AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH __, 1997
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. 5 [X]
Post-Effective Amendment No. ____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 5 [x]
(Check appropriate box or boxes.)
THE SBI FUND, INC.
_______________________________________________________________________
(Exact Name of Registrant as Specified in Charter)
One SBI Plaza, School of Business & Industry
Florida A&M University, Tallahassee, Florida 32307
_______________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (904) 561-2661
______________
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.
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 <PAGE>
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>
<PAGE>
CROSS-REFERENCE SHEET
Part A of
Form N-1A Caption Page
Item 1 Cover Page Cover
Item 2 Synopsis 4
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 and Other Practices 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
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<PAGE>
SUBJECT TO COMPLETION DATED MARCH 26, 1997
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 un-
lawful prior to registration or qualification under the securities
laws of any such state.
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PROSPECTUS MARCH , 1997
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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 sub-
scriptions are received aggregating at least $1 million. See
"DESCRIPTION OF THE FUND -- Structure of the Fund" below.
----------------
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 March __, 1997, 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 SE-
CURITIES 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
-i-<PAGE>
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 diversi-
fied portfolio of stocks of companies ex-
pected 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
opportunity to participate in the opera-
tion of a registered investment company.
Students will assist in a variety of
capacities in the operations of the In-
vestment 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.<PAGE>
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 9-10
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 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 15
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
liable for taxes on their proportionate
share of actually and deemed distributed
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 pur-
chased 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.
-2-<PAGE>
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.
Pages 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
-3-<PAGE>
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%
-------------------------------------------------------------
Total Fund Operating Expenses 0.30%
Example:
1 Year 3 Years
------ -------
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
-------------------------------------------------------------
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%
-------------------------------------------------------------
Total Fund Operating Expenses 0.85%
Example:
1 Year 3 Years
------ -------
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
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 AS-
SUMES A 5% ANNUAL RATE OF RETURN, THE FUND'S ACTUAL PERFOR-
MANCE 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 esti-
mates for the current fiscal year. See "MANAGEMENT OF THE
FUND -- Expenses" below.
-4-<PAGE>
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 se-
ries, each of which is diversified: Pool A, which will at-
tempt 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 invest-
ment objective of Pool B is to achieve long-term capital ap-
preciation 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 com-
position 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 "-- In-
vestment Policies." The Fund is neither sponsored by nor af-
filiated 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 In-
vestment 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 tech-
nology and competitive conditions. All companies invested in
by Pool B will generally have a minimum aggregate market
value of at least $100 million and must have an active trad-
ing market. Foreign stocks may be purchased if they are
traded in U.S. markets. Pool B will be prohibited from
purchasing securities of any issuer of which any officer or
director of the Fund or of the Investment Advisor is an
officer or a director. As of the date of this Prospectus,
this policy prohibits investment by Pool B in any security
issued by: Anheuser Busch Companies, Inc.; Champion
International Corp.; Dean Witter Discover & Co.; Hershey
Foods Corporation; Hewlett-Packard Co.; Sears, Roebuck and
Co.; Southwestern Bell Corporation. 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 pro-
vide 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 environ-
ment. SBI Investments, Inc. ("SBI Investments"), one of
these SBI
-5-<PAGE>
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 as-
signments through supporting research and strategy analysis.
The educational objectives of the Fund include:
(a) inspiring students to pursue professional careers in in-
vestment 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 per-
formance 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 In-
dex.
The S&P 500 Index is composed of 500 common stocks,
most of which are listed on the New York Stock Exchange, cho-
sen 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.
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 port-
folio 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 correla-
tion 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, in-
creases 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 Invest-
ment 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").
-6-<PAGE>
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
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 de-
rivative securities.
Futures on the S&P 500 Index are contracts that ob-
ligate 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. Pool A may not enter
into futures contracts for which aggregate initial margin
deposits exceed 5% of the fair market value of Pool A's
assets. Pool A's policy will be to deposit cash or cash
equivalents equal to the underlying value of any futures
contract being purchased with the futures commission merchant
or in a segregated account with the Fund's Custodian or with
a designated subcustodian at the time of purchase so that the
Pool's investment in futures will not be leveraged. Not more
than 20% of the net assets of Pool A will be invested in
futures at any time. Pool A may elect to close some or all
of its futures positions at any time prior to their
expiration.
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 pub-
licly 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
thirteen 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".
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
-7-<PAGE>
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 ob-
jectives and policies within six months of starting
operations.
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 as-
sets to secure permitted borrowings for temporary or emer-
gency 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 In-
vestment 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 OBJEC-
TIVES AND POLICIES -- Investment Restrictions" in the State-
ment of Additional Information.
-8-<PAGE>
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.
The Fund has been structured with a view toward en-
suring professional responsibility and prudent investment de-
cisions in accordance with the investment objectives de-
scribed under "Investment Objectives and Strategies." Inves-
tors 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 Ad-
visor 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 op-
eration 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 reim-
bursement 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 adminis-
tration 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 Educa-
tion 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 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 de-
cline over short periods and possibly over extended periods.
While Pool A will attempt to reflect the perfor-
mance of the S&P 500 Index, the relationship between the per-
formance of Pool A and the performance of the
-9-<PAGE>
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 In-
dex. Such factors include, among others, risks such as il-
liquidity, imperfect correlation with the index and the be-
havior 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 pos-
sible imposition of withholding taxes on interest income pay-
able on the securities, the possible establishment of ex-
change 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 sub-
ject to different accounting, auditing, and financial report-
ing standards.
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 ex-
penses. See "INVESTMENT OBJECTIVES AND POLICIES -- Portfolio
Turnover" and "BROKERAGE ALLOCATION AND OTHER PRACTICES" in
the Statement of Additional Information.
