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EXHIBIT 5
Investment Advisory Agreement dated as of December 9, 1997 between
the Registrant and Shay Assets Management, Inc.
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INVESTMENT ADVISORY AGREEMENT
This Agreement made and entered into as of December 9, 1997, by and
between M.S.B. Fund, Inc., a New York corporation (the "Fund"), and Shay
Assets Management, Inc., a Florida corporation (the "Adviser"):
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management investment
company incorporated in New York on June 8, 1964; and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth the parties hereto agree as follows:
1. Advisory Services. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund with respect to the assets belonging to
the Fund's Class A stock, $0.001 par value, for the period and on the
terms set forth in this Agreement. Shares of the Fund's Class A stock,
$0.001 par value, are referred to herein as "Fund Shares". The Adviser
accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided. The Fund, at its option,
may also appoint the Adviser to act as investment adviser to the Fund
hereunder with respect to the assets belonging to any other class of
capital stock of the Fund from time to time created, but the Adviser
shall not be required to accept any such appointment. The Adviser shall
furnish investment research and advice to the Fund and shall manage the
investment and reinvestment of the assets and its business affairs and
matters incidental thereto, all subject to the supervision of the Board
of Directors of the Fund and subject to the provisions of the Certificate
of Incorporation (as defined in paragraph 3(a) of this Agreement) and
By-Laws (as defined in paragraph 3(b) of this Agreement) of the Fund and
any resolution, rules or regulations adopted by the Board of Directors of
the Fund. The Adviser shall for all purposes herein provided be deemed
to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Directors of the Fund from
time to time, have no authority to act for or represent the Fund in any
way or otherwise be deemed an agent for the Fund. The Fund shall also be
free to retain, at its own expense, other persons to provide it with any
services whatsoever including, but not limited to, statistical, factual
or technical information or advice. The services of the Adviser herein
provided are not to be deemed exclusive and the Adviser shall be free to
render similar services or other services to others.
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2. Duties of the Adviser. Subject to the general supervision of the
Board of Directors of the Fund, the Adviser shall, employing its
discretion, manage the investment operations of the Fund and the
composition of the portfolio of securities and investments (including
cash) belonging to the Fund, including the purchase, retention and
disposition thereof and the execution of agreements relating thereto, in
accordance with the investment objective, policies and restrictions of
the Fund as stated in the Prospectus (as defined in paragraph 3(f) of
this Agreement), Registration Statement (as defined in paragraph 3(d) of
this Agreement), Certificate of Incorporation and By-Laws of the Fund and
subject to the following understandings:
(a) The Adviser shall furnish a continuous investment program for the
Fund and determine from time to time what investments or securities will
be purchased, retained or sold by the Fund, and what portion of the
assets will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Certificate of
Incorporation, the By-Laws and Prospectus of the Fund and with the
instructions and directions of the Board of Directors of the Fund and
will conform to and comply with the requirements of the Investment
Company Act of 1940, as amended from time to time, and the rules and
regulations of the Securities and Exchange Commission thereunder
(collectively, the "1940 Act") and all other applicable Federal and state
laws and regulations, including without limitation the provisions of the
Internal Revenue Code, as amended from time to time, applicable to the
Fund as a regulated investment company.
(d) The Adviser shall determine the securities and other investments to
be purchased or sold by the Fund and, as agent for the Fund, will effect
transactions pursuant to its determinations either directly with the
issuer or with any broker and/or dealer in such securities. In placing
orders with brokers and/or dealers the Adviser intends to seek the best
price and execution for purchases and sales and will comply with such
policies with respect to brokerage as are set forth in the Fund's
Registration Statement and Prospectus or as the Fund's Board of Directors
may adopt from time to time. On occasions when the Adviser deems the
purchase or sale of a security to be in the best interest of the Fund as
well as other customers, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be sold or purchased in order to obtain the best price
and execution. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be
made by the Adviser in a manner it considers to be equitable and
consistent with its fiduciary obligations to the Fund and, if applicable,
to such other customers.
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(e) The Adviser shall maintain books and records with respect to the
portfolio transactions of the Fund and shall render to the Fund's Board
of Directors such periodic and special reports as the Board of Directors
may reasonably request.
(f) The Adviser shall provide the Fund's custodian and administrator on
each business day with information relating to all transactions
concerning the assets of the Fund, except redemptions of and any
subscriptions for Fund Shares, and will provide on a timely basis to the
Fund's administrator and other persons providing services to the Fund
such information as the administrator or such other persons may
reasonably request in connection with the performance of their respective
duties and obligations with respect to the Fund.
