<PAGE> 1
As filed with the Securities and Exchange Commission on March 25, 1999
1933 Act Registration No. 33-_____
File No. 811-4550
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____ Pre-Effective Amendment No. ___ ____ 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
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(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 possible after
this Registration Statement becomes effective.
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. Registrant intends to file
with the Securities and Exchange Commission the notice required by Rule 24f-2
with respect to its most recent fiscal year no later than March 31, 1999.
- -------------------------------------------------------------------------------
It is proposed that this filing shall become effective on April 26,
1999 pursuant to Rule 488.
<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 ____ 1999. previously filed on
EDGAR, Accession Numbers 0000069620-98-000003,
0000069620-98-000005, and 00000069620-98-000010,
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>
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<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 Decmber 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
Dear Shareholder: ______________, 1999
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 Class I
shareholders 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;
- - as a shareholder of MainStay MAP, you will be able to reinvest dividends
and capital gains distributions and make additional investments in
MainStay MAP without the imposition of any sales charge, and you will be
able to exchange your Class I shares for certain shares of other
portfolios of The MainStay Funds, without the imposition of any sales
charge; and
- - MainStay Management Inc. has agreed to limit your MainStay MAP expenses
for Class I shares to 1.00% for a period of two years from the date that
MainStay MAP commences operations.
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
<PAGE> 6
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 _______________, 1999. YOU WILL BE ADVISED OF THE RESULTS OF THE
SHAREHOLDER MEETING SHORTLY AFTER THE MEETING.
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 the reorganization will benefit MAP and its
shareholders by enhancing the services and investment options available to them.
For example, following the reorganization, you will be able to exchange your
MainStay MAP shares for certain shares of another class 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 once 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 a manner that is substantially identical to the way in which MAP-
Equity is managed currently.
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 will close to
all new share
<PAGE> 7
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 after this date, 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.
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
separate 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
------------------
__________, 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 _____ __.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 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 16, 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,
-----------------------
-----------------------
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
- ------------ ---------------
<S> <C>
CORPORATE ACCOUNTS
(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
(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 shares of MainStay MAP and the
assumption by MainStay MAP of all of the liabilities of MAP. The 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 ____________,
1999 (the "Valuation Date"). 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 "Fund,"
and collectively, the "
<PAGE> 12
Funds"), see "Investment Objectives, Policies and Restrictions of MAP-Equity
Fund and MainStay MAP Equity Fund" in this Proxy Statement/Prospectus. MainStay
Management Inc. will serve as the manager to MainStay MAP. Markston
International, LLC ("Markston International") will serve as 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 ________, 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 and additional information
about the Reorganization, dated ________, 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 ________, 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.
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 ______________, 1999.
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY OF THE PROPOSED REORGANIZATION...................................... 2
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF MAP-EQUITY FUND AND
MAINSTAY MAP EQUITY FUND.............................................. 3
PRINCIPAL RISK FACTORS...................................................... 6
MANAGER, INVESTMENT ADVISERS, ADMINISTRATORS AND DISTRIBUTORS
OF MAP-EQUITY FUND AND MAINSTAY MAP EQUITY FUND....................... 7
COMPARISON OF FEES AND EXPENSES OF MAP-EQUITY FUND AND MAINSTAY MAP EQUITY
FUND.................................................................. 8
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES OF MAP-EQUITY
FUND AND MAINSTAY MAP EQUITY FUND..................................... 13
DIVIDEND POLICIES OF MAP-EQUITY FUND AND MAINSTAY MAP EQUITY FUND........... 15
INFORMATION ABOUT THE REORGANIZATION........................................ 16
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS............................... 19
ADDITIONAL INFORMATION ABOUT MAP-EQUITY FUND AND MAINSTAY MAP EQUITY FUND... 20
VOTING INFORMATION.......................................................... 21
</TABLE>
Exhibit A - Agreement and Plan of Reorganization
Exhibit B - Prospectus of MainStay MAP Class I Shares
<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 have purchase and redemption
procedures substantially similar to those of MAP.
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 the same manner as Markston Investment Management currently
manages the investments of MAP. The Directors 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 $13,348,832 as
of March 23, 1999.
<PAGE> 15
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 of MAP-Equity Fund and MainStay MAP Equity Fund."
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 OF MAP-EQUITY FUND AND
MAINSTAY MAP EQUITY FUND
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.
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 the same investment management style as sub-advise 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, Administrators and
Distributors of MAP-Equity Fund and MainStay MAP Equity Fund" 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.
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
- 12 -
<PAGE> 16
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 unrealized 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 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. For example, 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 issuers will be substantially similar to those of MAP. The Trustees of
MainStay MAP have also adopted a fundamental 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 the 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.
- 13 -
<PAGE> 17
With respect to MainStay MAP the Trustees did not adopt certain of MAP's
restrictions that are either 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 restrictions of MAP that are fundamental restrictions,
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 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, however,
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 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
- 14 -
<PAGE> 18
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 total 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 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, ADMINISTRATORS AND DISTRIBUTORS OF MAP-EQUITY
FUND AND MAINSTAY MAP EQUITY FUND
MAP
- 15 -
<PAGE> 19
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 Jerse 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 MainStay Management and Markston International.
Markston International is a recently organized New York limited liability
company that is registered with the Securities and Exchange Commission as an
investment adviser. Markston International is wholly owned by Michael 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.
- 16 -
<PAGE> 20
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 the 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 1998, Markston Investment
Management received an advisory fee of 0.35% of MAP's average net assets for
that year.
Under the terms of a Management Agreement between MainStay MAP and
MainStay Management, MainStay MAP will pay MainStay Management a monthly fee 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 the 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.
For the first two years from the commencement of operations of MainStay
MAP, 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 total net assets attributable to
that class. 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 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%.
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.
- 17 -
<PAGE> 21
COMPARISON OF FEES AND EXPENSES OF MAP-EQUITY FUND AND MAINSTAY
MAP EQUITY FUND
Following the Reorganization, MainStay MAP will be offered to the public
in multiple classes of shares. All classes will be identical, but 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 Class A, B, or C shares of other
portfolios offered by The MainStay Funds or purchase additional Class I shares
of MainStay MAP. Class I shares will not be subject to an initial or deferred
sales charge or a distribution or service fee.
Following the closing of the Reorganization, Class I shareholders who were
shareholders 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 into Class A shares of any Class I
shares of MainStay MAP. For additional information, see "Exchanges."
Total Expenses. For the fiscal year ended December 31, 1998, MAP had total
fees and expenses of .70% of its average monthly net assets. It is estimated
that during the one-year period following the closing of the Reorganization,
total fees and expenses of Class I shares of MainStay MAP will not exceed 1.12%
of the average daily net assets of that class. As discussed above, MainStay
Management has agreed to assume Class I expenses to the extent that Class I
total operating expenses (excluding taxes, interest, brokerage commissions, and
any extraordinary expenses) exceed 1.00% of average daily net assets of Class I
shares on an annual basis for a period of two years from the date MainStay MAP
begins operations, after which time 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 recoup a portion of
expenses reimbursed pursuant to the expense limitation, under certain
conditions.
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 fees and expenses incurred by shares of MAP for the 12 months
ended December 31, 1998, and the projected fees and expenses for Class I shares
of MainStay MAP for its first year of operations.
- 18 -
<PAGE> 22
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
MAP MAINSTAY MAP
--- ------------
CLASS I
-------
<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
Maximum Account Fee None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
MAP MainStay MAP
--- ------------
Class I
-------
<S> <C> <C>
Management Fees 0.35% 0.75
Distribution and/or Service (12b-1) Fees None None
Other Expenses 0.42% 0.37%(1)
----- -----
Total Fund Operating Expenses 0.77% 1.12%(2)
===== =====
Expense Reimbursement N/A 0.12%
Net Expenses 0.77% 1.00%
===== =====
</TABLE>
- ----------------
(1) Estimated.
