<PAGE> 1
As filed with the Securities and Exchange Commission on April 23, 1999
1933 Act Registration No. 33-333-75045
File No. 811-4550
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____ Pre-Effective Amendment No. 1 ____ Post-Effective Amendment No. ___
THE MAINSTAY FUNDS
----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 576-5773
51 Madison Avenue
New York, New York 10010
----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Sara L. Badler, Esq. Jeffrey L. Steele, Esq.
The MainStay Funds Dechert Price & Rhoads
51 Madison Avenue 1775 Eye Street, N.W.
New York, New York 10010 Washington, D.C. 20006
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(Name and Address of Agent for Service) (Copies of all Correspondence)
Approximate date of proposed public offering: As soon as practicable
after this Registration Statement becomes effective.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The Registrant has registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Rule 24(f) under the Investment Company
Act of 1940. Accordingly, no fee is payable herewith.
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<PAGE> 2
THE MAINSTAY FUNDS
FORM N-14 CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Proxy Statement/Prospectus
Part A. Item No. and Caption Statement Caption
- ----------------------------- --------------------------
<S> <C> <C>
1. Beginning of Registration Statement and Outside Cover Page
Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
3. Fee Table, Synopsis Information and Risk Factors Summary of the Proposed Reorganization; Principal Risk
Factors; Comparative Fee Table
4. Information About the Transaction Summary of the Proposed Reorganization; Information
About the Reorganization
5. Information About the Registrant Summary of the Proposed Reorganization; Manager,
Investment Advisers, Administrators and Distributors of
MAP-Equity Fund and MainStay MAP Equity Fund;
Investment Objectives, Policies and Restrictions of
MAP-Equity Fund and MainStay MAP Equity Fund; Principal
Risk Factors; Fees and Expenses MAP-Equity Fund and
MainStay MAP Equity Fund; Purchase, Redemption and
Exchange Procedures of MAP-Equity Fund and MainStay MAP
Equity Fund; Dividend Policies of MAP-Equity Fund and
MainStay MAP Equity Fund; Comparative Information on
Shareholder Rights; Additional Information About
MAP-Equity Fund and MainStay MAP Equity Fund. See also
the Prospectus for MainStay MAP Equity Fund dated
________, 1999, previously filed on EDGAR, Accession
Number ________________ .
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
6. Information About the Company Being Acquired Summary of the Proposed Reorganization;
Manager, Investment Advisers, Administrators
and Distributors of MAP-Equity Fund and
MainStay MAP Equity Fund; and Investment
Objectives, Policies and Restrictions of
MAP-Equity Fund and MainStay MAP Equity Fund;
Principal Risk Factors; Fees and Expenses
MAP-Equity Fund and MainStay MAP Equity Fund;
Purchase, Redemption and Exchange Procedures
of MAP-Equity Fund and MainStay MAP Equity
Fund; Dividend Policies of MAP-Equity Fund and
MainStay MAP Equity Fund; Comparative
Information on Shareholder Rights; Additional
Information About MAP-Equity Fund and MainStay
MAP Equity Fund. See also, the Prospectus for
Map-Equity Fund dated May 1, 1998, as supplemented
on May 1, 1998, August 6, 1998, September 24, 1998
and March 31, 1999. previously filed on EDGAR,
Accession Numbers 0001047469-98-016890
0000069620-98-000003, 0000069260-98-000005,
00000069620-98-000010, and 0000069620-99-000005
respectively
7. Voting Information Information About the Reorganization;
Voting Information
8. Interest of Certain Persons and Experts Not Applicable
9. Additional Information Required for Reoffering Not Applicable
by Persons Deemed to be Underwriters
Part B Item No. and Caption Statement of Additional Information Caption
- --------------------------- -------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Not Applicable
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
<S> <C> <C>
12. Additional Information About the Registrant Statement of Additional Information of
The MainStay Funds dated ______, 1999,
previously filed on EDGAR, Accession
Number ___________________
13. Additional Information About the Company Being Statement of Additional
Acquired Information of MAP-Equity Fund,
dated May 1, 1998, previously
filed on EDGAR, Accession Number
0001047469-98-016890.
14. Financial Statements Annual Report of MAP-Equity Fund for Fiscal
Year Ended December 31, 1998, previously
filed on EDGAR, Accession Number
0001047469-99-007871.
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
- 4 -
<PAGE> 5
MAP-EQUITY FUND
520 BROAD STREET
NEWARK, NEW JERSEY 07102-3111
(800) 559-5535
April , 1999
---
Dear Shareholder:
The Board of Directors (the "Directors") of MAP-Equity Fund ("MAP") is
pleased to announce that it has approved arrangements for the business and
operations of MAP to be continued by reorganizing MAP into a new portfolio of
The MainStay Funds, to be known as MainStay MAP Equity Fund ("MainStay MAP"). If
MAP shareholders approve these arrangements, they will become shareholders of
Class I of MainStay MAP, which will have a different sponsor but substantially
the same portfolio management as MAP. These arrangements are necessary because
after June 30, 1999, MBL Life Assurance Corporation will no longer be able to
serve as sponsor of MAP. The Directors, after thorough analysis and
consideration of various alternatives, believe that these new arrangements are
in the best interests of MAP shareholders because, among other things:
- as a shareholder of MainStay MAP, you will receive enhanced
investment supervision, administrative shareholder servicing, and
distribution capabilities from a major fund organization and its
affiliates -- MainStay Management, Inc., an indirect subsidiary of
New York Life Insurance Company;
- two individuals who currently serve as MAP's portfolio managers
will continue to serve as MainStay MAP's portfolio managers
through a new organization that will serve as sub-adviser of
MainStay MAP;
- MainStay MAP will have the same investment objectives and
substantially identical investment policies as MAP; and
- as a shareholder of MainStay MAP, you will be able to reinvest
dividends and capital gains distributions and make additional
investments in Class I shares of MainStay MAP without paying a
sales charge, and you will also be able to exchange your Class I
shares of MainStay MAP for certain shares of other portfolios of
The MainStay Funds without paying a sales charge.
The Directors have called a Special Meeting of Shareholders to be held on
June 3, 1999 to consider the proposed reorganization. Detailed information about
the proposed reorganization and the reasons for it are contained in the enclosed
materials. Please exercise your right to vote by completing, dating and signing
the enclosed proxy card. A self-addressed, postage-paid envelope has been
enclosed for your convenience. IT IS VERY IMPORTANT THAT YOU VOTE AND THAT YOUR
VOTING INSTRUCTIONS BE RECEIVED NO LATER THAN JUNE 2, 1999. YOU WILL BE ADVISED
OF THE RESULTS OF THE SHAREHOLDER MEETING SHORTLY AFTER THE MEETING.
<PAGE> 6
The Directors of MAP recommend that MAP shareholders approve the
reorganization. As a result of the reorganization, MAP will become a portfolio
of The MainStay Funds, the Directors of MAP will resign, and the trustees for
MainStay MAP will be the same trustees who serve on the board of The MainStay
Funds. The Directors believe that the reorganization will benefit MAP
shareholders by enhancing the services and investment options available to them.
For example, following the reorganization, you will be able to exchange your
Class I shares of MainStay MAP for certain shares of 22 other portfolios of The
MainStay Funds, representing a wide range of investment objectives and policies.
In making their determination, the Directors considered many factors, including
the qualifications and capabilities of The MainStay Funds' service providers.
If, as expected, NYLIFE Distributors, Inc., the distributor of The MainStay
Funds, distributes MainStay MAP shares successfully, growth in assets should
make possible the realization of economies of scale and attendant savings in
costs to MainStay MAP and its shareholders. Achievement of these goals, however,
cannot be assured.
In connection with the proposed reorganization, MAP will transfer all of
its assets and all of its liabilities to MainStay MAP. At that time, MAP
shareholders will have their MAP shares exchanged for the same number of
MainStay MAP shares with the same net asset value as their MAP shares. MainStay
MAP will commence operations as soon as practicable after the proposed
reorganization has been completed.
No sales or other charges will be imposed on MAP shareholders in
connection with the reorganization. The reorganization will not be completed
unless MAP and MainStay MAP receive an opinion of counsel to the effect that the
transaction will qualify as a tax-free reorganization for Federal income tax
purposes.
Like MAP, MainStay MAP will seek long-term capital appreciation by
investing primarily in equity-type securities of domestic issuers, including
common stocks, as well as securities convertible into, or exchangeable for,
common stocks. Also, like MAP, MainStay MAP will seek to earn income as a
secondary objective. Markston International, LLC will serve as sub-adviser to
MainStay MAP. We expect that following the reorganization MainStay MAP will be
managed in substantially the same manner as MAP-Equity currently is managed.
It will be necessary to retain an outside firm that specializes in proxy
solicitation to provide assistance with the solicitation of proxies. The costs
of retaining a proxy solicitation firm will be borne by MainStay Management,
Inc., the manager of The MainStay Funds. If we have not received your vote as
the Special Meeting of Shareholders approaches, you may receive a telephone call
from the proxy solicitation firm. We trust that the telephone call will not
inconvenience you.
Effective the close of business on April 30, 1999, MAP closed to all new
share purchases, including automatic purchases, pending the reorganization. The
Directors of MAP believe that closing MAP to new share purchases will help
facilitate a smooth and efficient transition of its business and operations.
Although MAP shareholders cannot purchase new shares of MAP at this time, they
can redeem their MAP shares through the closing date of the reorganization.
<PAGE> 7
Following the reorganization, shareholders may, of course, purchase additional
shares of MainStay MAP.
NOTE: You may receive more than one proxy package if you hold MAP
shares in more than one account. You must return a separate proxy card for each
account that you own. We have provided postage-paid return envelopes for each.
Sincerely,
---------------------
<PAGE> 8
MAP-EQUITY FUND
520 BROAD STREET
NEWARK, NEW JERSEY 07102-3111
(800) 559-5535
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 3, 1999
------------------
April , 1999
--
To the shareholders of
MAP-Equity Fund
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of MAP-Equity Fund ("MAP") will be held at the offices of MAP at 520
Broad Street, Newark, New Jersey 07102-3111, at 10:00 a.m., Eastern time, on
June 3, 1999, for the following purposes:
1. To consider and vote on a proposed Agreement and Plan of
Reorganization providing (a) for the acquisition of all of the assets of MAP by
MainStay MAP Equity Fund ("MainStay MAP"), a newly formed, separately managed
series of The MainStay Funds, in exchange for Class I shares of beneficial
interest of MainStay MAP and the assumption by MainStay MAP of all of the
liabilities of MAP, and (b) for the pro rata distribution of such MainStay MAP
shares to shareholders of MAP and the subsequent liquidation and dissolution of
MAP.
2. To transact such other business as may properly come before the
Meeting, or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 30, 1999
as the record date for determination of shareholders entitled to notice of, and
to vote at, the Meeting.
<PAGE> 9
By order of the Board of Directors,
Judith C. Keilp
---------------------
Secretary
---------------------
EACH SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IN PERSON IS
REQUESTED TO DATE, COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED FORM OF PROXY
IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
YOUR PROMPT ATTENTION TO THE ENCLOSED FORM OF PROXY WILL HELP TO AVOID
THE EXPENSE OF FURTHER SOLICITATION.
<PAGE> 10
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and may help avoid the time and expense involved in validating your vote
if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: sign your name exactly as it appears in the
registration on the proxy card.
2. JOINT ACCOUNTS: either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration on the proxy
card.
3. ALL OTHER ACCOUNTS: the capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form of
registration. For example:
<TABLE>
<CAPTION>
Registration Valid Signature
- ------------ ---------------
CORPORATE ACCOUNTS
<S> <C>
(1) ABC Corp. .................................. ABC Corp.
John Doe, Treasurer
(2) ABC Corp. .................................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe ..................... John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan............... John Doe, Trustee
PARTNERSHIP ACCOUNTS
(1) The XYZ Partnership......................... Jane B. Smith, Partner
(2) Smith and Jones, Limited
Partnership.................................. Jane B. Smith, General Partner
TRUST ACCOUNTS
(1) ABC Trust.................................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78.............................. Jane B. Doe, Trustee u/t/d/ 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr.,
UGMA/UTMA................................... John B. Smith, Custodian FBO John B.
............................................ Smith Jr., UGMA/UTMA
(2) Estate of John B. Smith..................... John B. Smith, Jr.,
Executor, Estate of John B. Smith
</TABLE>
<PAGE> 11
PROXY STATEMENT/PROSPECTUS
RELATING TO THE ACQUISITION OF THE ASSETS OF
MAP-EQUITY FUND
520 BROAD STREET
NEWARK, NEW JERSEY 07102-3111
TELEPHONE: (800) 559-5535
BY AND IN EXCHANGE FOR SHARES OF
MAINSTAY MAP EQUITY FUND
A SEPARATELY MANAGED SERIES OF THE MAINSTAY FUNDS
51 MADISON AVENUE
NEW YORK, NY 10010
TELEPHONE: (800) 624-6782
This Proxy Statement/Prospectus is being furnished to shareholders of
MAP-Equity Fund ("MAP") in connection with a proposed reorganization (the
"Reorganization") in which all of the assets of MAP would be acquired by
MainStay MAP Equity Fund ("MainStay MAP"), a newly formed, separate portfolio of
The MainStay Funds (the "Trust"), in exchange for Class I shares of MainStay MAP
and the assumption by MainStay MAP of all of the liabilities of MAP. The Class I
shares of MainStay MAP received in the Reorganization would then be distributed
to shareholders of MAP, and MAP would then be liquidated and dissolved. As a
result of the Reorganization, each shareholder of MAP would receive that number
of full and fractional Class I shares of MainStay MAP having an aggregate net
asset value equal to the aggregate net asset value of such shareholder's shares
of MAP held as of the close of business on the New York Stock Exchange on the
business day next preceding the closing date of the Reorganization. No sales or
other charges will be imposed on MAP shareholders in connection with the
transaction.
The Trust is an open-end management investment company that issues its
shares of beneficial interest in separate portfolios or funds, each with its own
investment objective or objectives and policies. The primary investment
objective of MainStay MAP, a separate diversified portfolio of the Trust, will
be to seek long-term capital appreciation. MainStay MAP will seek to achieve
this objective by investing primarily in equity-type securities of domestic
issuers, including common stocks, as well as securities convertible into, or
exchangeable for, common stocks. As a secondary investment objective, MainStay
MAP will seek to earn income. There can be no assurance that MainStay MAP will
achieve its investment objectives.
The investment objectives and policies of MainStay MAP (and consequently,
the risks of investing in it) will be substantially identical to those of MAP.
Certain investment restrictions of MainStay MAP, however, will be slightly
different from those of MAP. For a comparison of the investment objectives,
policies and restrictions of MAP and MainStay MAP (each referred to as a
<PAGE> 12
Fund," and collectively, the "Funds"), see "Investment Objectives, Policies and
Restrictions" in this Proxy Statement/Prospectus. MainStay Management, Inc. will
serve as the manager to MainStay MAP. Markston International, LLC ("Markston
International") will serve as the sub-adviser to MainStay MAP with full power to
make investment decisions for MainStay MAP.
This Proxy Statement/Prospectus, which should be retained for future
reference, sets forth concisely information about MainStay MAP that a
prospective investor should know before investing. Attached hereto as Exhibit B
is the Prospectus for MainStay MAP Class I shares dated May 1, 1999, which
prospectus is incorporated herein by reference (legally forms a part of this
Proxy Statement/Prospectus). A Statement of Additional Information for the
Trust, including information regarding MainStay MAP, dated May 1, 1999, has
been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by reference. Copies of MainStay MAP's Statement of
Additional Information are available upon request and without charge by writing
to NYLIFE Distributors, Inc. at 300 Interpace Parkway, Building A, Parsippany,
NJ 07054 or by calling 1-800-MAINSTAY (1-800-624-6782).
A Prospectus for MAP dated May 1, 1998, as supplemented on May 1, 1998,
August 6, 1998, September 24, 1998, and March 31, 1999, and a Statement of
Additional Information for MAP dated May 1, 1998, have been filed with the SEC
and are incorporated herein by reference. Copies of MAP's Prospectus and
Statement of Additional Information are available upon request and without
charge by calling First Priority Investment Corporation at (800) 559-5535.
A Statement of Additional Information dated April __, 1999, containing
additional information about the Reorganization and the parties thereto, has
been filed with the SEC and is incorporated herein by reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is April __, 1999.
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY OF THE PROPOSED REORGANIZATION..................................................2
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS........................................3
PRINCIPAL RISK FACTORS..................................................................5
MANAGER, INVESTMENT ADVISERS AND DISTRIBUTORS...........................................7
COMPARISON FEES AND EXPENSES............................................................8
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES...........................................12
DIVIDEND POLICIES......................................................................15
INFORMATION ABOUT THE REORGANIZATION...................................................15
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS..........................................18
ADDITIONAL INFORMATION.................................................................19
VOTING INFORMATION.....................................................................19
Exhibit A - Agreement and Plan of Reorganization
Exhibit B - Prospectus of MainStay MAP Class I Shares
</TABLE>
<PAGE> 14
SUMMARY OF THE PROPOSED REORGANIZATION
The Board of Directors of MAP, consisting solely of Directors who are not
"interested persons" of MAP as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), (the "Directors"), has unanimously approved an
Agreement and Plan of Reorganization (the "Plan") providing for the acquisition
of all of the assets of MAP by MainStay MAP, a separate portfolio of the Trust,
in exchange for shares of MainStay MAP and the assumption by MainStay MAP of all
of the liabilities of MAP. MainStay MAP will issue four different classes of
shares to the public, and shareholders of MAP will be issued Class I shares in
connection with the Reorganization. The aggregate net asset value of the Class I
shares of MainStay MAP to be issued in the exchange will equal the aggregate net
asset value of MAP's shares then outstanding. In connection with the
Reorganization, Class I shares of MainStay MAP will be distributed to
shareholders of MAP, and MAP will be liquidated and dissolved. As a result of
the Reorganization, each shareholder of MAP will cease to be a shareholder of
MAP and will receive that number of full and fractional Class I shares of
MainStay MAP having an aggregate net asset value equal to the aggregate net
asset value of such shareholder's shares of MAP on the Valuation Date. No sales
or other charges will be imposed on MAP shareholders in connection with the
transaction. As a condition to closing, MAP and MainStay MAP will obtain an
opinion of Dechert Price & Rhoads, counsel to the Trust, to the effect that the
Reorganization will qualify as a tax-free reorganization for Federal income tax
purposes. See "Information about the Reorganization."