(g) The Adviser will report to the Board of Directors of the Fund at each
meeting thereof all changes in the investments and other assets of the
Fund since the prior report, and will keep the Board of Directors
informed of material developments affecting the Fund and the Adviser, and
on its own initiative, will furnish the Board of Directors from time to
time with such information as the Adviser may believe appropriate for
this purpose, whether concerning the individual companies whose
securities are included in the Fund's holdings, the industries in which
they engage, or the economic, social or political conditions prevailing
in each country in which the Fund maintains investments. The Adviser
also will furnish the Board of Directors with such statistical and
analytical information with respect to securities and other investments
of the Fund as the Adviser may believe appropriate or as the Board of
Directors may reasonably request. The Adviser shall prepare and furnish
to the Board of Directors all such other written materials and documents
as may be requested or as may otherwise be necessary or appropriate in
connection with meetings of the Board of Directors, and, if the Secretary
of the Fund is an officer, director, or employee of the Adviser or any of
its affiliated persons, the Adviser shall cause to be prepared and shall
bear the costs of preparing and keeping the minutes of the meetings of
the Board of Directors and committees thereof and of meetings of the
stockholders of the Fund.
(h) The Adviser shall furnish such office and other facilities as may be
required by the Fund.
3. Delivery of Documents. The Fund has delivered, or will deliver
promptly, copies of each of the following documents to the Adviser and
will promptly notify and deliver to it all future amendments and
supplements if any:
(a) Certificate of incorporation of the Fund, as filed with the Secretary
of State of the State of New York and in effect on the date hereof and as
amended or restated from time to time (the "Certificate of
Incorporation").
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(b) By-Laws of the Fund, as in effect on the date hereof and as amended
or restated from time to time (the "By-Laws").
(c) Certified resolutions of the Board of Directors of the Fund and of
the Fund's stockholders, respectively, authorizing the appointment of the
Adviser and approving the form of this Agreement.
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement") as filed
with the Securities and Exchange Commission (the "Commission") and in
effect on the date hereof relating to the Fund, and all subsequent
amendments thereto.
(e) Notification of Registration under the 1940 Act on Form N-8A as filed
with the Commission.
(f) Prospectus or Prospectuses and Statement or Statements of Additional
Information of the Fund, if any, as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus".
4. Employees of the Adviser. The Adviser shall authorize and permit any
of its directors, officers and employees who may be elected as Directors
or officers of the Fund to serve in the capacities in which they are
elected.
5. Books and Records. The Adviser shall keep the Fund's books and
records required to be maintained by it pursuant to paragraph 2(e) of
this Agreement. The Adviser agrees that all records which it maintains
for the Fund are the property to the Fund and it will promptly surrender
any of such records to the Fund upon the Fund's request. The Adviser
further agrees to preserve for the period prescribed by Rule 31a-2 of the
Commission under the 1940 Act any such records as are required to be
maintained by the Adviser with respect to the Fund hereunder or by Rule
31a-1 of the Commission under the 1940 Act, as such rule may be amended
from time to time, and any other applicable rule that may be adopted by
the Commission.
6. Expenses. During the term of this Agreement the Adviser will pay all
expenses (including without limitation the compensation of all its
directors, officers and employees serving as Directors or officers of the
Fund pursuant to paragraph 4 of this Agreement) incurred by it in
connection with its activities under this Agreement other than the cost
of the securities and investments purchased for the Fund (including taxes
and brokerage commissions, if any). The Adviser also shall pay the
salaries, fees and expenses of Directors, officers and employees of the
Fund who are affiliated persons of the Adviser or
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affiliated persons of any affiliated person of the Adviser. All other
expenses shall be borne by the Fund, subject to the limitations and
reimbursements provided for in paragraphs 7 and 8 hereof.
7. Compensation and General Expense Limitation.
(a) For the services provided and expenses borne by the Adviser pursuant
to this Agreement, the Fund shall pay to the Adviser compensation based
on the annual percentage of the Fund's average daily net assets paid
monthly, as follows: 0.75% of the first $100 million and 0.50% over $100
million; provided, however, that if the Restricted Expenses (as defined
below) of the Fund with respect to any fiscal year of the Fund exceed an
amount (the "Restricted Expense Cap") equal to 1.10% of the average daily
net asset value of the Fund during such fiscal year, the fee payable to
the Adviser with respect to such fiscal year shall be reduced by the
amount of such excess, but not below zero. The fee payable to the
Adviser pursuant to this paragraph 7 (the "Advisory Fee") shall commence
on the date hereof (the "Effective Date") and shall be accrued daily,
subject to adjustment as provided below in this paragraph 7 and subject
to further adjustment as provided in paragraph 8, and the fee for each
month will be paid to the Adviser during the succeeding month.