STRUCTURE OF THE FUND
The Fund is comprised of two series: Pool A, rep-
resented by Class A Common Stock of the Fund, par value $.001
per share (the "Class A Common Stock"), and Pool B, repre-
sented by Class B Common Stock of the Fund, par value $.001
per share (the "Class B Common Stock").
-10-<PAGE>
The capital generated from the sale of Class A Com-
mon Stock will be invested in Pool A and the capital gener-
ated from the sale of Class B Common Stock will be invested
in Pool B.
To ensure that expenses are not excessive in rela-
tion to the size of the Fund, Pool A will not commence opera-
tions 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 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 "REDEMP-
TION 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 ac-
tivities 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 respon-
sible for determining investment strategies and managing the
investments of the Fund. The directors of the Investment Ad-
visor are comprised of the members of the SBI Executive Com-
mittee, ex officio, and the Chief Investment Officer,
-11-<PAGE>
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 in-
vestment portfolios of the Fund. As of the date of this
Prospectus, Darrell R. Williams serves as the Chief Invest-
ment Officer and Chief Operating Officer and a director of
the Investment Advisor and serves as the President, Chief
Investment Officer 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 Ad-
visor (the "Advisory Board") are appointed by the Board of
Directors of the Investment Advisor. The Advisory Board is
comprised of outside executive investment management offi-
cials 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 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 recom-
mendations 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 Of-
ficer 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 opera-
tions of SBI Investments will depend on individual educa-
tional level and experience. Because many SBI students at-
tend school in the summer, student participation in SBI In-
vestments 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
-12-<PAGE>
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 Invest-
ment Advisor.
Pursuant to the Investment Advisory Agreement be-
tween 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 pay-
able 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.
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 1 Heritage Drive, 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 ex-
penses 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 mem-
bers of the Board of Directors of the Fund who are unaffili-
ated with SBI may be reimbursed by the Fund for any out-of-
pocket expenses incurred by them in connection with the per-
formance of their duties but will not otherwise be compen-
sated by the Fund.
In addition, the Fund has adopted a Rule 12b-1
Plan which provides for the payment by the Fund of an amount
equal to .05% of the average net assets of Pool A and Pool B
in each year to the distributor of the shares of the Fund,
out of which the distributor will pay certain expenses
incurred in connection with the distribution of the Fund's
shares. Distribution 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
-13-<PAGE>
the assets of, such Pool. Those expenses which cannot be so
allocated are allocated between Pool A and Pool B in pro-
portion 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 educa-
tion 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 PRACTICES" 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.<R/>
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. Generally, including for such
matters as the election of directors of the Fund and the
approval 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. When required by law that
a class vote separately, including for such matters as the
approval or termination of the advisory contract between the
Fund and the Investment Advisor, the holders of shares of
each of the Class A Common Stock and Class B Common Stock
will vote as two separate classes. In any instance in which
either class would not be affected by a matter requiring a
shareholder vote, the vote of the shareholders of such class
will not be required.
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 prefer-
ence over the Class B Common Stock with respect to the assets
of Pool A, and the Class B Common Stock is
-14-<PAGE>
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 secu-
rities exchange or otherwise easily transferable through an
organized market. Consequently, shareholders may have to re-
quest redemption of their shares by the Fund to liquidate
their holdings. See "REDEMPTION OF FUND SHARES." Sharehold-
ers 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 gen-
erated by Pool B) are distributed each year to shareholders
of Class B Common Stock.
Dividends and distributions will be paid in ad-
ditional 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 deter-
mine, 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 in-
come tax purposes, however, distributions of additional
shares of the Fund made to shareholders in respect of divi-
dend 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 Conse-
quences" 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 ex-
planation 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.
-15-<PAGE>
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 LIABLE FOR TAXES ON THEIR
PROPORTIONATE SHARE OF ACTUALLY AND DEEMED DISTRIBUTED INCOME
AND GAINS OF THE FUND, EXCEPT FOR SHAREHOLDERS THAT ARE NOT
OTHERWISE SUBJECT TO TAX ON THEIR INCOME.
All dividends paid or distributed, or deemed to be
paid or distributed (in the form of additional shares of com-
mon stock of the Fund), out of investment company taxable in-
come 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 share-
holder in the form of additional shares of common stock of
the Fund is taxable as long-term capital gain to such share-
holder, regardless of the length of time such shareholder has
owned the shares. Generally, such dividends and distribu-
tions are taxable in the year in which received, but divi-
dends and distributions declared in October, November or De-
cember 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 distribu-
tions of their ordinary income and capital gain net income 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 invest-
ments 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 February 28, 1997, 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,
Tallahassee, Florida 32307, or by telephone during regular
business hours at (904) 561-2661.
-16-<PAGE>
PURCHASE OF FUND SHARES
Shares of Class A Common Stock and of Class B Com-
mon 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, 1 Heritage Drive, 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.: 011000028
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
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 cer-
tified taxpayer identification number upon opening your ac-
count. See the SBI Fund Account Application for further in-
formation.
Shareholders who already own shares of the Fund may
purchase additional shares by sending a completed SBI Fund
Additional Investment Application and check,
-17-<PAGE>
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 applica-
tion 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 deter-
mined 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 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 dis-
cretion, 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 refer-
encing 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 no-
tice 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 ordi-
narily will make payment for all redeemed shares within seven
days after receipt by the Transfer Agent of a redemption re-
quest, except as provided by applicable securities laws,
rules and regulations.