MainStay MAP will have investment objectives and policies substantially
identical to those of MAP. The risks of investing in MainStay MAP will be
substantially the same as the risks of investing in MAP, although the investment
restrictions of MainStay MAP will be slightly different from the investment
restrictions of MAP. The slight differences in investment restrictions are not
expected to affect the manner in which Markston International, LLC ("Markston
International"), the sub-adviser to MainStay MAP, will manage the assets of
MainStay MAP compared with the manner in which Markston Investment Management,
the investment adviser to MAP, currently manages the assets of MAP. See
"Principal Risk Factors" below. MainStay MAP will follow purchase and
redemption procedures substantially similar to those followed by MAP prior to
May 1, 1999.
For the reasons set forth below, the Directors of MAP have unanimously
concluded that the Reorganization is in the best interests of the shareholders
of MAP and that the interests of existing MAP shareholders will not be diluted
as a result of the Reorganization. The Directors of MAP, therefore, will submit
the Reorganization for approval by the shareholders of MAP at a Special Meeting
of Shareholders to be held on June 3, 1999 (the "Meeting"). Approval of the
Reorganization with respect to MAP requires the vote of a majority of the
outstanding voting securities of MAP, and the Reorganization will not be
effected unless the requisite approval is obtained. See "Voting Information."
The Directors of MAP have approved the Reorganization because they
believe it will benefit shareholders of MAP through the quality and quantity of
services that are expected to be offered to MainStay MAP shareholders. The
Directors also considered the fact that Markston International will manage the
investments of MainStay MAP in substantially the same manner as Markston
Investment Management currently manages the investments of MAP. The Directors
<PAGE> 15
also reviewed and considered the capabilities of the service providers to The
MainStay Funds to provide management, administrative and distribution services
to MainStay MAP. As discussed below, the service providers to the Trust manage
and distribute a family of 22 mutual fund portfolios with assets of
approximately $14 billion as of March 23, 1999. Shareholders of MainStay MAP
will enjoy the same services and privileges as other shareholders of the Trust,
including the opportunity to exchange Class I shares of MainStay MAP for a
certain class of shares of the other portfolios of The MainStay Funds with a
wide variety of investment objectives and policies. For additional information
see "Purchase, Redemption and Exchange Procedures" below.
The Directors of MAP also took into account a variety of other factors
discussed below in greater detail. See "Information About the Reorganization."
THE BOARD OF DIRECTORS OF MAP-EQUITY FUND, CONSISTING SOLELY OF INDEPENDENT
DIRECTORS, UNANIMOUSLY RECOMMENDS APPROVAL OF THE AGREEMENT AND PLAN OF
REORGANIZATION AND ADOPTION OF THE FOLLOWING RESOLUTION OF SHAREHOLDERS IN
ACCORDANCE WITH THE CORPORATIONS LAW OF THE STATE OF DELAWARE:
RESOLVED, THAT THE AGREEMENT AND PLAN OF REORGANIZATION BY AND BETWEEN
THE MAINSTAY FUNDS, ON BEHALF OF MAINSTAY MAP EQUITY FUND, AND MAP-EQUITY
FUND, AS SUBMITTED TO THE SHAREHOLDERS OF MAP-EQUITY FUND AS EXHIBIT A TO
THE PROXY STATEMENT/PROSPECTUS, BE, AND IT HEREBY IS, APPROVED.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The following is a general description of the investment objectives,
policies and restrictions of each of the Funds. This discussion is qualified in
its entirety by reference to the more detailed description set forth in the
accompanying Prospectus of MainStay MAP Class I shares.
The investment objectives and policies of MainStay MAP will be
substantially identical to those of MAP. Furthermore, Markston International
will serve as sub-adviser to MainStay MAP following the Reorganization, with
full power to make investment decisions for MainStay MAP. Markston International
will follow substantially the same investment management style as sub-adviser to
MainStay MAP as Markston Investment Management currently follows as investment
adviser to MAP. For a further discussion of Markston International and Markston
Investment Management, please see "Manager, Investment Advisers, and
Distributors" below.
Like MAP, MainStay MAP will have a primary investment objective of
seeking long-term appreciation of capital, and a secondary investment objective
of seeking to earn income. There can be no assurance that MainStay MAP will
achieve its stated investment objectives. See "Principal Risk Factors" below.
-3-
<PAGE> 16
In seeking to achieve its investment objectives, MAP invests primarily in
equity-type securities, including common stocks, as well as securities
convertible into or exchangeable for, common stocks. In seeking to achieve its
investment objectives, MainStay MAP will normally invest at least 65% of its
total assets in these types of securities. MAP invests primarily in securities
traded on national securities exchanges and, to a lesser extent, in securities
traded in the "over-the-counter" market. MainStay MAP will invest primarily in
the securities of domestic issuers.
Like Markston Investment Management, Markston International will identify
securities that are out of favor but where a catalyst exists for turning such
securities into investments that the investment adviser believes will have
improved performance (i.e., value opportunities). Factors examined by Markston
International to indicate realized value will include: statistical indications,
such as low multiples of book value or cash flow, and more fundamental factors,
such as industry consolidations. Also, like Markston Investment Management,
Markston International will emphasize the presence of a catalyst that may unlock
a company's potential value, such as stock repurchase programs, management
changes, restructurings and sales of underperforming assets. In selecting
securities for investment, Markston International also will assess the
judgement, quality and integrity of company management and the track record of
product development.
Like MAP, MainStay MAP also may invest in warrants, may invest up to 10%
of its total net assets in the securities of foreign issuers, and may buy
"restricted" securities, which cannot be sold publicly until registered under
the Securities Act of 1933.
Like MAP, under normal circumstances MainStay MAP intends to hold its
securities for a relatively long period of time. Each Fund's investment adviser
may, however, sell investments when it believes the opportunity for current
profits or the risk of market decline outweighs the prospect of capital
appreciation. Like MAP, MainStay MAP also may acquire certain securities from
time to time, in an effort to earn short-term profits.
In addition, when its investment adviser believes that investment
opportunities in the equity markets are diminished (due either to fundamental
changes in those markets or to an anticipated general decline in the value of
equity securities), each Fund may adopt a temporary defensive position. During
such periods, MAP may invest in cash, preferred stock, bonds, debentures, notes,
government obligations, or other evidences of indebtedness. MainStay MAP may
also invest during such periods without limit in cash, preferred stock, money
market investments, or other debt or debt-related instruments. If a Fund adopts
a temporary defensive position, it may not achieve its investment objectives.
The investment restrictions of MainStay MAP will be substantially similar
to those of MAP, with certain exceptions. MainStay MAP's fundamental investment
restrictions regarding investment in real estate; investment in commodities and
commodities contracts; making of loans to other persons; diversification of both
the industries and the issuers in which the Fund is permitted to invest; and
acting as an underwriter for the securities of other
-4-
<PAGE> 17
issuers will be substantially similar to those of MAP. The Trustees of MainStay
MAP have also adopted a fundamental investment restriction followed by MAP
pertaining to the percentage of total assets that the Fund is permitted to
borrow from banks as a temporary measure. As adopted, however, the fundamental
restriction will permit MainStay MAP to borrow only up to 5% of its total assets
for temporary purposes, instead of the 10% limitation that was followed by MAP.
The Trustees of MainStay MAP have also adopted a fundamental investment
restriction followed by MAP limiting the amount of voting securities or any
other class of securities of any one issuer that the Fund may own. In adopting
this latter restriction, however, the Trustees increased the percentage
limitation from 8% to 10% of the voting securities of any one issuer.
With respect to MainStay MAP the Trustees did not adopt certain of MAP's
restrictions that either are no longer required under certain state securities
laws or are not required under the Federal securities laws. These restrictions
pertain to investment by the Fund in oil, gas or mineral leases; investment by
the Fund in the securities of unseasoned issuers; investment by the Fund in
securities that are also held in certain amounts by the Directors or officers of
the Fund; pledging of Fund assets; joint and several participation by the Fund
in securities trading accounts; and investment by the Fund in the securities of
companies for the purpose of exercising control over them.
Moreover, certain fundamental restrictions of MAP (changeable only with
the approval of a majority of shareholders) were adopted by the Trustees as
non-fundamental restrictions of MainStay MAP. These restrictions may be changed
by the affirmative vote of a majority of the Trustees without shareholder
approval. The investment restrictions that the Trustees adopted as
non-fundamental restrictions of MainStay MAP pertain to short sales of
securities; purchases of securities on margin; investment in securities which
are not readily marketable; and investment in securities of other registered
investment companies.
The slight differences in investment restrictions are not expected to
affect the manner in which Markston International will manage the assets of
MainStay MAP compared to the manner in which Markston Investment Management
currently manages the assets of MAP.
Each Fund may, to similar degrees, purchase or engage in the following
other investment instruments and techniques: short-term investments, cash or
cash equivalents, repurchase agreements, when-issued securities, preferred
stock, and U.S. government securities. For additional information on each Fund's
investment restrictions, the instruments which it may purchase, and techniques
in which it may engage, see its respective Statement of Additional Information.
PRINCIPAL RISK FACTORS
Because of the substantially identical investment objectives, policies
and portfolio management styles, the risks of investing in MainStay MAP are
expected to be substantially similar to the risks of investing in MAP. For a
further discussion of the investment objectives, policies and restrictions
applicable to MAP and MainStay MAP and the risks of investing in each
-5-
<PAGE> 18
Fund, see "Investment Objectives, Policies and Restrictions" herein and the
discussions under "Investment Objective", "Principal Investment Strategies" and
"Risks" in the accompanying prospectus of MainStay MAP Class I shares.
Like MAP, MainStay MAP will invest primarily in the equity-type
securities of domestic issuers, including common stocks, as well as securities
convertible into, or exchangeable for, common stocks. Investment in common
stocks and securities convertible into, or exchangeable for, common stocks is
particularly subject to the risk of changing economic, stock market, industry
and company conditions, which can adversely affect the value of a Fund's
holdings. Over time, equity securities can fluctuate in value, sometimes due to
factors unrelated to the issuer of the securities, and such fluctuations can be
pronounced. Changes in the value of a Fund's investments will result in changes
in the value of the Fund's shares and thus its total return to investors. Like
an investment in MAP, an investment in MainStay MAP will not be insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
As part of its investment management strategy, Markston International,
like Markston Investment Management, will attempt to invest in equity securities
that it believes are undervalued and have the potential for future growth. There
can be no guarantee, however, that an assessment of the future value of a given
company will be accurate. In the event that the market does not come to share
the investment adviser's assessment of the growth potential of a particular
company, the securities of that company held by the Fund may experience a
decline in value. As a consequence, the Fund may experience a decline in net
asset value, and shareholders may lose money.
In addition, like MAP, MainStay MAP may invest up to 10% of its net
assets in the securities of foreign issuers. Investing in foreign securities
involves special risks. These include the risks of currency fluctuations,
political or economic instability in the country of issue and the possible
imposition of exchange controls or other laws or restrictions. Fluctuations in
currency exchange rates can have a positive or negative affect on the value of a
Fund's shares, depending upon whether the foreign currencies are appreciating or
depreciating relative to the U.S. dollar. In addition, foreign markets may not
be as liquid as U.S. securities markets and securities prices in foreign markets
are generally subject to economic, financial, political and social factors that
are different from the factors to which the prices of securities in U.S. markets
are subject. With respect to some foreign countries there may be the possibility
of expropriation or confiscatory taxation, limitations on liquidity of
securities or political or economic developments which could affect the foreign
investments of each Fund.
Further, securities of foreign issuers generally will not be registered
with the SEC, and such issuers will generally not be subject to the SEC's
reporting requirements. Accordingly, there is likely to be less publicly
available information concerning certain of the foreign issuers of securities
held by each Fund than is available concerning U.S. companies. Foreign companies
are also generally not subject to uniform accounting, auditing and financial
reporting standards or to practices and requirements comparable to those
applicable to U.S. companies. There may also be
-6-
<PAGE> 19
less government supervision and regulation of foreign broker-dealers, financial
institutions and listed companies than exists in the U.S. These and other
factors could make foreign investments more volatile than domestic investments.
In addition, like MAP, MainStay MAP may buy "restricted" securities,
which cannot be sold publicly until registered under the Securities Act of 1933.
The Fund's ability to dispose of investments in "restricted" securities at
reasonable price levels might be limited unless and until their registration
under the Securities Act of 1933 has been completed. SEC rules do permit some of
these securities to be sold in privately negotiated transactions. MainStay MAP
will endeavor to have the issuing company pay all the expenses of any such
registration, but there is no assurance that MainStay MAP will not have to pay
some or all of these expenses.
MANAGER, INVESTMENT ADVISERS AND DISTRIBUTORS
MAP
Investment advisory services have been provided to MAP by Markston
Investment Management, a New Jersey partnership between Markston International,
Inc. and MBL Sales Corporation. Markston International, Inc. is wholly owned by
Michael J. Mullarkey, Roger Lob and other Markston Investment Management
employees, and is a 49% general partner of Markston Investment Management. MBL
Sales Corporation is an indirect wholly-owned subsidiary of MBL Life Assurance
Company ("MBL Life") and is a 51% partner of Markston Investment Management.
MBL Life has sold its individual life and individual and group annuity
businesses to SunAmerica, Inc. and, as a result, will be ceasing operations.
Markston Investment Management will, however, remain as the investment adviser
to MAP until MAP is reorganized as MainStay MAP. Thereafter, Markston Investment
Management will be dissolved. Once the Reorganization is complete, investment
advisory services will be provided to MainStay MAP by Markston International LLC
("Markston International").
First Priority Investment Corporation ("First Priority"), a registered
broker/dealer under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., serves as the distributor of
MAP's shares.
MainStay MAP
MainStay Management, Inc. ("MainStay Management"), whose address is 300
Interpace Parkway, Building A, Parsippany, New Jersey 07054, will serve as the
manager to MainStay MAP. MainStay Management is a direct subsidiary of NYLIFE
Inc., which is a direct subsidiary of New York Life Insurance Company.
Following the Reorganization, Markston International will serve as the
sub-adviser to MainStay MAP pursuant to a Sub-Advisory Agreement to be dated
__________, 1999 between
-7-
<PAGE> 20
MainStay Management and Markston International. Markston International is a
recently organized New York limited liability company that is registered with
the SEC as an investment adviser. Markston International is wholly owned by
Michael J. Mullarkey and Roger Lob and will continue the investment advisory
services conducted previously by Markston Investment Management. Under the
supervision of MainStay Management, Markston International will be responsible
for making the specific decisions about buying, selling and holding securities
for MainStay MAP; selecting brokers and brokerage firms to trade on behalf of
MainStay MAP; maintaining accurate records for MainStay MAP; and, if possible,
negotiating for MainStay MAP favorable commissions and fees with the brokers and
brokerage firms. For these services, Markston International will be paid a
monthly fee by MainStay Management.
MainStay MAP's shares will be distributed by NYLIFE Distributors, Inc.
("NYLIFE") in its capacity as principal underwriter and distributor of the
Trust's shares. NYLIFE Securities, Inc., an affiliated company of NYLIFE, as
well as other registered broker-dealers, sell shares of the Trust pursuant to
dealer agreements with NYLIFE.
COMPARISON OF FEES AND EXPENSES
Management and Advisory Fees. Under the terms of an Investment Advisory
Agreement between MAP and Markston Investment Management, MAP currently pays
Markston Investment Management a basic fee, which accrues daily and is paid
quarterly, adjusted for investment performance, at an annual rate of 0.50% of
the first $200 million of the Fund's daily net asset value, 0.45% of the next
$100 million, 0.40% of the next $100 million, and 0.35% of any net asset value
in excess of $400 million. The basic fee may be increased or decreased by an
amount (the "adjustment amount") determined according to a formula based upon
MAP's performance in relation to the Standard & Poor's 500 Composite Stock Index
(the "Index") over certain designated periods. The maximum allowable adjustment
is 0.30% per annum (0.00577% per week) for performance better or worse by 12
percentage points or more than the performance of the Index. The basic fee may
be increased or decreased by an "adjustment rate" equal to 0.05% per annum
(0.00096% per week) for each full two percentage points that MAP's performance
(including reinvestment of cash dividends) is better or worse, respectively,
than the investment record for the Index. During the fiscal year ended December
31, 1998, Markston Investment Management received an advisory fee at an annual
rate of 0.35 % of MAP's average monthly net assets (which reflects a downward
performance adjustment).
