computation of the value of the
Fund's net assets. Upon the commencement of activities
of the Fund in the middle of a quarter or upon
termination of this Agreement before the end of any
quarter, the fee for such part of a quarter shall be
prorated appropriately and, in the case of termination,
shall be payable upon the date of termination of this
Agreement.
5. EXPENSES
SBICMRC shall bear all expenses in connection with the
performance of its services under this Agreement.
SBICMRC shall, in addition to its own expenses, bear the
following expenses of the Fund:
organizational costs of the Fund; and
fees and expenses incident to the filing of the
initial registration statement under federal law
covering the shares of the Fund for public sale.
All other expenses to be incurred in the operation of
the Fund shall be borne by the Fund, including but not
limited to the following expenses:
brokerage commissions on portfolio transactions;
insurance premiums for fidelity and other coverage;
expenses of members of the Board of Directors of
the Fund not affiliated with SBICMRC;
legal and audit expenses;
custodian and transfer agent fees and expenses;
fees and expenses of the custodian for
administrative activities undertaken by the
custodian on behalf of the Fund;
-4-<PAGE>
interest and taxes;
fees with respect to registration of the shares of
the Fund under federal or state securities laws;
expenses of printing and mailing reports, notices
and proxy materials to shareholders of the Fund;
expenses incurred in connection with the
distribution of shares of the Fund pursuant to a
duly adopted Rule 12b-1 Plan;
all incidental expenses to holding meetings of the
Fund's shareholders; and
such extraordinary non-recurring expenses as may
arise, including litigation, affecting the Fund and
any legal obligation which the Fund may have to
indemnify its officers and directors with respect
thereto.
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement, but exclud-
ing taxes, brokerage and, with the prior written consent
of the necessary state securities commission,
extraordinary expenses) exceed the expense limitations
of any state having jurisdiction over the Fund, the Fund
may deduct from the fees to be paid hereunder, to the
extent required by state law, the amount of such excess.
SBICMRC's obligation pursuant hereto is limited to the
amount of its fees hereunder. Such deduction, if any,
will be estimated daily, and reconciled and effected on
a monthly basis.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE
SBICMRC is authorized, in arranging the purchase and
sale of the Fund's portfolio securities, to employ or
deal with such members of securities or commodities
exchanges, brokers or dealers, or futures commission
merchants (hereinafter "broker-dealers"), including
"affiliated" broker-dealers (as that term is defined in
the Investment Company Act), as may, in its best
judgment, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable security price
obtainable) of the Fund's portfolio transactions as well
as to obtain, consistent with the provisions of the
third subparagraph of this Paragraph 6, the benefit of
-5-<PAGE>
such investment information or research as will be of
significant assistance to the performance by SBICMRC of
its investment management functions. Portfolio
transactions may be transacted with primary marketmakers
acting as principal on a net basis, with no brokerage
commissions being paid by the Fund. Such principal
transactions may, however, result in a profit to such
marketmakers. SBICMRC may make purchases of
underwritten issues for the Fund at prices which include
underwriting fees.
SBICMRC shall select broker-dealers to effect the Fund's
portfolio transactions on the basis of its estimate of
their ability to obtain best execution of particular and
related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular
portfolio transaction(s) will be judged by SBICMRC on
the basis of all relevant factors and considerations
including, insofar as feasible, the execution
capabilities required by the transaction or
transactions; the ability and willingness of the broker-
dealer to facilitate the Fund's portfolio transactions
by participating therein for its own account; the
importance to the Fund of speed, efficiency or
confidentiality; the broker-dealer's apparent
familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any
other matters relevant to the selection of a broker-
dealer for particular and related transactions of the
Fund.
SBICMRC shall have discretion, in the interests of the
Fund, to allocate brokerage on the Fund's portfolio
transactions to broker-dealers, other than "affiliated"
broker-dealers (as defined in the Investment Company
Act), qualified to obtain best execution of such
transactions who provide brokerage and/or research
services (as such services are defined in Section 28(e)
of the Securities Exchange Act of 1934) for the Fund
and to cause the Fund to pay such broker-dealers a
commission for effecting a portfolio transaction for the
Fund that is in excess of the amount of commission
another broker-dealer adequately qualified to effect
such transaction would have charged for effecting that
transaction, if SBICMRC determines, in good faith, that
such commission is reasonable in relation to the value
of the brokerage and/or research services provided by
such broker-dealer, viewed in terms of either that
particular transaction or the overall responsibilities
-6-<PAGE>
of SBICMRC with respect to the Fund. In reaching such
determination, SBICMRC will not be required to place or
attempt to place a specific dollar value on the
brokerage and/or research services provided or being
provided by such broker-dealer. In demonstrating that
such determinations were made in good faith, SBICMRC
shall be prepared to show that all commissions were
allocated for purposes contemplated by this Agreement
and that the total commissions paid by the Fund over a
representative period selected by the Board of Directors
of the Fund were reasonable in relation to the benefits
to the Fund.
SBICMRC shall have no duty or obligation to seek advance
competitive bidding for the most favorable commission
rate applicable to any particular portfolio transactions
or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the
best of its ability, endeavor to be aware of the current
level of the charges of eligible broker-dealers and to
minimize the expense incurred by the Fund for effecting
its portfolio transactions to the extent consistent with
the interests and policies of the Fund as established by
the determinations of the Board of Directors and the
provisions of this paragraph 6.
The Fund recognizes that an "affiliated" broker-dealer
(as defined in the Investment Company Act): (i) may act
as one of the Fund's regular brokers for the Fund so
long as it is lawful for it so to act; (ii) may be a
major recipient of brokerage commissions paid by the
Fund; and (iii) may effect portfolio transactions for
the Fund only if the commissions, fees or other
remuneration received or to be received by it are
determined in accordance with procedures contemplated by
any rule, regulation or order adopted under the
Investment Company Act for determining the permissible
level of such commissions.
7. DURATION
This Agreement will take effect on the date first set
forth above. Unless earlier terminated pursuant to
paragraph 8 hereof, this Agreement shall remain in ef-
fect until [August 31, 1996], and thereafter will
continue in effect from year to year, so long as such
continuance shall be approved at least annually by the
Fund's Board of Directors, including the vote of the
majority of the directors of the Fund who are not
-7-<PAGE>
parties to this Agreement or "interested persons" (as
defined in the Investment Company Act) of any such
party, cast in person at a meeting called for the
purpose of voting on such approval, or by the holders of
a "majority" (as defined in the Investment Company Act)
of the outstanding voting securities of the Fund and by
such a vote of the Fund's Board of Directors.
8. TERMINATION
This Agreement may be terminated (i) by SBICMRC at any
time without penalty upon sixty days' written notice to
the Fund (which notice may be waived by the Fund); or
(ii) by the Fund at any time without penalty upon sixty
days' written notice to SBICMRC (which notice may be
waived by SBICMRC) provided that such termination by the
Fund shall be directed or approved by the vote of a
majority of all of the Directors of the Fund then in
office or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the
outstanding voting securities of the Fund.
9. AMENDMENT AND ASSIGNMENT
This Agreement may not be amended or the rights of
SBICMRC hereunder sold, transferred, pledged or
otherwise in any manner encumbered without the
affirmative vote or written consent of the holders of
the "majority" (as defined in the Investment Company
Act) of the outstanding voting securities of the Fund.
This Agreement shall automatically and immediately
terminate in the event of its "assignment" (as defined
in the Investment Company Act). An assignment shall be
deemed to have occurred for purposes of this paragraph
if SBI no longer controls SBICMRC.
10. DEFINITIONS
The terms and provisions of the Agreement shall be
interpreted and defined in a manner consistent with the
provisions and definitions contained in the Investment
Company Act.
-8-<PAGE>
THE SBI FUND, INC.