(2) For the first two years from the date that MainStay MAP commences
operations, MainStay Management has agreed 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 total 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.
Example of Effect on Fund Expenses. The following example attempts to
illustrate the impact of annual operating expenses stated above on a $10,000
investment, assuming (i) a 5%
- 19 -
<PAGE> 23
annual return, (ii) that you redeem all of your shares at the end of the period,
and (iii) that the expenses for each Fund are the ones shown in the chart above.
The MAP expenses shown below reflect an initial sales charge of up to 4.75% of
the public offering price that normally is charged in connection with the sale
of MAP shares. No initial sales charge will be imposed on Class I shares
of MainStay MAP distributed to shareholders of MAP in connection with the
Reorganization.
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
MAP $ 126 $ 292 $ 473 $ 987
MAINSTAY MAP $ 114 $ 356 $ 617 $ 1,363
</TABLE>
You would pay the following expenses if you did not redeem your
shares:
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
MAP $ 126 $ 292 $ 473 $ 997
MAINSTAY MAP $ 114 $ 356 $ 617 $ 1,363
</TABLE>
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
OF MAP-EQUITY FUND AND MAINSTAY MAP EQUITY FUND
Effective on the close of business on April 30, 1999, MAP will close to
all new share 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
will not be able to purchase new shares of MAP after this date, they will be
able to redeem their MAP shares through the closing date of the Reorganization.
Following the Reorganization, shareholders may, of course, purchase 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 identical to those of MAP.
- 20 -
<PAGE> 24
Purchases. Shares of MAP are currently offered for sale at net asset value
plus an initial sales charge, as set forth below.
<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%
$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>
Shares of MAP are not subject to a distribution or service fee.
Class I shares of MainStay MAP will be offered for sale at net asset value
and will not be subject to an initial sales charge, a contingent deferred sales
charge, or a distribution or service fee.
For investments by mail, MAP requires a minimum initial investment of at
least $250 and minimum subsequent investments of at least $50. This minimum
initial investment does not apply to periodic investment plans, or Individual
Retirement Accounts. In addition, investments made 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 may be less than the
minimum purchase requirements, if the average investment for all participants
under the plan or trust meets the minimum purchase requirements for MAP. MAP's
Directors reserve 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.
Initial and subsequent purchases by telephone for shares of MAP must be
made in an amount not less than $1,000, and payment must be received by 4:00
p.m. eastern time on the same day that the order is placed in order to receive
the net asset value calculated at 4:00 p.m. eastern time
- 21 -
<PAGE> 25
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 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. The redemption procedures that will be followed by MainStay
MAP will be substantially similar to those followed currently by MAP, with the
exception of the minimum amounts for redemption proceeds to be paid by wire, the
conditions under which a signature guarantee must be provided, and certain
requirements for systematic withdrawal programs.
MAP shareholders may make redemption requests by telephone in amounts up
to $25,000. Proceeds of redemption requests 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 may on at least 60 days' notice effect an involuntary
redemption of a shareholder's account with a current value of less than $250. 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 may 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 imposition of an initial sales charge.
- 22 -
<PAGE> 26
Once Class I shares have been exchanged for Class A shares, they may not be
exchanged back into Class I shares. Class A shares of The MainStay Funds
portfolios are only exchangeable into Class A shares of other portfolios of The
MainStay Funds. MainStay MAP permits 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.
DIVIDEND POLICIES OF MAP-EQUITY FUND AND MAINSTAY MAP EQUITY
FUND
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 annually.
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 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.
- 23 -
<PAGE> 27
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
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 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,
- 24 -
<PAGE> 28
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 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................. $ $ 60,414,243 $
Net asset value per share
Class I................. $ $ 24.58 $
Shares outstanding
Class I................. 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 MAP as a result of
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<PAGE> 29
the Reorganization will receive Class I shares of MainStay MAP. MainStay
Management has agreed further not to impose on those shareholders an initial
sales charge on the exchange of their MainStay MAP Class I shares into Class
A shares of another portfolio 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 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
- 26 -
<PAGE> 30
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 ABOUT MAP-EQUITY FUND AND MAINSTAY MAP
EQUITY FUND
Information concerning the operation and management of MainStay MAP is
incorporated herein by reference from its prospectus dated ________ , 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 ______ , 1999,
which has been filed with the SEC and is incorporated by reference in its
prospectus included herewith. A copy of the SAI for MainStay MAP is available
upon request and without charge by calling NYLIFE 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 ________ 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 and SAI 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. Copies of such materials can also be
obtained 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.
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.
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<PAGE> 31
Shareholders of record of MAP at the close of business on April 16, 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.
As of _______________, 1999, there were no outstanding shares of MainStay
MAP.
To the best of MAP's knowledge, as of March 23, 1999, no person
beneficially owned more than 5% of MAP's outstanding shares.
- 28 -
<PAGE> 32
- 29 -
<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 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 liabilities of the Reorganizing Fund by the Successor
Fund is in the best interests of the Successor Fund and its 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;
<PAGE> 34
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 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 ASSETS OF THE REORGANIZING FUND 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 liabilities of the Reorganizing Fund. 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 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. 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.
1.4 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.
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<PAGE> 35
1.5 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.
1.6 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.
(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
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<PAGE> 38
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 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.
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<PAGE> 39
(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.
(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
- 8 -
<PAGE> 40
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.
(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
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<PAGE> 41
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.
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.
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<PAGE> 42
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:
(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
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<PAGE> 43
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 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
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<PAGE> 44
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.
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
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<PAGE> 45
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:
(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
- 14 -
<PAGE> 46
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 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
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<PAGE> 47
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.
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 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.
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<PAGE> 48
(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.
(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
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<PAGE> 49
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
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;
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<PAGE> 50
(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.
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 the
MAP-Equity Fund, c/o Markston International LLC, 520 Broad St, Newark NJ
07102-3111, Attention: Judith 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
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<PAGE> 51
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 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 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 of Class I 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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
<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> 58
<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> 59
<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> 60
<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> 61
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> 62
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> 63
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> 64
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> 65
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> 66
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> 67
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> 68
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 substantially 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 ______, 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 March 25, 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> 69
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> 70
(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,
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<PAGE> 71
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> 72
(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***
(b) Form of Sub-Advisory Agreement - MAP Equity Fund***
(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 Regsitration Statement*
(8) - Not applicable
- ----------------
(1) Filed herewith as Exhibit "A" to the Proxy Statement/Prospectus.
- 5 -
<PAGE> 73
(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***
(a)(2) Plan of Distribution pursuant to Rule 12b-1
(Class B shares)--MAP Equity Fund***
(a)(3) Plan of Distribution pursuant to Rule 12b-1
(Class C shares)--MAP Equity Fund***
(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 ***
(12) - Opinion and Consent of Dechert Price & Rhoads as to tax
consequences**
(13) - Not applicable
(14) - Consent of Independent Accountants **
(15) - Not applicable
(16) - Powers of Attorney -- Incorporated by reference from
Post-Effective Amendments No. 40 and No. 44 to the
Registrant's Registration Statement*
(17) - Proxy Card***
* Incorporated herein by reference
** To be filed by amendment.
*** Filed herewith.
ITEM 17. UNDERTAKINGS
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<PAGE> 74
(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> 75
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
_______ day of March, 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 ________ March _________, 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>
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<PAGE> 76
<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.