Under the terms of a Management Agreement between MainStay MAP and
MainStay Management, MainStay MAP will pay MainStay Management a monthly fee at
an annual rate of 0.75% of the Fund's average daily net assets. Unlike MAP's
advisory fee, MainStay MAP's management fee will not be subject to a performance
adjustment. Under the terms of a Sub-Advisory Agreement between MainStay
Management and Markston International, MainStay Management will pay Markston
International a monthly fee at an annual rate of 0.45% of MainStay MAP's average
daily net assets up to the first $250 million, 0.40% of the next $250 million,
and 0.35% of any amount in excess of $500 million.
-8-
<PAGE> 21
Distribution and Shareholder Servicing Fees. First Priority distributes
MAP's shares on a best-efforts basis, acting as principal for its own account,
not as agent for MAP. In exchange for distribution services provided to MAP,
First Priority retains the sales charge paid by investors. The sales charge
begins at 4.75% of the offering price of the shares, but is reduced over
successive breakpoints beginning at an investment of $50,000. First Priority
reallows to dealers 82% of any sales charge on shares sold by dealers pursuant
to selling agreements between the dealers and First Priority. The reallocation
percentage may be increased, from time to time, to 100% of the sales charge, as
a sales incentive. First Priority also assumes certain expenses in connection
with the offer and sale of MAP's shares, including the expenses of printing and
distributing prospectuses and preparing, printing and distributing advertising
and sales literature.
Following the Reorganization, MainStay MAP will be offered to the public
in multiple classes of shares. All classes will be identical, except that they
will have different initial sales charges, deferred sales charges, distribution
and shareholder servicing arrangements and fees.
As noted above, MAP shareholders will receive Class I shares of MainStay
MAP as a result of the Reorganization. Following the Reorganization, those
shareholders will be able to purchase additional Class I shares of MainStay MAP
and also will be able to purchase Class A, B, or C shares of other portfolios
offered by The MainStay Funds. Class I shares will not be subject to an initial
or a deferred sales charge or to a distribution or service fee. However, Class
A, B, and C shares of other Portfolios offered by The MainStay Funds are subject
to such charges and fees.
Following the closing of the Reorganization, Class I shareholders of
MainStay MAP who were shareholders of MAP on the date of the Reorganization will
also be able to exchange any of their Class I shares for Class A shares of other
portfolios offered by The MainStay Funds. Class A shares of the portfolios of
The MainStay Funds are subject to a maximum initial sales charge of up to 5.50%
of the purchase price and a 12b-1 distribution fee of 0.25%. Class I
shareholders of MainStay MAP who were shareholders of MAP on the date of the
Reorganization will not, however, pay an initial sales charge on the exchange of
any Class I shares of MainStay MAP for Class A shares of other portfolios
offered by The MainStay Funds. Such Class A shares will, however, be subject to
the applicable 12b-1 fee. For additional information, see "Exchanges" below.
Total Expenses. For the fiscal year ended December 31, 1998, MAP incurred
total fees and expenses at an annual rate of .70% of its average monthly net
assets, after expense reimbursement. It is estimated that during the one-year
period following the closing of the Reorganization, total annual fees and
expenses of Class I shares of MainStay MAP will not exceed 1.00% of the average
daily net assets of that class after expense reimbursement as described below.
For the first two years from the date that MainStay MAP commences operations,
MainStay Management has agreed to assume the operating expenses of Class I
shares of MainStay MAP to the extent that the total operating expenses
(excluding taxes, interest, brokerage commissions and any extraordinary
expenses) of Class I shares exceed 1.00% of the average daily net assets
attributable to that class on an annual basis. Thereafter, however, MainStay
Management may discontinue assuming such expenses. In addition, if at any time
during the two-year period following the end of the two-year expense limitation
period the total operating expenses of Class I shares of MainStay MAP fall below
1.00% of the total net assets attributable to that class, MainStay MAP will
reimburse MainStay
-9-
<PAGE> 22
Management for expenses reimbursed, but only to the extent that such
reimbursements do not cause the expense ratio of the Class I shares to exceed
1.00%.
Comparative Fee Table. The following tables show (1) the shareholder
transaction expenses applicable to shares of MAP and Class I shares of MainStay
MAP, and (2) the annual operating expenses incurred by shares of MAP for the 12
months ended December 31, 1998, and the projected fees and expenses expected to
be incurred by Class I shares of MainStay MAP for its first year of operations.
-10-
<PAGE> 23
SHAREHOLDER FEES
(Fees paid directly from your investment)
<TABLE>
<CAPTION>
MAP MAINSTAY MAP
--- ------------
CLASS I AND PRO FORMA
---------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of 4.75% None
public offering price)
Maximum Deferred Sales None None
Charge (Load) on Sale of Shares (as a
percentage of the lesser of original
price or redemption proceeds)
Maximum Sales Charge (Load) Imposed None None
on Reinvested Dividends
Redemption Fee None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES (1)
(Expenses that are deducted from Fund assets)
<CAPTION>
MAP MAINSTAY MAP
--- ------------
CLASS I AND
PRO FORMA
-------
<S> <C> <C>
Management Fees 0.35 % 0.75%
Distribution and/or Service (12b-1) Fees None None
Other Expenses 0.42% 0.37%(2)
---- -----
Total Annual Fund Operating Expenses 0.77% (4) 1.12%(3)
====== =======
Expense Reimbursement - - 0.12%
-----
Net Expenses - - 1.00%
=====
</TABLE>
- ----------------
(1) As a percentage of average net assets.
(2) Estimated.
(3) For the first two years from the date that MainStay MAP commences
operations, MainStay Management has agreed by written contract to assume
all of the operating expenses of Class I shares of MainStay MAP to the
extent that the total operating expenses (excluding, taxes, interest,
brokerage commissions and any extraordinary expenses) of Class I shares
exceed 1.00% of the net assets attributable to that class. Although
MainStay MAP will initially pay these operating expenses, it will be
reimbursed by MainStay Management for fees and expenses attributable to
Class I shares in excess of the 1.00% limitation. Thereafter, however,
MainStay Management may discontinue assuming such expenses. In addition,
for a two-year period following expiration of the expense limitation,
MainStay Management may be entitled to reimbursement for a portion of
expenses paid pursuant to the expense limitation, under certain
conditions.
-11-
<PAGE> 24
(4) First Priority agreed to assume the operating expenses of MAP (excluding
taxes, interest, brokerage commissions, and extraordinary expenses) to
the extent such daily expenses exceeded 1.00% on an annualized basis of
MAP's daily net assets through December 31, 1998. After reimbursement by
First Priority, MAP's operating expenses were 0.70%.
Example of Effect on Fund Expenses. The following Example is intended to
help you compare the cost of investing in MAP with the cost of investing in
MainStay MAP.
The Example assumes that you invest $10,000 in a Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that your shareholder fees and the annual operating expenses shown in the
tables above remain the same. Shareholders should note that the expenses
reflected below for MAP include a 4.75% initial sales charge. Although your
actual costs may be higher or lower, based upon these assumptions your costs
would be:
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
MAP $ 550 $ 709 $ 883 $ 1,384
MAINSTAY MAP $ 114 $ 356 $ 617 $ 1,363
</TABLE>
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
Effective on the close of business on April 30, 1999, MAP closed to all
new share purchases, including automatic deposits, pending the Reorganization.
The Directors of MAP believe that closing MAP to new share purchases will help
facilitate a smooth and efficient transition of its business and operations.
Although MAP shareholders cannot purchase new shares of MAP at this time, they
can redeem their MAP shares through the closing date of the Reorganization.
Following the Reorganization, shareholders may, of course, purchase additional
shares of MainStay MAP. The following discussion is qualified by the foregoing
statement.
Except as set forth below, the purchase and redemption procedures of
MainStay MAP will be substantially similar to those of MAP.
Purchases. Prior to May 1, 1999, shares of MAP were offered for sale at
net asset value plus an initial sales charge, as set forth below, and were not
subject to a distribution or service fee.
<TABLE>
<CAPTION>
Sales Charge as % of
--------------------
Amount of Purchase Offering Net Amount
at Offering Price Price Invested
- -------------------- -------- ----------
<S> <C> <C>
Less than $50,000 4.75% 4.99%
</TABLE>
-12-
<PAGE> 25
<TABLE>
<S> <C> <C>
$50,000 up to $99,999 4.25% 4.44%
$100,000 up to $249,999 3.60% 3.73%
$250,000 up to $499,999 2.40% 2.46%
$500,000 up to $999,999 1.60% 1.63%
$1,000,000 or more 1.00% 1.01%
</TABLE>
Class I shares of MainStay MAP will be offered for sale at net asset
value and will not be subject to an initial or a deferred sales charge, or to a
distribution or service fee.
Prior to May 1, 1999, for investments by mail, MAP required a minimum
initial investment of at least $250 and minimum subsequent investments of at
least $50. This minimum initial investment did not apply to periodic investment
plans, or Individual Retirement Accounts. In addition, investments of less than
the minimum purchase requirements were permitted on behalf of participants in a
pension, profit-sharing, or other employee benefit plan or trust meeting the
requirements of Section 401 of the Internal Revenue Code, if the average
investment for all participants under the plan or trust met the minimum purchase
requirements for MAP. MAP's Directors reserved the right to change or waive the
minimum purchase requirements.
MainStay MAP will require a minimum initial investment of at least $500,
and minimum subsequent investments of at least $50. MainStay MAP may waive
initial and subsequent investment minimums for certain purchases, when deemed
appropriate, including but not limited to, purchases by certain qualified
retirement plans, New York Life employee and agent investment plans, investments
resulting from distributions by other New York Life products and products
distributed by NYLIFE, and purchases by certain individual investors including
those made by the Trustees, and employees, officers, directors, or agents of New
York Life and its subsidiaries.
Like MAP, MainStay MAP will allow both initial and subsequent purchases
of Class I shares by telephone, subject to certain conditions. Although the
procedures that will be followed by MainStay MAP for telephone purchases will be
substantially similar to those followed by MAP, MainStay MAP will require higher
minimum purchase amounts for telephone transactions than those required by MAP.
Prior to May 1, 1999, initial and subsequent purchases by telephone for
shares of MAP were required to be made in an amount not less than $1,000, and
payment was required to be received by 4:00 p.m. eastern time on the same day
that the order was placed in order to receive the net asset value calculated at
4:00 p.m. eastern time that day.
Initial and subsequent purchases by telephone for Class I shares of
MainStay MAP must be made in an amount not less than $5,000. With respect to
initial purchases, orders received by 4:00 p.m. eastern time will receive the
net asset value calculated that day at 4:00 p.m. eastern time, and payment must
be received in good order within three business days, otherwise the order will
be cancelled and the purchaser may be liable to the Fund for fees and any
losses. With respect to subsequent purchases, payment must be received by 4:00
p.m. eastern time on the same
-13-
<PAGE> 26
day that the order is placed in order to receive the net asset value calculated
at 4:00 p.m. eastern time that day.
Redemptions. MAP shareholders may make redemption requests by telephone
in amounts up to $25,000. Proceeds of redemption requests in amounts in excess
of $1,000 may be transmitted by wire to the shareholder; proceeds of redemption
requests in amounts less than $1,000 will be mailed. MAP requires a signature
guarantee for redemption requests in amounts greater than $25,000 or for
requests that the proceeds of the redemption be mailed to an address other than
the address of record for the shares redeemed. MAP permits systematic
withdrawals in amounts not less than $50 per withdrawal provided that at the
time the systematic withdrawal plan is initiated, the account value is at least
$5,000.
MainStay MAP will permit redemptions by telephone in amounts of at least
$5,000 but not in excess of $100,000. Telephone redemption requests will be
limited to one request every thirty days, and will not be honored for
certificated shares, shares purchased within the ten days preceding the
redemption request, or for accounts for which the recordholder's address has
been changed within the preceding 30 days. MainStay MAP will require a signature
guarantee for all redemption requests in excess of $100,000, for which the
proceeds are requested to be mailed to an address other than the shareholder's
address of record, or where the shareholder's record address has been changed
within the preceding 30 days. In order to participate in a systematic withdrawal
plan, the shareholder's account value must be at least $10,000 at the time of
the participation request and each systematic withdrawal must be in an amount of
at least $100.
MainStay MAP reserves the right to charge a $12 annual account fee
(maximum of $36 per social security number or tax I.D. number) on accounts with
balances less than $250. This fee will not be charged, however, on retirement
plan accounts, accounts with automatic investment plans or accounts for which
tracking data is not available. In order to maintain an open account in
MAP-Equity, a minimum of $250 must be maintained in the account at all times.
Exchanges. Exchanges are not available for MAP shares. Class I
shareholders of MainStay MAP who were shareholders of MAP on the date of the
Reorganization will be able to exchange any Class I shares, including additional
Class I shares purchased after the Reorganization and Class I shares acquired
through dividend reinvestment, for Class A shares of any other portfolio of The
MainStay Funds, without the imposition of an initial sales charge. Once Class I
shares have been exchanged for Class A shares, they may not be exchanged back
into Class I shares. Class A shares purchased other than through an exchange of
Class I shares will be subject to the initial sales charge applicable to Class A
shares. Class A shares of portfolios of The MainStay Funds are exchangeable only
into Class A shares of other portfolios of The MainStay Funds. MainStay MAP will
permit five telephone exchanges per year, free of charge. However, a $10 fee
will be charged for each exchange in excess of five within one year, and
additional exchanges may be denied.
-14-
<PAGE> 27
DIVIDEND POLICIES
MAP distributes semi-annually any net investment income, such as
dividends, and distributes annually any net realized capital gains. MainStay MAP
will distribute all of its net investment income and any net capital gains at
least quarterly.
In order for MAP to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code, it must distribute
substantially all of its taxable net income and net realized capital gains to
its shareholders. Prior to the closing of the Reorganization, MAP will pay out
any dividends and capital gains applicable to 1998.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary of the proposed Plan is
qualified in its entirety by reference to the Plan attached to this Proxy
Statement/Prospectus as Exhibit A.
The Plan provides that MainStay MAP, a newly created portfolio of The
MainStay Funds, will acquire all of the assets of MAP in exchange for Class I
shares of MainStay MAP and the assumption by MainStay MAP of all of the
liabilities of MAP on the Closing Date, which shall occur on the business day
next following the Valuation Date. The value of MAP's assets to be acquired by
MainStay MAP shall be the value of such assets computed on the Valuation Date.
The number of full and fractional Class I shares of MainStay MAP to be issued
shall equal the number of full and fractional shares of MAP outstanding on the
Valuation Date. The net asset value per share of MAP will be determined by
dividing the value of MAP's assets, less its liabilities, by the total number of
its shares outstanding. MAP's assets will be valued using the valuation
procedures set forth in MAP's Articles of Incorporation and prospectus or
statement of additional information, subject to adjustment by the amount, if
any, agreed to by the Funds. MainStay MAP will assume all of the liabilities,
expenses, costs, charges and reserves reflected on an unaudited statement of
assets and liabilities of MAP.
Immediately after the transfer of assets described above, MAP will
distribute pro rata to its shareholders of record, determined as of the close of
business on the Valuation Date, the shares of MainStay MAP received by MAP, and
then MAP will be liquidated and dissolved. Such distribution will be
accomplished by the transfer of the MainStay MAP shares then credited to the
account of MAP on the books of MainStay MAP to open accounts on the share
records of MainStay MAP in the names of MAP shareholders and representing the
respective pro rata number of MainStay MAP shares due such shareholders.
Ownership of MainStay MAP shares will be shown on the books of MainStay
MAP's transfer agent. Shares of MainStay MAP will be issued in the manner
described in MainStay MAP's Prospectus and Statement of Additional Information.
MAP shareholders holding certificates representing their ownership of MAP shares
must surrender such certificates or deliver an affidavit with respect to lost
certificates, in such form and accompanied by such surety bonds as MainStay MAP
may require prior to the Closing Date. Any MAP share certificate that remains
-15-
<PAGE> 28
outstanding on the Closing Date shall be deemed to be canceled, shall no longer
evidence ownership of any shares of MAP, and will instead evidence ownership of
corresponding shares of MainStay MAP. MainStay MAP will not issue share
certificates in the Reorganization. The legal existence of MAP will be
terminated as promptly as reasonably practicable after the Closing Date.
The Directors of MAP have determined that the interests of existing MAP
shareholders will not be diluted as a result of the transactions contemplated by
the Reorganization, and that participation in the Reorganization is in the best
interests of MAP shareholders.
Approval of the Plan will require the affirmative vote of the holders of
a majority of the shares of MAP. If the Reorganization is not approved by the
shareholders of MAP, the Directors of MAP will consider other possible courses
of action, including the liquidation of MAP.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan. The Plan may be terminated and the Reorganization abandoned
prior to the Closing Date, before or after approval by shareholders of MAP, by
resolution of the Board of either Fund if, in the exercise of its fiduciary
duties under applicable state law and the 1940 Act, the Board determines that
consummation of the Reorganization is no longer in the best interests of the
Fund and its shareholders. The Plan also may be terminated by the mutual consent
of the Funds.
Full and fractional Class I shares of beneficial interest of MainStay MAP
will be issued to shareholders of MAP in accordance with the procedures under
the Plan, as described above. Each share will be fully paid and non-assessable
by MainStay MAP when issued, will be transferable without restrictions, and will
have no preemptive or conversion rights. See "Comparative Information on
Shareholder Rights" for additional information with respect to the shares of
MainStay MAP.
Federal Income Tax Consequences. The Reorganization is intended to
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended, with no gain
or loss recognized by MainStay MAP, MAP, or shareholders of either Fund as a
consequence of the Reorganization. As a condition to the closing of the
Reorganization, each Fund will receive an opinion from Dechert Price & Rhoads,
counsel to MainStay MAP, to the effect that the Reorganization will qualify as a
tax-free reorganization for Federal income tax purposes, based on certain
assumptions and representations made by the Funds.