(b) The amount of compensation payable to the Adviser with respect to
each day during a fiscal year of the Fund shall be adjusted as follows:
(i) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the
close of business on such day exceeds the Applicable Pro
Rata Portion of the Restricted Expense Cap (as defined
below) through such day, the compensation payable to the
Adviser with respect to such day shall be reduced by the
amount of such excess.
(ii) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the
close of business on such day is less than the Applicable
Pro Rata Portion of the Restricted Expense Cap through
such day, the compensation payable to the Adviser with
respect to such day shall be increased by the amount of
such excess, except to the extent such increase would
cause the aggregate compensation payable to the Adviser
with respect to the period from the beginning of such
fiscal year through such date to exceed the Applicable
Pro Rata Portion of the Advisory Fee (as defined below).
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In the event any reduction of the Advisory Fee provided for in this paragraph
7(b) would result in an aggregate Advisory Fee of less than zero for any month
in a fiscal year, the Adviser shall make a refund payment to the Fund in such
amount; provided, however, the Adviser shall not be obligated to refund an
amount greater than the aggregate amount of the Advisory Fee previously paid to
the Adviser with respect to such fiscal year.
(c) For purposes of this paragraph 7:
(i) "Applicable Pro Rata Portion of the Restricted Expense
Cap" as of any day shall mean the dollar amount computed
by multiplying 1.10% by (A) the ratio computed by
dividing the number of days elapsed since the beginning
of the relevant fiscal year by the number of days in such
year and (B) the average daily net asset value of the
Fund from the beginning of the relevant fiscal year
through such day.
(ii) "Applicable Pro Rata Portion of the Advisory Fee" as of
any day shall mean the dollar amount of the Advisory Fee
that would be payable to the Adviser with respect to the
period from the beginning of the relevant fiscal year
through such day, if such amount were computed without
regard to the limitations set forth in paragraph 7(b) and
paragraph 8, multiplied by the ratio computed by dividing
the number of days elapsed since the beginning of the
relevant fiscal year by the number of days in such fiscal
year.
(d) In the event this Agreement becomes effective on a date other than
the first day of any fiscal year, solely for the purpose of computing the
amount of the Advisory Fee for such fiscal year, such first fiscal year
shall be deemed to begin on the Effective Date and to end on December 31
of such year. In the event this Agreement terminates on a date other
than the last day of any fiscal year, solely for the purpose of computing
the amount of the Advisory Fee for such fiscal year, such fiscal year
shall be deemed to begin on January 1 of such year and to end on the date
of the termination of this Agreement. In either of such events, the
Applicable Pro Rata Portion of the Restricted Expense Cap and the
Applicable Pro Rata Portion of the Advisory Fee shall be reduced by
multiplying such amount by the ratio computed by dividing the number of
days deemed to occur in such fiscal year by 365.
(e) As used herein, the term "Restricted Expenses" means all expenses of
the Fund, including without limitation (i) the general expenses of the
Fund, (ii) the fees payable to the Adviser, the Fund's administrator, if
any, the Fund's transfer agent and dividend paying agent, if any, and the
Fund's custodian and (iii) registration fees and the costs and expenses
of qualifying the Fund's shares for offer and sale under the Blue Sky
laws of any jurisdiction where such shares may be qualified from time to
time; but the Restricted
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Expenses shall exclude (A) the fees and expenses of the Fund's outside
counsel (other than registration and filing fees disbursed by such counsel
on behalf of the Fund), (B) the fees and expenses of the Fund's
independent accountants, (C) Directors' fees and the expenses incurred by
Directors and reimbursed by the Fund and (D) fees and expenses paid under
a plan of distribution, if any, adopted pursuant to Rule 12b-1 under the
1940 Act.
8. Blue Sky Limitation on Expenses.
(a) In the event the Expenses (as defined in paragraph 8(b) below) of the
Fund for any fiscal year exceed the lowest applicable annual expense
limitations, if any, established pursuant to the statutes or regulations
of any jurisdictions in which Fund Shares are then qualified for offer
and sale (such excess hereinafter called the "Blue Sky Excess Expense"),
the compensation due to the Adviser under paragraph 7 for the fiscal year
in question shall be reduced by an amount equal to the Blue Sky Excess
Expense of the Fund, and if the Blue Sky Excess Expense of the Fund
exceeds the fees of the Fund payable to the Adviser with respect to the
Fund for the fiscal year in question, the Adviser shall, to the extent
required by such statute or regulations, reimburse the Fund for the
amount of such excess. If for any month the Expenses shall exceed 1/12th
of the percentage of average daily net assets allowable as Expenses, the
payment to the Adviser for that month shall be reduced, and, if
necessary, the Adviser shall make a refund payment to the Fund so that
the Expenses will not exceed such percentage. As of the end of the
fiscal year, however, the foregoing computations shall be readjusted so
that the aggregate compensation payable to the Adviser for the year is
equal to the amount provided for in paragraph 7 hereof, reduced by an
amount equal to the Blue Sky Excess Expense of the Fund. The aggregate
of the repayments, if any, by the Adviser to the Fund for the year shall
be the amount necessary to reimburse the Fund for the amount of such
excess.