- 9 -
<PAGE> 77
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit
- -------------- ---------------
<S> <C>
6(a) Management Agreement -- MAP Equity Fund
6(b) Form of Sub-Advisory Agreement - MAP Equity Fund
10(a)(1) Plan of Distribution pursuant to Rule 12b-1 (Class A
shares)--MAP Equity Fund
10(a)(2) Plan of Distribution pursuant to Rule 12b-1 (Class B
shares)--MAP Equity Fund
10(a)(3) Plan of Distribution pursuant to Rule 12b-1 (Class C
shares)--MAP Equity Fund
11 Opinion and Consent of Dechert Price & Rhoads as to
legality of the securities being offered
17 Proxy Card
</TABLE>
<PAGE> 1
EXHIBIT 6(a)
THE MAINSTAY FUNDS
MANAGEMENT AGREEMENT
Agreement, made as of the 27th day of October, 1997 between THE MAINSTAY
FUNDS, a Massachusetts business trust (the "Trust"), on behalf of its series
(each, a "Fund," and collectively, the "Funds") as set forth on Schedule A, as
amended from time to time, and MainStay Management, Inc., a Delaware corporation
(the "Manager").
W I T N E S S E T H :
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the shares of beneficial interest of the Trust (the "Shares")
are divided into separate series, each of which is established pursuant to a
written instrument executed by the Trustees of the Trust and the Trustees may
from time to time terminate such series or establish and terminate additional
series; and
WHEREAS, each Fund desires to retain the Manager to render investment
advisory and related administrative services to the Fund, and the Manager is
willing to render such services on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. Each Fund hereby appoints MainStay Management, Inc.
to act as manager to the Fund for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services herein described, for the compensation herein provided.
2. Duties as Manager. Subject to the supervision of the Trustees of
the Trust, the Manager shall administer each Fund's business affairs and manage
the investment operations of each Fund and the composition of the portfolio of
each Fund, including the purchase, retention and disposition of securities
therein, in accordance with the investment objectives, policies and restrictions
of each Fund, as stated in the currently effective Prospectus (as hereinafter
defined) and subject to the following understandings:
(a) The Manager shall (i) furnish each Fund with office
facilities; (ii) be responsible for the financial and accounting records
required to be maintained by each Fund (excluding those being maintained by the
Fund's Custodian, Transfer Agent and Accounting Services Agent except as to
which the Manager has supervisory functions) and other than those being
maintained by the Fund's sub-adviser, if any; and (iii) furnish each Fund with
ordinary clerical, bookkeeping and recordkeeping services at such office
facilities.
<PAGE> 2
(b) The Manager shall provide supervision of each Fund's
investments and determine from time to time what investments or securities will
be purchased, retained, sold or lent by the Fund, and what portion of the Fund's
assets will be invested or held uninvested as cash.
(c) The Manager shall use its best judgment in the performance
of its duties under this Agreement.
(d) The Manager, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the Declaration
of Trust, By-Laws and Prospectus (each as hereinafter defined) of the Trust and
with the instructions and directions of the Trustees of the Trust and will
conform to and comply with the requirements of the 1940 Act and all other
applicable federal and state laws and regulations.
(e) The Manager, and any sub-adviser to whom such authority has
been delegated, shall determine the securities to be purchased or sold by each
Fund and will place orders pursuant to its determination with or through such
persons, brokers or dealers (including NYLIFE Securities Inc.) in conformity
with the policy with respect to brokerage as set forth in the Trust's
Registration Statement and Prospectus (each as hereinafter defined) or as the
Trustees may direct from time to time. It is recognized that, in providing a
Fund with investment supervision or the placing of orders for portfolio
transactions, the Manager or any sub-adviser will give primary consideration to
securing the most favorable price and efficient execution. Consistent with this
policy, the Manager or any sub-adviser may consider the financial
responsibility, research and investment information and other services provided
by brokers or dealers who may effect or be a party to any such transaction or
other transactions to which other clients of the Manager or any sub-adviser may
be a party. It is understood that none of the Funds, the Trust nor the Manager
or any sub-adviser has adopted a formula for allocation of a Fund's investment
transaction business. It is also understood that it is desirable for each Fund
that the Manager or any sub-adviser have access to supplemental investment and
market research and security and economic analyses provided by certain brokers
who may execute brokerage transactions at a higher cost to a Fund than may
result when allocating brokerage to other brokers on the basis of seeking the
most favorable price and efficient execution. Therefore, the Manager or any
sub-adviser is authorized to place orders for the purchase and sale of
securities for a Fund with such certain brokers, subject to review by the
Trust's Trustees from time to time with respect to the extent and continuation
of this practice. It is understood that the services provided by such brokers
may be useful to the Manager or any sub-adviser in connection with its services
to other clients.
On occasions when the Manager or any sub-adviser deems the purchase or
sale of a security to be in the best interest of a Fund as well as other
clients, the Manager or any sub-adviser, to the extent permitted by applicable
laws and regulations, may, but shall be under no obligation to, aggregate the
securities to be so sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as expenses incurred
in the transaction, will be made by the Manager or
- 2 -
<PAGE> 3
any sub-adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to that Fund and to such other
clients.
(f) The Manager shall maintain all books and records with
respect to each Fund's securities transactions required by sub-paragraphs
(b)(5), (6), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act and
any other books and records required to be maintained by it under the 1940 Act
and the Rules thereunder and shall render to the Trust's Trustees such periodic
and special reports as the Trustees may reasonably request.
(g) The Manager shall provide the Trust's Custodian on each
business day with information relating to the execution of all portfolio
transactions pursuant to standing instructions.
(h) With respect to any or all Series of the Trust, including
the Funds, the Manager may enter into one or more contracts ("Sub-Advisory or
Sub-Administration Contract") with a sub-adviser or sub-administrator in which
the Manager delegates to such sub-adviser or sub-administrator any or all its
duties specified in this Agreement, provided that each Sub-Advisory or
Sub-Administration Contract meets all applicable requirements of the 1940 Act
and rules thereunder.
3. Manager Personnel. The Manager shall authorize and permit any of
its directors, officers and employees who may be elected or appointed as
Trustees or officers of the Trust to serve in the capacities in which they are
elected or appointed. Services to be furnished by the Manager under this
Agreement may be furnished through the medium of any of such directors,
officers, or employees.
4. Books and Records. The Manager shall keep the Funds' books and
records required to be maintained by it, pursuant to paragraph 2 hereof. The
Manager agrees that all records which it maintains for a Fund are the property
of such Fund, and it will surrender promptly to the Fund any of such records
upon the Fund's request. The Manager further agrees to preserve for the periods
prescribed by Rule 31a-2 as promulgated by the Securities and Exchange
Commission (the "Commission") under the 1940 Act any such records as are
required to be maintained by the Manager pursuant to paragraph 2 hereof.
5. Services Not Exclusive. The services furnished by the Manager
hereunder are not to be deemed exclusive and the Manager shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby.
6. Documents. The Trust has delivered to the Manager copies of each
of the following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust of the Trust, filed with the Secretary
of The Commonwealth of Massachusetts (such Declaration of Trust, as in effect on
the date hereof and as amended from time to time, is herein called the
"Declaration of Trust");
- 3 -
<PAGE> 4
(b) By-Laws of the Trust (such By-Laws, as in effect on the
date hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified Resolutions of the Trustees of the Trust
authorizing the appointment of the Manager and approving the form of this
Agreement;
(d) Written Instrument to Establish and Designate Separate
Series of Shares;
(e) Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-lA (the "Registration Statement"),
as filed with the Commission, relating to each Fund and each Fund's Shares and
all amendments thereto;
(f) Notification of Registration of the Trust under the 1940
Act on Form N-8A as filed with the Commission and all amendments thereto; and
(g) Each form of Prospectus and Statement of Additional
Information of the Trust (such Prospectus and Statement of Additional
Information, as currently in effect and as amended or supplemented from time to
time, being herein called collectively the "Prospectus").