Shareholders of MAP should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. BECAUSE THE FOREGOING DISCUSSION RELATES ONLY TO THE FEDERAL
INCOME TAX CONSEQUENCES OF THE REORGANIZATION, SHAREHOLDERS OF MAP SHOULD ALSO
CONSULT THEIR TAX ADVISERS AS TO STATE, LOCAL AND OTHER TAX CONSEQUENCES, IF
ANY, OF THE REORGANIZATION.
Capitalization. The following table shows the capitalization of each Fund
at December 31, 1998 (unaudited) and on a pro forma combined basis (unaudited)
giving effect to the
-16-
<PAGE> 29
Reorganization. As MAP has only one share class, the information for those
shares is listed as "Class I" in order to facilitate the comparison.
<TABLE>
<CAPTION>
Pro Forma
MainStay MAP MAP Combined
------------ --- --------
<S> <C> <C> <C>
Net assets
Class I............................. $0 $60,414,243 $60,414,243
Net asset value per share
Class I............................. $0 $24.58 $24.58
Shares outstanding
Class I............................. 0 2,457,556 2,457,556
</TABLE>
Considerations of the Board of Directors of MAP. In determining whether
to recommend that shareholders of MAP vote to approve the Reorganization, the
Directors of MAP, with the assistance and advice of independent legal counsel,
inquired into a number of matters and considered a number of factors, including
the following:
1. MainStay Management and its affiliates have the resources and experience
necessary to provide comprehensive investment supervision, and
shareholder- and distribution-related services.
2. MainStay Management has informed MAP's Directors of MainStay Management's
future plans relating to growth of MainStay MAP and other portfolios of
The MainStay Funds (through promotion of sales of shares). These plans
could result in higher net assets for MainStay MAP, with the potential
for increased economies of scale.
3. The Directors reviewed information regarding the fees and expenses of MAP
and MainStay MAP. Among other factors, the Directors considered the fact
that MainStay Management has agreed to limit the total operating expenses
(excluding taxes, interest, brokerage commissions and any extraordinary
expenses) of Class I shares of MainStay MAP for the two-year period
following the commencement of operations of MainStay MAP to an annual
rate of 1.00% of the average daily net assets attributable to that class.
4. The Directors considered the fact that Class I shares of MainStay MAP
received by MAP shareholders as a result of the Reorganization will not
be subject to an initial sales charge.
5. The Directors reviewed the similarities and differences between the
investment objectives, policies, and restrictions of MAP and MainStay
MAP.
6. The Directors reviewed the terms and conditions of the proposed
Reorganization, including its tax-free nature for Federal income tax
purposes, and that fact that MAP's expenses in connection with the
Reorganization will be borne by MainStay Management.
7. The Directors considered other alternatives available to MAP, including
liquidating the Fund.
8. The MainStay Funds consist of a large number of portfolios, which will be
available for exchange by shareholders of MAP if the Reorganization is
approved. MainStay Management has agreed that MAP shareholders who become
shareholders of MainStay
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<PAGE> 30
MAP as a result of the Reorganization will receive Class I shares of
MainStay MAP. MainStay Management has agreed further not to impose on
these shareholders an initial sales charge on the exchange of any of
their Class I shares of MainStay MAP for Class A shares of other
portfolios of The MainStay Funds.
In reaching the decision to recommend that the shareholders of MAP vote
to approve the Reorganization, the Directors of MAP concluded that participation
by MAP in the Reorganization is in the best interests of its shareholders and
that the interests of existing shareholders of MAP will not be diluted as a
result of the Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
General. MainStay MAP is a series of The MainStay Funds, a Massachusetts
business trust organized on January 9, 1986. As a series of a Massachusetts
business trust, MainStay MAP is governed by the Trust's Declaration of Trust, as
amended, its Bylaws, and applicable Massachusetts law. MAP is a Delaware
corporation organized on March 6, 1970. As a Delaware corporation, MAP is
similarly governed by its Articles of Incorporation, its Bylaws, and applicable
Delaware law. The rights of MainStay MAP shareholders will not differ materially
from those of MAP shareholders.
Shares. The Trust is authorized to create an unlimited number of series
and, with respect to each series, to issue an unlimited number of full and
fractional shares of one or more classes and to divide or combine the shares
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the series. MAP is authorized to issue
21,000,000 shares of common stock. All MainStay MAP shares and all MAP shares
have equal voting rights, except that with respect to The MainStay Funds, of
which MainStay MAP is a separate series, only shares of the respective series or
separate classes within a series are entitled to vote on matters concerning only
that series or class. Like the shareholders of MAP, shareholders of MainStay MAP
will be entitled to one vote per share of the Fund held, and to a fractional
vote equal to any fraction of a share held.
Shareholder Meetings. Under Delaware law, MAP is required generally to
hold annual shareholder meetings to, among other things, elect the Directors of
MAP. Under Massachusetts law, The MainStay Funds is not required to hold annual
shareholder meetings. There normally will be no meetings of shareholders of The
MainStay Funds to elect trustees unless fewer than a majority of the trustees
holding office have been elected by shareholders. However, meetings of the
shareholders will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of any affected series or
class having voting rights.
Shareholder Liability. Under Massachusetts law, there is a remote
possibility that shareholders of a business trust could, under certain
circumstances, be held personally liable as partners for the obligations of such
trust. However, the Declaration of Trust for The MainStay Funds contains
provisions intended to limit such liability and to provide indemnification out
of
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<PAGE> 31
MainStay MAP property of any shareholder charged or held personally liable for
obligations or liabilities of MainStay MAP solely by reason of being or having
been a shareholder of MainStay MAP and not because of such shareholder's acts or
omissions or for some other reason. Thus, the risk of a shareholder of MainStay
MAP incurring financial loss on account of shareholder liability is considered
remote because it is limited to circumstances in which MainStay MAP itself would
be unable to meet its obligations. Under Delaware law, MAP shareholders
generally have no personal liability for the obligations of MAP.
ADDITIONAL INFORMATION
Information concerning the operation and management of MainStay MAP is
incorporated herein by reference from its prospectus dated May 1, 1999, a copy
of which is included herewith and incorporated by reference herein. Additional
information concerning MainStay MAP, and the Reorganization, is included in its
Statement of Additional Information ("SAI") dated May 1, 1999, which has been
filed with the SEC and is incorporated by reference in its prospectus included
herewith. A copy of the SAI Distributors for MainStay MAP is available upon
request and without charge by calling NYLIFE Distributors at (800) 624-6782.
Information concerning the operation and management of MAP is included in
its prospectus dated May 1, 1998, as supplemented May 1, 1998, August 6, 1998,
September 24, 1998, and March 31, 1999. Additional information concerning MAP is
included in its SAI dated May 1, 1998. That SAI has been filed with the SEC and,
along with MAP's prospectus, as supplemented, is incorporated by reference
herein. Copies of the prospectus, SAI, and annual report for MAP are available
upon request and without charge by calling First Priority Investment Corporation
at (800) 559-5535.
Reports and other information filed by The MainStay Funds, on behalf of
MainStay MAP, and by MAP, including charter documents, can be inspected and
copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Information on the operation of the public
reference room may be obtained by calling the SEC at 1-800-SEC-0330. Copies of
such materials are available on the SEC's Internet site at http://www.sec.gov
and can also be obtained, after payment of a duplicating fee, from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20459 at prescribed rates.
VOTING INFORMATION
Proxies for the Meeting are being solicited from MAP shareholders by the
Directors of MAP. A proxy may be revoked at any time at or before the Meeting by
oral or written notice to the Secretary of MAP, 520 Broad Street, Newark, New
Jersey 07102-3111, (800) 559-5535, or by voting in person at the Meeting. Unless
revoked, all valid proxies will be voted in accordance with the specifications
thereon or, in the absence of such specifications, for approval of the Plan and
the Reorganization.
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<PAGE> 32
Additional solicitations may be made by telephone, telegraph, facsimile
or personal contact by a professional proxy solicitation firm. The printing,
postage, and solicitation expenses (including the fees and expenses of a proxy
solicitor) incurred in connection with the Reorganization will be borne by
MainStay Management. MainStay Management will also bear SEC registration fees
and "Blue Sky" expenses relating to the Reorganization.
Shareholders of record of MAP at the close of business on April 30, 1999
(the "Record Date") will be entitled to vote at the Meeting or any adjournment
thereof. The holders of a majority of the shares of MAP outstanding at the close
of business on the Record Date present in person or represented by proxy will
constitute a quorum for the Meeting. Shareholders are entitled to one vote for
each share held, and each fractional share will be entitled to a proportionate
fractional vote. As of March 23, 1999, there were issued and outstanding
2,549,741 shares of common stock of MAP.
In the event that a quorum is not present at the Meeting, or a quorum is
present at the Meeting but sufficient votes to approve the Plan are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. If a quorum is not present, the persons named as
proxies will vote those proxies which they are entitled to vote FOR the Plan in
favor of such an adjournment and will vote those proxies which they are required
to vote AGAINST the Plan against any such adjournment.
Approval of the Plan and the Reorganization will require the affirmative
vote of the holders of a majority of the outstanding voting securities of MAP.
The Plan will not be approved, and the Reorganization will not be effected,
unless the requisite vote is provided by shareholders of MAP.
"Broker non-votes" are shares held in a broker's street name for which
the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote, and the broker does not
have discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present for purposes of determining whether a quorum is
present but will not be voted for or against any adjournment or proposal.
Accordingly, abstentions and broker non-votes effectively will be a vote against
adjournment and against the proposal because the required vote is a percentage
of the shares outstanding.
The Directors of MAP know of no other business to be brought before the
Meeting. However, if any other matters properly come before the Meeting, proxies
will be voted in accordance with the judgment of the persons named as proxies.
To the best of MAP's knowledge, as of March 23, 1999, no person owned
beneficially more than 5% of MAP's outstanding shares.
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<PAGE> 33
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ___th day of ___________, 1999, by and between The MainStay Funds
("MainStay"), a Massachusetts business trust, on behalf of its MainStay MAP
Equity Fund series (the "Successor Fund") and MAP-Equity Fund, a Delaware
corporation (the "Reorganizing Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
assets of the Reorganizing Fund to the Successor Fund in exchange solely for (1)
the assumption by the Successor Fund of all of the liabilities of the
Reorganizing Fund and (2) the issuance by MainStay to the Reorganizing Fund of
Class I shares of beneficial interest of the Successor Fund. The aggregate
number of Class I shares of the Successor Fund (the "Successor Fund Shares")
issued to the Reorganizing Fund will be equal to the number of shares of common
stock ("Shares") of the Reorganizing Fund outstanding immediately before the
Reorganization. These transactions will be immediately followed by a pro rata
distribution by the Reorganizing Fund of the Successor Fund Shares it receives
in the exchange described above to the holders of corresponding Reorganizing
Fund Shares in exchange for those Reorganizing Fund Shares and in liquidation of
the Reorganizing Fund, all upon the terms and conditions hereinafter set forth
in this Agreement.
WHEREAS, MainStay and the Reorganizing Fund are registered open-end,
management investment companies;
WHEREAS, MainStay is authorized to issue its shares of beneficial
interest in separate series, including the Successor Fund, each of which
maintains a separate and distinct portfolio of assets;
WHEREAS, the shares of beneficial interest of MainStay with respect to
the Successor Fund are authorized to be issued in multiple classes, including a
class designated "Class I";
WHEREAS, the parties intend that the Successor Fund shall have nominal,
if any, assets and liabilities prior to the transaction contemplated by this
Agreement and shall continue the investment operations of the Reorganizing Fund
thereafter, and that in this regard certain actions shall be taken as described
in this Agreement;
WHEREAS, the Board of Trustees of MainStay, including MainStay's
Independent Trustees, on behalf of the Successor Fund, has determined that the
exchange of all of the assets of the Reorganizing Fund for Successor Fund Shares
and the assumption of all of the liabilities of the Reorganizing Fund by the
Successor Fund is in the best interests of the Successor Fund and its
<PAGE> 34
shareholders and that the interests of the existing shareholders of the
Successor Fund, if any, would not be diluted as a result of this transaction;
WHEREAS, the Board of Directors of the Reorganizing Fund, consisting
solely of the Reorganizing Fund's Independent Directors, has determined that the
exchange of all of the assets of the Reorganizing Fund for Successor Fund Shares
and the assumption of all of the liabilities of the Reorganizing Fund by the
Successor Fund is in the best interests of the Reorganizing Fund and its
shareholders and that the interests of the existing shareholders of the
Reorganizing Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the promises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ALL REORGANIZING FUND ASSETS TO THE SUCCESSOR FUND IN
EXCHANGE FOR THE SUCCESSOR FUND SHARES, THE ASSUMPTION OF ALL
REORGANIZING FUND LIABILITIES, AND THE TERMINATION OF THE REORGANIZING
FUND
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Reorganizing Fund
agrees to transfer all of its assets as set forth in paragraph 1.2 to the
Successor Fund, and MainStay on behalf of the Successor Fund agrees in exchange
therefor (a) to issue to the Reorganizing Fund Successor Fund Shares and (b) to
assume all of the liabilities of the Reorganizing Fund as set forth in paragraph
1.3. Such transactions shall take place at the closing provided for in paragraph
3.1 (the "Closing"). The number of Successor Fund Shares to be issued by
MainStay on behalf of the Successor Fund will be identical to the number of
Reorganizing Fund Shares outstanding on the Valuation Date provided for in
paragraph 2.1.
1.2 The assets of the Reorganizing Fund to be acquired by the Successor
Fund shall consist of all property, including, without limitation, all cash,
securities, commodities and futures interests, claims (whether absolute or
contingent, known or unknown, accrued or unaccrued) and dividends or interest
receivable which are owned by the Reorganizing Fund and any deferred expenses
shown as an asset on the books of the Reorganizing Fund (the "Reorganizing Fund
Assets") on the Valuation Date provided for in paragraph 2.1.
1.3 The Reorganizing Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Valuation Date provided for in
paragraph 2.1. The Successor Fund shall assume all liabilities, expenses, costs
and charges reflected on an unaudited statement of assets and liabilities of the
Reorganizing Fund, as of the Valuation Date prepared on its behalf by _______ ,
in accordance with generally accepted accounting principles applied from the
prior audited period. The Successor Fund shall assume only those liabilities of
the Reorganizing Fund reflected on that unaudited statement of assets and
liabilities and shall not assume any other liabilities.
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<PAGE> 35
1.4 Immediately after the transfer of assets provided for in paragraph
1.1, the Reorganizing Fund will distribute pro rata to the Reorganizing Fund's
shareholders of record, determined as of the close of business on the Valuation
Date (the "Reorganizing Fund Shareholders"), the Successor Fund Shares received
by the Reorganizing Fund pursuant to paragraph 1.1, and the Reorganizing Fund
will terminate in accordance with paragraph 1.7. Such distribution will be
accomplished by the transfer of the Successor Fund Shares then credited to the
account of the Reorganizing Fund on the books of the Successor Fund to open
accounts on the share records of the Successor Fund in the names of the
Reorganizing Fund Shareholders and representing the respective pro rata number
of the Successor Fund Shares due such shareholders.
1.5 Ownership of Successor Fund Shares will be shown on the books of the
Successor Fund's transfer agent. Shares of the Successor Fund will be issued in
the manner described in the Successor Fund's prospectus and statement of
additional information.
1.6 Reorganizing Fund Shareholders holding certificates representing
their ownership of Shares of the Reorganizing Fund shall surrender such
certificates or deliver an affidavit with respect to lost certificates, in such
form and accompanied by such surety bonds as the Reorganizing Fund may require
(collectively, an "Affidavit"), to the Reorganizing Fund prior to the Closing
Date. Any Reorganizing Fund Share certificate which remains outstanding on the
Closing Date shall be deemed to be canceled, shall no longer evidence ownership
of any Shares of the Reorganizing Fund and shall instead evidence ownership of
corresponding Successor Fund Shares. The Successor Fund will not issue share
certificates in the Reorganization.
1.7 The legal existence of the Reorganizing Fund shall be terminated as
promptly as reasonably practicable after the Closing Date.
2. VALUATION
2.1 The value of the Reorganizing Fund's assets to be acquired by the
Successor Fund hereunder shall be the value of such assets computed as of the
close of business on the New York Stock Exchange on June ______, 1999 (such time
and date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Reorganizing Fund's Articles of Incorporation and
prospectus or statement of additional information, subject to adjustment by the
amount, if any, agreed to by the Reorganizing and Successor Funds. Markston
Investment Management ("Markston") and MainStay Management, Inc. ("MainStay
Management") agree to use commercially reasonable efforts to resolve any
material pricing differences between the prices of portfolio securities
determined in accordance with their respective pricing policies and procedures.
2.2 The number of the Successor Fund Shares to be issued in exchange for
the Reorganizing Fund's assets shall equal the number of full and fractional
Reorganizing Fund Shares outstanding on the Valuation Date. The initial value of
each Successor Fund Share shall be equal to the value of each Reorganizing Fund
Share on the Valuation Date.
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<PAGE> 36
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be the next business date following the
Valuation Date, or such other date as the parties may agree to in writing. The
time of the Closing shall be no later than 8:00 a.m. New York time on the
Closing Date. All acts taking place at the Closing shall be deemed to take place
simultaneously as of 8:00 a.m. New York time. The Closing shall be held at the
offices of MainStay Management, or at such other place as the parties may agree.