Attest:
______________________ By: ______________________
SBI CAPITAL MANAGEMENT AND
RESEARCH CORPORATION
Attest:
______________________ By: ______________________
-9-
Exhibit 8
CUSTODIAN CONTRACT
Between
THE SBI FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be
Held By It.......................................... 2
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the
United States....................................... 3
2.1 Holding Securities........................... 3
2.2 Delivery of Securities....................... 4
2.3 Registration of Securities................... 9
2.4 Bank Accounts................................ 10
2.5 Availability of Federal Funds................ 11
2.6 Collection of Income......................... 11
2.7 Payment of Fund Monies....................... 12
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased.............. 15
2.9 Appointment of Agents........................ 16
2.10 Deposit of Fund Assets in Securities
System....................................... 16
2.10A Fund Assets Held in the Custodian's Direct
Paper System................................. 19
2.11 Segregated Account........................... 21
2.12 Ownership Certificates for Tax Purposes...... 23
2.13 Proxies...................................... 23
2.14 Communication; Relating to Portfolio
Securities................................... 23
3. Duties of the Custodian with Respect to Property
of the Fund Held Outside of the United States....... 24
3.1 Appointment of Foreign Sub-Custodians........ 24
3.2 Assets to be Held............................ 25
3.3 Foreign Securities Depositories.............. 26
3.4 Agreements with Foreign Banking
Institutions................................. 26
3.5 Access of Independent Accountants of
the Fund..................................... 27
3.6 Reports by Custodian......................... 27
3.7 Transactions in Foreign Custody Account...... 28
3.8 Liability of Foreign Sub-Custodians.......... 29
3.9 Liability of Custodian....................... 30
3.10 Reimbursement for Advances................... 31
3.11 Monitoring Responsibilities.................. 31
3.12 Branches of U.S. Banks....................... 32
3.13 Tax Law...................................... 33
-i-<PAGE>
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund............................... 34
5. Proper Instructions................................. 35
6. Actions Permitted Without Express Authority......... 36
7. Evidence of Authority............................... 37
8. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income...................................... 37
9. Records............................................. 38
10. Opinion of Fund's Independent Accountants........... 39
11. Reports to Fund by Independent Public Accountants... 39
12. Compensation of Custodian........................... 40
13. Responsibility of Custodian......................... 40
14. Effective Period, Termination and Amendment......... 42
15. Successor Custodian................................. 44
16. Interpretive and Additional Provisions.............. 46
17. Additional Funds.................................... 47
18. Massachusetts Law to Apply.......................... 47
19. Prior Contracts..................................... 47
20. Shareholder Communications.......................... 47
-ii-<PAGE>
CUSTODIAN CONTRACT
This Contract between The SBI Fund, Inc., a corporation
organized and existing under the laws of Maryland, having its
principal place of business at One SBI Plaza, School of Busi-
ness and Industry, Florida A&M University, Tallahassee,
Florida, 32307, hereinafter called the "Fund", and State Street
Bank and Trust Company, a Massachusetts trust company, having
its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in
separate series, with each such series representing interests
in a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares
in two series, Pool A and Pool B (such series together with all
other series subsequently established by the Fund and made sub-
ject to this Contract in accordance with paragraph 17, being
herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual cov-
enants and agreements hereinafter contained, the parties hereto
agree as follows:<PAGE>
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custo-
dian of the assets of the Portfolios of the Fund, including
securities which the Fund, on behalf of the applicable Portfo-
lio desires to be held in places within the United States ("do-
mestic securities") and securities it desires to be held out-
side the United States ("foreign securities") pursuant to the
provisions of the Articles of Incorporation. The Fund on be-
half of the Portfolio(s) agrees to deliver to the Custodian all
securities and cash of the Portfolios, and all payments of in-
come, payments of principal or capital distributions received
by it with respect to all securities owned by the Portfolio(s)
from time to time, and the cash consideration received by it
for such new or treasury shares of capital stock of the Fund
representing interests in the Portfolios, ("Shares") as may be
issued or sold from time to time. The Custodian shall not be
responsible for any property of a Portfolio held or received by
the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more
sub-custodians, located in the United States but only in ac-
cordance with an applicable vote by the Board of Directors of
the Fund on behalf of the applicable Portfolio(s), and provided
that the Custodian shall have no more or less responsibility or
-2-<PAGE>
liability to the Fund on account of any actions or omissions of
any sub-custodian so employed than any such sub-custodian has
to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign secu-
rities depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physi-
cally segregate for the account of each Portfolio all
non-cash property, to be held by it in the United States
including all domestic securities owned by such Portfo-
lio, other than (a) securities which are maintained pur-
suant to Section 2.10 in a clearing agency which acts as
a securities depository or in a book-entry system autho-
rized by the U.S. Department of the Treasury, col-
lectively referred to herein as "Securities System" and
(b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in
the Direct Paper System of the Custodian pursuant to
Section 2.10A.
-3-<PAGE>
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by
the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf
of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Portfolio;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Sec-
tion 2.10 hereof;
4) To the depository agent in connection with tender
or other similar offers for securities of the Port-
folio;
5) To the issuer thereof or its agent when such secu-
rities are called, redeemed, retired or otherwise
become payable; provided that, in any such case,
-4-<PAGE>
the cash or other consideration is to be delivered
to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of
any nominee or nominees of the Custodian or into
the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number
of bonds, certificates or other evidence represent-
ing the same aggregate face amount or number of
units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of
the Portfolio, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery" custom; provided that in any
such case, the Custodian shall have no responsibil-
ity or liability for any loss arising from the de-
livery of such securities prior to receiving pay-
ment for such securities except as may arise from
the Custodian's own negligence or willful miscon-
duct;
-5-<PAGE>
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorgani-
zation or readjustment of the securities of the
issuer of such securities, or pursuant to provi-
sions for conversion contained in such securities,
or pursuant to any deposit agreement; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securi-
ties, the surrender thereof in the exercise of such
warrants, rights or similar securities or the sur-
render of interim receipts or temporary securities
for definitive securities; provided that, in any
such case, the new securities and cash, if any, are
to be delivered to the Custodian;
10) For delivery in connection with any loans of secu-
rities made by the Portfolio, but only against re-
ceipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund on be-
half of the Portfolio, which may be in the form of
cash or obligations issued by the United States
government, its agencies or instrumentalities, ex-
cept that in connection with any loans for which
collateral is to be credited to the Custodian's
-6-<PAGE>
account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery
of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf
of the Portfolio, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Fund on behalf of the Port-
folio, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Ex-
change Act") and a member of The National Associa-
tion of Securities Dealers, Inc. ("NASD"), relating
to compliance with the rules of The Options Clear-
ing Corporation and of any registered national se-
curities exchange, or of any similar organization
or organizations, regarding escrow or other ar-
rangements in connection with transactions by the
Portfolio of the Fund;
-7-<PAGE>
13) For delivery in accordance with the provisions of
any agreement among the Fund on behalf of the Port-
folio, the Custodian, and a Futures Commission Mer-
chant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Com-
modity Futures Trading Commission and/or any Con-
tract Market, or any similar organization or orga-
nizations, regarding account deposits in connection
with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for delivery
to such Transfer Agent or to the holders of shares
in connection with distributions in kind, as may be
described from time to time in the currently effec-
tive prospectus and statement of additional infor-
mation of the Fund, related to the Portfolio ("Pro-
spectus"), in satisfaction of requests by holders
of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper Instructions
from the Fund on behalf of the applicable Portfo-
lio, a certified copy of a resolution of the Board
of Directors or of the Executive Committee signed
-8-<PAGE>
by an officer of the Fund and certified by the Sec-
retary or an Assistant Secretary, specifying the
securities of the Portfolio to be delivered, set-
ting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by
the Custodian (other than bearer securities) shall be
registered in the name of the Portfolio or in the name
of any nominee of the Fund on behalf of the Portfolio or
of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund
has authorized in writing the appointment of a nominee
to be used in common with other registered investment
companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Portfolio under the terms of this Contract
shall be in "street name" or other good delivery form.
If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the
-9-<PAGE>
Fund on such securities and to notify the Fund on a best
efforts basis only of relevant corporate actions includ-
ing, without limitation, pendency of calls, maturities,
tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States
in the name of each Portfolio of the Fund, subject only
to draft or order by the Custodian acting pursuant to
the terms of this Contract, and shall hold in such ac-
count or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Port-
folio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for a Portfolio may be de-
posited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem neces-
sary or desirable; provided, however, that every such
bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and
that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on
behalf of each applicable Portfolio be approved by vote
of a majority of the Board of Directors of the Fund.