7. Expenses. (a) In connection with the services rendered by the
Manager under this Agreement, the Manager will bear all of the following
expenses:
(i) the salaries and expenses of all personnel of the
Trust and the Manager, except the fees and expenses of Trustees who are not
interested persons of the Manager or of the Trust; and
(ii) all expenses incurred by the Manager in connection
with managing the investment operations of each Fund and administering the
ordinary course of each Fund's business, other than those assumed by the Funds
herein;
(b) Each Fund assumes and will pay its expenses, including but
not limited to those described below (where any such category applies to more
than one series of the Trust, each Fund shall be liable only for its allocable
portion of the expenses):
(i) the fees and expenses of Trustees who are not
interested persons of the Manager or of the Trust;
(ii) the fees and expenses of each Fund which relate to
(A) the custodial function and the recordkeeping connected therewith, (B) the
maintenance of the required accounting records of the Funds not being maintained
by the Manager, (C) the pricing of the Funds' Shares, including the cost of any
pricing service or services which may be retained pursuant to the authorization
of the Trustees of the Trust, and (D) for both mail and wire orders, the
cashiering function in connection with the issuance and redemption of the Funds'
Shares;
- 4 -
<PAGE> 5
(iii) the fees and expenses of the Trust's transfer and
dividend disbursing agent, which may be the custodian, which relate to the
maintenance of each shareholder account;
(iv) the charges and expenses of legal counsel (including
an allocable portion of the cost of maintaining an internal legal and compliance
department) and independent accountants for the Trust;
(v) brokers' commissions and any issue or transfer taxes
chargeable to the Trust in connection with its securities transactions on behalf
of the Funds;
(vi) all taxes and business fees payable by the Trust or
the Funds to federal, state or other governmental agencies;
(vii) the fees of any trade association of which the Trust
may be a member;
(viii) the cost of share certificates representing Fund
Shares;
(ix) the fees and expenses involved in registering and
maintaining registrations of the Trust and of its Shares with the Commission,
registering the Trust as a broker or dealer and qualifying its Shares under
state securities laws, including the preparation and printing of the Trust's
registration statements and prospectuses for filing under federal and state
securities laws for such purposes;
(x) allocable communications expenses with respect to
investor services and all expenses of shareholders' and Trustees' meetings and
of preparing, printing and mailing reports to shareholders in the amount
necessary for distribution to the shareholders;
(xi) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Trust's
business; and
(xii) any expenses assumed by the Funds pursuant to a Plan
of Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
8. Organization Expenses. Each Fund hereby agrees to reimburse the
Manager for the organization expenses of, and the expenses incurred in
connection with, the initial offering of Shares of that Fund.
9. Compensation. For the services provided and the facilities
furnished pursuant to this Agreement, the Trust will pay to the Manager as full
compensation therefor a fee at an annual rate, as set forth opposite each Fund's
name on Schedule A, of the average daily net assets of each Fund.
- 5 -
<PAGE> 6
This fee will be computed daily and will be paid to the Manager
monthly. This fee will be chargeable only to the respective Fund, and no other
series of the Trust shall be liable for the fee due and payable hereunder. No
Fund shall be liable for any expense of any other series of the Trust.
10. Standard of Care. Subject to the applicable law, the Manager shall
not be liable for any error of judgment or for any loss suffered by a Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
11. Duration and Termination. This Agreement shall continue in effect
with respect to each Fund for a period of more than two years from the date
hereof only so long as such continuance is specifically approved at least
annually with respect to that Fund in conformity with the requirements of the
1940 Act and the Rules thereunder; provided, however, that this Agreement may be
terminated with respect to a Fund at any time, without the payment of any
penalty, by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of that Fund, or by
the Manager at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act).
12. Other Business. Nothing in this Agreement shall limit or restrict
the right of any of the Manager's directors, officers, or employees who may also
be a Trustee, officer, or employee of the Trust to engage in any other business
or to devote his time and attention in part to the management or other aspects
of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Manager's right to engage in any other business or to render
services of any kind to any other corporation, trust, firm, individual or
association.
13. Independent Contractor. Except as otherwise provided herein or
authorized by the Trustees of the Trust from time to time, the Manager shall for
all purposes herein be deemed to be an independent contractor and shall have no
authority to act for or represent any Fund or the Trust in any way or otherwise
be deemed an agent of any Fund or the Trust.
14. Trust Materials. During the term of this Agreement, the Trust
agrees to furnish the Manager at its principal office all Prospectuses, proxy
statements, reports to shareholders, sales literature or other material prepared
for distribution to shareholders of a Fund or to the public, which refer to the
Manager in any way, prior to use thereof and not to use such material if the
Manager reasonably objects in writing within five business days (or such other
time as may be mutually agreed) after receipt thereof. In the event of
termination of this Agreement, the Trust will continue to furnish to the Manager
copies of any of the above-mentioned materials which refer in any way to the
Manager. The Trust shall furnish or otherwise make available to the Manager such
other information relating to the business affairs of each Fund as the Manager
at any time, or from time to time, reasonably requests in order to discharge its
obligations hereunder.
- 6 -
<PAGE> 7
15. Amendment. This Agreement may be amended in writing by mutual
consent, but the consent of each of the Funds, if required, must be obtained in
conformity with the requirements of the 1940 Act and the Rules thereunder.
16. Notice. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at Morris Corporate Center
I, Building A, 300 Interpace Parkway, Parsippany, New Jersey 07054; or (2) to
the Trust at 51 Madison Avenue, New York, NY 10010.
17. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
18. Limitation of Liability of the Trust and the Shareholders. It is
understood and expressly stipulated that none of the Trustees, officers, agents
or shareholders of the Trust shall be personally liable hereunder. The name "The
MainStay Funds" is the designation of the Trust for the time being under the
Declaration of Trust and all persons dealing with the Trust must look solely to
the property of the Trust for the enforcement of any claims against the Trust,
as neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust. No series of the
Trust shall be liable for any claims against any other series of the Trust.
19. Use of Name. Each Fund may use any name including the word
"MainStay" only for so long as this Agreement or any other agreement between the
Manager or any other affiliate of New York Life Insurance Company and the Trust
or any extension, renewal or amendment thereof remains in effect, including any
similar agreement with any organization which shall have succeeded to the
Manager's business as investment adviser. At such time as such an agreement
shall no longer be in effect, the respective Fund will (to the extent that it
lawfully can) cease to use such name or any other name indicating that it is
advised by or otherwise connected with the Manager or any organization which
shall have so succeeded to its business.
20. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. As used in this Agreement, terms shall have the same meaning
as such terms have in the 1940 Act. Where the effect of a requirement of the
federal securities laws reflected in any provision of this Agreement is made
less restrictive by a rule, regulation or order of the Commission, whether of
special or general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order. This Agreement may be signed in
counterpart.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE MAINSTAY FUNDS, on behalf of
each series listed on Schedule A
By:
-------------------------------
Name:
Title:
MAINSTAY MANAGEMENT, INC.
By:
-------------------------------
Name:
Title:
- 8 -
<PAGE> 9
SCHEDULE A
(as revised, April 27, 1998 and March 15, 1999)
<TABLE>
<CAPTION>
FUND ANNUAL RATE*
<S> <C>
California Tax Free Fund 0.50%
Capital Appreciation Fund 0.72%
Convertible Fund 0.72%
Equity Index Fund 0.50%
Government Fund 0.60%
High Yield Corporate Bond Fund 0.60%
International Bond Fund 0.70%
International Equity Fund 1.00%
Money Market Fund 0.50% **
New York Tax Free Fund 0.50%
Strategic Income Fund 0.60%
Tax Free Bond Fund 0.60%
Total Return Fund 0.64%
Value Fund 0.72%***
Blue Chip Growth Fund 1.00%
Research Value Fund 0.85%
Small Cap Value Fund 1.00%
Growth Opportunities Fund 0.70%
Small Cap Growth Fund 1.00%
Equity Income Fund 0.70%
Global High Yield Fund 0.70%
Map Equity Fund 0.75%
</TABLE>
* of each Fund's average daily net assets
** up to $300 million; .450% from $300 to $700 million; .40% from $700 million
to $1 billion; and .35% in excess of $1 million.