3.2 The Bank of New York, as custodian for the Successor Fund (the
"Custodian"), shall deliver at the Closing a certificate of an authorized
officer stating that: (a) the Reorganizing Fund's portfolio securities, cash,
and any other assets have been delivered in proper form to the Successor Fund on
or prior to the Closing Date; and (b) all necessary taxes, including all
applicable federal and state stock transfer stamps, if any, have been paid, or
provision for payment has been made, in conjunction with the delivery of
portfolio securities. The Successor Fund may waive compliance with this
paragraph 3.2 if in its sole discretion it determines to do so.
3.3 In the event that on the Valuation Date (a) the New York Stock
Exchange or another primary trading market for portfolio securities of the
Reorganizing Fund shall be closed to trading or trading thereon shall be
restricted, or (b) trading or the reporting of trading on said Exchange or
elsewhere shall be disrupted so that, in the judgment of both the Reorganizing
Fund and the Successor Fund, accurate appraisal of the value of the net assets
of the Reorganizing Fund is impracticable, the Valuation Date shall be postponed
until the first business day when trading shall have been fully resumed and
reporting shall have been restored, and the Closing Date shall be the next
business day following the Valuation Date, as established pursuant hereto.
3.4 MainStay Management, on behalf of the Successor Fund, shall deliver
at the Closing a certificate of an authorized officer stating that MainStay
Management's records contain the names and addresses of the Reorganizing Fund
Shareholders and the number and percentage ownership of outstanding shares owned
by each such shareholder immediately prior to the Closing. The Successor Fund
shall issue and deliver a confirmation evidencing the Successor Fund Shares to
be credited on the Closing Date to the Secretary of the Reorganizing Fund or
provide evidence satisfactory to the Reorganizing Fund that such Successor Fund
Shares have been credited to the Reorganizing Fund's account on the books of the
Successor Fund. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Reorganizing Fund represents and warrants to the Successor Fund
as follows:
(a) The Reorganizing Fund is a corporation duly organized, validly
existing and in good standing under the laws of Delaware.
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<PAGE> 37
(b) The Reorganizing Fund is a registered open-end management investment
company, and its registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company Act of 1940
("1940 Act") is in full force and effect.
(c) The Reorganizing Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of the
Articles of Incorporation or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Reorganizing Fund is a party
or by which it is bound.
(d) The Reorganizing Fund has no material contracts or other material
commitments (other than this Agreement) which will be terminated with liability
to it prior to the Closing Date.
(e) Except as otherwise disclosed in writing to and accepted by the
Successor Fund, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge is threatened against the Reorganizing Fund or any of its properties
or assets which, if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business. The Reorganizing Fund
knows of no facts which might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(f) The Statements of Assets and Liabilities of the Reorganizing Fund at
December 31, 1998, 1997, 1996, 1995, and 1994 (copies of which have been
delivered by the Reorganizing Fund to the Successor Fund) have been audited by
PricewaterhouseCoopers LLP, or its predecessor, independent certified public
accountants, and are in accordance with generally accepted accounting standards
consistently applied, and such Statements fairly reflect the financial condition
of the Reorganizing Fund as of such dates, and there are no known contingent
liabilities of the Reorganizing Fund as of such dates not disclosed therein.
(g) Since December 31, 1998, there has not been any material adverse
change in the Reorganizing Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Reorganizing Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Successor Fund. For the purposes of this subparagraph (g), a
decline in net asset value per share of the Reorganizing Fund shall not
constitute a material adverse change.
(h) The Reorganizing Fund has valued, and will continue to value, its
portfolio securities and other assets in accordance with applicable legal
requirements.
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<PAGE> 38
(i) At the Closing Date, all federal, state and other tax returns and
reports of the Reorganizing Fund required by law then to be filed shall have
been filed, and all federal, state and other taxes shall have been paid so far
as due, or provision shall have been made for the payment thereof, and to the
best of the Reorganizing Fund's knowledge no such return is currently under
audit and no assessment has been asserted with respect to such returns.
(j) For each taxable year of its operation, the Reorganizing Fund has
qualified and elected to be treated as a regulated investment company under
Subchapter M of the Code, and has been eligible to and has computed its income
under Section 852 of the Code.
(k) All issued and outstanding shares of the Reorganizing Fund are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding shares of the Reorganizing
Fund will, at the time of Closing, be held by the persons and in the amounts set
forth in the records of State Street Bank & Trust Company, the transfer agent to
the Reorganizing Fund. The Reorganizing Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Reorganizing Fund shares (other than pursuant to the Reorganizing Fund's
dividend reinvestment plan), nor is there outstanding any security convertible
into any of the Reorganizing Fund shares.
(l) At the Closing Date, the Reorganizing Fund will have good and
marketable title to the Reorganizing Fund's assets to be transferred to the
Successor Fund pursuant to paragraph 1.2 and full right, power, and authority to
sell, assign, transfer and deliver such assets hereunder, and upon delivery and
payment for such assets, the Successor Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the Securities Act of 1933, as
amended (the "1933 Act"), other than as disclosed to the Successor Fund.
(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Reorganizing Fund's Directors, and, subject to such approval and the
approval of the Reorganizing Fund shareholders, this Agreement constitutes a
valid and binding obligation of the Reorganizing Fund, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The Reorganizing Fund has the power to own all of its properties and
assets and, subject to the approval of Reorganizing Fund shareholders, to carry
out and consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now being
conducted and to consummate the transactions contemplated by this Agreement.
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Reorganizing Fund
of the transaction
-6-
<PAGE> 39
contemplated by this Agreement, except such as may be required under the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940
Act, the rules and regulations under those Acts, or state securities laws, all
of which shall have been received prior to the Closing Date, except for such
consents, approvals, authorizations or orders as may be required subsequent to
the Closing Date.
(p) Insofar as the following relate to it, the registration statement
filed by MainStay on Form N-14 relating to the shares of the Successor Fund that
will be registered with the SEC pursuant to this Agreement, which shall include
or incorporate by reference, as applicable, the proxy statement and related
materials of the Reorganizing Fund and prospectus of the Successor Fund with
respect to the transactions contemplated by this Agreement, and any supplement
or amendment thereto or to the documents contained or incorporated therein by
reference (the "N-14 Registration Statement"), from its effective and clearance
dates with the Commission, through the time of the meeting of shareholders of
the Reorganizing Fund contemplated therein (the "Shareholders Meeting") and at
the Closing Date: (i) shall comply in all material respects with the provisions
of the 1933 Act, 1934 Act and the 1940 Act, the rules and regulations
thereunder, and applicable state securities laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading; provided, that the representations and warranties in this
subsection shall apply with respect to statements in or omissions from the N-14
Registration Statement regarding Markston, the Reorganizing Fund, and the
Reorganizing Fund's other service providers or statements made in reliance upon
and in conformity with information furnished by or on behalf of Markston or by
or on behalf of the Reorganizing Fund if furnished by its investment adviser,
custodian or transfer agent, acting in its capacity as such.
(q) The Reorganizing Fund shall not sell or otherwise dispose of any
Successor Fund Shares to be received in the transactions contemplated herein,
except in distribution to its shareholders as contemplated herein.
(r) The Reorganizing Fund shall provide a list of all portfolio
securities held by it, and their values, to the Successor Fund at least fifteen
days before the Closing Date and shall immediately notify the Successor Fund's
manager of any portfolio security thereafter acquired or sold by the
Reorganizing Fund. Upon notice by the Successor Fund, the Reorganizing Fund
shall immediately sell any portfolio security that the Successor Fund identifies
as impermissible under the investment objectives, policies and limitations of
the Reorganizing Fund.
4.2 MainStay, on behalf of the Successor Fund, represents and warrants to
the Reorganizing Fund as follows:
(a) MainStay is a business trust duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts.
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<PAGE> 40
(b) MainStay is a registered open-end management investment company and
its registration with the Commission as an investment company with respect to
each series of shares it offers, including those of the Successor Fund, under
the 1940 Act, is in full force and effect.
(c) The prospectus and statement of additional information of the
Successor Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading.
(d) The Successor Fund is not, and the execution, delivery and
performance of this Agreement will not result in a material violation of
MainStay's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Successor Fund or
MainStay is a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or threatened against
the Successor Fund or any of its properties or assets, except as previously
disclosed in writing to the Reorganizing Fund. The Successor Fund knows of no
facts which might form the basis for the institution of such proceedings and is
not a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(f) MainStay has filed a post-effective amendment (the "N-1A
Post-Effective Amendment") to its registration statement on Form N-1A with the
Commission so that the Successor Fund and its shares will be registered under
the 1933 Act and 1940 Act. In addition, MainStay shall file an N-14 Registration
Statement with the Commission relating to the matters described herein as
promptly as practicable and to use its best efforts to obtain the effectiveness
thereof.
(g) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Trustees of MainStay, and, subject to such approval, this Agreement
constitutes a valid and binding obligation of MainStay, on behalf of the
Successor Fund, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles.
(h) The Successor Fund has the power to own all of its properties and
assets and to consummate the transaction contemplated herein, and has all
necessary federal, state and local authorizations to carry on its business as
now being conducted and to consummate the transaction contemplated by this
Agreement.
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<PAGE> 41
(i) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Successor Fund of
the transactions contemplated by this Agreement, except such as may be required
under the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under
those Acts, or state securities laws, all of which shall have been received
prior to the Closing Date, except for such consents, approvals, authorizations
or orders as may be required subsequent to the Closing Date.
(j) The Successor Fund Shares to be issued and delivered to the
Reorganizing Fund, for the account of the Reorganizing Fund Shareholders,
pursuant to the terms of this Agreement will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly issued
shares of beneficial interest of the Successor Fund, and will be fully paid and
non-assessable by the Successor Fund (recognizing that, under Massachusetts law,
Successor Fund Shareholders could, under certain circumstances, be held
personally liable for the obligations of the Successor Fund).
(k) The N-14 Registration Statement, from its effective and clearance
dates with the Commission, through the time of the Shareholders Meeting and at
the Closing Date: (i) shall comply in all material respects with the provisions
of the 1933 Act, 1934 Act and the 1940 Act, the rules and regulations
thereunder, and applicable state securities laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading; provided, that the representations and warranties in this subsection
shall not apply with respect to statements in or omissions from the N-14
Registration Statement made in reliance upon and in conformity with information
furnished by or on behalf of the Reorganizing Fund if furnished by its
investment adviser, custodian or transfer agent, acting in its capacity as such.
(l) The Successor Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
applicable state securities laws in order to continue its operations after the
Closing Date.
5. COVENANTS OF THE REORGANIZING FUND
5.1 The Reorganizing Fund will operate its business in the ordinary
course between the date hereof and the Closing Date, it being understood that
such ordinary course of business will include the payment of customary dividends
and distributions, as well as such other distributions as may be deemed
advisable.
5.2 The Reorganizing Fund covenants that the Successor Fund Shares to be
issued hereunder to the Reorganizing Fund are not being acquired for the purpose
of making any distribution thereof other than in accordance with the terms of
this Agreement.
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<PAGE> 42
5.3 The Reorganizing Fund will assist the Successor Fund in obtaining
such information as the Successor Fund reasonably requests concerning the
beneficial ownership of the Reorganizing Fund Shares.
5.4 The Reorganizing Fund will provide MainStay with information
reasonably necessary for the preparation of the N-14 Registration Statement
included therein, in compliance with the 1933 Act, the 1934 Act and the 1940 Act
in connection with the Shareholders Meeting.
5.5 As promptly as practicable, but in any event within 60 days after the
Closing Date, MainStay shall have received, in such form as is reasonably
satisfactory to MainStay, a statement of the earnings and profits of the
Reorganizing Fund for federal income tax purposes, and of any capital loss
carryovers and other items that will be carried over to the Successor Fund as a
result of Section 381 of the Code. Such statement shall be certified by the
President or Treasurer of the Reorganizing Fund.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE REORGANIZING FUND
The obligations of the Reorganizing Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
MainStay of all the obligations to be performed by it hereunder on or before the
Closing Date, and, in addition thereto, the following further conditions:
6.1 All representations and warranties of MainStay on behalf of the
Successor Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date.
6.2 MainStay shall have delivered to the Reorganizing Fund on the Closing
Date a certificate executed in its name by its President or Vice President and
its Chief Financial Officer or his delegate, in a form reasonably satisfactory
to the Reorganizing Fund and dated as of the Closing Date, to the effect that
the representations and warranties of MainStay made in this Agreement are true
and correct at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as the
Reorganizing Fund shall reasonably request.
6.3 MainStay shall have performed and complied in all material respects
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
6.4 The Reorganizing Fund shall have received on the Closing Date the
opinion of Dechert Price & Rhoads, counsel to MainStay, dated as of the Closing
Date, covering the following points:
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<PAGE> 43
(a) MainStay is a business trust duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts and has the
power to own all of its properties and assets, including those of the Successor
Fund, and to carry on its business, including that of the Successor Fund, as
presently conducted and as anticipated to be conducted subsequent to the Closing
Date.
(b) The Agreement has been duly authorized, executed and delivered by
MainStay on behalf of the Successor Fund and, assuming that the N-14
Registration Statement complies with the 1933 Act, the 1934 Act and the 1940 Act
and the rules and regulations thereunder and, assuming due authorization,
execution and delivery of the Agreement by the Reorganizing Fund, is a valid and
binding obligation of MainStay on behalf of the Successor Fund enforceable
against MainStay in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles.
(c) The Successor Fund Shares to be issued to the Reorganizing Fund
Shareholders as provided by this Agreement are duly authorized, upon such
delivery will be validly issued and outstanding, and are fully paid and
non-assessable by the Successor Fund (recognizing that, under Massachusetts law,
shareholders of the Successor Fund could, under certain circumstances, be held
personally liable for the obligations of the Successor Fund), and no shareholder
of the Successor Fund has any preemptive rights to subscription or purchase in
respect thereof.
(d) The execution and delivery of the Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
material violation of MainStay's Declaration of Trust or By-Laws or any
provision of any agreement (known to such counsel) to which MainStay is a party
or by which it is bound or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition of any penalty under any
agreement, judgment, or decree to which MainStay is a party or by which it is
bound.
(e) No consent, approval, authorization or order of any court or
governmental authority of the United States or The Commonwealth of Massachusetts
is required for the consummation by the Successor Fund of the transactions
contemplated herein, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act, and such as may be required under state securities
laws.
(f) Only insofar as they relate to MainStay and the Successor Fund, the
descriptions in the N-14 Registration Statement of statutes, legal and
governmental proceedings and contracts and other documents, if any, are accurate
and fairly present the information required to be shown.
(g) Such counsel does not know of any legal or governmental proceedings,
only insofar as they relate to MainStay and the Successor Fund, existing on or
before the effective date of the N-14 Registration Statement or the Closing Date
required to be described in the N-14
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<PAGE> 44
Registration Statement or to be filed as exhibits to the N-14 Registration
Statement which are not described as required.
(h) MainStay is registered as an investment company with respect to each
series of shares it offers, including those of the Successor Fund, under the
1940 Act, and its registration with the Commission as an investment company
under the 1940 Act is in full force and effect.
(i) Shares of MainStay, including those of the Successor Fund, [are]
registered under the 1933 Act, and such registration is in full force and
effect.
(j) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to MainStay or the Successor Fund or any of
their respective properties or assets and neither MainStay nor the Successor
Fund is a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business other than as previously disclosed in the N-14 Registration Statement.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of MainStay at which the
contents of the N-14 Registration Statement and related matters were discussed,
and, although they are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the N-14
Registration Statement (except to the extent indicated in paragraph (f) of their
opinion), on the basis of the foregoing (relying as to materiality to a large
extent upon the opinions of officers and other representatives of MainStay), no
facts have come to their attention that lead them to believe that the N-14
Registration Statement as of its date, as of the date of the Shareholders
Meeting, and as of the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein regarding
MainStay or the Successor Fund or necessary to make the statements therein
regarding MainStay or the Successor Fund, in the light of the circumstances
under which they were made, not misleading. Such opinion may state that such
counsel does not express any opinion or belief as to the financial statements or
other financial data, or as to the information relating to the Reorganizing Fund
contained in the N-14 Registration Statement and that such opinion is solely for
the benefit of the Reorganizing Fund, its Directors and its officers. Such
opinion shall also include such other matters incident to the transactions
contemplated hereby as the Reorganizing Fund may reasonably request.
In this paragraph 6.4, references to the N-14 Registration Statement
include and relate only to the text of such N-14 Registration Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
Each of the foregoing conditions precedent may be waived by the
Reorganizing Fund.
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<PAGE> 45
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF MAINSTAY
The obligations of MainStay to complete the transactions provided for
herein shall be subject, at its election, to the performance by the Reorganizing
Fund of all of the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:
7.1 All representations and warranties of the Reorganizing Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date.
7.2 The Reorganizing Fund shall have delivered to MainStay a statement of
assets and liabilities of the Reorganizing Fund, together with a list of the
portfolio securities of the Reorganizing Fund showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Valuation Date, certified by the Treasurer or Assistant Treasurer of the
Reorganizing Fund as having been prepared in accordance with generally accepted
accounting standards consistently applied.
7.3 The Reorganizing Fund shall have duly executed and delivered to
MainStay such bills of sale, assignments, certificates and other instruments of
transfer ("Transfer Documents") as MainStay may deem necessary or desirable to
transfer all of the Reorganizing Fund's right, title and interest in and to the
Reorganizing Fund's assets. The Reorganizing Fund's assets shall be accompanied
by all necessary state stock transfer stamps or cash for the appropriate
purchase price therefor.
7.4 The Reorganizing Fund shall have delivered to MainStay on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
MainStay and dated as of the Closing Date, to the effect that the
representations and warranties of the Reorganizing Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as MainStay shall reasonably request.