-10-<PAGE>
Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Fund on behalf of each applicable Portfolio
and the Custodian, the Custodian shall, upon the receipt
of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfo-
lio as of specified times agreed upon from time to time
by the Fund and the Custodian in the amount of checks
received in payment for Shares of such Portfolio which
are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Sec-
tion 2.3, the Custodian shall collect on a timely basis
all income and other payments with respect to registered
domestic securities held hereunder to which each Portfo-
lio shall be entitled either by law or pursuant to cus-
tom in the securities business, and shall collect on a
timely basis all income and other payments with respect
to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian
or its agent thereof and shall credit such income, as
-11-<PAGE>
collected, to such Portfolio's custodian account. With-
out limiting the generality of the foregoing, the Custo-
dian shall detach and present for payment all coupons
and other income items requiring presentation as and
when they become due and shall collect interest when due
on securities held hereunder. Income due each Portfolio
on securities loaned pursuant to the provisions of Sec-
tion 2.2 (10) shall be the responsibility of the Fund.
The Custodian will have no duty or responsibility in
connection therewith, other than to provide the Fund
with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Portfolio is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instruc-
tions from the Fund on behalf of the applicable Portfo-
lio, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out
monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts
for the account of the Portfolio but only (a)
against the delivery of such securities or evidence
-12-<PAGE>
of title to such options, futures contracts or op-
tions on futures contracts to the Custodian (or any
bank, banking firm or trust company doing business
in the United States or abroad which is qualified
under the Investment Company Act of 1940, as
amended, to act as a custodian and has been desig-
nated by the Custodian as its agent for this pur-
pose) registered in the name of the Portfolio or in
the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for trans-
fer; (b) in the case of a purchase effected through
a Securities System, in accordance with the condi-
tions set forth in Section 2.10 hereof; (c) in the
case of a purchase involving the Direct Paper Sys-
tem, in accordance with the conditions set forth in
Section 2.10A; (d) in the case of repurchase agree-
ments entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank,
or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in cer-
tificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of
the receipt evidencing purchase by the Portfolio of
-13-<PAGE>
securities owned by the Custodian along with written evidence
of the agreement by the Custodian to repurchase such securities
from the Portfolio or (e) for transfer to a time deposit
account of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a con-
firmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or sur-
render of securities owned by the Portfolio as set
forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued
by the Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability in-
curred by the Portfolio, including but not limited
to the following payments for the account of the
Portfolio: interest, taxes, management, account-
ing, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated
as deferred expenses;
-14-<PAGE>
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing docu-
ments of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the
Fund on behalf of the Portfolio, a certified copy
of a resolution of the Board of Directors or of the
Executive Committee of the Fund signed by an of-
ficer of the Fund and certified by its Secretary or
an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose
to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securi-
ties Purchased. Except as specifically stated otherwise
in this Contract, in any and every case where payment
for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific
written instructions from the Fund on behalf of such
Portfolio to so pay in advance, the Custodian shall be
-15-<PAGE>
absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Cus-
todian may from time to time direct; provided, however,
that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereun-
der.
2.10 Deposit of Fund Assets in Securities Systems. The Cus-
todian may deposit and/or maintain securities owned by a
Portfolio in a clearing agency registered with the Secu-
rities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securi-
ties depository, or in the book-entry system authorized
by the U.S. Department of the Treasury and certain fed-
eral agencies, collectively referred to herein as "Secu-
rities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission
-16-<PAGE>
rules and regulations, if any, and subject to the fol-
lowing provisions:
1) The Custodian may keep securities of the Portfolio
in a Securities System provided that such securi-
ties are represented in an account ("Account") of
the Custodian in the Securities System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to secu-
rities of the Portfolio which are maintained in a
Securities System shall identify by book-entry
those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased
for the account of the Portfolio upon (i) receipt
of advice from the Securities System that such se-
curities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the Secu-
rities System that payment for such securities has
-17-<PAGE>
been transferred to the Account, and (ii) the mak-
ing of an entry on the records of the Custodian to
reflect such transfer and payment for the account
of the Portfolio. Copies of all advices from the
Securities System of transfers of securities for
the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its re-
quest. Upon request, the Custodian shall furnish
the Fund on behalf of the Portfolio confirmation of
each transfer to or from the account of the Portfo-
lio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfo-
lio copies of daily transaction sheets reflecting
each day's transactions in the Securities System
for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Port-
folio with any report obtained by the Custodian on
the Securities System's accounting system, internal
accounting control and procedures for safeguarding
securities deposited in the Securities System;
-18-<PAGE>
5) The Custodian shall have received from the Fund on
behalf of the Portfolio the initial or annual cer-
tificate, as the case may be, required by Article
14 hereof;
6) Anything to the contrary in this Contract notwith-
standing, the Custodian shall be liable to the Fund
for the benefit of the Portfolio for any loss or
damage to the Portfolio resulting from use of the
Securities System by reason of any negligence, mis-
feasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or
from failure of the Custodian or any such agent to
enforce effectively such rights as it may have
against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any
claim against the Securities System or any other
person which the Custodian may have as a conse-
quence of any such loss or damage if and to the
extent that the Portfolio has not been made whole
for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities
-19-<PAGE>
owned by a Portfolio in the Direct Paper System of the
Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions from the Fund on behalf of the
Portfolio;
2) The Custodian may keep securities of the Portfolio
in the Direct Paper System only if such securities
are represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to secu-
rities of the Portfolio which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased
for the account of the Portfolio upon the making of
an entry on the records of the Custodian to reflect
-20-<PAGE>
such payment and transfer of securities to the ac-
count of the Portfolio. The Custodian shall trans-
fer securities sold for the account of the Portfo-
lio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt
of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of
the Portfolio confirmation of each transfer to or
from the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the
next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio cop-
ies of daily transaction sheets reflecting each
day's transaction in the Securities System for the
account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of
the Portfolio with any report on its system of in-
ternal accounting control as the Fund may reason-
ably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of
Proper Instructions from the Fund on behalf of each ap-
plicable Portfolio establish and maintain a segregated
account or accounts for and on behalf of each such Port-
folio, into which account or accounts may be transferred
-21-<PAGE>
cash and/or securities, including securities maintained
in an account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Ex-
change Act and a member of the NASD (or any futures com-
mission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Op-
tions Clearing Corporation and of any registered na-
tional securities exchange (or the Commodity Futures
Trading Commission or any registered contract market),
or of any similar organization or organizations, regard-
ing escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of seg-
regating cash or government securities in connection
with options purchased, sold or written by the Portfolio
or commodity futures contracts or options thereon pur-
chased or sold by the Portfolio, (iii) for the purposes
of compliance by the Portfolio with the procedures re-
quired by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of seg-
regated accounts by registered investment companies and
(iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to
-22-<PAGE>
Proper Instructions from the Fund on behalf of the ap-
plicable Portfolio, a certified copy of a resolution of
the Board of Directors or of the Executive Committee
signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and de-
claring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and af-
fidavits for all federal and state tax purposes in con-
nection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the do-
mestic securities held hereunder, cause to be promptly
executed by the registered holder of such securities, if
the securities are registered otherwise than in the name
of the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to
the Portfolio such proxies, all proxy soliciting materi-
als and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. Sub-
ject to the provisions of Section 2.3, the Custodian
-23-<PAGE>
shall transmit promptly to the Fund for each Portfolio
all written information (including, without limitation,
pendency of calls and maturities of domestic securities
and expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio)
received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly
to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian
is to take such action.