- 9 -
<PAGE> 10
*** up to $200 million; .65% from $200 million to $500 million; and .50% in
excess of $500 million.
- 10 -
<PAGE> 1
SUB-ADVISORY AGREEMENT
MAINSTAY MAP EQUITY FUND
Agreement made as of ______, 1999 (the "Agreement") between MainStay
Management, Inc., a Delaware corporation (the "Manager"), and Markston
International, LLC, a [ ] limited liability company (the "Sub-Adviser").
WHEREAS, the Manager has entered into a Management Agreement, dated
October 27, 1997 (the "Management Agreement") with The MainStay Funds (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of the
MainStay MAP Growth Equity Fund (the "Fund"), a series of the Trust;
WHEREAS, under the Management Agreement, the Manager has agreed to
provide certain investment advisory and related administrative services to the
Fund;
WHEREAS, the Management Agreement permits the Manager to delegate
certain of its investment advisory duties under the Management Agreement to a
sub-adviser; and
WHEREAS, the Manager desires to retain the Sub-Adviser to furnish
certain investment advisory services with respect to the Fund and the
Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Manager hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Fund for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts that appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. Duties as Sub-Adviser. Subject to the supervision of the Board
of Trustees of the Trust and the Manager, the Sub-Adviser shall manage the
investment operations of the Fund and the composition of the portfolio of the
Fund, including the purchase, retention and disposition of securities therein
in accordance with the investment objectives, policies and restrictions of the
Fund, as specified in the currently effective Prospectus (as hereinafter
defined) and subject to the following understandings:
(a) The Sub-Adviser shall provide supervision of the Fund's
investments and determine from time to time what investments or securities will
be purchased, retained, sold or lent by the Fund, and what portion of the
Fund's assets will be invested or held uninvested as cash.
(b) The Sub-Adviser shall use its best judgment in the
performance of its duties under this Agreement.
<PAGE> 2
(c) The Sub-Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the Declaration
of Trust, By-Laws and Prospectus (each as hereinafter defined) of the Trust and
with the instructions and directions of the Board of Trustees and the Manager
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal and state laws and regulations.
(d) The Sub-Adviser shall determine the securities to be
purchased or sold by the Fund and will place orders pursuant to its
determination with or through such persons, brokers or dealers (including
NYLIFE Securities Inc.) in conformity with the policy with respect to brokerage
as set forth in the Trust's Registration Statement and Prospectus (each as
hereinafter defined) or as the Board of Trustees may direct from time to time.
It is recognized that, in providing the Fund with investment supervision or the
placing of orders for portfolio transactions, the Sub-Adviser will give primary
consideration to securing the most favorable price and efficient execution.
Consistent with this policy, the Sub-Adviser may consider the financial
responsibility, research and investment information and other services provided
by brokers or dealers who may effect or be a party to any such transaction or
other transactions to which other clients of the Sub-Adviser may be a party. It
is understood that none of the Fund, the Trust, the Manager nor the Sub-Adviser
has adopted a formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund that the
Sub-Adviser have access to supplemental investment and market research and
related services and security and economic analyses that will consitute
research services with the meaning of Section 28(e) of the Securities and
Exchange Act of 1934 provided by certain brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Sub-Adviser is authorized to place orders
for the purchase and sale of securities for the Fund with such certain brokers,
subject to review by the Trust's Board of Trustees from time to time with
respect to the extent and continuation of this practice. It is understood that
the products services provided by such brokers may be useful to the Sub-Adviser
in connection with its services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be so sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other clients.
(e) The Sub-Adviser shall maintain all books and records with
respect to the Fund's securities transactions required by sub-paragraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act and any
other books and records required to be maintained by it under the 1940 Act and
the Rules thereunder and shall render to the Manager and to the Trust's Trustees
such periodic and special reports as the Manager or the Trustees may reasonably
request.
- 2 -
<PAGE> 3
(f) The Sub-Adviser shall provide the Fund's Custodian on
each business day with information relating to the execution of all portfolio
transactions pursuant to standing instructions.
3. Sub-Adviser Personnel. The Sub-Adviser shall authorize and
permit any of its directors, officers and employees who may be elected or
appointed as Trustees or officers of the Trust to serve in the capacities in
which they are elected or appointed. Services to be furnished by the
Sub-Adviser under this Agreement may be furnished through the medium of any of
such directors, officers, or employees.
4. Books and Records. The Sub-Adviser shall keep the Fund's books
and records required to be maintained by it, pursuant to paragraph 2 hereof.
The Sub-Adviser agrees that all records which it maintains for the Fund are the
property of the Fund, and it will surrender promptly to the Fund any of such
records upon the Fund's request. The Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 as promulgated by the Securities and
Exchange Commission (the "Commission") under the 1940 Act any such records as
are required to be maintained by the Sub-Adviser pursuant to paragraph 2
hereof.
5. Services Not Exclusive. The services furnished by the
Sub-Adviser hereunder are not to be deemed exclusive and the Sub-Adviser shall
be free to furnish similar or different services to others so long as its
services under this Agreement are not impaired thereby.
6. Documents. The Manager has delivered to the Sub-Adviser copies
of each of the following documents and will deliver to it all future amendments
and supplements, if any:
(a) Declaration of Trust of the Trust, filed with the
Secretary of The Commonwealth of Massachusetts (such Declaration of Trust, as
in effect on the date hereof and as amended from time to time, is herein called
the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the
date hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified Resolutions of the Board of Trustees of the
Trust and Shareholder o the Fund authorizing the appointment of the Sub-Adviser
and approving the form of this Agreement;
(d) Written Instrument to Establish and Designate the Fund
as a Separate Series of Shares;
(e) Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-lA (the "Registration
Statement"), as filed with the Commission relating to the Fund and the Fund's
Shares and all amendments thereto;
(f) Notification of Registration of the Trust under the 1940
Act on Form N-8A as filed with the Commission and all amendments thereto; and
(g) Prospectus and Statement of Additional Information of
the Trust (such
-3-
<PAGE> 4
Prospectus and Statement of Additional Information, as currently in effect and
as amended or supplemented from time to time, being herein called the
"Prospectus").
7. Expenses. During the term of this Agreement, the Sub-Adviser
will bear all expenses, including but limited to all interest, taxes, fees and
commissions of every kind, and all custodian charges incurred by it in
connection with its services under this Agreement. The Sub-Adviser shall not be
responsible for any expenses incurred by the Trust, the Fund or the Manager.
8. Compensation. For the services provided and the expenses assumed
by the Sub-Adviser pursuant to this Agreement, the Manager, not the Trust or
the Fund, will pay to the Sub-Adviser a fee, computed daily and payable
monthly, at an annual rate of 0.45% of the first $250 million of the Fund's
average daily net assets; 0.40% of the next $250 million to $500 million of
average daily net assets; and 0.35% on average daily net assets in excess of
$500 million.
9. Standard of Care. Subject to the applicable law, the Sub-Adviser
shall not be liable for any error of judgment or for any loss suffered by the
Fund in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
10. Duration and Termination. This Agreement shall continue in
effect for a period of more than two years from the date hereof only so long as
such continuance is specifically approved at least annually with respect to the
Fund in conformity with the requirements of the 1940 Act and the Rules
thereunder. Notwithstanding the foregoing, this Agreement may be terminated:
(a) with respect to the Fund at any time without penalty upon the vote of a
majority of the Trustees or by vote of the majority of the Fund's outstanding
voting securities, upon sixty (60) days' written notice to the Sub-Adviser, (b)
by the Manager at any time without penalty upon sixty (60) days' written notice
to the Sub-Adviser or immediately upon material breach by the Sub-Adviser or
immediately if, in the reasonable judgment of the Manager, the Sub-Adviser
becomes unable to discharge its duties and obligations under this Agreement, or
(c) by the Sub-Adviser at any time without penalty, upon sixty (60) days'
written notice to the Fund. This Subadvisory Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act) or
the assignment or termination of the Management Agreement.