7.5 The Reorganizing Fund shall have performed and complied in all
material respects with each of its agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
7.6 MainStay shall have received on the Closing Date the opinion of
Kirkpatrick & Lockhart LLP, counsel to the Reorganizing Fund, dated as of the
Closing Date, covering the following points:
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<PAGE> 46
(a) The Reorganizing Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the power to own all of its properties and assets and to carry on its business
as presently conducted.
(b) The Agreement has been duly authorized, executed and delivered by the
Reorganizing Fund and, assuming that the N-14 Registration Statement and the
Reorganization Proxy Materials comply with the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of the Agreement by MainStay, is a valid
and binding obligation of the Reorganizing Fund enforceable against the
Reorganizing Fund in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles.
(c) The execution and delivery of the Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
material violation of the Reorganizing Fund's Articles of Incorporation or
By-Laws or any provision of any agreement (known to such counsel) to which the
Reorganizing Fund is a party or by which it is bound or, to the knowledge of
such counsel, result in the acceleration of any obligation or the imposition of
any penalty under any agreement, judgment, or decree to which the Reorganizing
Fund is a party or by which it is bound.
(d) No consent, approval, authorization or order of any court or
governmental authority of the United States or the State of Delaware is required
for the consummation by the Reorganizing Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act and
the 1940 Act, and such as may be required under state securities laws.
(e) Only insofar as they relate to the Reorganizing Fund, the
descriptions in the N-14 Registration Statement of statutes, legal and
governmental proceedings and contracts and other documents, if any, are accurate
and fairly present the information required to be shown.
(f) Such counsel does not know of any legal or governmental proceedings,
only insofar as they relate to the Reorganizing Fund, existing on or before the
effective date of the N-14 Registration Statement or the Closing Date required
to be described in the N-14 Registration Statement or its exhibits which are not
described as required.
(g) The Reorganizing Fund is registered as an investment company under
the 1940 Act and its registration with the Commission as an investment company
under the 1940 Act is in full force and effect.
(h) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to the Reorganizing Fund or any of its
respective properties or assets and the Reorganizing Fund is
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<PAGE> 47
not a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business other than as previously disclosed in the Reorganization Proxy
Materials.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Reorganizing Fund at
which the contents of the N-14 Registration Statement and related matters were
discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the N-14 Registration Statement (except to the extent indicated in
paragraph (e) of their opinion), on the basis of the foregoing (relying as to
materiality to a large extent upon the opinions of officers and other
representatives of the Reorganizing Fund), no facts have come to their attention
that lead them to believe that the N-14 Registration Statement as of its date,
as of the date of the Shareholders Meeting, and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein regarding the Reorganizing Fund or necessary
to make the statements therein regarding the Reorganizing Fund, in light of the
circumstances under which they were made, not misleading. Such opinion may state
that such counsel does not express any opinion or belief as to the financial
statements or other financial data, or as to the information relating to
MainStay or the Successor Fund, contained in the N-14 Registration Statement and
that such opinion is solely for the benefit of the Successor Fund, MainStay, its
Trustees and its officers. Such opinion shall also include such other matters
incident to the transactions contemplated hereby as MainStay may reasonably
request.
In this paragraph 7.6, references to the N-14 Registration Statement
include and relate to only the text of such N-14 Registration Statement and not
to any exhibits or attachments thereto or to any document incorporated by
reference therein.
Each of the foregoing conditions precedent may be waived by MainStay.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF MAINSTAY AND THE
REORGANIZING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date, either party to this Agreement shall, at its option, not be
required to consummate the transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Reorganizing Fund in accordance with the provisions of the Reorganizing
Fund's Articles of Incorporation and By-Laws and certified copies of the
resolutions evidencing such approval shall have been delivered to MainStay.
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<PAGE> 48
8.2 On the Closing Date, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency which seeks to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities deemed necessary by
MainStay or the Reorganizing Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Successor Fund or the Reorganizing Fund.
8.4 The N-14 Registration Statement shall have become effective under the
1933 Act and no stop orders suspending such effectiveness shall have been
instituted or, to the knowledge of either party to the Agreement, contemplated
by the Commission and the parties shall have received any other authorizations
necessary under state securities laws to consummate the transaction contemplated
by this Agreement.
8.5 MainStay and the Reorganizing Fund shall have received the opinion of
Dechert Price & Rhoads addressed to MainStay on behalf of the Successor Fund and
to the Reorganizing Fund substantially to the effect that for federal income tax
purposes:
(a) The transfer by the Reorganizing Fund of all of its assets to the
Successor Fund in exchange for Successor Fund Shares and the assumption by the
Successor Fund of all of the Reorganizing Fund's liabilities, and the
distribution of the Successor Fund Shares to the Reorganizing Fund Shareholders,
as provided in this Agreement, will constitute a reorganization within the
meaning of Section 368(a)(1) of the Code, and Successor Fund and Reorganizing
Fund are each a "party to the reorganization" within the meaning of Section
368(b) of the Code.
(b) In accordance with Sections 361(a), 361(c)(1) and 357(a) of the Code,
no gain or loss will be recognized by the Reorganizing Fund as a result of such
transactions.
(c) In accordance with Section 1032(a) of the Code, no gain or loss will
be recognized by the Successor Fund as a result of such transactions.
(d) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by the shareholders of the Reorganizing Fund on the
distribution to them by the Reorganizing Fund of the Successor Fund Shares in
exchange for their shares of the Reorganizing Fund.
(e) In accordance with Section 358(a)(1) of the Code, the basis of the
Successor Fund Shares received by each shareholder of the Reorganizing Fund will
be the same as the basis of the shareholder's Reorganizing Fund shares
immediately prior to such transactions.
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<PAGE> 49
(f) In accordance with Section 362(b) of the Code, the basis of the
Reorganizing Fund Assets received by the Successor Fund will be the same as the
basis of such assets in the hands of the Reorganizing Fund immediately prior the
transactions.
(g) In accordance with Section 1223(1) of the Code, a shareholder's
holding period for the Successor Fund Shares will be determined by including the
period for which the shareholder held the shares of the Reorganizing Fund
exchanged therefor, provided that the shareholder held such shares of the
Reorganizing Fund as a capital asset.
(h) In accordance with Section 1223(2) of the Code, the holding period of
the Successor Fund with respect to the Reorganizing Fund Assets will include the
period for which such Assets were held by the Reorganizing Fund.
(i) In accordance with Section 381(a) of the Code, the Successor Fund
will succeed to the tax attributes of the Reorganizing Fund described in Section
381(c) of the Code.
8.6 No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain or
prohibit or obtain damages or other relief in connection with this Agreement or
the transactions contemplated herein.
8.7 The Commission shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the transactions contemplated by this Agreement under
Section 25(c) of the 1940 Act.
8.8 Either party, at its option, may waive compliance by the other party
with any condition contained in this Section 8, other than the conditions
contained in Sections 8.1 and 8.4.
9. BROKERAGE FEES AND EXPENSES
9.1 The Reorganizing Fund and MainStay on behalf of the Successor Fund
each represents and warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
9.2 Except as described in this Section 9.2, none of the fees or expenses
of counsel, accountants, agents, or representatives of MainStay incurred in
connection with the Reorganization shall be borne by the Reorganizing Fund, and
no such fees and expenses of the Reorganizing Fund shall be borne by MainStay.
The printing, postage, and solicitation expenses (including the fees and
expenses of a proxy solicitor) incurred in connection with the Reorganization
shall be borne by MainStay Management, Inc. MainStay Management, Inc. will
also bear SEC registration fees and "Blue Sky" expenses relating to the
Reorganization.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
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<PAGE> 50
10.1 MainStay and the Reorganizing Fund agree that neither party has made
any representation, warranty or covenant to the other not set forth herein and
that this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. FURTHER ASSURANCES
Subject to the terms and conditions herein provided, each of the parties
hereto shall use its best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement, including without limitation delivering and/or causing to be
delivered to the other party hereto each of the items required under this
Agreement as a condition to such party's obligations hereunder. In addition, the
Reorganizing Fund shall deliver or cause to be delivered to MainStay or its
designees each account, book, record or other document of the Reorganizing Fund
required to be maintained by Section 31(a) of the 1940 Act and Rules 31a-1 to
31a-3 thereunder (regardless of whose possession they are in).
12. TERMINATION
This Agreement may be terminated by a party at or, in the case of
Subsection 12(c) below, at any time prior to, the Closing Date by a vote of a
majority of its Board as provided below:
(a) By the Reorganizing Fund if the conditions set forth in Section 6
or 8 are not satisfied as specified in said Section;
(b) By MainStay on behalf of the Successor Fund if the conditions set
forth in Section 7 or 8 are not satisfied as specified in said
Section;
(c) By either MainStay on behalf of the Successor Fund or by the
Reorganizing Fund by notice to the other stating that the
terminating party's Board has determined, in the exercise of its
fiduciary duties under applicable state law and the 1940 Act, that
consummation of the Reorganization is no longer in the best
interests of the terminating party and its shareholders; and
(d) By mutual consent.
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<PAGE> 51
13. AMENDMENTS
This agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Reorganizing Fund and MainStay; provided, however, that following the
Shareholders Meeting, no such amendment may have the effect of changing the
provisions for determining the number of the Successor Fund Shares to be issued
to the Reorganizing Fund Shareholders under this Agreement to the detriment of
such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier, facsimile, or certified mail addressed
to The MainStay Funds, c/o MainStay Management, Inc., 300 Interpace Parkway,
Building A, Parsippany, NJ 07054, Attention: ________________ or to MAP-Equity
Fund, 520 Broad Street, Newark, New Jersey 07102-3111, Attention: Judith C.
Keilp with a copy to Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036, Attention: Richard M. Phillips.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY; ACKNOWLEDGEMENTS
15.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts.
15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
15.5 It is expressly agreed that the obligations of MainStay hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of MainStay personally, but bind only the trust property of
the Successor Fund, as provided in the Declaration of Trust of MainStay. The
execution and delivery by such officers shall not be deemed to have been made by
any of them individually or to impose any liability on any of them
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<PAGE> 52
personally, but shall bind only the trust property of the Successor Fund as
provided in the Declaration of Trust of MainStay.
15.6 The parties acknowledge that the Successor Fund's manager, MainStay
Management, Inc., has agreed with the Successor Fund that for the two-year
period following the commencement of the Successor Fund's operations, the total
operating expenses (excluding taxes, interest, brokerage commissions and any
extraordinary expenses) of Class I Shares of the Successor Fund will be limited
to not more than 1.00% per annum of the average daily net assets attributable to
Class I Shares of the Successor Fund. MainStay Management, Inc. has agreed to
waive its management fee or reimburse expenses (excluding taxes, interest,
brokerage commissions and any extraordinary expenses) of Class I shares of the
Successor Fund to the extent required to do so to satisfy this expense
limitation provision.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its President or Vice President.
The MainStay Funds
on behalf of the
MainStay Equity Fund
By:
-------------------------------
Title:
----------------------------
MAP-Equity Fund
By:
-------------------------------
Title:
----------------------------
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<PAGE> 53
MainStay MAP Equity Fund Prospectus , 1999
Class I shares
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The MainStay MAP Equity Fund is a series of The MainStay Funds. MainStay offers
22 mutual funds in addition to the MAP Equity Fund.
<PAGE> 54
What's Inside?
MAP Equity Fund............................................................... 3
Account Policies: Buying, Selling and Exchanging Shares....................... 5
Decide How to Receive Your Earnings...........................................11
Understand the Tax Consequences...............................................12
Know With Whom You're Investing...............................................13
Financial Highlights..........................................................14
2
<PAGE> 55
MAP EQUITY FUND
INVESTMENT OBJECTIVE -- The MAP Equity Fund's investment objective is to seek
long-term appreciation of capital. The Fund also seeks to earn income, but this
is a secondary objective.
PRINCIPAL INVESTMENT STRATEGIES -- The Fund normally invests at least 65% of its
total assets in equity-type securities, including common stocks, as well as
securities convertible into, or exchangeable for, common stocks. The Fund
primarily invests in the securities of domestic issuers.
In pursuing the Fund's investment objective, the Sub-Adviser seeks to identify
securities that are out of favor but where a catalyst exists for turning such
securities into investments that the Sub-Adviser believes will have improved
performance [i.e., value opportunities]. Factors examined by the Sub-Adviser to
indicate value include: statistical indications, such as low multiples of book
value or cash flow, and more fundamental factors, such as industry
consolidations. The Sub-Adviser also places emphasis on the presence of a
catalyst that may unlock a company's potential, such as management changes,
restructurings and sales of underperforming assets. In selecting securities for
investment, the Sub-Adviser also assesses the judgment, quality and integrity of
company management and the track record of product development.
Although under normal circumstances the Fund intends to hold its securities for
a relatively long period of time, the Sub-Adviser may sell investments when it
believes the opportunity for current profits or the risk of market decline
outweighs the prospect of capital gains. Certain securities may be acquired from
time to time in an effort to earn short-term profits.
RISKS -- The NET ASSET VALUE of the Fund will fluctuate and you could lose money
by investing in the Fund. Investment in common stocks and securities convertible
into common stocks is particularly subject to the risk of changing economic,
stock market, industry and company conditions, which can adversely affect the
value of the Fund's holdings. An investment in the Fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
TEMPORARY DEFENSIVE INVESTMENTS -- In times of unusual or adverse market,
economic or political conditions, or during periods when the Sub-Adviser
believes that investment opportunities in the equity markets are diminished (due
to either fundamental changes in those markets or an anticipated general decline
in the value of equity securities), for temporary defensive purposes, the Fund
may invest in cash, preferred stock, [money market investments or other debt or
debt-related instruments.]
3
<PAGE> 56
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Fund by
showing changes in its performance over a ten year period and by showing how the
Fund's average annual returns for one, five and ten years compare to those of a
broad-based securities market index. The Fund commenced operations in 1970 as
the Mutual Benefit Fund. It was renamed MAP-Equity Fund on May 1, 1995. Pursuant
to an Agreement and Plan of Reorganization dated , 1999, the MAP-Equity
Fund is to be reorganized as the MainStay MAP Equity Fund on or about June ,
1999. The shares of the MAP-Equity Fund are being designated as Class I shares
of the Fund. The performance figures shown reflect the performance of the
MAP-Equity Fund (the Fund's Class I shares) for the periods ended December 31,
1998. As with all mutual funds, past performance is not necessarily an
indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------
BAR CHART
- ------------------------------------------------------------
MAP EQUITY FUND (CLASS I) QUARTER/YEAR RETURN
- ------------------------------------------------------------
Highest Return/Best Quarter
- ------------------------------------------------------------
Lowest Return/Worst Quarter
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
<S> <C> <C> <C>
- ------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
- ------------------------------------------------------------
MAP Equity Fund
Class I
- ------------------------------------------------------------
S&P 500*
- ------------------------------------------------------------
</TABLE>
* The Standard & Poor's Composite Stock Price Index (the "S&P 500") is an
unmanaged index which generally is representative of the U.S. stock market.
EXPENSES
The table below describes the fees and expenses that you may pay if you buy and
hold Class I shares of the Fund. The "Example" is intended to help you compare
the cost of investing in the Fund with the cost of investing in other mutual
funds. The Example assumes that you invest $10,000 in the Fund for the time
periods indicated. The Example also assumes that your investment has a 5% return
each year and that the Fund operating expenses remain the same. The Example does
not reflect sales charges (loads) on reinvested dividends. There is no sales
charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
Sales Charges and Operating Expenses Examples
- --------------------------------------------------------------------------------------------------------------
MAP EQUITY FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR EXPENSES
INVESTMENT) AFTER
-----------
MAXIMUM SALES CHARGE (LOAD)
IMPOSED ON PURCHASES OF
SHARES (as a percentage of
offering price) None 1 year $
3 years $
5 years $
10 years $
Maximum Deferred Sales Charge
(Load) (as a percentage of
redemption proceeds) None
Exchange Fee *
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees 0.75%
Distribution and/or Service
(12b-1) Fees None
Other Expenses %
---
Total Fund Operating Expenses %
===
Fee Waiver %
-
Net Expenses(1) 1.00%
</TABLE>
* Except as to certain accounts for which tracking data is not available, after
five exchanges per calendar year, a $10 fee will be imposed.
1. Pursuant to an Expense Limitation Agreement, the Manager has agreed to assume
the Fund's Class I expenses to the extent Class I total operating expenses
exceed 1.00% on an annual basis. The Manager has agreed to assume such
expenses until May 30, 2001, after which time the Manager may discontinue
assuming such expenses.
4
<PAGE> 57
Account Policies: Buying, Selling and Exchanging Shares
General Instructions: Buying and Selling Shares
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
IN WRITING
Complete your application and Send additional investments directly to: Write a letter of instruction that
send it and your check to your includes:
investment professional. The MainStay Funds
P.O. Box 8401 - your name(s) and signature(s)
Class I shares are only Boston, MA 02266-8401 - your account number
available to shareholders who - fund name and class of shares
held shares of the Fund on the Include your fund, account number and - dollar amount you want to sell
date it was reorganized, which class of shares with your check.
is expected to be on or about Obtain a signature guarantee or other
June , 1999, and institutions documentation, if required.
that [insert qualifying
factors]. Mail your request to:
The MainStay Funds
P.O. Box 8401
Boston, MA 02266-8401
You must ask to sell your shares in
writing and have your signature
guaranteed for:
- amounts of $100,000 or more
- accounts which have had a change of
address within 30 days
- redemptions sent to an address other
than the address of record
A signature guarantee helps protect
against fraud. You can obtain one from
most banks and securities dealers, but
not from a notary public. For joint
accounts, each signature must be
guaranteed. Please call MSS to ensure
that your signature guarantee will be
processed correctly.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 58
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY TELEPHONE
If your purchase is at least WIRE Call us to request your transaction
$5,000, have your investment and determine whether proceeds will be
professional call in your Have your investment professional call sent by wire or by check.
order. Your application and in your order and wire your investment
payment must be received in to: GETTING YOUR MONEY BY WIRE TRANSFER
good order within 3 business
days. State Street Bank and Trust Company with Be sure MainStay has your bank account
these instructions: information on file. Proceeds will be
- ABA# 011 0000 28 wired to your bank.