-18-<PAGE>
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 incre-
mental 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 com-
mon 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 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 other-
wise 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 RE-
DEMPTION 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 deliv-
ered 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. Ad-
vertisements 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 an-
nual total return for one, five and ten year periods, or for
shorter time periods 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
-19-<PAGE>
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 inves-
tors 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 INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CON-
TAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING OF
THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMA-
TION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO
WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-20-<PAGE>
SUBJECT TO COMPLETION DATED MARCH 26, 1997
Information contained herein is subject to completion or
amendment. A registration statement relating to these secu-
rities has been filed with the Securities and Exchange Com-
mission. These securities may not be sold nor may any offers
to buy be accepted prior to the time the registration state-
ment becomes effective. This Statement of Additional Infor-
mation does not constitute a prospectus.
-------------------------------------------------------------
THE SBI FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH __, 1997
-------------------------------------------------------------
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 March __, 1997, 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 Practices................ 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 se-
ries, 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"), re-
spectively. 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 com-
pany" under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), or change the subclas-
sification of such series from "diversified" to "non-
diversified."
(b) Invest 25 percent or more of such series' to-
tal assets in any single industry, or 10 percent or more
of such series' total assets in any single issuer.
(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 in-
cluding 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.
B-2<PAGE>
(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 bro-
kers, 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 se-
ries may be deemed to be an underwriter under the fed-
eral 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 invest-
ment 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 per-
cent 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.
(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 be-
low), 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 se-
curities) that are not listed or admitted to trading on
a nationally recognized securities exchange in the Unit-
ed 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 invest-
ment by such series.
B-3<PAGE>
(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
value of the loaned securities; (v) the Fund is not re-
quired 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 to invest
its assets in shares of money market funds, the Fund has
no intention of purchasing 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
PRACTICES."
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.
-------------------------------------------------------------
(1) (2) (3)
Name, Address Positions Held Principal Occupation(s)
and Age with the Fund During Past 5 Years
-------------------------------------------------------------
Amos Bradford (50)* Director Program Director,
Professor and Member of
Executive Committee,
SBI from before 1991 to
present; Director of
Investment Advisor
since 1989; and
President and Treasurer
of Investment Advisor
since July, 1993.
Vivian Carpenter (44)* Director Assistant Dean, SBI
from August,
B-4<PAGE>
1995 to present; Pro-
fessor and Member of
Executive Committee,
SBI from August, 1992
to present; Director of
Academic Programs, SBI
from August, 1992 to
August, 1995; Manager,
Atwater Entertainment
Associates, L.L.C.,
from 1995 to present;
Assistant Professor,
Wayne State University,
from before 1991 to
1992; Visiting As-
sistant Professor, Uni-
versity of Michigan,
from 1990 to 1992;
Director of Investment
Advisor since August,
1992; and Executive
Vice President and Sec-
retary of Investment
Advisor since July,
1993.
Marx Cazenave (56) Director President and Chief
Executive Officer,
Progress Investment Man-
agement Co. (a regis-
tered investment
advisor), 1990 to
present; President,
Cazenave & Company (a
registered broker-
dealer), 1986 to
present.
Lucille Dabney (43) Director Director, The Cultural
Arts Council of Houston,
from September, 1992 to
present; Professional
Development Associate,
SBI, from November, 1991
to August, 1992.
Sybil Mobley (71)* Director Dean of SBI from before
1991 to the present; Di-
rector of Investment Ad-
visor 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 (36) Director Controller and U.S.
Field Procurement
Manager, Hewlett-Packard
Co., from before 1991 to
the present; Partner,
Ledger Plus (accounting
services) from October,
1994 to the present.
B-5<PAGE>
Darrell Williams (39)* Director, Chief Operating Officer
President, and Chief Investment
Chief Officer of Investment
Investment Advisor since July,
Officer 1993;Director of
and Investment Advisor since
Treasurer September, 1992; Vice
President, Precision Asset
Management, from March,
1990 to July, 1992;
currently Chairman of
the Leon County In-
vestment 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 asso-
ciation 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 (51) Vice Assistant Professor of
President Business
and Administration, SBI,
Secretary from August, 1994 to
present;
Associate Professor of
Business Administration,
Morehouse College,
Department of Economics
and Business, from
before 1991 to August,
1994; Appraiser, The
Burton Appraisal Group
(real estate appraising)
from 1991 to 1992.
* indicates a director who is an "interested person" of the
Fund, as defined in the 1940 Act.
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 February 28, 1997. Neither
officers nor directors of the Fund will be
B-6<PAGE>
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. Share-
holders 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 share-
holders for the purpose of voting upon the question of re-
moval 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, Tal-
lahassee, Florida 32307. See "INVESTMENT ADVISORY AND OTHER
SERVICES -- Investment Advisor." As of February 28, 1997,
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 Prospec-
tus entitled "MANAGEMENT OF THE FUND -- The Investment Advi-
sor," "--Administrative, Transfer Agent and Custodial
Services" and "--Expenses."
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 relation-
ships, may be deemed to control the Investment Ad-
visor; 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, Chief Investment Officer and Treasurer of the
Fund.
B-7<PAGE>
The advisory fees payable by the Fund to the In-
vestment Advisor are 0.10% per annum of the average net as-
sets 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 pay-
able 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 Invest-
ment Advisor will be distributed to SBI at least annually to
further its scholastic and educational programs.
The Investment Advisor performs the following ser-
vices 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 Advi-
sor bears all expenses in connection with the performance of
its services in return for its advisory fees.
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.
The Advisory Board of the Investment Advisor re-
views 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 implementa-
tion; 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 capac-
ity; 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 be-
half 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
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
B-8<PAGE>
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 indepen-
dent auditors.
The salaries of the administrative personnel of the
Fund, as well as the expenses of the faculty and other indi-
viduals 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, for
distribution services rendered by the distributor to the
Fund. Out of such amount, the distributor will pay costs
incurred by it 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 PRACTICES
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 trans-
actions, including their frequency, is made in the best judg-
ment of the Investment Advisor and in a manner deemed to ob-
tain, 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 their abil-
ity 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 securi-
ties 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
B-9<PAGE>
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 ex-
pected 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.