11. Other Business. Nothing in this Agreement shall limit or
restrict the right of any of the Sub-Adviser's directors, officers, or
employees who may also be a Trustee, officer, or employee of the Trust to
engage in any other business or to devote his or her time and attention in part
to the management or other aspects of any business, whether of a similar or
dissimilar nature, nor limit or restrict the Sub-Adviser's right to engage in
any other business or to render services of any kind to any other corporation,
trust, firm, individual or association.
-4-
<PAGE> 5
12. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. No material amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) by a vote of a majority of the Fund's outstanding voting
securities (unless in the case of (ii), the Trust receives a Commission order
or no-action letter permitting it to modify the Agreement without such vote).
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
14. Notice. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at Morris Corporate Center
I, Building A, 300 Interpace Parkway, Parsippany, New Jersey 07054; or (2) to
the Sub-Adviser at 1 North Lexington Avenue, White Plains, New York 10601.
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. As used in this Agreement, the terms "majority of the
outstanding voting securities," "affiliated person," "interested person,"
"assignment," "broker," "investment adviser," "net assets," "sale," "sell" and
"security" shall have the same meaning as such terms have in the 1940 Act.
Where the effect of a requirement of the federal securities laws reflected in
any provision of this Agreement is made less restrictive by a rule, regulation
or order of the Commission, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order. This Agreement may be signed in counterpart.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
MAINSTAY MANAGEMENT, INC.
By:
-------------------------------
Name:
Title:
MARKSTON INTERNATIONAL, LLC.
By:
-------------------------------
Name:
Title:
-6-
<PAGE> 1
EXHIBIT 10(a)(1)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
FOR CLASS A SHARES
OF THE MAINSTAY FUNDS
WHEREAS, The MainStay Funds (the "Trust") engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, shares of beneficial interest of the Trust are currently divided
into a number of separate series (individually, a "Fund,"and collectively, the
"Funds") as set forth in Schedule A, as amended from time to time;
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of the Plan of Distribution will benefit the
Trust, the Fund and its shareholders;
WHEREAS, the Trust employs NYLIFE Distributors Inc. ("NYLIFE
Distributors") as distributor of the securities of which it is the issuer,
including Class A shares of the Fund; and
WHEREAS, the Trust and NYLIFE Distributors have entered into a
Distribution Agreement, pursuant to which the Trust employs NYLIFE Distributors
in such capacity during the continuous offering of both Class A and Class B
shares of the Trust.
NOW, THEREFORE, the Trust hereby adopts on behalf of the Fund, and NYLIFE
Distributors hereby agrees to the terms of, the Plan, in accordance with Rule
12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to NYLIFE Distributors, as the distributor of
securities of which the Fund is the issuer, a fee for distribution of Class A
shares, and services to shareholders of the Class A shares of the Fund at the
annual rate of 0.25% of the Fund's average daily net assets of the Fund's Class
A shares. Such fee shall be calculated and accrued daily and paid monthly or at
such other intervals as the Trustees shall determine, subject to any applicable
restriction imposed by rules of the National Association of Securities Dealers,
Inc. If this Plan is terminated, the Fund will owe no payments to NYLIFE
Distributors other than any portion of the distribution fee accrued through the
effective date of termination but then unpaid.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
NYLIFE Distributors' services as distributor of the Class A shares of the Fund
in connection with any activities or expenses primarily intended to result in
the sale of Class A shares of the Fund, including, but not limited to,
compensation to registered representatives or other employees of NYLIFE
Distributors and to other broker-dealers that have entered into a Soliciting
Dealer Agreement with NYLIFE Distributors, compensation to and expenses of
employees of NYLIFE Distributors who engage in or support distribution of the
Fund's Class A shares; telephone expenses; interest expense; printing of
prospectuses and reports for other than existing shareholders; preparation,
printing and distribution of sales literature and advertising materials;
<PAGE> 2
administrative services and expenses; and profit on the foregoing; provided,
however, that such amount to be paid to NYLIFE Distributors may be paid to it as
compensation for "service activities" (as defined below) rendered to Class A
shareholders of the Fund. Such fee shall be calculated daily and paid monthly or
at such other intervals as the Board shall determine.
For purposes of the Plan, "service activities" shall mean activities in
connection with the provision of personal, continuing services to investors in
the Fund, excluding transfer agent and subtransfer agent services for beneficial
owners of Fund Class A shares, aggregating and processing purchase and
redemption orders, providing beneficial owners with share account statements,
processing dividend payments, providing subaccounting services for Class A
shares held beneficially, forwarding shareholder communications to beneficial
owners and receiving, tabulating and transmitting proxies executed by beneficial
owners; provided, however, that if the National Association of Securities
Dealers Inc. ("NASD") adopts a definition of "service fee" for purposes of
Section 26(d) of the Rules of Fair Practice of the NASD that differs from the
definition of "service activities" hereunder, or if the NASD adopts a related
definition intended to define the same concept, the definition of "service
activities" in this Paragraph shall be automatically amended, without further
action of the parties, to conform to such NASD definition. Overhead and other
expenses of NYLIFE Distributors related to its "service activities," including
telephone and other communications expenses, may be included in the information
regarding amounts expended for such activities.
3. This Plan shall not take effect until it, together with any
related agreements, has been approved by votes of a majority of both (a) the
Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-l Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
4. The Plan of Distribution shall continue in full force and effect
as to the Fund for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 4.
5. NYLIFE Distributors shall provide to the Trustees of the Trust and
the Trustees shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
6. This Plan may be terminated as to the Fund at any time, without
payment of any penalty, by vote of a majority of the Rule 12b-l Trustees, or by
a vote of a majority of the outstanding voting securities of the Fund on not
more than 30 days' written notice to any other party to the Plan.
7. This Plan may not be amended to increase materially the amount of
the compensation provided for in paragraph 1 hereof unless such amendment is
approved in the
<PAGE> 3
manner provided for initial approval in paragraph 3 hereof, and no material
amendment to the Plan shall be made unless approved in the manner provided for
approval and annual renewal in paragraph 4 hereof.
8. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the Act) of the Trust
shall be committed to the discretion of the Trustees who are not such interested
persons.
9. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 6 hereof, for a period of
not less than six years from the date of this Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
10. The Trustees of the Trust and the shareholders of the Fund shall
not be liable for any obligations of the Trust or the Fund under this Plan, and
NYLIFE Distributors or any other person, in asserting any rights or claims under
this Plan, shall look only to the assets and property of the Trust or the Fund
in settlement of such right or claim, and not to such Trustees or shareholders.
IN WITNESS WHEREOF, the Trust, on behalf of the Fund, and NYLIFE
Distributors have executed this amended and restated Plan of Distribution as of
the ____ day of ______________, 1997, to be effective ______________, 1997.
THE MAINSTAY FUNDS
By:
-------------------------------
Title:
NYLIFE DISTRIBUTORS INC.