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian
to employ as sub-custodians for the Portfolio's securi-
ties and other assets maintained outside the United
-24-<PAGE>
States the foreign banking institutions and foreign se-
curities depositories designated on Schedule A hereto
("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board
of Directors, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign se-
curities depositories to act as sub-custodian. Upon
receipt of Proper Instructions, the Fund may instruct
the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the secu-
rities and other assets maintained in the custody of the
foreign sub-custodians to: (a) "foreign securities", as
defined in paragraph (c)(1) of Rule 17f-5 under the In-
vestment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund
may determine to be reasonably necessary to effect the
Portfolio's foreign securities transactions. The Custo-
dian shall identify on its books as belonging to the
Fund, the foreign securities of the Fund held by each
foreign sub-custodian.
-25-<PAGE>
3.3 Foreign Securities Depositories. Except as may other-
wise be agreed upon in writing by the Custodian and the
Fund, assets of the Portfolios shall be maintained in
foreign securities depositories only through arrange-
ments implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof.
Where possible, such arrangements shall include entry
into agreements containing the provisions set forth in
Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall be
substantially in the form set forth in Exhibit 1 hereto
and shall provide that: (a) the assets of each Portfo-
lio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the for-
eign banking institution or its creditors or agent, ex-
cept a claim of payment for their safe custody or admin-
istration; (b) beneficial ownership for the assets of
each Portfolio will be freely transferable without the
payment of money or value other than for custody or ad-
ministration; (c) adequate records will be maintained
identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the
extent permitted under applicable law the independent
-26-<PAGE>
public accountants for the Fund, will be given access to
the books and records of the foreign banking institution
relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the
foreign sub-custodian will be subject only to the in-
structions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of
the Fund to be afforded access to the books and records
of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate
to the performance of such foreign banking institution
under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon, state-
ments in respect of the securities and other assets of
the Portfolio(s) held by foreign sub-custodians, includ-
ing but not limited to an identification of entities
having possession of the Portfolio(s) securities and
other assets and advices or notifications of any trans-
fers of securities to or from each custodial account
-27-<PAGE>
maintained by a foreign banking institution for the Cus-
todian on behalf of each applicable Portfolio indicat-
ing, as to securities acquired for a Portfolio, the
identity of the entity having physical possession of
such securities.
3.7 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of
this Section 3.7, the provision of Sections 2.2 and 2.7
of this Contract shall apply, mutatis mutandis to the
foreign securities of the Fund held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities re-
ceived for the account of each applicable Portfolio and
delivery of securities maintained for the account of
each applicable Portfolio may be effected in accordance
with the customary established securities trading or
securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering 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.
-28-<PAGE>
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such
entity's nominee to the same extent as set forth in Sec-
tion 2.3 of this Contract, and the Fund agrees to hold
any such nominee harmless from any liability as a holder
of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign bank-
ing institution as a foreign sub-custodian shall require
the institution to exercise reasonable care in the per-
formance of its duties and to indemnify, and hold harm-
less, the Custodian and each Fund from and against any
loss, damage, cost, expense, liability or claim arising
out of or in connection with the institution's perfor-
mance of such obligations. At the election of the Fund,
it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claims against a for-
eign banking institution as a consequence of any such
loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for
any such loss, damage, cost, expense, liability or
claim.
-29-<PAGE>
3.9 Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a foreign banking institu-
tion to the same extent as set forth with respect to
sub-custodians generally in this Contract and, regard-
less of whether assets are maintained in the custody of
a foreign banking institution, a foreign securities de-
pository or a branch of a U.S. bank as contemplated by
paragraph 3.12 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism or any loss
where the sub-custodian has otherwise exercised reason-
able care. Notwithstanding the foregoing provisions of
this paragraph 3.9, in delegating custody duties to
State Street London Ltd., the Custodian shall not be
relieved of any responsibility to the Fund for any loss
due to such delegation, except such loss as may result
from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropria-
tion, nationalization, insurrection, civil strife or
armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the
-30-<PAGE>
Custodian and State Street London Ltd. have exercised
reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the
Custodian to advance cash or securities for any purpose
for the benefit of a Portfolio including the purchase or
sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connec-
tion with the performance of this Contract, except such
as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct,
any property at any time held for the account of the
applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available
cash and to dispose of such Portfolios assets to the
extent necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall fur-
nish annually to the Fund, during the month of June,
information concerning the foreign sub-custodians em-
ployed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund
-31-<PAGE>
in connection with the initial approval of this Con-
tract. In addition, the Custodian will promptly inform
the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a
foreign sub-custodian or any material loss of the assets
of the Fund or in the case of any foreign sub-custodian
not the subject of an exemptive order from the Securi-
ties and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined
below $200 million (in each case computed in accordance
with generally accepted U.S. accounting principles).
3.12 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the
provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign branch
of a banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940
meeting the qualification set forth in Section 26(a) of
said Act. The appointment of any such branch as a sub-
custodian shall be governed by paragraph 1 of this Con-
tract.
-32-<PAGE>
(b) Cash held for each Portfolio of the Fund in the
United Kingdom shall be maintained in an interest bear-
ing account established for the Fund with the
Custodian's London branch, which account shall be sub-
ject to the direction of the Custodian, State Street
London Ltd. or both.
3.13 Tax Law
The Custodian shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund
or the Custodian as custodian of the Fund by the tax law
of the United States of America or any state or politi-
cal subdivision thereof. It shall be the responsibility
of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those
mentioned in the above sentence, including responsibil-
ity for withholding and other taxes, assessments or
other governmental charges, certifications and govern-
mental reporting. The sole responsibility of the Custo-
dian with regard to such tax law shall be to use reason-
able efforts to assist the Fund with respect to any
claim for exemption or refund under the tax law of ju-
risdictions for which the Fund has provided such infor-
mation.
-33-<PAGE>
4. Payments for Sales or Repurchases or Redemptions of
Shares of the Fund
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent of the Fund and deposit into
the account of the appropriate Portfolio such payments as are
received for Shares of that Portfolio issued or sold from time
to time by the Fund. The Custodian will provide timely notifi-
cation to the Fund on behalf of each such Portfolio and the
Transfer Agent of any receipt by it of payments for Shares of
such Portfolio.
From such funds as may be available for the purpose
but subject to the limitations of the Articles of Incorporation
and any applicable votes of the Board of Directors of the Fund
pursuant thereto, the Custodian shall, upon receipt of instruc-
tions from the Transfer Agent, make funds available for payment
to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In con-
nection with the redemption or repurchase of Shares of a Port-
folio, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a com-
mercial bank designated by the redeeming shareholders. In con-
nection with the redemption or repurchase of Shares of the
Fund, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian
-34-<PAGE>
in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custo-
dian.
5. Proper Instructions
Proper Instructions as used throughout this Contract
means a writing signed or initialled by one or more person or
persons as the Board of Directors shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a spe-
cific statement of the purpose for which such action is re-
quested. Oral instructions will be considered Proper Instruc-
tions if the Custodian reasonably believes them to have been
given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all
oral instructions to be confirmed in writing. Upon receipt of
a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Directors of the Fund ac-
companied by a detailed description of procedures approved by
the Board of Directors, Proper Instructions may include com-
munications effected directly between electro-mechanical or
electronic devices provided that the Board of Directors and the
Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this
-35-<PAGE>
Section, Proper Instructions shall include instructions re-
ceived by the Custodian pursuant to any three - party agreement
which requires a segregated asset account in accordance with
Section 2.11.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor ex-
penses of handling securities or other similar items relating
to its duties under this Contract, provided that all such pay-
ments shall be accounted for to the Fund on behalf of the
Portfolio;
2) surrender securities in temporary form for secu-
rities in definitive form;
3) endorse for collection, in the name of the Port-
folio, checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary de-
tails in connection with the sale, exchange, substitution, pur-
chase, transfer and other dealings with the securities and
property of the Portfolio except as otherwise directed by the
Board of Directors of the Fund.