(b) For purposes of paragraph 8(a) of this Agreement, the term "Expenses"
means the general expenses of the Fund, including without limitation fees
payable to the Adviser, the Fund's administrator, if any, the Fund's
transfer agent, if any, and to the Fund's custodian; but the Expenses
shall exclude any interest, taxes, brokerage commissions and litigation
and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business.
9. Limitation of Liability. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except a
loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section
36(b)(3) of the 0000 Xxx) or a loss resulting from willful misfeasance,
bad faith or gross negligence on its part
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in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
10. Effective Date and Term. This Agreement shall become effective on
the date hereof. This Agreement shall remain in effect until May 30,
1998, and shall continue in effect thereafter for successive twelve-month
periods (or for such shorter periods as may be specified by the Fund's
Board of Directors) subject to termination as hereinafter provided, if
such continuance is approved at least annually (a) by vote of the Fund's
Board of Directors, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by vote of a majority of the Directors
of the Fund who are not parties to this Agreement or "interested persons"
(as defined in the 0000 Xxx) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
The annual approvals provided for herein shall be effective to continue
this Agreement from year to year (or for such shorter period referred to
above) if given within a period beginning not more than ninety (90) days
prior to (and including) the anniversary of the date upon which the most
recent previous continuance of this Agreement became effective,
notwithstanding the fact that more than three hundred sixty-five (365)
days may have elapsed since the date on which such approval was last
given. This Agreement may be terminated (i) by the Fund at any time,
without the payment of any penalty, by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities (as defined
in the 0000 Xxx) of the Fund, on 30 (thirty) days' written notice to the
Adviser, or (ii) after May 19, 1998, by the Adviser at any time, without
the payment of any penalty, on 90 (ninety) days' written notice to the
Fund. This Agreement will automatically and immediately terminate in the
event of its assignment (as defined in the 1940 Act).
11. Amendment of Agreement. This Agreement may be amended by mutual
consent, provided that the amendment is approved (a) by vote of a
majority of those Directors of the Fund who are not parties to this
Agreement or "interested persons" (as defined in the 0000 Xxx) of any
such party, cast in person at a meeting called for the purpose of voting
on such amendment, and (b), if required by the 1940 Act, by vote of a
majority of the outstanding voting securities (as defined in the 0000
Xxx) of the Fund.
12. Notices. Notices of any kind to be given to the Adviser by the Fund
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 000 Xxxx Xxxxxx Xx., Xxxxxxx, XX 00000, Attention: Executive
Vice President, or at such other address or to such other individual as
shall be specified by the Adviser to the Fund in accordance with this
paragraph 12. Notices of any kind to be given to the Fund by the Adviser
shall be in writing and shall be duly given if mailed or delivered to the
Fund at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: President, or at
such other address or to such other individual as shall be specified by
the Fund to the Adviser in accordance with this paragraph 12, with copies
to each of the Fund's Directors at their respective addresses set forth
in the Fund's Registration Statement and to the legal counsel to the
Fund.
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13. Authority. The Directors have authorized the execution of this
Agreement in their capacity as Directors and not individually. The
Adviser agrees that neither the stockholders nor the Directors nor any
officer, employee, representative or agent of the Fund shall be
personally liable upon, nor shall resort be had to their private property
for the satisfaction of, obligations given, executed or delivered on
behalf of or by the Fund, that the stockholders, Directors, officers,
employees, representatives and agents of the Fund shall not be personally
liable hereunder, and that the Adviser shall look solely to the property
of the Fund for the satisfaction of any claim hereunder.
14. Controlling Law. This Agreement shall be governed by the construed
in accordance with the laws of the state of New York.
15. Multiple Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed to be an original,
but which together shall constitute one and the same instrument.
16. Captions. The captions of the paragraphs are for descriptive
purposes only and they are not intended to limit or otherwise affect the
content of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
M.S.B. FUND, INC.
By: /s/ XXXXXX X. XXXXXXXX
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Xxxxxx X. Xxxxxxxx
President
SHAY ASSETS MANAGEMENT, INC.
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx
Vice President