- Attn: Custody and Shareholder Services
- the Fund name and class of shares - Minimum amount: $5,000
- your account number - Limit: One every 30 days
- name(s) of investor(s) - Authorization: You must select this
option on your application initially
To buy shares the same day, your or request it in writing at a later
investment professional must call by date.
noon and the wire must be received by
4:00 pm. After receiving your sell order by
phone, we will send the proceeds by
Your investment must be at least $5,000. bank wire to your designated bank
account the next business day. Your
bank may charge you a fee to receive
the wire transfer.
GETTING YOUR MONEY BY CHECK
A check will be sent to the address of
record.
- Maximum amount: $100,000
The check will be payable to the name
(or names) on the account and mailed
to the address on the account. (See
the SAI for more details.)
LIMITS ON TELEPHONE REDEMPTIONS
Telephone redemptions are not
permitted for shares:
- represented by certificates
- bought within the previous 10
calendar days, or
- owned by someone whose address of
record has changed within the
previous 30 days
- equaling an amount of $100,000 or
more
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 59
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTOMATICALLY
Not Applicable. AUTOINVEST SYSTEMATIC WITHDRAWAL PLAN
Investors who are authorized for To make regular redemptions, choose
AutoInvest can call MSS toll free at the plan when you open your account or
1-800-MAINSTAY to make scheduled call MSS to request a form to add the
systematic investments from a designated plan. Complete the form, specifying
bank account or to buy shares by using the amount and frequency of
electronic debits from a designated bank withdrawals you would like.
account. Withdrawals must be at least $100.
PAYROLL DEDUCTION Requires at least $10,000 in the
For making automatic investments through account at the time of request and
a payroll deduction. shares must not be in certificate
DIVIDEND REINVESTMENT form.
For automatically reinvesting dividends SYSTEMATIC EXCHANGES
and distributions in the Fund or another For regular, systematic exchanges from
MainStay Fund. one MainStay Fund to another.
TELEPHONE EXCHANGES
For telephone exchanges from one
MainStay Fund to another.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 60
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
NAV
You buy shares at net asset You may sell shares by calling or
value ("NAV"). NAV is generally writing MSS or your investment
calculated as of the close of professional. MSS must receive your
trading on the New York Stock order with all the information,
Exchange (usually 4:00 pm signatures and documentation necessary
Eastern time) everyday the to sell your shares. If you have share
Exchange is open. When you buy certificates, you must return them
shares, you must pay the next with your redemption request.
NAV calculated after MainStay
Shareholder Services, Inc. the Your shares will be sold at the next
Funds' transfer agent ("MSS") NAV calculated after MSS accepts your
accepts your order. This means order. MainStay will make the payment,
all the necessary information, minus any deferred sales charge,
signatures and documentation within 7 days after receiving your
has been received. request in good order.
VALUING SECURITIES
The Fund's investments are
valued based on current market
value. Events affecting the
values of portfolio securities
which occur between the time
their prices are determined and
the close of the Exchange
generally will not be reflected
in the Fund's calculation of
NAV. However, the Sub-Adviser,
in consultation with the
Manager, may, in their
judgment, determine that an
adjustment to NAV should be
made because intervening events
have caused the Fund's NAV to
be materially inaccurate.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 61
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER
MINIMUM INVESTMENTS* If you buy shares by check and quickly There will be no redemption during any
decide to sell them, the Fund may period in which the right of
Initial $500 withhold payment for up to 10 days to redemption is suspended or date of
Subsequent $50 allow the check to clear. payment is postponed because the New
Class I purchases by York Stock Exchange is closed or
institutions $ Minimum investment for subsequent trading on the Exchange is restricted
purchases: $50 or the SEC deems an emergency to
*The minimum initial investment Class I purchases by institutions $ exist.
amount is waived for purchase
by the Trustees, New York Life REDEMPTIONS-IN-KIND
and its subsidiaries and their
employees, officers, directors The Fund reserves the right to pay
or agents. certain redemptions, either totally or
partially, by a distribution in kind
All investments must be in U.S. of securities (instead of cash) from
dollars and drawn on a U.S. the Fund's portfolio. See the SAI for
bank. Except under certain details.
circumstances, third-party
checks cannot be accepted. If CONVENIENT, YES . . . BUT NOT RISK-
your check doesn't clear, your FREE
order will be canceled and you
could be liable for losses or Telephone redemption privileges are
fees. We also reserve the right convenient, but you give up some
to limit the number of checks security. When you sign the
processed at one time. application to buy shares, you agree
Telephone purchase orders must that neither the MainStay Funds nor
be at least $5,000 per Fund. MSS will be liable for following phone
Wires are not accepted when the instructions that they reasonably
New York Stock Exchange or believe are genuine. When using the
banks are closed. MainStay Audio Response System, you
bear the risk of any loss from your
The Fund has the right to close errors unless the Fund or MSS fail to
your account if it gets too use established safeguards for your
small. If there is less than protection. These safeguards are among
$250 in your account, the Fund those currently in place at
may ask you to increase your MainStay Funds:
balance. We will give you 60
days' written notice so you can - all phone calls are tape recorded;
add to your account and avoid and
the redemption. - written confirmation of every
transaction is sent to your address
of record.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 62
SHAREHOLDER SERVICES
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-MAINSTAY.
EXCHANGE PRIVILEGES
Once you open an account, Class I shareholders of the Fund who were shareholders
of the MAP-Equity Fund on the date of the reorganization may exchange Class I
shares into Class A shares of another MainStay Fund without the imposition of a
sales charge. Currently, the other MainStay Funds do not offer Class I shares.
Prior to making exchanges, Class I shareholders should note that a 12b-1 fee is
imposed on Class A shares. Once you exchange your Class I shares for Class A
shares of another Fund, you may not exchange those shares back into Class I
shares.
When you redeem exchanged shares you will have to pay any applicable sales
charge. For information about CDSC waivers, see the SAI.
IN GENERAL
Selling and exchanging shares may result in a gain or loss and therefore may be
subject to taxation. Consult your tax adviser on the consequences.
MainStay may revise or terminate the systematic withdrawal plan and the exchange
privileges upon written notice. In addition, upon notice, a $5 fee per
redemption may be charged. Five free telephone exchanges per account are
permitted in each calendar year. After that, except as to certain accounts for
which tracking data is not available, a $10 fee will be charged for each
exchange and additional requests may be denied.
GENERAL POLICIES--PURCHASING, SELLING AND EXCHANGING SHARES
Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as MSS takes reasonable
measures to verify the order.
The MainStay Funds reserves the right to:
- - refuse any purchase or exchange request that could adversely affect a Fund or
its operations including those from any individual or group who, in the Fund's
view, is likely to engage in excessive trading
- - change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
- - change minimum investment amounts
If you invest through a third party (rather than directly with MainStay), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Fund may be purchased for retirement plans providing tax-deferred
investments for individuals and institutions. Shares purchased may be used as
investments for established plans or the Distributor may provide plan documents
for selected plans. A plan document must be adopted in order for a plan to be in
existence.
Custodial services are provided for IRA/ROTH IRA/ SEP/SARSEP, SIMPLE IRA and
Education IRA plans, and for 403(b)(7) Custodial Accounts. Plan administration
is also available for select qualified retirement plans.
Contributions made to such plans to the extent provided in federal income tax
law currently in effect, and earnings thereon, will not be taxable to the plan
participant until distribution. An investor should consult with his or her tax
adviser before establishing any tax-deferred retirement plan.
10
<PAGE> 63
Decide How to Receive Your Earnings
TWO KINDS OF EARNINGS
DIVIDENDS AND INTEREST
Most Funds earn either dividends from stocks, interest from bonds and other
securities, or both. A mutual fund, however, always pays this income to you as
"dividends." The dividends paid by the Fund will vary based on the income from
its investments and the expenses incurred by the Fund.
WHEN THE FUND PAYS
The Fund declares and distributes any dividends [semi-annually]. Dividends are
paid on the first business day of each month after a dividend is declared.
CAPITAL GAINS
Funds earn capital gains when they sell securities at a profit.
WHEN THE FUND PAYS
At the end of each fiscal year, the Fund matches its gains against its losses.
If the balance results in a gain, the Fund will distribute the gain to
shareholders.
HOW TO TAKE YOUR EARNINGS
You may choose how to receive earnings (and change your choice as often as you
like) by notifying your investment professional (if permitted by the broker-
dealer) or MainStay directly. If you don't make a choice on your application,
your earnings will be automatically reinvested in the same class of shares of
the Fund. In order to reinvest dividends and/or capital gains in another Fund,
you must have an established account in that class of shares of that Fund. You
don't pay a sales charge on shares bought through the automatic
reinvestment of dividends or capital gains. Here are your choices:
REINVEST EVERYTHING IN:
- - the Fund; or
- - in another Fund of your choice.
TAKE THE DIVIDENDS IN CASH
Reinvest the capital gains in:
- - the Fund; or
- - in another Fund of your choice.
TAKE THE CAPITAL GAINS IN CASH
Reinvest the dividends in:
- - the Fund; or
- - in another Fund of your choice.
TAKE A PERCENTAGE OF THE DIVIDENDS OR CAPITAL GAINS IN CASH AND REINVEST THE
REMAINDER IN:
- - the Fund.
TAKE EVERYTHING IN CASH
11
<PAGE> 64
Understand the Tax Consequences
MOST OF YOUR DIVIDENDS ARE TAXABLE
Virtually all of the dividends you receive from the Fund are taxable, whether
you take them as cash or automatically reinvest them. Some dividends will be
taxable as long-term capital gains.
MainStay keeps track of your tax status and will mail your tax report each year
by January 31. This report will tell you which dividends and redemptions should
be treated as taxable ordinary income, which, if any, as tax-exempt income, and
which, if any, as long- and short-term capital gains.
RETIREMENT PLANS
None of the dividends earned in a tax-deferred retirement plan are taxable until
distributed from the plan.
EXCHANGES
An exchange of shares of one fund for shares of another will be treated as a
sale of shares of the first fund and a purchase of shares of the second fund.
Any gain on the transaction may be subject to federal income tax.
- -------------------------------------------------------------------------------
You should be aware that if you buy shares shortly before a dividend payment,
a part of your investment will be returned in the form of a dividend which may
be taxable income for you.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- - SEEK ASSISTANCE
Your investment professional is always available to help you keep your
investment goals coordinated with your tax considerations. You should,
however, rely on your tax adviser for tax counsel.
For additional information on taxation, see the SAI.
DON'T OVERLOOK SALES CHARGES
The amount you pay in sales charges reduces gains and increases losses for tax
purposes.
- -------------------------------------------------------------------------------
12
<PAGE> 65
Know With Whom You're Investing
WHO RUNS THE FUND'S DAY-TO-DAY BUSINESS?
MainStay Management, Inc., 300 Interpace Parkway, Building A, Parsippany, NJ
07054, serves as the Fund's manager, handling business affairs for the Fund.
MainStay Management, Inc. is a corporation organized under the laws of Delaware
and is an indirect, wholly-owned subsidiary of New York Life Insurance Company.
The Manager provides offices and conducts clerical, recordkeeping and
bookkeeping services, and keeps most of the financial and accounting records
required for the Fund. The Manager has delegated its portfolio management
responsibilities to the Sub-Adviser.
The Manager pays the salaries and expenses of all personnel affiliated with the
Fund, and all the operational expenses that aren't the responsibility of the
Fund, including the fee paid to the Sub-Adviser.
The Trust, on behalf of the Fund, pays the Manager an aggregate fee for services
performed at an annual rate of 0.75% of the average daily net assets of that
Fund.
The Fund, pursuant to an Accounting Agreement with the Manager, will bear an
allocable portion of the Manager's cost of performing certain bookkeeping and
pricing services. The Fund pays the Manager a monthly fee for services provided
under the Accounting Agreement at the annual rate of 1/20 of 1% for the first
$20 million of average monthly net assets, 1/30 of 1% of the next $80 million of
average monthly net assets and 1/100 of 1% of any amount in excess of $100
million of average monthly net assets.
The Manager is not responsible for records maintained by the Fund's Custodian,
Transfer Agent, Dividend Disbursing and Shareholder Servicing Agent, or Sub-
Adviser.
WHO MANAGES YOUR MONEY?
Markston International, LLC ("Markston"), 1 North Lexington Avenue, White
Plains, New York 10601, is the Fund's Sub-Adviser. Under the supervision of the
Manager, the Sub-Adviser is responsible for making the specific decisions about
buying, selling and holding securities; selecting brokers and brokerage firms to
trade for them; maintaining accurate records; and, if possible, negotiating
favorable commissions and fees with the brokers and brokerage firms. For these
services, the Sub-Adviser is paid a monthly fee by the Manager, not the Fund.
The Fund's Trustees oversee the management and operations of the Fund.
Investment decisions for the Fund are made by Michael Mullarkey and Roger Lob.
Michael Mullarkey has been a portfolio manager for the Fund since 1981, and
Roger Lob has been a portfolio manager since 1987. Michael Mullarkey currently
is the Fund's primary portfolio manager. Fund assets are divided between the
managers within certain parameters. Markston reviews this asset allocation by
manager periodically, and may adjust this allocation based on investment
performance and new investment opportunities identified by each manager. This
dual-manager investment structure achieves the Fund's objective of prudent
diversification while allowing each manager to focus his research on a limited
number of companies.
YEAR 2000
Services provided to the Fund by the Manager, the Sub-Adviser and the Fund's
other service providers could be disrupted if the service providers' computer
systems cannot properly distinguish between the Year 2000 and the Year 1900. The
Fund is taking steps to ensure that the Year 2000 problem is being addressed by
each of its service providers. The Fund does not anticipate any material adverse
impact as a result of Year 2000 problem but there can be no assurances.
13
<PAGE> 66
Financial Highlights
The financial highlights table is intended to help you understand the MAP-Equity
Fund's financial performance for the past 5 years. Certain information reflects
financial results for a single MAP-Equity Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the MAP-Equity Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the MAP-Equity Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.......................... $ 22.73 $ 20.66 $ 19.36 $ 16.67 $ 18.13
------- ------- ------- ------- -------
Net investment income....................................... 0.33 0.28 0.36 0.43 0.37
Net realized and unrealized gain (loss) on investments...... 4.81 5.49 4.16 4.90 0.13
------- ------- ------- ------- -------
Net increase (decrease) in net assets from operations....... 5.14 5.77 4.52 5.33 0.50
------- ------- ------- ------- -------
Dividends from net investment income........................ (0.33) (0.29) (0.36) (0.43) (0.37)
Distributions from net realized gain from security
transactions.............................................. (2.96) (3.41) (2.86) (2.07) (1.59)
Distribution in excess of net investments income (see Note
A)........................................................ -- -- -- (0.14) --
------- ------- ------- ------- -------
Total distributions......................................... (3.29) (3.70) (3.22) (2.64) (1.96)
------- ------- ------- ------- -------
Net Asset Value, End of Year................................ $ 24.58 $ 22.73 $ 20.66 $ 19.36 $ 16.67
======= ======= ======= ======= =======
Total Return(2)............................................. 24.23% 27.99% 23.82% 32.50% 2.76%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net Assets, End of Year (thousands)......................... $60,414 $94,172 $73,591 $60,467 $48,130
======= ======= ======= ======= =======
Ratio of Expenses to Average Net Assets..................... 0.70% 0.82% 0.74% 0.81% 1.07%
======= ======= ======= ======= =======
Ratio of Net Investment Income to Average Net Assets........ 1.10% 1.18% 1.82% 2.30% 2.03%
======= ======= ======= ======= =======
Portfolio Turnover Rate..................................... 40.57% 57.57% 52.88% 39.40% 39.31%
======= ======= ======= ======= =======
</TABLE>
- --------
(1) The performance information provided is for the Fund's Class
I shares. The Fund commenced operations in 1970 as the
Mutual Benefit Fund. It was renamed MAP-Equity Fund on May
1, 1995. Pursuant to an Agreement and Plan of Reorganization
dated , 1999, the MAP-Equity Fund is to be reorganized
as the MainStay MAP Equity Fund on or about June , 1999.
The shares of the MAP-Equity Fund are being designated as
Class I shares of the Fund. Class A, Class B and Class C
shares of the Fund were first offered on , 1999.
(2) Total return does not reflect the sales commission (maximum
4.75%) charged on Fund shares.
14
<PAGE> 67
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IN THE RELATED STATEMENT OF ADDITIONAL INFORMATION, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND OR THE DISTRIBUTOR. THIS PROSPECTUS AND THE RELATED STATEMENT OF
ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE
DISTRIBUTOR TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER IN SUCH JURISDICTION.
[MAINSTAY FUNDS LOGO]
NYLIFE DISTRIBUTORS INC.
300 Interpace Parkway
Building A
Parsippany, New Jersey 07054
Distributor of The MainStay Funds
NYLIFE Distributors Inc. is an indirect wholly owned
subsidiary of New York Life Insurance Company.