-36-<PAGE>
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The Custo-
dian may receive and accept a certified copy of a vote of the
Board of Directors of the Fund as conclusive evidence (a) of
the authority of any person to act in accordance with such vote
or (b) of any determination or of any action by the Board of
Directors pursuant to the Articles of Incorporation as de-
scribed in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply neces-
sary information to the entity or entities appointed by the
Board of Directors of the Fund to keep the books of account of
each Portfolio and/or compute the net asset value per share of
the outstanding shares of each Portfolio or, if directed in
writing to do so by the Fund on behalf of the Portfolio, shall
itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also cal-
culate daily the net income of the Portfolio as described in
-37-<PAGE>
the Fund's currently effective prospectus related to such Port-
folio and shall advise the Fund and the Transfer Agent daily of
the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income
among its various components. The calculations of the net as-
set value per share and the daily income of each Portfolio
shall be made at the time or times described from time to time
in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
The Custodian shall with respect to each Portfolio
create and maintain all records relating to its activities and
obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the
property of the Fund and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and em-
ployees and agents of the Securities and Exchange Commission.
The Custodian shall, at the Fund's request, supply the Fund
with a tabulation of securities owned by each Portfolio and
held by the Custodian and shall, when requested to do so by the
-38-<PAGE>
Fund and for such compensation as shall be agreed upon between
the Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as
the Fund on behalf of each applicable Portfolio may from time
to time request, to obtain from year to year favorable opinions
from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the
Fund's Form N-1A, and Form N-SAR or other annual reports to the
Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of
each of the Portfolios at such times as the Fund may reasonably
require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on
futures contracts, including securities deposited and/or main-
tained in a Securities System, relating to the services pro-
vided by the Custodian under this Contract; such reports, shall
be of sufficient scope and in sufficient detail, as may reason-
ably be required by the Fund to provide reasonable assurance
-39-<PAGE>
that any material inadequacies would be disclosed by such ex-
amination, and, if there are no such inadequacies, the reports
shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compen-
sation for its services and expenses as Custodian, as agreed
upon from time to time between the Fund on behalf of each ap-
plicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exer-
cise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evi-
dence of title thereto received by it or delivered by it pursu-
ant to this Contract and shall be held harmless in acting upon
any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the
proper party or parties, including any futures commission mer-
chant acting pursuant to the terms of a three-party futures or
options agreement. The Custodian shall be held to the exercise
of reasonable care in carrying out the provisions of this Con-
tract, but shall be kept indemnified by and shall be without
liability to the Fund for any action taken or omitted by it in
good faith without negligence. It shall be entitled to rely on
-40-<PAGE>
and may act upon advice of counsel (who may be counsel for the
Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omis-
sions of a foreign banking institution appointed pursuant to
the provisions of Article 3 to the same extent as set forth in
Article 1 hereof with respect to sub-custodians located in the
United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody
of a foreign banking institution, a foreign securities deposi-
tory or a branch of a U.S. bank as contemplated by paragraph
3.12 hereof, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from, or
caused by, the direction of or authorization by the Fund to
maintain custody of any securities or cash of the Fund in a
foreign country including, but not limited to, losses resulting
from nationalization, expropriation, currency restrictions, or
acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the
Custodian to take any action with respect to securities, which
action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund or the Portfolio being liable for
the payment of money or incurring liability of some other form,
-41-<PAGE>
the Fund on behalf of the Portfolio, as a prerequisite to re-
quiring the Custodian to take such action, shall provide indem-
nity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
foreign exchange contracts and assumed settlement) for the ben-
efit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event
that the Custodian or its nominee shall incur or be assessed
any taxes, charges, expenses, assessments, claims or liabili-
ties in connection with the performance of this Contract, ex-
cept such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail
to repay the Custodian promptly, the Custodian shall be en-
titled to utilize available cash and to dispose of such Portfo-
lio's assets to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execu-
tion, shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual
-42-<PAGE>
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or
mailing; provided, however that the Custodian shall not with
respect to a Portfolio act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of Directors of the
Fund has approved the initial use of a particular Securities
System by such Portfolio and the receipt of an annual certifi-
cate of the Secretary or an Assistant Secretary that the Board
of Directors has reviewed the use by such Portfolio of such
Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Sec-
tion 2.10A hereof in the absence of receipt of an initial cer-
tificate of the Secretary or an Assistant Secretary that the
Board of Directors has approved the initial use of the Direct
Paper System by such Portfolio and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the
Board of Directors has reviewed the use by such Portfolio of
the Direct Paper System; provided further, however, that the
Fund shall not amend or terminate this Contract in contraven-
tion of any applicable federal or state regulations, or any
-43-<PAGE>
provision of the Articles of Incorporation, and further pro-
vided, that the Fund on behalf of one or more of the Portfolios
may at any time by action of its Board of Directors (i) substi-
tute another bank or trust company for the Custodian by giving
notice as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the di-
rection of an appropriate regulatory agency or court of compe-
tent jurisdiction.
Upon termination of the Contract, the Fund on behalf
of each applicable Portfolio shall pay to the Custodian such
compensation as may be due as of the date of such termination
and shall likewise reimburse the Custodian for its costs, ex-
penses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more
of the Portfolios shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to
such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall trans-
fer to an account of the successor custodian all of the securi-
ties of each such Portfolio held in a Securities System.
-44-<PAGE>
If no such successor custodian shall be appointed,
the Custodian shall, in like manner, upon receipt of a certi-
fied copy of a vote of the Board of Directors of the Fund, de-
liver at the office of the Custodian and transfer such securi-
ties, funds and other properties in accordance with such vote.
In the event that no written order designating a suc-
cessor custodian or certified copy of a vote of the Board of
Directors shall have been delivered to the Custodian on or be-
fore the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the Investment
Company Act of 1940, doing business in Boston, Massachusetts,
of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of
not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable
Portfolio and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract
on behalf of each applicable Portfolio and to transfer to an
account of such successor custodian all of the securities of
each such Portfolio held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custo-
dian under this Contract.
-45-<PAGE>
In the event that securities, funds and other
properties remain in the possession of the Custodian after the
date of termination hereof owing to failure of the Fund to
procure the certified copy of the vote referred to or of the
Board of Directors to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its ser-
vices during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions
of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract,
the Custodian and the Fund on behalf of each of the Portfolios,
may from time to time agree on such provisions interpretive of
or in addition to the provisions of this Contract as may in
their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions
shall be in a writing signed by both parties and shall be an-
nexed hereto, provided that no such interpretive or additional
provisions shall contravene any applicable federal or state
regulations or any provision of the Articles of Incorporation
of the Fund. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
-46-<PAGE>
17. Additional Funds
In the event that the Fund establishes one or more
series of Shares in addition to Pool A and Pool B with respect
to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the Custo-
dian in writing, and if the Custodian agrees in writing to pro-
vide such services, such series of Shares shall become a Port-
folio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the
date hereof, all prior contracts between the Fund on behalf of
each of the Portfolios and the Custodian relating to the cus-
tody of the Fund's assets.
20. Shareholder Communications
Securities and Exchange Commission Rule 14b-2
requires banks which hold securities for the account of cus-
tomers to respond to requests by issuers of securities for the
-47-<PAGE>
names, addresses and holdings of beneficial owners of securi-
ties of that issuer held by the bank unless the beneficial
owner has expressly objected to disclosure of this information.
In order to comply with the rule, we need you to indicate
whether you authorize us to provide your name, address, and
share position to requesting companies whose stock you own. If
you tell us "no", we will not provide this information to re-
questing companies. If you tell us "yes" or do not check
either "yes" or "no" below, we are required by the rule to
treat you as consenting to disclosure of this information for
all securities owned by you or any funds or accounts estab-
lished by you. For your protection, the Rule prohibits the
requesting company from using your name and address for any
purpose other than corporate communications. Please indicate
below whether you consent or object by checking one of the al-
ternatives below.
YES [ ] You are authorized to release our name,
address, and share positions.
NO [ ] You are not authorized to release our name,
address, and share positions.
-48-<PAGE>
IN WITNESS WHEREOF, each of the parties has caused
this instrument to be executed in its name and behalf by its
duly authorized representative and its seal to be hereunder
affixed as of the day of , 1993.
ATTEST THE SBI FUND, INC.