By:
-------------------------------
Title:
<PAGE> 4
SCHEDULE A
(as revised, April 27, 1998 and March 15, 1999)
FUND
Capital Appreciation Fund
International Equity Fund
Convertible Fund
Total Return Fund
Value Fund
Government Fund
High Yield Corporate Bond Fund
International Bond Fund
California Tax Free Fund
New York Tax Free Fund
Tax Free Bond Fund
Blue Chip Growth Fund
Research Value Fund
Small Cap Value Fund
Growth Opportunities Fund
Small Cap Growth Fund
Equity Income Fund
Global High Yield Fund
MAP Equity Fund
<PAGE> 1
EXHIBIT 10(a)(2)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
FOR CLASS B SHARES
OF THE MAINSTAY FUNDS
WHEREAS, The MainStay Funds (the "Trust") engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, shares of beneficial interest of the Trust are currently divided
into a number of separate series (individually, a "Fund,"and collectively, the
"Funds") as set forth in Schedule A, as amended from time to time;
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of the Plan of Distribution (the "Plan")
will benefit the Trust, each Fund and its respective shareholders;
WHEREAS, the Trust employs NYLIFE Distributors Inc. ("NYLIFE
Distributors") as distributor of the securities of which it is the issuer,
including Class B shares of each Fund; and
WHEREAS, the Trust and NYLIFE Distributors have entered into a
Distribution Agreement, pursuant to which the Trust employs NYLIFE Distributors
in such capacity during the continuous offering of Class B shares of the Trust.
NOW, THEREFORE, the Trust hereby adopts on behalf of each Fund, and
NYLIFE Distributors hereby agrees to the terms of, the Plan in accordance with
Rule 12b-1 under the Act on the following terms and conditions:
1. Each Fund shall pay to NYLIFE Distributors, as the distributor of
securities of which the Fund is the issuer, a fee for distribution of the Class
B shares of the Fund at an annual rate, as set forth opposite each Fund's name
on Schedule A, of the Fund's average daily net assets attributable to the Fund's
Class B shares. Such fee shall be calculated and accrued daily and paid monthly
or at such other intervals as the Trustees shall determine, subject to any
applicable restriction imposed by rules of the National Association of
Securities Dealers, Inc. If this Plan is terminated, a Fund will owe no payments
to NYLIFE Distributors other than any portion of the distribution fee accrued
through the effective date of termination but then unpaid.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
NYLIFE Distributors' services as distributor of the Class B shares of each Fund
in connection with any activities or expenses primarily intended to result in
the sale of Class B shares of the Fund, including, but not limited to,
compensation to registered representatives or other employees of NYLIFE
Distributors and its affiliates, including NYLIFE Securities Inc., and to other
broker-dealers that have entered into a Soliciting Dealer Agreement with NYLIFE
Distributors, compensation to and expenses of employees of NYLIFE Distributors
who engage in or support distribution of the Fund's Class B
<PAGE> 2
shares; telephone expenses; interest expense; printing of prospectuses and
reports for other than existing shareholders; preparation, printing and
distribution of sales literature and advertising materials; administrative
services and expenses; and profit on the foregoing.
3. Each Fund will pay to NYLIFE Distributors, in addition to the
distribution fee, a service fee at the rate of 0.25% on an annualized basis of
the average daily net assets of the Class B shares of the Fund (the "Service
Fee") as compensation for "service activities" (as defined below) rendered to
shareholders of the Fund. Such Service Fee shall be calculated daily and paid
monthly or at such other intervals as the Board shall determine.
For purposes of the Plan, "service activities" shall mean activities in
connection with the provision of personal, continuing services to investors in a
Fund, excluding transfer agent and subtransfer agent services for beneficial
owners of Fund Class B shares, aggregating and processing purchase and
redemption orders, providing beneficial owners with share account statements,
processing dividend payments, providing subaccounting services for Class B
shares held beneficially, forwarding shareholder communications to beneficial
owners and receiving, tabulating and transmitting proxies executed by beneficial
owners; provided, however, that if the National Association of Securities
Dealers Inc. ("NASD") adopts a definition of "service activities" for purposes
of Conduct Rule 2830 that differs from the definition of "service activities"
hereunder, or if the NASD adopts a related definition intended to define the
same concept, the definition of "service activities" in this Paragraph shall be
automatically amended, without further action of the parties, to conform to such
NASD definition. Overhead and other expenses of NYLIFE Distributors related to
its "service activities," including telephone and other communications expenses,
may be included in the amounts expended for such activities.
4. This Plan shall not take effect until it, together with any
related agreements, has been approved by votes of a majority of both (a) the
Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-l Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
5. The Plan of Distribution shall continue in full force and effect
as to a Fund for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 4.
6. NYLIFE Distributors shall provide to the Trustees of the Trust and
the Trustees shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
7. This Plan may be terminated as to a Fund at any time, without
payment of any penalty, by vote of a majority of the Rule 12b-l Trustees, or by
a vote of a majority of the outstanding voting securities of the Fund on not
more than 30 days' written notice to any other party to the Plan.
- 2 -
<PAGE> 3
8. This Plan may not be amended to increase materially the amount of
compensation provided for herein unless such amendment is approved in the manner
provided for initial approval in paragraph 4 hereof, and no material amendment
to the Plan shall be made unless approved in the manner provided for approval
and annual renewal in paragraph 5 hereof.
9. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the Act) of the Trust
shall be committed to the discretion of the Trustees who are not such interested
persons.
10. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 6 hereof, for a period of
not less than six years from the date of this Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
11. The Trustees of the Trust and the shareholders of each Fund shall
not be liable for any obligations of the Trust or the Fund under this Plan, and
NYLIFE Distributors or any other person, in asserting any rights or claims under
this Plan, shall look only to the assets and property of the Trust or the Fund
in settlement of such right or claim, and not to such Trustees or shareholders.
IN WITNESS WHEREOF, the Trust, on behalf of each Fund, and NYLIFE
Distributors have executed this Plan of Distribution as of the 27th day of
October, 1997, to be effective October 27, 1997.
THE MAINSTAY FUNDS
By:
------------------------------
Title:
NYLIFE DISTRIBUTORS INC.
By:
------------------------------
Title:
- 3 -
<PAGE> 4
SCHEDULE A
(as revised, April 27, 1998 and March 15, 1999)
<TABLE>
<CAPTION>
FUND DISTRIBUTION FEE
<S> <C>
Capital Appreciation Fund .75%
International Equity Fund .75%
Convertible Fund .75%
Total Return Fund .75%
Value Fund .75%
Government Fund .75%
High Yield Corporate Bond Fund .75%
International Bond Fund .75%
California Tax Free Fund .25%
New York Tax Free Fund .25%
Tax Free Bond Fund .25%
Blue Chip Growth Fund .75%
Research Value Fund .75%
Small Cap Value Fund .75%
Growth Opportunities Fund .75%
Small Cap Growth Fund .75%
Equity Income Fund .75%
Global High Yield Fund .75%
MAP Equity Fund .75%
</TABLE>
- 4 -
<PAGE> 1
EXHIBIT 10(a)(3)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
FOR CLASS C SHARES
OF THE MAINSTAY FUNDS
WHEREAS, The MainStay Funds (the "Trust") engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, shares of beneficial interest of the Trust are currently divided
into a number of separate series (individually, a "Fund,"and collectively, the
"Funds") as set forth in Schedule A, as amended from time to time;
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of the Plan of Distribution (the "Plan")
will benefit the Trust, each Fund and its respective shareholders;
WHEREAS, the Trust employs NYLIFE Distributors Inc. ("NYLIFE
Distributors") as distributor of the securities of which it is the issuer,
including Class C shares of each Fund; and
WHEREAS, the Trust and NYLIFE Distributors have entered into a
Distribution Agreement, pursuant to which the Trust employs NYLIFE Distributors
in such capacity during the continuous offering of Class C shares of the Trust.