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, conver-
sion rights and redemption provisions, see the section en-
titled "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 Prospec-
tus 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 pe-
riod when the New York Stock Exchange is closed, (b) when
trading in the markets the Fund normally utilizes is re-
stricted, 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
B-10<PAGE>
value is not reasonably practicable or (c) for such periods
as the Commission by order may permit to protect the Fund's
shareholders.
Redemption in Kind. If the Board of Directors de-
termines 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 secu-
rities 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 re-
deem 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 sub-
tracting 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, secu-
rities for which current market quotations are readily avail-
able are valued, as of the close of each day of trading on
the New York Stock Exchange, in the following manner: secu-
rities 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."
The following is only a summary of certain addi-
tional 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 expla-
nation 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 (i) 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
B-11<PAGE>
the year (the "Distribution Requirement"), and (ii) the
excess of its tax-exempt interest income over certain
deductions with respect to such income, 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 dividends, interest and
gains from the sale or other disposition of stocks, securi-
ties or foreign currencies, or from other income derived with
respect to its business of investing in such stock, securi-
ties 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 se-
curities, 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 securi-
ties 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.
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 sells
investments, including stock index futures, held for less
than three months, but will not be precluded from making such
sales.
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, with-
out 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 invest-
ment 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 deemed received.
B-12<PAGE>
The Code allows a 70 percent dividends-received de-
duction (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 determin-
ing the Deduction, a series of the Fund may not take into ac-
count any amount received as a dividend with respect to any
security unless such series has held the security with re-
spect to which the dividend has been paid for a minimum pe-
riod, 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 distribu-
tions 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 per-
cent 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 with respect to each calendar year to avoid liability
for this excise tax.
Rules of state and local taxation of ordinary in-
come 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.
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 deter-
mining 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.
B-13<PAGE>
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-14<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements:
None.
(b) Exhibits:
(1.1) Articles of Incorporation
(1.2) Articles of Amendment dated February 17, 1997
(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
* Previously filed.
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
C-1<PAGE>
directors of the Fund are members of the faculty and adminis-
tration 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 Educa-
tion 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 February 28, 1997
------------------------------------------------------------
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 autho-
rize a corporation subject to the MGCL to indemnify directors,
officers, employees, and agents. In addition, reference is
made to Article EIGHTH of the Registrant's Articles of Incor-
poration 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 stock-
holders for damages; (ii) the Fund shall indemnify its direc-
tors, officers, employees and agents to the extent provided in
the by-laws of the Fund; (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. Article VIII of the Registrant's By-Laws
filed as Exhibit 2 hereto provides that (i) the Fund shall in-
demnify and advance expenses to its currently acting and former
officers and directors to the fullest extent that indemnifica-
tion is permitted by law; and (ii) employees and agents of the
Fund who are not
C-2<PAGE>
officers or directors may be indemnified and expenses may be
advanced as may be provided by action of the Board of Directors
or by contract, subject to any limitations imposed by the
Investment Company Act of 1940.
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 di-
rectors, officers and controlling persons of the Regis-
trant 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 Regis-
trant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or con-
trolling 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.
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
C-3<PAGE>
Corporation, Sears, Roebuck and Co., Southwestern Bell Corpo-
ration 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 under-
writer, depositor or investment advisor for any other regis-
tered 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.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
SBI Capital Management and Research Corporation, One
SBI Plaza, School of Business & Industry, Florida A&M Univer-
sity, Tallahassee, Florida 32307, and the offices of the cus-
todian 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 subscrip-
tions 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 Regis-
trant's 1933 Act Registration Statement;
C-4<PAGE>
(c)(1) to provide assistance to the shareholders concern-
ing 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 26th day of March, 1997.
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 26th day of March, 1997.
*
_______________________________
Sybil Mobley, Director
*
_______________________________
Amos Bradford, Director
*
_______________________________
Vivian Carpenter, Director
*
_______________________________
Marx Cazenave, Director
*
_______________________________
Lucille Dabney, Director
*
_______________________________
Craig Washington, Director
/s/Darrell Williams
Darrell Williams, Director
/s/Darrell Williams
Darrell Williams, as attorney-
in-fact for the above directors
marked by an asterisk<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
(1.1) Articles of Incorporation
(1.2) Articles of Amendment dated Ferbruary 17,
1997
(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
* Previously filed.
EXHIBIT 1.1
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
-8-<PAGE>
requirements as to delivery of certificates evidencing
shares, if issued.
(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.
-9-<PAGE>
(4) Any determination made in good faith by or
pursuant to the direction of the Board of Directors, as to:
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.
-10-<PAGE>
(3) No provision of this Article EIGHTH shall be
effective to protect or purport to protect any director or
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
-11-<PAGE>
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.
(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"
-12-<PAGE>
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
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
/s/ Sherri D. Reiss
Sherri D. Reiss, Incorporator
-13-
EXHIBIT 1.2
THE SBI FUND, INC.
ARTICLES OF AMENDMENT
THE SBI FUND, INC., a Maryland corporation, having its
principal office at 32 South Charles Street, Baltimore,
Maryland 21202 (hereinafter referred to as the "Corporation"),
hereby certified to the Sate Department of Assessments and
Taxation of Maryland (the "Department") that:
FIRST: The Charter of the Corporation is hereby amended
by striking out in its entirety Article FIFTH (5)(v) and
substituting the following in lieu thereof:
"(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
standing in his name on the books of the Corporation
regardless of the class thereof, and all shares of
all classes shall vote together as a single class;
provided, however, that (a) when Maryland law or the
Investment Company Act require that a class vote
separately with respect to a given matter, the
separate voting requirements of the applicable law
shall govern with respect to the affected class and
the other classes shall vote as a single class and
(b) as to any matter, which, in the judgment of the
Board of Directors (which shall be conclusive), does
not affect the interests of a particular class, such
class shall not be entitled to any vote and only the
holders of the affected class shall be entitled to
vote."