By
ATTEST STATE STREET BANK AND TRUST COMPANY
By
Assistant Secretary Executive Vice President
-49-<PAGE>
Schedule A
The following foreign banking institutions and for-
eign securities depositories have been approved by the Board of
Directors of The SBI Fund, Inc. for use as sub-custodians for
the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
Fund's Authorized Officer
Date:
-50-
EXHIBIT 9
DRAFT
ADMINISTRATION AGREEMENT
Agreement dated as of , 1993 between State
Street Bank and Trust Company, a Massachusetts trust company
(the "Bank") and SBI Fund, Inc. (the "Fund").
WHEREAS, the Bank provides certain administrative and
other services to investment companies and others; and
WHEREAS, the Fund desires to retain the Bank to ren-
der certain administrative and other services with respect to
the Fund and the Bank is willing to render such services on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment of Bank
The Fund hereby appoints the Bank to act as adminis-
trator with respect to the Fund for purposes of providing cer-
tain administrative services for the period and on the terms
set forth in this Agreement. The Bank accepts such appointment
and agrees to render the services stated herein and to provide
the office facilities and the personnel required by it to per-
form such services. In connection with such appointment, the
Fund will deliver to the Bank copies of each of the following
documents and will deliver to it all future amendments and sup-
plements, if any:
A. Certified copies of the Agreement and Articles
of Incorporation as presently in effect and as amended from
time to time;
B. The Fund's most recent registration statement on
Form N-1A as filed with, and declared effective by, the U.S.
Securities and Exchange Commission, and ail amendments thereto;
C. Each resolution of the Board of Directors of the
Fund authorizing the original issue of its shares;
D. Certified copies of the resolutions of the
Fund's Board of Directors authorizing: (1) this Agreement, (2)
certain officers and trustees of the Fund to give instructions
to the Bank pursuant to this Agreement and (3) certain officers
and employees of the Fund to sign checks and pay expenses on
behalf of the Fund, respectively;
E. A copy of the Management Agreement;<PAGE>
F. A copy of the Investment Advisor Agreement
between the Fund and the Advisor;
G A copy of the Custodian Agreement between the
Fund and its custodian;
H. A copy of the Transfer Agency and Registrar
Agreement between the Fund and its transfer agent; and
I. Such other certificates, documents or opinions
which the Bank may, in its reasonable discretion, deem neces-
sary or appropriate in the proper performance of its duties.
2. Representation and Warranties of the Bank
The Bank represents and warrants to the Fund that:
A. It is a Massachusetts trust company, duly orga-
nized and existing in good standing under the laws of the Com-
monwealth of Massachusetts;
B. It is duly qualified to carry on its business in
the Commonwealth of Massachusetts;
C. All requisite corporate proceedings have been
taken to authorize it to enter into and perform this Agreement;
and
D. It has and will continue to have and maintain
the necessary facilities, equipment and personnel to perform
its duties and obligations under this Agreement.
3. Authorized Shares
The Fund certifies to the Bank that, as of the close
of business on the date of this Agreement, the Fund is autho-
rized to issue shares of beneficial interest, and that it would
initially offer shares in the authorized amounts as set forth
in Schedule A attached hereto.
4. Administration Services
The Bank shall discharge the responsibilities set
forth in Schedule B hereof subject to the control of the Fund
in accordance with procedures established from time to time
between the Fund and the Bank.
-2-<PAGE>
It is the responsibility of the Fund and/or its legal
counsel and accountants no notify the Bank in a timely manner
of any change to any rule, regulation, law or statute that will
affect the services to be provided hereunder. The Bank and the
Fund agree that all services provided hereunder are subject to
review and correction by the Fund's accountants and/or legal
counsel and the services provided by Bank shall not constitute
the practice of public accountancy or law.
5. Services to be Obtained by the Fund
The Fund shall provide for any of its own:
A. Organizational expenses;
B. Services of an independent accountant;
C. Services of outside legal and tax counsel (in-
cluding such counsel's review of the Fund's registration state-
ment, proxy materials, federal and state tax qualification as a
regulated investment company, and other reports and materials
prepared by the Bank under this Agreement);
D. Any services contracted for by the Fund directly
from parties other than the Bank;
E. Trading operations and brokerage fees, commis-
sions and transfer taxes in connection with the purchase and
sale of securities for the Fund;
F. Investment advisory services;
G. Taxes, insurance premiums and other fees and
expenses applicable to its operation;
H. Costs incidental to any meetings of shareholders
including, but not limited to, legal and accounting fees, proxy
filing fees and the preparation, printing and mailing of any
proxy materials;
I. Administration of and costs incidental to Direc-
tors' meetings, including fees and expenses of Directors;
J. The salary and expenses of any officer, director
or employee of the Fund;
K. Costs incidental to the preparation, printing
and distribution of the Fund's registration statements and any
amendments thereto, and shareholder reports;
-3-<PAGE>
L. All applicable registration fees and filing fees
required under the securities laws of the United States and
state regulatory authorities;
M. Preparation and filing of the Fund's tax
returns, Form N-1A, Annual Report and Semi-Annual Report on
Form N-SAR, and all notices, registrations and amendments
associated with applicable tax and securities laws of the
United States and state regulatory authorities; and
N. Fidelity bond and directors' and officers'
liability insurance.
6. Fees
The Bank shall receive from the Fund such compensa-
tion for the Bank's services provided pursuant to this Agree-
ment as may be agreed to from time to time in a written fee
schedule approved by the parties hereto and initially set forth
herein in Schedule C attached hereto. In addition, the Bank
shall be reimbursed by the the Fund for the out-of-pocket costs
incurred in connection with this Agreement.
7. Instructions
At any time the Bank may apply to any officer or
trustee of the Fund for instructions and may consult with legal
counsel for the Fund, or its own legal counsel, the outside
counsel for the Fund or the auditors for the Fund at the
expense of the Fund, with respect to any matter arising in con-
nection with the services to be performed by the Bank under
this Agreement. The Bank shall not be liable and shall be
indemnified by the Fund for any action taken or omitted by it
in good faith in reliance upon such instructions or upon any
paper or document believed by it to be genuine and to have been
signed by the proper person or persons. The Bank shall not be
held to have notice of any change of authority of any person
until receipt of written notice thereof from the Fund.
8. Limitation of Liability and Indemnification
a. The Bank shall be responsible for the perfor-
mance of only such duties as are set forth herein and shall
have no responsibility for the actions or activities of any
other party including other service providers. The Bank shall
have no liability for any loss or damage resulting from the
performance or nonperformance of its duties hereunder unless
-4-<PAGE>
solely caused by or resulting from the gross negligence or
willful misconduct of the Bank, its officers or employees. In
any event, the Bank's liability shall be limited to its total
annual compensation earned and fees paid hereunder during the
preceding twelve months for any liability or loss suffered by
the Fund including, but not limited to, any liability relating
to qualification of the Fund as a regulated investment company
or any liability relating to the Fund's compliance with any
federal or state tax or securities statute, regulation or rul-
ing.
b. The Fund shall indemnify and hold the Bank harm-
less from all loss, cost, damage and expense, including reason-
able expenses for counsel, incurred by the Bank resulting from
any claim, demand, action or suit in connection with the Bank's
acceptance of this Agreement, any action or omission by it in
the performance of its duties hereunder, or as a result of act-
ing upon any instructions reasonably believed by it to have
been executed by a duly authorized officer of the Manager or of
the Fund, provided that this indemnification shall not apply to
actions or omissions of the Bank, its officers or employees in
cases of its or their own gross negligence or willful miscon-
duct.
c. The Fund will be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any liability subject to
the indemnification provided above. In the event the Fund
elects to assume the defense of any such suit and retain such
counsel, the Bank or any of its affiliated persons, named as
defendant or defendants in the suit, may retain additional
counsel but shall bear the fees and expenses of such counsel
unless the Fund shall have specifically authorized the retain-
ing of such counsel.
d. The indemnification contained herein shall sur-
vive the termination of this Agreement.
e. This Section 8 shall not apply with respect to
services covered by the Custodian Agreement or the Transfer
Agency and Registrar Agreement.
9. Confidentiality
The Bank agrees that, except as otherwise required by
law, it will keep confidential the terms of this Agreement, all
records and information in its possession relating to the Fund
-5-<PAGE>
or its shareholders or shareholder accounts and will not dis-
close the same to any person except at the request or with the
written consent of the Fund.
