<PAGE> 1
MAP-EQUITY FUND
520 BROAD STREET
NEWARK, NEW JERSEY 07102-3111
1-800-559-5535
April 30, 1999
Dear Shareholder:
The Board of Directors (the "Directors") of MAP-Equity Fund ("MAP") is
pleased to announce that it has approved arrangements for the business and
operations of MAP to be continued by reorganizing MAP into a new portfolio of
The MainStay Funds, to be known as MainStay MAP Equity Fund ("MainStay MAP"). If
MAP shareholders approve these arrangements, they will become shareholders of
Class I of MainStay MAP, which will have a different sponsor but substantially
the same portfolio management as MAP. These arrangements are necessary because
after June 30, 1999, MBL Life Assurance Corporation will no longer be able to
serve as sponsor of MAP. The Directors, after thorough analysis and
consideration of various alternatives, believe that these new arrangements are
in the best interests of MAP shareholders because, among other things:
-- as a shareholder of MainStay MAP, you will receive enhanced investment
supervision, administrative shareholder servicing, and distribution
capabilities from a major fund organization and its
affiliates -- MainStay Management, Inc., an indirect subsidiary of New
York Life Insurance Company;
-- two individuals who currently serve as MAP's portfolio managers will
continue to serve as MainStay MAP's portfolio managers through a new
organization that will serve as sub-adviser of MainStay MAP;
-- MainStay MAP will have investment objectives and policies substantially
identical to those of MAP; and
-- as a shareholder of MainStay MAP, you will be able to reinvest dividends
and capital gains distributions and make additional investments in Class
I shares of MainStay MAP without paying a sales charge, and you also will
be able to exchange your Class I shares of MainStay MAP for certain
shares of other portfolios of The MainStay Funds without paying a sales
charge.
The Directors have called a Special Meeting of Shareholders to be held on
June 3, 1999 to consider the proposed reorganization. Detailed information about
the proposed reorganization and the reasons for it are contained in the enclosed
materials. Please exercise your right to vote by completing, dating and signing
the enclosed proxy card. A self-addressed, postage-paid envelope has been
enclosed for your convenience.
IT IS VERY IMPORTANT THAT YOU VOTE AND THAT YOUR VOTING INSTRUCTIONS BE
RECEIVED NO LATER THAN JUNE 2, 1999. You will be advised of the results of the
shareholder meeting shortly after the meeting.
The Directors of MAP recommend that MAP shareholders approve the
reorganization. As a result of the reorganization, MAP will become a portfolio
of The MainStay Funds, the Directors of MAP will resign, and the trustees for
MainStay MAP will be the same trustees who serve on the board of The MainStay
Funds. The Directors believe that the reorganization will benefit MAP
shareholders by enhancing the services and investment options available to them.
For example, following the reorganization, you will be able to exchange your
Class I shares of MainStay MAP for certain shares of 22 other portfolios of The
MainStay Funds, representing a wide range of investment objectives and policies.
In making their determination, the Directors considered many factors, including
the qualifications and capabilities of The MainStay Funds' service providers.
If, as expected, NYLIFE Distributors, Inc., the distributor of The MainStay
Funds, distributes MainStay MAP shares successfully, growth in assets should
make possible the realization of economies of scale and attendant cost savings
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 Class I shares with the same net asset value as their MAP shares.
MainStay MAP will commence operations as soon as the proposed reorganization has
been completed.
<PAGE> 2
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 stock, as well as securities convertible into, or exchangeable for,
common stock. Also, like MAP, MainStay MAP will seek to earn income as a
secondary objective. Markston International, LLC will serve as sub-adviser to
MainStay MAP. We expect that following the reorganization MainStay MAP will be
managed in substantially the same manner as MAP-Equity currently is managed.
Although after the reorganization the total annual operating expenses of
MainStay MAP Class I shares will be higher than the current total operating
expenses of MAP, MainStay Management, Inc. has agreed to limit the total annual
operating expenses of MainStay MAP Class I shares to 1.00% of the net assets
attributable to that Class, for a period of two years. In addition, Class I
shares will not be subject to an initial sales charge.