SECOND: The Charter of the Corporation is hereby amended
by striking out in its entirety Article FIFTH (7) and
substituting the following in lieu thereof:
"(7) 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 or at the direction of the Corporation's
Board of Directors, 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."
THIRD: The Charter of the Corporation is hereby amended
by striking out in its entirety Article EIGHTH (2) and
substituting the following in lieu thereof:<PAGE>
"(2) The Corporation shall indemnify its directors,
officers, employees and agents to the extent provided
in the by-laws of the Corporation."
FOURTH: The Board of Directors of the Corporation,
pursuant to and in accordance with the Charter and Bylaws of
the Corporation and the Corporations and Associations Article
of the Annotated Code of Maryland (the "Corporations
Articles"), duly advised the aforegoing amendments and the sole
Stockholder of the Corporation, pursuant to and in accordance
with the Charter and Bylaws of the Corporation and the
Corporations Article, duly approved the aforegoing amendments.
[SIGNATURES ON NEXT PAGE]<PAGE>
IN WITNESS WHEREOF, THE SBI FUND, INC. has caused these
presents to be signed in its name and on its behalf by its
President and it corporate seal to be hereunder affixed and
attested by its Secretary on this 17th day of February, 1997,
and its President acknowledges that these Articles of Amendment
are the act and deed of THE SBI FUND, INC. and, under the
penalties of perjury, that the matters and facts set forth
herein with respect to authorization and approval are true in
all material respects to the best of his knowledge, information
and belief.
ATTEST: THE SBI FUND, INC.
/s/ Marion R. Sillah By:/s/ Darrell R. Williams
Marion Sillah Darrell R. Williams
Secretary President
EXHIBIT 5
DRAFT 3/7/97
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the _____ day of __________, 1997, 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
important developments <PAGE>
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.
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
-2-<PAGE>
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
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
-3-<PAGE>
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;
interest and taxes;
fees with respect to registration of the shares
of the Fund under federal securities laws and any
fees with respect to notification filings or other
filings as may be required under state securities
laws;
-4-<PAGE>
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.
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
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
-5-<PAGE>
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
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
-6-<PAGE>
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 [December 31, 1997], 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
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.
-7-<PAGE>
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.
THE SBI FUND, INC.
Attest:
______________________ By: ______________________
SBI CAPITAL MANAGEMENT AND
RESEARCH CORPORATION
Attest:
______________________ By: ______________________
-8-
Exhibit 6
Draft 3/7/97
DISTRIBUTION AGREEMENT
The SBI Fund, Inc. (the "Fund") has agreed that Lamaute
Capital, Inc. ("LCI") shall be, for the period of this agree-
ment, the distributor of shares of each Series of the Fund.
For purposes of this agreement the term "Shares" shall mean the
authorized shares of the relevant Series.
1. Services as Distributor
1.1 LCI will act as agent for the distribution of Shares
covered by, and in accordance with, the registration statement
and prospectus then in effect under the Securities Act of 1933,
as amended, and will transmit promptly any orders received by
LCI for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has
notified LCI in writing.
1.2 LCI agrees to use its best efforts to distribute the
appropriate sales literature, applications and prospectuses in
the manner agreed upon between the Fund and LCI from time to
time.
1.3 LCI shall act as distributor of Shares in compliance
with all applicable laws, rules and regulations, including,
without limitations, all rules and regulations made or adopted
pursuant to the Investment Company Act of 1940, as amended, by
the Securities and Exchange Commission or any securities asso-
ciation registered under the Securities Exchange Act of 1934,
as amended.
1.4 Whenever in their judgment such action is warranted
by market, economic or political conditions, or by abnormal
circumstances of any kind deemed by the parties hereto to
render sales of the Fund's Shares not in the best interest of
the Fund, the parties hereto may decline to accept any orders
for, or make any sales of, any Shares until such time as those
parties deem it advisable to accept such orders and to make
such sales and each party shall advise promptly the other party
of any such determination.
1.5 LCI will act only on its own behalf as principal if
LCI chooses to enter into selling agreements with selected
dealers or others. Any payments to selected dealers shall be
governed by a separate agreement between LCI and such dealer
and by the Fund's then-current prospectus.<PAGE>
1.6 The Fund agrees to pay all costs and expenses in con-
nection with the registration of Shares under the Securities
Act of 1933, as amended, and all expenses in connection with
maintaining facilities for the issue and transfer of Shares and
for supplying information, prices, and other data to be
furnished by the Fund hereunder, and all expenses in connection
with the preparation, printing, and delivery of the Fund's
prospectuses and statements of additional information for regu-
latory purposes and for distribution to shareholders.
1.7 LCI agrees to pay for all expenses incurred by LCI in
connection with (i) printing and distributing such number of
copies of the prospectus as agreed upon by the Fund and LCI
from time to time for use in connection with offering the
Shares to prospective investors, (ii) preparing, printing and
distributing any literature and advertising as agreed upon by
the Fund and LCI from time to time for use in connection with
offering the Shares for sale, and (iii) all other expenses in-
curred in connection with the sale of the Shares as contem-
plated by this Agreement. In addition, it is understood and
agreed that, so long as a plan of distribution of the Fund
adopted pursuant to Rule 12b-1 under the 1940 Act (the "Plan")
continues in effect, any expenses incurred by LCI hereunder may
be paid from amounts received by it from the Fund under the
Plan. So long as the Plan continues in effect, LCI shall be
entitled to receive quarterly payments not exceeding in the
aggregate a maximum annual amount equal to 0.05% of the average
daily net asset value of the Fund during each fiscal year of
the Fund. The appropriate officer of the Fund shall provide to
the Board of Directors of the Fund, and the Board of Director
shall review, at least quarterly, a written report of the
amounts expended pursuant to the Plan and the purposes for
which such expenditures were made.