NOW, THEREFORE, the Trust hereby adopts on behalf of each Fund, and
NYLIFE Distributors hereby agrees to the terms of, the Plan in accordance with
Rule 12b-1 under the Act on the following terms and conditions:
1. Each Fund shall pay to NYLIFE Distributors, as the distributor of
securities of which the Fund is the issuer, a fee for distribution of the Class
C shares of the Fund at an annual rate, as set forth opposite each Fund's name
on Schedule A, of the Fund's average daily net assets attributable to the Fund's
Class C shares. Such fee shall be calculated and accrued daily and paid monthly
or at such other intervals as the Trustees shall determine, subject to any
applicable restriction imposed by rules of the National Association of
Securities Dealers, Inc. If this Plan is terminated, a Fund will owe no payments
to NYLIFE Distributors other than any portion of the distribution fee accrued
through the effective date of termination but then unpaid.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
NYLIFE Distributors' services as distributor of the Class C shares of each Fund
in connection with any activities or expenses primarily intended to result in
the sale of Class C shares of the Fund, including, but not limited to,
compensation to registered representatives or other employees of NYLIFE
Distributors and its affiliates, including NYLIFE Securities Inc., and to other
broker-dealers that have entered into a Soliciting Dealer Agreement with NYLIFE
Distributors, compensation to and expenses of employees of NYLIFE Distributors
who engage in or support distribution of the Fund's Class C
<PAGE> 2
shares; telephone expenses; interest expense; printing of prospectuses and
reports for other than existing shareholders; preparation, printing and
distribution of sales literature and advertising materials; administrative
services and expenses; and profit on the foregoing.
3. Each Fund will pay to NYLIFE Distributors, in addition to the
distribution fee, a service fee at the rate of 0.25% on an annualized basis of
the average daily net assets of the Class C shares of the Fund (the "Service
Fee") as compensation for "service activities" (as defined below) rendered to
shareholders of the Fund. Such Service Fee shall be calculated daily and paid
monthly or at such other intervals as the Board shall determine.
For purposes of the Plan, "service activities" shall mean activities in
connection with the provision of personal, continuing services to investors in a
Fund, excluding transfer agent and subtransfer agent services for beneficial
owners of Fund Class C shares, aggregating and processing purchase and
redemption orders, providing beneficial owners with share account statements,
processing dividend payments, providing subaccounting services for Class C
shares held beneficially, forwarding shareholder communications to beneficial
owners and receiving, tabulating and transmitting proxies executed by beneficial
owners; provided, however, that if the National Association of Securities
Dealers Inc. ("NASD") adopts a definition of "service activities" for purposes
of Conduct Rule 2830 that differs from the definition of "service activities"
hereunder, or if the NASD adopts a related definition intended to define the
same concept, the definition of "service activities" in this Paragraph shall be
automatically amended, without further action of the parties, to conform to such
NASD definition. Overhead and other expenses of NYLIFE Distributors related to
its "service activities," including telephone and other communications expenses,
may be included in the amounts expended for such activities.
4. This Plan shall not take effect until it, together with any
related agreements, has been approved by votes of a majority of both (a) the
Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-l Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
5. The Plan of Distribution shall continue in full force and effect
as to a Fund for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 4.
6. NYLIFE Distributors shall provide to the Trustees of the Trust and
the Trustees shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
7. This Plan may be terminated as to a Fund at any time, without
payment of any penalty, by vote of a majority of the Rule 12b-l Trustees, or by
a vote of a majority of the outstanding voting securities of the Fund on not
more than 30 days' written notice to any other party to the Plan.
- 2 -
<PAGE> 3
8. This Plan may not be amended to increase materially the amount of
compensation provided for herein unless such amendment is approved in the manner
provided for initial approval in paragraph 4 hereof, and no material amendment
to the Plan shall be made unless approved in the manner provided for approval
and annual renewal in paragraph 5 hereof.
9. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the Act) of the Trust
shall be committed to the discretion of the Trustees who are not such interested
persons.
10. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 6 hereof, for a period of
not less than six years from the date of this Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
11. The Trustees of the Trust and the shareholders of each Fund shall
not be liable for any obligations of the Trust or the Fund under this Plan, and
NYLIFE Distributors or any other person, in asserting any rights or claims under
this Plan, shall look only to the assets and property of the Trust or the Fund
in settlement of such right or claim, and not to such Trustees or shareholders.
IN WITNESS WHEREOF, the Trust, on behalf of each Fund, and NYLIFE
Distributors have executed this Plan of Distribution as of the 1st day of
September, 1998, to be effective September 1, 1998.
THE MAINSTAY FUNDS
By:
--------------------------------
Title:
NYLIFE DISTRIBUTORS INC.
By:
--------------------------------
Title:
- 3 -
<PAGE> 4
SCHEDULE A
(as revised March 15, 1999)
<TABLE>
<CAPTION>
FUND DISTRIBUTION FEE
<S> <C>
Capital Appreciation Fund .75%
International Equity Fund .75%
Convertible Fund .75%
Total Return Fund .75%
Value Fund .75%
Government Fund .75%
High Yield Corporate Bond Fund .75%
International Bond Fund .75%
California Tax Free Fund .25%
New York Tax Free Fund .25%
Strategic Income Fund .75%
Strategic Value Fund .75%
Tax Free Bond Fund .25%
Blue Chip Growth Fund .75%
Research Value Fund .75%
Small Cap Value Fund .75%
Growth Opportunities Fund .75%
Small Cap Growth Fund .75%
Equity Income Fund .75%
Global High Yield Fund .75%
MAP Equity Fund .75%
</TABLE>
- 4 -
<PAGE> 1
DECHERT PRICE & RHOADS
1775 Eye Street
Washington, D.C. 20009
March 22, 1999
The MainStay Funds
51 Madison Avenue
New York, NY 10010
Dear Ladies and Gentlemen:
We have acted as counsel to The MainStay Funds, a Massachusetts business
trust (the "Trust"), and we have a general familiarity with the Trust's business
operations, practices and procedures. You have asked for our opinion regarding
the issuance of shares of beneficial interest by the Trust in connection with
the acquisition by MainStay MAP Equity Fund, a series of the Trust, of the
assets of MAP-Equity Fund which will be registered on a Form N-14 Registration
Statement (the "Registration Statement") to be filed by the Trust with the
Securities and Exchange Commission.
We have examined originals or certified copies, or copies otherwise
identified to our satisfaction as being true copies, of various trust records of
the Trust and such other instruments and documents as we have deemed necessary
in order to render this opinion. We have assumed the genuineness of all
signatures, the authenticity of all documents examined by us and the correctness
of all statements of fact contained in those documents.
On the basis of the foregoing, we are of the opinion that the shares of
beneficial interest of the Trust being registered under the Securities Act of
1933 in the Registration Statement will be legally and validly issued, fully
paid and non-assessable by the Trust upon transfer of the assets of the
MAP-Equity Fund pursuant to the terms of the Agreement and Plan of
Reorganization included in the Registration Statement.
We hereby consent to the filing of this opinion with and as part of the
Registration Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
<PAGE> 1
PROXY
MAP-EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS
JUNE 3, 1999
The undersigned hereby appoints as proxies William Clark, Albert Leier
and Judith Keilp and each of them (with power of substitution) to vote for the
undersigned all shares of beneficial interest of the undersigned at the
aforesaid meeting and any adjournment thereof with all the power the undersigned
would have if personally present. The shares represented by this proxy will be
voted as instructed. Unless indicated to the contrary, this proxy shall be
deemed to indicate authority to vote "FOR" all proposals. This proxy is
solicited on behalf of the Board of Directors of MAP-Equity Fund.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy and return it in the enclosed envelope to
____________________, ______________________.
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 President or
Signature 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
Signature if held jointly "Partner." For addition information about how to properly
complete the proxy card, see "Instructions for Signing Proxy
Date: ____________________, 1999 Cards" that accompany the Proxy/Prospectus.
</TABLE>
Please indicate your vote by an "X" in the appropriate box below.
The Board of Directors recommends a vote "FOR"
1. Approval of an Agreement and Plan of Reorganization between
MAP-Equity Fund and The Mainstay Funds on behalf of MainStay MAP Equity Fund.
FOR ______ AGAINST ______ ABSTAIN ______
PLEASE SIGN AND DATE ABOVE.