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 as of the close of business on April 30, 1999, MAP closed to all
new share purchases, including automatic purchases, pending the reorganization.
The Directors of MAP believe that closing MAP to new share purchases will help
facilitate a smooth and efficient transition of its business and operations.
Although MAP shareholders cannot purchase new shares of MAP at this time, they
can redeem their MAP shares through the closing date of the reorganization.
Following the reorganization, shareholders may, of course, purchase additional
shares of MainStay MAP.
NOTE: You may receive more than one proxy package if you hold MAP shares
in more than one account. You must return a separate proxy card for each account
that you own. We have provided postage-paid return envelopes for each.
Sincerely,
/s/ KATHLEEN M. KOERBER
Kathleen M. Koerber
President of
MAP-Equity Fund
<PAGE> 3
MAP-EQUITY FUND
520 BROAD STREET
NEWARK, NEW JERSEY 07102-3111
1-800-559-5535
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 3, 1999
------------------------
April 30, 1999
To the shareholders of
MAP-Equity Fund
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of MAP-Equity Fund ("MAP") will be held at the offices of MAP at 520
Broad Street, Newark, New Jersey 07102-3111, at 10:00 a.m., Eastern time, on
June 3, 1999, for the following purposes:
1. To consider and vote on a proposed Agreement and Plan of Reorganization
providing (a) for the acquisition of all of the assets of MAP by MainStay MAP
Equity Fund ("MainStay MAP"), a newly formed, separately managed series of The
MainStay Funds, in exchange for Class I shares of beneficial interest of
MainStay MAP and the assumption by MainStay MAP of all of the liabilities of
MAP, and (b) for the pro rata distribution of such MainStay MAP Class I shares
to shareholders of MAP and the subsequent liquidation and dissolution of MAP.
2. To transact such other business as may properly come before the Meeting,
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 30, 1999 as
the record date for determination of shareholders entitled to notice of, and to
vote at, the Meeting.
By order of the Board of Directors,
/s/ JUDITH C. KEILP
Judith C. Keilp
Secretary
EACH SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IN PERSON IS
REQUESTED TO DATE, COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED FORM OF PROXY
IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
YOUR PROMPT ATTENTION TO THE ENCLOSED FORM OF PROXY WILL HELP TO AVOID THE
EXPENSE OF FURTHER SOLICITATION.
<PAGE> 4
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> <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., John B. Smith, Custodian FBO John B.
UGMA/UTMA........................................... Smith Jr., UGMA/UTMA
(2) Estate of John B. Smith............................. John B. Smith, Jr., Executor, Estate
of John B. Smith
</TABLE>
2
<PAGE> 5
PROXY STATEMENT/PROSPECTUS
RELATING TO THE ACQUISITION OF THE ASSETS OF
MAP-EQUITY FUND
520 BROAD STREET
NEWARK, NEW JERSEY 07102-3111
TELEPHONE: 1-800-559-5535
BY AND IN EXCHANGE FOR CLASS I SHARES OF
MAINSTAY MAP EQUITY FUND
A SEPARATELY MANAGED SERIES OF THE MAINSTAY FUNDS
51 MADISON AVENUE
NEW YORK, NEW YORK 10010
TELEPHONE: 1-800-624-6782
This Proxy Statement/Prospectus is being furnished to shareholders of
MAP-Equity Fund ("MAP") in connection with a proposed reorganization (the
"Reorganization") in which all of the assets of MAP would be acquired by
MainStay MAP Equity Fund ("MainStay MAP"), a newly formed, separate portfolio of
The MainStay Funds (the "Trust"), in exchange for Class I shares of MainStay MAP
and the assumption by MainStay MAP of all of the liabilities of MAP. The Class I
shares of MainStay MAP received in the Reorganization would then be distributed
to shareholders of MAP, and MAP would 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 June 8, 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 stock, as well as securities convertible into, or
exchangeable for, common stock. 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 "Funds"), see "Investment Objectives, Policies and
Restrictions" in this Proxy Statement/Prospectus. MainStay Management, Inc. will
serve as the manager to MainStay MAP. Markston International, LLC ("Markston
International") will serve as the sub-adviser to MainStay MAP with full power to
make investment decisions for MainStay MAP.