[NYLIFE LOGO]
[RECYCLE LOGO]
MORE INFORMATION ABOUT THE FUND IS AVAILABLE FREE UPON REQUEST:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Provides more details about the Fund. A current SAI is incorporated by reference
into the prospectus and has been filed with the SEC.
ANNUAL/SEMIANNUAL REPORTS
Provide additional information about the Fund's investments and include
discussions of market conditions and investment strategies that significantly
affected the Fund's performance during the last fiscal year.
TO OBTAIN INFORMATION:
Write to NYLIFE Distributors Inc., 300 Interpace Parkway, Building A,
Parsippany, N.J. 07054, call 1-800-MAINSTAY (1-800-624-6782) or visit our
website at mainstayfunds.com.
You can obtain information about the Fund (including the SAI) by visiting the
SEC's Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330). You may
visit the SEC's website at sec.gov or you may send your written request and a
duplicating fee to the SEC's Public Reference Section, Washington, D.C.
20549-6009.
THE MAINSTAY FUNDS
SEC File Number: 811-4550
[This prospectus is also available in Spanish. For a copy, please call
1-800-MAINSTAY (1-800-624-6782), option 3.]
<PAGE> 68
THE FULL MAINSTAY LINE-UP INCLUDES:
AGGRESSIVE GROWTH
Small Cap Growth Fund
Small Cap Value Fund
GROWTH
Blue Chip Growth Fund
Capital Appreciation Fund
Equity Index Fund
Equity Fund
International Equity Fund
GROWTH AND INCOME
Convertible Fund*
Equity Income Fund
Growth Opportunities Fund
Research Value Fund
Strategic Value Fund
Total Return Fund
Value Fund
INCOME
Global High Yield Fund
Government Fund
High Yield Corporate Bond Fund
International Bond Fund
Money Market Fund
Strategic Income Fund
TAX-FREE INCOME
California Tax Free Fund
New York Tax Free Fund
Tax Free Bond Fund
* As of 6/2/97, the MainStay Convertible Fund was closed to new investors.
TO LEARN MORE ABOUT OTHER MAINSTAY FUNDS, PLEASE CONTACT YOUR INVESTMENT
PROFESSIONAL FOR A
PROSPECTUS CONTAINING MORE COMPLETE INFORMATION INCLUDING ADVISORY FEES, OTHER
EXPENSES, AND SHARE CLASSES.
PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
THIS COVER IS NOT PART OF THE PROSPECTUS.
[MAINSTAY FUNDS LOGO] MSPR12-09/98
<PAGE> 69
STATEMENT OF ADDITIONAL INFORMATION
Relating to the acquisition of the assets of
MAP-EQUITY FUND
520 Broad Street
Newark, New Jersey 07102-3111
by and in exchange for shares of
MAINSTAY MAP EQUITY FUND
a series of
THE MAINSTAY FUNDS
51 Madison Avenue
New York NY 10010
Telephone: (212) 576-5773
This Statement of Additional Information, relating specifically to
the proposed acquisition of all of the assets of MAP-Equity Fund (the "Acquired
Fund") by MainStay MAP Equity Fund (the "Acquiring Fund"), a series of The
MainStay Funds, in exchange for shares of the Acquiring Fund, consists of this
cover page and the following described documents, each of which is incorporated
by reference herein:
(1) The Statement of Additional Information of the Acquired Fund
dated May 1, 1998, previously filed on EDGAR, Accession Number
0001047469-98-016890;
(2) The Statement of Additional Information of the Acquiring Fund
dated May 1, 1999 previously filed on EDGAR, Accession Number
_____________; and
(3) The Annual Report of the Acquired Fund for the year
ended December 31, 1998 previously filed on EDGAR, Accession Number
0001047469-99-007871.
This Statement of Additional Information is not a prospectus. A
Proxy Statement/Prospectus dated _____, 1999 relating to the above-referenced
matter may be obtained from The MainStay Funds at the number and address listed
above. This Statement of Additional Information relates to, and should be read
in conjunction with, such Proxy Statement/Prospectus.
The date of this Statement of Additional Information is _________,
1999.
<PAGE> 70
PART C
OTHER INFORMATION
ITEM 25. INDEMNIFICATION
New York Life Insurance Company maintains Directors & Officers Liability
insurance coverage totaling $100 million. The coverage limit applies each year
and has been extended to cover Directors, Trustees and Officers of the Trust,
and subsidiaries and certain affiliates of New York Life. Subject to the
policies' terms, conditions, deductible and retentions, Directors, Officers and
Trustees are covered for claims, including related expenses, made against them
while acting in their capacities as such. The primary policy in the amount of
$25 million is issued by National Union Fire Insurance Company of Pittsburgh,
PA, and the excess policies in the amount at $75 million are issued by various
insurance companies. The issuing insurance companies may be changed from time
to time and there is no assurance that any or all of the current coverage will
be maintained by New York Life.
Article IV of Registrant's Declaration of Trust states as follows:
Section 4.3. Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph (b)
below:
(i) every person who is, or has been, a Trustee or officer of the
Trust shall be indemnified by the Trust, or by one or more Series thereof
if the claim arises from his or her conduct with respect to only such
Series to the fullest extent permitted by law against all liability and
against all expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal, or
other, including appeals), actual or threatened; and the words "liability"
and "expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or a Series thereof or the
Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
<PAGE> 71
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust or a Series
thereof;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or (b)(ii)
resulting in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(A) by the court or other body approving the settlement or
other disposition; or
(B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote of a
majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested
Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceedings of the character described in paragraph (a) of
this Section 4.3 shall be advanced by the Trust or a Series thereof to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient, to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by surety bond or some other
appropriate security provided by the recipient, or the Trust or a Series
thereof shall be insured against losses arising out of any such advances;
or
(ii) a majority of the Non-interested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees acts on the
matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who is not
(i) an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action,
- 3 -
<PAGE> 72
suit or proceeding.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS
(1) - (a) Amended and Restated Declaration of Trust dated August
30, 1991 -- Incorporated by reference from
Post-Effective Amendment No. 13 to the Registrant's
Registration Statement*
(b) Fifth Amended and Restated Establishment and Designation
of Series of Shares of Beneficial Interest, Par Value
$.01 Per Share dated October 26, 1992 -- Incorporated by
reference from Post-Effective Amendment No. 16 to the
Registrant's Registration Statement*
(c) Establishment and Designation of Additional Series of
Shares of Beneficial Interest, Par Value $.01 Per Share
-- Incorporated by reference from Post-Effective
Amendment No. 11 to the Registrant's Registration
Statement*
(d) Form of Establishment and Designation of Additional
Series of Shares of Beneficial Interest, Par Value $.01
Per Share -- Incorporated by reference from
Post-Effective Amendment No. 23 to the Registrant's
Registration Statement*
(e) Form of Declaration of Trust as Amended and Restated
December 31, 1994 -- Incorporated by reference from
Post-Effective Amendment No. 27 to the Registrant's
Registration Statement*
(f) Form of Establishment and Designation of Additional
Series of Shares of Beneficial Interest, Par Value $.01
Per Share -- Incorporated by reference from
Post-Effective Amendment No. 28 to the Registrant's
Registration Statement*
(g) Form of Establishment and Designation of an Additional
Series of Shares of Beneficial Interest, Par Value $.01
Per Share -- Incorporated by reference from
Post-Effective Amendment No. 35 to the Registrant's
Registration Statement*
- 4 -
<PAGE> 73
(h) Establishment and Designation of an Additional Series of
Shares of Beneficial Interest, Par Value $.01 Per Share
-- Incorporated by reference from Post-Effective
Amendment No. 38 to the Registrant's Registration
Statement*
(i) Establishment and Designation of Additional Series of
Shares of Beneficial Interest, Par Value $.01 Per Share
--Incorporated by reference from Post--Effective
Amendment No. 47 to the Registrant's Registration
Statement*
(2) - (a) Amended and Restated By-laws dated August 30, 1991 --
Incorporated by reference from Post-Effective Amendment
No. 13 to the Registrant's Registration Statement*
(b) Amended and Restated By-Laws dated December 31, 1994 --
Incorporated by reference from Post-Effective Amendment
No. 32 to the Registrant's Registration Statement*
(3) - Not applicable
(4) - Agreement and Plan of Reorganization(1)
(5) - Specimen Share Certificate -- Previously filed as
Exhibit 4 to Pre- Effective Amendment No. 2 to the
Registrant's Registration Statement*
(6) - (a) Management Agreement -- MAP Equity Fund -- Incorporated
by reference from Registrant's Registration Statement
on Form N-14 filed with the Securities and Exchange
Commission on March 25, 1999.*
(b) Form of Sub-Advisory Agreement - MAP Equity Fund --
Incorporated by reference from Registrant's
Registration Statement on Form N-14 filed with the
Securities and Exchange Commission on March 25, 1999.*
(7) - (a) Form of Distribution Agreement -- Incorporated by
reference from Post-Effective Amendment No. 22*
(b)(1) Form of Soliciting Dealer Agreement -- Incorporated
by reference from Pre-Effective Amendment No. 1
to Registrant's Registration Statement*
(b)(2) Soliciting Dealer Agreement -- Incorporated by
reference from Post-effective Amendment No. 50 to
the Registrant's Registration Statement*
(8) - Not applicable
- ----------------
(1) Filed herewith as Exhibit "A" to the Proxy Statement/Prospectus.
- 5 -
<PAGE> 74
(9) - (a) Custodian Contract with State Street Bank and
Trust Company -- Previously filed as Exhibit
8(a) to Pre-Effective Amendment No. 1*
(b) Fee schedule for Exhibit 8(a) -- Incorporated by
reference from Pre-Effective Amendment No. 2*
(c) Custodian Contract with The Bank of New York
--Incorporated by reference from Post-Effective
Amendment No. 7*
(10) - (a)(1) Plan of Distribution pursuant to Rule 12b-1
(Class A shares)--MAP Equity Fund -- Incorporated
by reference from Registrant's Registration
Statement on Form N-14 filed with the Securities
and Exchange Commission on March 25, 1999.*
(a)(2) Plan of Distribution pursuant to Rule 12b-1
(Class B shares)--MAP Equity Fund -- Incorporated
by reference from Registrant's Registration
Statement on Form N-14 filed with the Securities
and Exchange Commission on March 25, 1999.*
(a)(3) Plan of Distribution pursuant to Rule 12b-1
(Class C shares)--MAP Equity Fund -- Incorporated
by reference from Registrant's Registration
Statement on Form N-14 filed with the Securities
and Exchange Commission on March 25, 1999.*
(b) Form of Multiple Class Plan Pursuant to Rule
18f-3 -- Incorporated by reference from
Post-Effective Amendment No. 30*
(11) - Opinion and Consent of Dechert Price & Rhoads as to legality
of the securities being offered -- Incorporated by reference
from Registrant's Registration Statement on Form N-14 filed
with the Securities and Exchange Commission on March 25, 1999.
(12) - Opinion and Consent of Dechert Price & Rhoads as to tax
consequences**
(13) - Not applicable
(14) - Consent of Independent Accountants ***
(15) - Not applicable
(16) - (a) Powers of Attorney -- Incorporated by reference
from Post-Effective Amendments No. 40 and No. 44
to the Registrant's Registration Statement*
(b) Power of Attorney***
(17) - Proxy Card***
* Incorporated herein by reference
** To be filed by amendment.
*** Filed herewith.
ITEM 17. UNDERTAKINGS
- 6 -
<PAGE> 75
(1) The undersigned registrant agrees that prior to any public offering of the
securities registered through the use of a prospectus which is part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment shall be deemed to be a
new registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial
bona fide offering of them.
(3) The undersigned registrant agrees to file, by post-effective amendment, an
opinion of counsel or a copy of an Internal Revenue Service ruling
supporting the tax consequences of the proposed acquisition of assets and
issuance of shares described in this Registration Statement within a
reasonable time after receipt of such opinion or ruling.
- 7 -
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Parsippany and the State of New Jersey, on the
21st day of April, 1999.
THE MAINSTAY FUNDS
By: /s/ Stephen C. Roussin
-----------------------------
STEPHEN C. ROUSSIN, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on 21 April, 1999.
<TABLE>
<CAPTION>
Signatures Title
- ---------- -----
<S> <C>
* Chairman and Trustee
- -------------------------------
RICHARD M. KERNAN, JR.
/s/ Stephen C. Roussin President, Chief Executive
- ------------------------------- Officer and Trustee
STEPHEN C. ROUSSIN
/s/ Anthony W. Polis Chief Financial Officer
- ------------------------------- (Principal Financial and
ANTHONY W. POLIS Accounting Officer)
*
- -------------------------------
EDWARD J. HOGAN Trustee
*
- -------------------------------
HARRY G. HOHN Trustee
</TABLE>
- 8 -
<PAGE> 77
<TABLE>
<S> <C>
*
- -------------------------------
DONALD K. ROSS
Trustee
*
- -------------------------------
RICHARD M. KERNAN, JR. Trustee
*
- -------------------------------
NANCY M. KISSINGER Trustee
*
- -------------------------------
TERRY L. LIERMAN Trustee
**
- -------------------------------
JOHN B. McGUCKIAN Trustee
*
- -------------------------------
DONALD E. NICKELSON Trustee
***
- -------------------------------
MARK GORDON
Trustee
/s/ Jeffrey L. Steele
- -------------------------------
JEFFREY L. STEELE
</TABLE>
* Executed by Jeffrey L. Steele pursuant to a power of attorney filed with
Post-Effective Amendment No. 44 on March 17, 1998.
** Executed by Jeffrey L. Steele pursuant to a power of attorney filed with
Post-Effective Amendment No. 40 on August 28, 1997.
*** Executed by Jeffrey L. Steele pursuant to a power of attorney filed with
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement
on Form N-14 on April 23, 1999.
- 9 -
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit
- -------------- ---------------
<S> <C>
14 Consent of Independent Accountants
16 Power of Attorney
17 Proxy Card
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registrant's
Registration Statement on Form N-14 (Securities Act File No. 333-75045 and
Investment Company Act File No. 811-4550) (the "Registration Statement") of our
report dated February 11, 1999, relating to the financial statements and
financial highlights appearing in the December 31, 1998 Annual Report to
Shareholders of the MAP-Equity Fund, which are also incorporated by reference
into the Registration Statement.
We also hereby consent to the reference to our firm under the captions
"Financial Highlights" in the MainStay MAP Equity Fund Class I Shares
Prospectus and "Independent Accountants" in the Statement of Additional
Information, both of which are dated May 1, 1999 and incorporated by reference
into the Registrant's Registration Statement.
/s/ PricewaterhouseCoopers
1177 Avenue of the Americas
New York, New York 10036
April 22, 1999
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints each of Jeffrey L. Steele, Robert W. Helm and Sara L. Badler his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead, to sign any and all
Registration Statements applicable to The MainStay Funds and any amendments or
supplements thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and the states, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Signature Title Date
- --------- ----- ----
/s/ MARK GORDON Trustee March 15, 1999
- ---------------
Mark Gordon
<PAGE> 1
PROXY
MAP-EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS
JUNE 3, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking previous proxies, hereby appoint(s) William G.
Clark, Albert W. Leier and Judith C. Keilp and each of them, the proxies of the
undersigned, with the power of substitution to each of them, to vote all shares
of common stock of MAP-Equity Fund that the undersigned is entitled to vote at
the Special Meeting of Shareholders of MAP-Equity Fund to be held at the offices
of MAP-Equity Fund, 520 Broad Street, Newark, New Jersey 07102-3111, at 10:00
a.m. Eastern time, on June 3, 1999, and at any adjournments thereof. Receipt of
the Notice of the Meeting and the accompanying Proxy Statement/Prospectus is
hereby acknowledged.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy and return it in the enclosed envelope.
THIS PROXY WILL NOT BE VOTED UNLESS IT IS DATED AND SIGNED
EXACTLY AS INSTRUCTED BELOW.
Sign exactly as name appears hereon.
<TABLE>
<CAPTION>
<S> <C>
If the shares are held jointly, each shareholder named
should sign. If only one signs, his or her signature will
- ---------------------------------------- be binding. If the shareholder is a corporation, the
(Signature of Shareholder) President or Vice President should sign in his or her
own name, indicating title. If the shareholder is a
partnership, a partner should sign in his or her own
- ---------------------------------------- name, indicating that he or she is a "Partner." For
(Signature of Joint Owner, if any) addition information about how to properly complete
the proxy card, see "Instructions for Signing Proxy
Date: ____________________, 1999 Cards" that accompany the Proxy Statement/
Prospectus.
</TABLE>
<PAGE> 2
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
The Board of Directors recommends a vote "FOR" all proposals.
Unless otherwise indicated below, this proxy shall be deemed to indicate
authority to vote "FOR" all proposals.
1. Approval of an Agreement and Plan of Reorganization between MAP-Equity
Fund and The Mainstay Funds, on behalf of MainStay MAP Equity Fund, providing
for the acquisition of all of the assets of MAP-Equity Fund by MainStay MAP
Equity Fund in exchange for Class I shares of beneficial interest of MainStay
MAP Equity Fund and the assumption by MainStay MAP Equity Fund of all of the
liabilities of MAP-Equity Fund, and for the pro rata distribution of such
MainStay MAP Equity Fund Class I shares to shareholders of MAP-Equity Fund and
the subsequent liquidation and dissolution of MAP-Equity Fund, as described in
the accompanying Proxy Statement/Prospectus.
FOR ______ AGAINST ______ ABSTAIN ______
2. In their discretion on any other business which may properly come
before the Meeting or any adjournments thereof.
PLEASE SIGN AND DATE ABOVE.