10. Compliance with Governmental Rules and Regulations
The Fund assumes full responsibility for complying
with all applicable requirements of the Investment Company Act,
the Securities Act of 1933, the Securities Exchange Act of
1934, and the Internal Revenue Code of 1986, all as amended,
and any laws, rules and regulations issued thereunder.
The Bank shall maintain and preserve for the periods
prescribed such records relating to the services to be per-
formed by the Bank under this Agreement as are required pur-
suant to the Investment Company Act. All such records shall at
all times remain the property of the Fund, shall be readily
accessible during normal business hours, and shall be promptly
surrendered upon the termination of the Agreement or otherwise
on written request. Records shall be surrendered in usable
machine-readable form.
11. Status of the Bank
The services of the Bank to the Fund are not to be
deemed exclusive, and the Bank shall be free to render similar
services to others. The Bank shall be deemed to be an indepen-
dent contractor and shall, unless otherwise expressly provided
herein or authorized by the Fund from time to time, have no
authority to act or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
12. Printed Matter
Neither party shall publish or circulate any printed
matter which contains any reference to the other party without
such party's prior written approval. The Fund any circulate
such printed matter as refers in accurate terms to the Bank's
appointment hereunder provided that the Bank is given a copy of
such material prior to its first use.
13. Term, Amendment and Termination
This Agreement may be modified or amended from time
to time by mutual agreement between the parties hereto. The
Agreement shall remain in effect for a period of one year from
-6-<PAGE>
the date the Fund first accepts money for investment, and shall
automatically continue in effect thereafter with respect to the
Fund unless terminated by a party at the end of such period or
thereafter on sixty (60) days' prior written notice. Upon ter-
mination of this Agreement, the Fund shall pay to the Bank such
compensation as may be due under the terms hereof as of the
date of such termination including reasonable out-of-pocket
expenses associated with such termination.
14. Notices
Any notice or other communication authorized or
required by this Agreement to be given to any party mentioned
herein shall be sufficiently given if addressed to such party
and mailed postage prepaid or delivered to its principal
office.
15. Non-Assignability
This Agreement shall not be assigned by any of the
parties hereto without the prior consent in writing of the
other parties.
16. Successors
This Agreement shall be binding on and shall inure to
the benefit of the Fund and the Bank and their respective suc-
cessors.
17. Entire Agreement
This Agreement (and any Compliance Manual and Fund
Profile as may be prepared by the Bank) contains the entire
understanding between the parties hereto and supersedes all
previous representations, warranties or commitments regarding
the services to be performed hereunder whether oral or in writ-
ing. This Agreement cannot be modified or terminated except in
accordance with its terms or by a writing signed by all par-
ties.
18. Governing Law
This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of
the Commonwealth of Massachusetts.
-7-<PAGE>
SBI FUND, INC.
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By:
Name:
Title:
-8-<PAGE>
SCHEDULE A
TO
ADMINISTRATION AGREEMENT
Fund Authorized Shares
Pool A
Pool B
-9-<PAGE>
SCHEDULE B
TO
ADMINISTRATION AGREEMENT
Services Provided by the Bank:
(a) Oversee the determination and publication of the
Fund's net asset value in accordance with the Fund's
policy as adopted from time to time by the Board of
Directors;
(b) Oversee the maintenance by State Street Bank and
Trust Company of certain books and records of the
Fund as required under Rule 31a-1(b)(4) of the
Investment Company Act of 1940;
(c) Prepare the Fund's federal, state and local income
tax returns for review by the Fund's independent
accountants and filing by the Fund treasurer;
(d) Review the appropriateness of and arrange for payment
of the Fund's expenses;
(e) Prepare for review and approval by officers of the
Fund financial information for the Fund's semi-annual
and annual reports, proxy statements and other com-
munications with shareholders required or otherwise
to be sent to Fund shareholders, and arrange for the
printing and dissemination of such reports and com-
munications to shareholders;
(f) Prepare for review by an officer of and counsel for
the Fund the Fund's periodic financial report
required to be filed with the Securities and Exchange
Commission ("SEC") on Form N-SAR and Form N-1A and
such other reports, forms or filings, as may be mutu-
ally agreed upon;
(g) Prepare reports relating to the business and affairs
of the Fund as may be mutually agreed upon and not
otherwise appropriately prepared by the Fund's
investment adviser, custodian, counsel or auditors;
(h) Make such reports and recommendations to the Board
concerning the performance of the independent
accountants as the Board may reasonably request or
deems appropriate;
-10-<PAGE>
(i) Make such reports and recommendations to the Board
concerning the performance and fees of the Fund's
custodian and transfer and dividend disbursing agent
as the Board may reasonably request or deems appro-
priate;
(j) Oversee and review calculations of fees paid to the
Manager, the investment adviser, the custodian, and
the transfer agent;
(k) Consult with the Fund's officers, independent
accountants, legal counsel, custodian and transfer
and dividend disbursing agent in establishing the
accounting policies of the Fund;
(l) Review implementation of any dividend reinvestment
programs authorized by the Board of Directors;
(m) Respond to or refer to the Fund's officers or trans-
fer agent, shareholder inquiries relating to the
Fund.
(n) Provide periodic testing of portfolios to assist the
Fund's advisor in complying with Internal Revenue
Code mandatory qualification requirements, the
requirements of the Investment Company Act and Fund
prospectus limitations as may be mutually agreed
upon.
Certain details of the scope of the Bank services
hereunder may be documented in the Compliance Manual and Fund
Profile as amended from time to time.
-11-<PAGE>
SCHEDULE B-2
REGISTRATION OF Fund SHARES
WITH STATE SECURITIES ADMINISTRATORS
The Bank will prepare required documentation and register Fund
shares in accordance with the securities laws of each state or
jurisdiction in which Fund shares are offered or sold as deter-
mined by the Fund. The registration services shall consist of
the following:
1. Filing of Fund initial registration statements
and amendments thereto (N-1A);
2. Amending state registration statements as
required;
3. Filing on behalf of the Fund, Fund sales reports
and advertising literature where applicable;
4. Payment at the expense of the Fund of all Fund
state registration and filing fees;
5. Filing post effective amendments to the prospec-
tuses and statements of additional information
(SAI);
6. Filing of annual reports, supplements and stick-
ers, and proxy statements; and
7. The performance of additional services which the
Bank and the Manager may agree upon in writing.
Unless otherwise noted in writing by the Bank, registration
services by the Bank shall not include determining the avail-
ability of institutional exemptions under a state's blue sky
law. Any such determination shall be made by the Manager or
its legal counsel. In connection with the services described
herein, the Manager shall cause the Fund to issue in favor of
the Bank a power of attorney to register Fund shares on behalf
of the Fund, which power of attorney shall be substantially in
the form of Exhibit I attached hereto.
-12-<PAGE>
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of , 1993 that
FLORIDA A & M SBI FUND (the "Fund") makes, constitutes, and
appoints STATE STREET BANK AND TRUST COMPANY (the "Bank") with
principal offices at 225 Franklin Street, Boston, Massachusetts
its lawful attorney-in-fact for it to do as if it were itself
acting, the following:
1. REGISTRATION OF Fund SHARES. The power to register shares
of the Fund in each jurisdiction in which Fund shares are
offered or sold and in connection therewith the power to
prepare, execute, and deliver and file any and all Fund
applications, including without limitation, applications
to register shares, to register agents, consents, includ-
ing consents to service of process, reports, including
without limitation, all periodic reports, claims for
exemption, or other documents and instruments now or here-
after required or appropriate in the judgement of the Bank
in connection with the registration of Fund shares.
2. CHECKS. The power to draw, endorse, and deposit checks in
the name of the Fund in connection with the registration
of Fund shares with state securities administrators.
The execution of this limited power of attorney shall be deemed
coupled with an interest and shall be revocable only upon
receipt by Bank of such termination of authority. Nothing
herein shall be construed to constitute the appointment of the
Bank as or otherwise authorize the Bank to act as an officer,
director or employee of the Fund.