This Proxy Statement/Prospectus, which should be retained for future
reference, sets forth concisely information about MainStay MAP that a
prospective investor should know before investing. Attached hereto as Exhibit B
is the Prospectus for MainStay MAP Class I shares dated May 1, 1999, which
prospectus is incorporated herein by reference (legally forms a part of this
Proxy Statement/Prospectus). A Statement of Additional Information for the
Trust, including information regarding MainStay MAP, dated May 1, 1999, has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. Copies of MainStay MAP's Statement of Additional
Information are available upon request and without charge by writing to NYLIFE
Distributors, Inc. at 300 Interpace Parkway, Building A, Parsippany, New Jersey
07054 or by calling 1-800-MAINSTAY (1-800-624-6782).
A Prospectus for MAP dated May 1, 1998, as supplemented on May 1, 1998,
August 6, 1998, September 24, 1998, and March 31, 1999, and a Statement of
Additional Information for MAP dated May 1, 1998, have been filed with the SEC
and are incorporated herein by reference. Copies of MAP's Prospectus, as
supplemented, and Statement of Additional Information are available upon request
and without charge by calling First Priority Investment Corporation at
1-800-559-5535.
A Statement of Additional Information dated April 30, 1999, containing
additional information about the Reorganization and the parties thereto, has
been filed with the SEC and is incorporated herein by reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS APRIL 30, 1999.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF THE PROPOSED REORGANIZATION...................... 3
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............ 4
PRINCIPAL RISK FACTORS...................................... 5
MANAGER, INVESTMENT ADVISERS AND DISTRIBUTORS............... 6
COMPARISON OF FEES AND EXPENSES............................. 7
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES................ 10
DIVIDEND POLICIES........................................... 11
INFORMATION ABOUT THE REORGANIZATION........................ 11
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS............... 14
ADDITIONAL INFORMATION...................................... 14
VOTING INFORMATION.......................................... 15
</TABLE>
EXHIBIT A -- FORM OF AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT B -- PROSPECTUS OF MAINSTAY MAP CLASS I SHARES
2
<PAGE> 7
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" below.
MainStay MAP will have investment objectives and policies substantially
identical to those of MAP. The risks of investing in MainStay MAP will be
substantially the same as the risks of investing in MAP, although the investment
restrictions of MainStay MAP will be slightly different from the investment
restrictions of MAP. The slight differences in investment restrictions are not
expected to affect the manner in which Markston International, LLC ("Markston
International"), the sub-adviser to MainStay MAP, will manage the assets of
MainStay MAP compared with the manner in which Markston Investment Management,
the investment adviser to MAP, currently manages the assets of MAP. See
"Principal Risk Factors" below. MainStay MAP will follow purchase and redemption
procedures substantially similar to those followed by MAP. Although after the
Reorganization the total annual operating expenses of MainStay MAP Class I
shares will be higher than MAP's current total operating expenses, MainStay
Management has contractually agreed, for a period of two years from the date
that MainStay MAP commences operations, to limit the total annual operating
expenses of MainStay MAP Class I shares to 1.00% of the net assets attributable
to that Class. In addition, MainStay MAP Class I shares will not be subject to
an initial sales charge.
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"
below.
The Directors of MAP have approved the Reorganization because they believe
it will benefit shareholders of MAP through the quality and quantity of services
that are expected to be offered to MainStay MAP shareholders. The Directors also
considered the fact that Markston International will manage the investments of
MainStay MAP in substantially the same manner as Markston Investment Management
currently manages the investments of MAP. The Directors also reviewed and
considered the capabilities of the service providers to The MainStay Funds to
provide management, administrative and distribution services to MainStay MAP. As
discussed below, the service providers to the Trust manage and distribute a
family of 22 mutual fund portfolios with assets of approximately $14 billion as
of March 23, 1999. Shareholders of MainStay MAP will enjoy the same services and
privileges as other shareholders of the Trust, including the opportunity to
exchange MainStay MAP Class I shares for a certain class of shares of the other
portfolios of The MainStay Funds with a wide variety of investment objectives
and policies. For additional information, see "Purchase, Redemption and Exchange
Procedures" below.