1.8 The Fund agrees to execute any and all documents and
to furnish any and all information and otherwise take all
actions which may be reasonably necessary in the discretion of
the Fund's officers in connection with filings required to be
made in connection with the sale of Shares in such states as
LCI may designate to the Fund and the Fund may approve. LCI
shall be responsible for all expenses connected with its own
qualification as a broker-dealer under Federal law and the
state laws of California, Georgia and Florida. All other
expenses in connection with the sale of Shares in states other
than those specifically referenced in this agreement shall be
incurred by the Fund or reimbursed to LCI by the Fund.
-2-<PAGE>
1.9 The Fund shall furnish LCI from time to time, for use
in connection with the sale of Shares, such information with
respect to the Fund or any relevant Series and the Shares as
LCI may reasonably request, all of which shall be signed by one
or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information,
when so signed by the Fund's officers, shall be true and cor-
rect. The Fund also shall furnish LCI upon request with: (a)
semi-annual reports and annual audited reports of the Fund's
books and accounts made by independent public accountants regu-
larly retained by the Fund, (b) quarterly earnings statements
prepared by the Fund, (c) a monthly itemized list of the secu-
rities in the Fund's or, if applicable, each Series' portfolio,
(d) monthly balance sheets as soon as practical after the end
of each month, and (e) from time to time such additional infor-
mation regarding the Fund's financial condition as LCI may rea-
sonably request.
1.10 The Fund represents to LCI that all registration
statements and prospectuses filed by the Fund with the Securi-
ties and Exchange Commission under the Securities Act of 1933,
as amended, and under the Investment Company Act of 1940, as
amended, with respect to the Shares have been prepared in con-
formity in all material respects with the requirements of said
Acts and rules and regulations of the Securities and Exchange
Commission thereunder. As used in this agreement the terms
"registration statement" and "prospectus" shall mean any regis-
tration statement and prospectus, including the statement of
additional information incorporated by reference therein, filed
with the Securities and Exchange Commission and any amendments
and supplements thereto which at any time shall have been filed
with said Commission. The Fund represents and warrants to LCI
that neither any registration statement nor any prospectus when
such registration statement becomes effective will include an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading. The Fund may, but shall not
be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or
supplements to any prospectus as, in the light of future devel-
opments, may, in the opinion of the Fund's counsel, be neces-
sary or advisable. If the Fund shall not propose any such
amendment or amendments and/or supplement or supplements within
fifteen days after receipt of the Fund of a written request
from LCI to do so, LCI may, at its option, terminate this
agreement or decline to make offers of the Fund's securities
-3-<PAGE>
until such amendments are made. The Fund shall not file any
amendment to any registration statement or supplement to any
prospectus without giving LCI reasonable notice thereof in ad-
vance; provided, however, that nothing contained in this agree-
ment shall in any way limit the Fund's right to file at any
time such amendments to any registration statement and/or sup-
plements to any prospectus, of whatever character, as the Fund
may deem advisable, such right being in all respects absolute
and unconditional.
1.11 The Fund authorizes LCI and any dealers with whom
LCI shall enter into dealer agreements to use any prospectus in
the form furnished by the Fund from time to time in connection
with the sale and distribution of Shares. The Fund agrees to
indemnify, defend and hold LCI, its several officers and direc-
tors, and any person who controls LCI within the meaning of
Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabil-
ities and expenses (including the reasonable cost of investi-
gating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which
LCI, its officers and directors, or any such controlling per-
sons, may incur under the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, or common law
or otherwise, arising out of or on the basis of any untrue
statement, or alleged untrue statement, of a material fact
required to be stated in either any registration statement or
any prospectus or any statement of additional information, or
arising out of or based upon any omission, or alleged omission,
to state a material fact required to be stated in any registra-
tion statement, any prospectus or any statement or additional
information or necessary to make the statements in any of them
not misleading, except that the Fund's agreement to indemnify
LCI, its officers or directors, and any such controlling person
will not be deemed to cover any such claim, demand, liability
or expense to the extent that it arises out of or is based upon
any such untrue statement, alleged untrue statement, omission
or alleged omission made in any registration statement, any
prospectus or any statement of additional information in reli-
ance upon information furnished by LCI, its officers, directors
or any such controlling person to the Fund or to its represen-
tatives for use in the preparation thereof, and except that the
Fund's agreement to indemnify LCI, its officers or directors,
and any such controlling person, and the Fund's representations
and warranties set out in paragraph 1.10 of this Agreement will
not be deemed to cover any liability to the Fund or its share-
holders to which LCI would otherwise be subject by reason of
-4-<PAGE>
willful misfeasance, bad faith or gross negligence in the per-
formance of its duties, or by reason of its reckless disregard
of its obligations and duties under this Agreement ("Disquali-
fying Conduct"). The Fund's agreement to indemnify LCI, its
officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being noti-
fied of any action brought against LCI, its officers or direc-
tors, or any such controlling person, such notification to be
given by letter, facsimile or by telegram addressed to the Fund
at its address set forth above as promptly as practical after
the summons or other first legal process shall have been
served. The failure so to notify the Fund of any such action
shall not relieve the Fund from any liability which the Fund
may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or
omission, or alleged omission, otherwise than on account of the
Fund's indemnity agreement contained in this paragraph 1.11.
The Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in
such case, such defense shall be conducted by counsel of good
standing chosen by the Fund and approved by LCI, which approval
shall not unreasonably be withheld. In the event the Fund
elects to assume the defense of any such suit and retain coun-
sel of good standing approved by LCI, the defendant or defen-
dants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the
Fund does not elect to assume the defense of any such suit with
counsel reasonably acceptable to LCI, the Fund will reimburse
LCI, its officers and directors, or the controlling person or
persons named as the defendant or defendants in such suit, for
the reasonable fees and expenses of any counsel retained by LCI
or them. The Fund's indemnification agreement contained in
this paragraph 1.11 and the Fund's representations and warran-
ties in this Agreement shall remain operative and in full force
and effect regardless of any investigation made by or on behalf
of LCI, its officers and directors, or any controlling person,
and shall survive the delivery of any Shares. This agreement
of indemnity will inure exclusively to LCI's benefit, to the
benefit of its several officers and directors, and their
respective estates, and to the benefit of any controlling per-
sons and their successors. The Fund agrees promptly to notify
LCI of the commencement of any litigation or proceedings
against the Fund or any of its officers or directors in con-
nection with the issue and sale of Shares.
1.12 LCI agrees to indemnify, defend and hold the Fund,
its several officers and directors, and any person who controls
the Fund within the meaning of Section 15 of the Securities Act
of 1933, as amended, free and harmless from and against any and
-5-<PAGE>
all claims, demands, liabilities and expenses (including the
reasonable cost of investigating or defending such claims, de-
mands or liabilities and any reasonable counsel fees incurred
in connection therewith) which the Fund, its officers or direc-
tors, or any such controlling person, may incur under the Secu-
rities Act of 1933, as amended, the Investment Company Act of
1940, as amended, or under common law or otherwise, but only to
the extent that such liability or expense incurred by the Fund,
its officers or directors, or such controlling person resulting
from such claims or demands, (a) shall arise out of or be based
upon any unauthorized sales literature, advertisements, infor-
mation, statements or representations or any Disqualifying Con-
duct in connection with the offering and sale of any Shares, or
(b) shall arise out of or be based upon any untrue, or alleged
untrue, statement of a material fact contained in information
furnished in writing by LCI to the Fund specifically for use in
the Fund's registration statement and used in the answers to
any of the items of the registration statement or in the cor-
responding statements made in the prospectus or statement of
additional information, or shall arise out of or be based upon
any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by LCI to
the Fund and required to be stated in such answers or necessary
to make such information not misleading. LCI's agreement to
indemnify the Fund, its officers and directors, and any such
controlling person, as aforesaid, is expressly conditioned upon
LCI being notified of any action brought against the Fund, its
officers or directors, or any such controlling person, such
notification to be given by letter, by facsimile or by telegram
addressed to LCI at its address set forth above as promptly as
practicable after the summons or other first legal process
shall have been served. The failure so to notify LCI of any
such action shall not relieve LCI from any liability which LCI
may have to the Fund, its officers or directors, or to such
controlling person by reason of any such untrue, or alleged
untrue, statement or omission, otherwise than on account of
LCI's indemnity agreement contained in this paragraph 1.12.
LCI shall have the right to control the defense of such action,
with counsel of its own choosing, reasonably satisfactory to
the Fund, if such action is based solely upon such alleged mis-
statement or omission on LCI's part, and in any other event the
Fund, its officers or directors, or such controlling person
shall each have the right to participate in the defense or
preparation of the defense of any such action. This agreement
of indemnity will inure exclusively to the Fund's benefit, to
the benefit of the Fund's officers and directors, and their
respective estates, and to the benefit of any controlling per-
-6-<PAGE>
sons and their successors. LCI agrees promptly to notify the
Fund of the commencement of any litigation or proceedings
against LCI or any of its officers or directors in connection
with the issue and sale of Fund Shares.
1.13 No Shares shall be offered by either LCI or the Fund
under any of the provisions of this agreement and no orders for
the purchase or sale of such Shares hereunder shall be accepted
by the Fund if and so long as the effectiveness of the regis-
tration statement then in effect or any necessary amendments
thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a cur-
rent prospectus as required by Section 10 of said Act, as
amended, is not on file with the Securities and Exchange Com-
mission; provided, however, that nothing contained in this
paragraph 1.13 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to repurchase any
Shares from any shareholder in accordance with the provisions
of the Fund's prospectus or charter documents.
1.14 The Fund agrees to advise LCI promptly in writing:
(a) of any request by the Securities and Exchange
Commission for amendments to the registration statement or
prospectus then in effect or for additional information;
(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the ef-
fectiveness of the registration statement or prospectus then in
effect or the initiation of any proceeding for that purpose;
(c) of the happening of any event which makes un-
true any statement of a material fact made in the registration
statement or prospectus then in effect or which requires the
making of a change in such registration statement or prospectus
in order to make the statements therein not misleading; and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to any registration
statement or prospectus which may from time to time be filed
with the Securities and Exchange Commission.
2. Offering Price
Shares of the Fund shall be offered for sale and sold at a
price per share (the "offering price") in accordance with the
provisions of the current prospectus applicable to such offer
and sale. The Fund will cause the net asset value to be deter-
-7-<PAGE>
mined with such frequency and at such times and will cause the
offering price to be effective for such period as are set forth
in the then current prospectus of the Fund and the Fund will
cause such determinations to be furnished to LCI as often as
they are made.
3. Term
This Agreement shall become effective with respect to the
Fund as of the date hereof and will continue for one (1) year
and will continue thereafter automatically for successive an-
nual periods so long as such continuance is specifically ap-
proved at least annually (i) by the Fund's Board of Directors
or (ii) by vote of a majority (as defined in the Investment
Company Act of 1940) of the outstanding voting securities of
the Fund or the relevant Series, as the case may be, provided
that in either event its continuance also is approved by a
majority of the directors who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote
cast in person at a meeting called for the purpose of voting on
such approval. This Agreement is terminable with respect to
the Fund, without penalty, on not less than sixty days' written
notice, by vote of a majority of the Fund's disinterested
directors as defined in Rule 12b-1 under the 1940 Act, by vote
of a majority (as defined in the Investment Company Act of
1940) of the outstanding voting securities of such Fund, or by
LCI. This Agreement shall terminate automatically in the event
of its assignment (as defined in said Act).