IN WITNESS WHEREOF, the Fund has caused this Agreement to be
executed in its name and on its behalf by and through its duly
authorized officer, as of the date first written above.
SBI FUND, INC.
By:
Name:
Title:
-13-
EXHIBIT 13
ARRANGEMENT WITH RESPECT TO INITIAL CAPITAL
THE SBI FUND, INC., a Maryland corporation (the "Fund"),
hereby acknowledges receipt of $100,000 from ["Initial
Investor"], as the initial capital of the Fund, and, in
consideration thereof, hereby delivers to ["Initial
Investor"] 10,000 shares of Class A Common Stock of the Fund
(by directing State Street Bank & Trust Company, the
Custodian of the Fund, to enter into the stock ledger of the
Fund the sale of 10,000 shares of such Stock to ["Initial
Investor"] as of the date hereof and to maintain ["Initial
Investor"] on the books of the Fund as the owner of such
Stock).
["Initial Investor"] hereby represents that this purchase is
made for investment purposes without any present intention of
redeeming or reselling such Stock.
Dated this day of , 1995.
THE SBI FUND, INC. ["INITIAL INVESTOR"]
By By
Name: Name:
Title: Title:
EXHIBIT 15
SBI FUND, INC.
DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
This Plan (the "Plan") dated the day of
1995, is the written plan contemplated by Rule 12b-1 ("Rule
12b-1") under the Investment Company Act of 1940 (the "Act") of
SBI Fund, Inc. (the "Fund").
WHEREAS, the Fund is registered as an open-end management
investment company under the Act.
WHEREAS, the Fund has two classes of common stock autho-
rized and outstanding, Class A Common Stock (the "Class A
Shares") and Class B Common Stock (the "Class B Shares" and,
together with the Class A Shares and all other shares that may
be authorized by the Board of Directors from time to time, the
"Shares"), each representing a specific pool of assets (Pool A
and Pool B, respectively) provided that the Board of Directors
may establish additional classes of equity securities from time
to time representing additional pools of assets respectively.
WHEREAS, the Fund desires to adopt a Plan pursuant to Rule
12b-1 under the Act to provide for the payment by the Fund of
expenses in connection with the distribution of the Shares, and
the Directors have determined, in the exercise of their rea-
sonable business judgment and in light of their fiduciary duty,
that there is a reasonable likelihood that this Plan will ben-
efit the Fund and its shareholders.
WHEREAS, the Fund has entered into an agreement dated as
of , 1995 (the "Agreement") with Lamaute Capital Inc.
(the "Distributor") pursuant to which the Distributor has
agreed to act as distributor of the Shares.
NOW, THEREFORE, in consideration of the foregoing, the
Fund hereby adopts this Plan in accordance with Rule 12b-1 on
the following terms and conditions:
1. Definitions. As used in this Plan, the following
terms shall have the following meanings:
(a) "Qualified Directors" shall mean the Directors
of the Fund who are not interested persons (as such term
is defined in the Act) of the Fund and who have no direct
or indirect financial interest in the operation of this
Plan or any agreement related to this Plan. While this
Plan is in effect, the selection and nomination of Quali-
fied Directors shall be committed to the discretion of the
Directors who are not interested persons of the Fund.<PAGE>
Nothing herein shall prevent the involvement of others in
such selection and nomination if the final decision on any
such selection and nomination is approved by a majority of
such disinterested Directors.
(b) "Qualified Recipient" shall mean any broker-
dealer or other "person" (as such term is defined in the
Act) which (i) has entered into a written agreement (a
"related agreement") with the Distributor that complies
with the Rule and (ii) has rendered distribution assis-
tance (whether direct, administrative or both) in the
distribution of the Shares.
2. Payments for Distribution Assistance. Under the
Plan, the Fund shall make quarterly payments to the Distribu-
tor, not exceeding in the aggregate a maximum annual amount
equal to 0.05% of the average daily net asset value of Pool A
and of Pool B (and of any additional pool of assets with re-
spect to which an additional class or series of shares of the
Fund may be authorized from time to time by the Board of Di-
rectors) during each fiscal year of the Fund, as agreed to
pursuant to the terms of the Distribution Agreement entered
into between the Fund and the Distributor. The Distributor
shall use such fee received from the Fund in its entirety to
reimburse itself for its costs incurred in connection with the
distribution of the Shares, including but not limited to, ad-
vertising, printing and mailing promotional literature, tele-
phone calls and lines, computer terminals and personnel, and
compensating Qualified Recipients for providing distribution
assistance with respect to the Shares. The Distributor may
make Plan payments to any "affiliated person" (as such term is
defined in the Act) of the Distributor if such affiliated per-
son qualifies as a Qualified Recipient. Payment of such fee
shall be subject to any limitations set forth in applicable
regulations of the National Association of Securities Dealers,
Inc.
3. Allocation Between Pools. Distribution costs paid
for pursuant to the Plan shall be allocated between Pool A and
Pool B of the Fund (and any additional pool of assets with re-
spect to which an additional class or series of shares of the
Fund may be authorized from time to time by the Board of Di-
rectors) based on the relative average net asset size of such
Pools.
4. Reports. While this Plan is in effect, any person
authorized to direct the disposition of monies paid or payable
by the Fund pursuant to the Plan or any related agreement shall
report in writing at least quarterly to the Fund's Board of
Directors, and the Board shall review, the amounts expended
-2-<PAGE>
under the Plan and the purposes for which such expenditures
were made.
5. Effectiveness, Continuation and Termination. This
Plan shall become effective as to each class of shares of the
Fund upon approval (i) by a vote of the Board of Directors of
the Fund and of the Qualified Directors, cast in person at a
meeting called for the purpose of voting on this Plan; and (ii)
by a vote of holders of at least a majority (as such term is
defined in the Act) of the outstanding voting shares of the
respective class or series of Shares. Unless terminated as
hereinafter provided, this Plan shall continue in effect for a
period of one year from its effective date, and from year to
year thereafter only so long as such continuance is specifi-
cally approved at least annually by the Fund's Board of Direc-
tors and its Qualified Directors cast in person at a meeting
called for the purpose of voting on such continuance.
This Plan may be terminated at any time with respect to
either or both of the Class A Shares and Class B Shares (or any
additional class or series of shares as may be authorized from
time to time by the Board of Directors) by a vote of a majority
of the Qualified Directors or by the vote of the holders of a
majority (as defined in the Act) of the outstanding voting
shares of the respective class or series of Shares.
6. Amendment. This Plan may not be amended to increase
materially the amount of payments to be made without share-
holder approval, as set forth in 5(ii) above, and all amend-
ments must be approved in the manner set forth under 5(i)
above.
7. Related Agreements. Any agreement related to the
Plan shall be in writing, and shall provide that (i) such
agreement may be terminated at any time, without payment of
penalty, by the vote of a majority of the Qualified Directors
or with respect to either or both of the Class A Shares and
Class B Shares (or any additional class or series of shares as
may be authorized by the Board of Directors) by a vote of a
majority of the Qualified Directors or by the vote of the
holders of a majority (as defined in the Act) of the outstand-
ing voting shares of the respective class or series of Shares
on not more than 60 days written notice to any other party to
the agreement; and (ii) such agreement shall terminate auto-
matically in the event of its assignment. Any such related
agreement shall become effective upon approval by a vote of the
Board of Directors of the Fund and of the Qualified Directors
cast in person at a meeting called for the purpose of voting on
such agreement.
-3-<PAGE>
Unless terminated as provided in 7(i) and (ii) above, any
agreement related to the Plan shall continue in effect for a
period of one year from its effective date, and from year to
year thereafter only so long as such continuance is specifi-
cally approved at least annually by the Fund's Board of Direc-
tors and its Qualified Directors cast in person at a meeting
called for the purpose of voting on such continuance.
8. Preservation of Documents. The Fund shall preserve
copies of the Plan and any agreements and reports made pursuant
thereto, and minutes of the Board of Directors' consideration
of the Plan which describe the factors considered and the basis
for the decision, for a period of six years from the date of
such document, the first two years in an easily accessible
place.
-4-