4. Miscellaneous
4.1 The Fund recognizes that LCI's directors, officers
and employees may from time to time serve as directors, trust-
ees, officers and employees of corporations and business trusts
(including other investment companies), and that LCI or its
affiliates may enter into distribution or other agreements with
such other entities, corporations and trusts. LCI agrees to
promptly give notice to the Fund upon entering into any distri-
bution agreements with such other entities, corporations and
trusts.
4.2 No provision of this agreement may be changed,
waived, discharged or terminated orally, but only by an in-
strument in writing signed by the party against which an en-
forcement of the change, waiver, discharge or termination is
sought.
4.3 This agreement shall be governed by the internal
laws of the State of Florida without giving effect to
principles of conflict of laws.
-8-<PAGE>
4.4 If any provision of this agreement shall be held or
made invalid by a court decision, statute, rule, or otherwise,
the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
5. Fees
The annual cost for these services is 5 basis points of
gross assets under management with a minimum annual fee of
$12,500 plus out-of-pocket expenses. The fee paid to LCI shall
be calculated on a daily basis and depends on the level of
total assets of the Fund. Such fees shall be paid quarterly,
in advance, each quarterly payment being based upon one quarter
of the anticipated annualized fee with the first payment due
within thirty (30) days of the commencement of operations of
the Fund.
THE SBI FUND, INC.
By:______________________
Name:
Title:
Date:
LAMAUTE CAPITAL INC.
By:______________________
Name:
Title:
Date:
-9-
EXHIBIT 10
[Letterhead of Ober, Kaler, Grimes & Shriver]
March 26, 1997
The SBI Fund, Inc.
School of Business & Industry
Florida A & M University
One SBI Plaza
Tallahassee, Florida 32307
Gentlemen:
The SBI Fund, Inc. (the "Fund") is a corporation
incorporated under the laws of the State of Maryland on August
9, 1993. We understand that the Fund has filed a registration
statement with the Securities and Exchange Commission (the
"Commission") on Form N-1A (the "Registration Statement") for
the purpose of registering an indefinite number of shares of
the Fund's capital stock, one-tenth of one cent ($0.001) par
value per share (collectively, the "Registered Shares" and
individually, a "Registered Share"), under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as
amended. The Fund's authorized capital consists of 20,000,000
shares of common stock, 10,000,000 of which have been
designated as the Class A Common Stock and 10,000,000 of which
have been designated as the Class B Common Stock.
We understand that our opinion is required to be filed as
part of the Registration Statement, and that you intend to
include such opinion in Pre-Effective Amendment No. 5 to the
Registration Statement.
We have made such legal and factual investigations as we
have deemed necessary for purposes of this opinion letter. In
our investigation, we have assumed the genuineness of all
signatures, the proper execution of all documents submitted to
us as originals, the conformity to the original documents of
all documents submitted to us as copies and the authenticity of
the originals of such copies.
In rendering the opinions set forth below, we have
examined originals or copies, certified or otherwise identified
to our satisfaction, of the Charter, By-Laws, and certain
records of corporate proceedings of the Fund, and such
additional documents, and we have obtained such other
certificates, affidavits and advice from officers of the Fund
or from public officials, as we have deemed necessary or
appropriate for the purposes of this opinion letter.<PAGE>
page 2
In rendering the opinions set forth below, we have assumed
that (i) at no time prior to the issuance of the Registered
Shares will the Fund's Charter, its By-Laws or the resolution
of the Fund's Board of Directors authorizing the issuance of
the Registered Shares and establishing a minimum consideration
therefor, be amended, repealed, rescinded, or otherwise
altered; (ii) consideration for each Registered Share of not
less than the per-share net asset value of the class of common
stock of which the Registered Share is a part will be paid in
full in cash and/or cash equivalents to the Fund prior to the
issuance of such Registered Share; and (iii) at no time will
shares of either class of the Fund's capital stock be issued in
excess of the authorized number of shares in such class.
Further, we have assumed that there will be no changes in any
of the facts material to the authorization of the issuance of
the Registered Shares prior to such issuance.
Based on the foregoing, we are of the opinion that:
1. The Fund is duly and validly incorporated and presently
existing in good standing under the laws of the State of
Maryland.
2. The issuance and sale of the Registered Shares has been
duly and validly authorized by all necessary corporate action
on the part of the Fund.
3. Upon the issuance and sale of the Registered Shares in the
manner described in the Registration Statement, all of the
Registered Shares will be legally and validly issued, and fully
paid and non-assessable.
We express no opinion as to compliance with the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as
amended, or the securities laws of any state with respect to
any matter. Our opinion only addresses Maryland law as in
effect on the date hereof.
We assume no obligation to advise you of any changes in
the foregoing subsequent to the delivery of this opinion
letter. We hereby consent to the filing of this opinion letter
with the Commission as an exhibit to the Registration
Statement, and we further consent to reference to this firm in
the Registration Statement as counsel to the Fund and as
experts, if reference is so made.
Sincerely yours,
/s/ Ober, Kaler, Grimes & Shriver,
a professional corporation
EXHIBIT 15
DRAFT 3/7/97
SBI FUND, INC.
DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
This Plan (the "Plan") dated the day of
1997, 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 , 1997 (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 to reimburse itself
for its costs incurred in connection with the distribution of
the Shares, including but not limited to, advertising, printing
and mailing promotional literature, telephone 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 person qualifies as a Qualified
Recipient. Payment of such fee shall be subject to any limita-
tions 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.
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