The Directors of MAP also took into account a variety of other factors
discussed below in greater detail. See "Information About the Reorganization"
below.
3
<PAGE> 8
THE BOARD OF DIRECTORS OF MAP-EQUITY FUND, CONSISTING SOLELY OF INDEPENDENT
DIRECTORS, UNANIMOUSLY RECOMMENDS APPROVAL OF THE AGREEMENT AND PLAN OF
REORGANIZATION AND ADOPTION OF THE FOLLOWING RESOLUTION OF SHAREHOLDERS IN
ACCORDANCE WITH THE CORPORATIONS LAW OF THE STATE OF DELAWARE:
RESOLVED, THAT THE AGREEMENT AND PLAN OF REORGANIZATION BY AND BETWEEN
THE MAINSTAY FUNDS, ON BEHALF OF MAINSTAY MAP EQUITY FUND, AND MAP-EQUITY
FUND, AS SUBMITTED TO THE SHAREHOLDERS OF MAP-EQUITY FUND AS EXHIBIT A TO
THE PROXY STATEMENT/PROSPECTUS, BE, AND IT HEREBY IS, APPROVED.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The following is a general description of the investment objectives,
policies and restrictions of each of the Funds. This discussion is qualified in
its entirety by reference to the more detailed description set forth in the
accompanying Prospectus of MainStay MAP Class I shares.
The investment objectives and policies of MainStay MAP will be
substantially identical to those of MAP. Furthermore, Markston International
will serve as sub-adviser to MainStay MAP following the Reorganization, with
full power to make investment decisions for MainStay MAP. Markston International
will follow substantially the same investment management style as sub-adviser to
MainStay MAP as Markston Investment Management currently follows as investment
adviser to MAP. For a further discussion of Markston International and Markston
Investment Management, see "Manager, Investment Advisers and Distributors"
below.
Like MAP, MainStay MAP will have a primary investment objective of seeking
long-term appreciation of capital, and a secondary investment objective of
seeking to earn income. There can be no assurance that MainStay MAP will achieve
its stated investment objectives. See "Principal Risk Factors" below.
In seeking to achieve its investment objectives, MAP invests primarily in
equity-type securities, including common stock, as well as securities
convertible into, or exchangeable for, common stock. In seeking to achieve its
investment objectives, MainStay MAP will normally invest at least 65% of its
total assets in these types of securities. MAP invests primarily in securities
traded on national securities exchanges and, to a lesser extent, in securities
traded in the "over-the-counter" market. MainStay MAP will invest primarily in
the securities of domestic issuers.
Like Markston Investment Management, Markston International will identify
securities that are out of favor but where a catalyst exists for turning such
securities into investments that the investment adviser believes will have
improved performance (i.e., value opportunities). Factors examined by Markston
International to indicate realized value will include: statistical indications,
such as low multiples of book value or cash flow; and more fundamental factors,
such as industry consolidations. Also, like Markston Investment Management,
Markston International will emphasize the presence of a catalyst that may unlock
a company's potential value, such as stock repurchase programs, management
changes, restructurings and sales of underperforming assets. In selecting
securities for investment, Markston International also will assess the
judgement, quality and integrity of company management and the track record of
product development.
Like MAP, MainStay MAP also may invest in warrants, may invest up to 10% of
its net assets in the securities of foreign issuers, and may buy "restricted"
securities, which cannot be sold publicly until registered under the Securities
Act of 1933.
Like MAP, under normal circumstances MainStay MAP intends to hold its
securities for a relatively long period of time. Each Fund's investment adviser
may, however, sell investments when it believes the opportunity for current
profits or the risk of market decline outweighs the prospect of capital
appreciation. Like MAP, MainStay MAP also may acquire certain securities from
time to time, in an effort to earn short-term profits.
In addition, when its investment adviser believes that investment
opportunities in the equity markets are diminished (due either to fundamental
changes in those markets or to an anticipated general decline in the value of
equity securities), each Fund may adopt a temporary defensive position. During
such periods, MAP may invest in cash, preferred stock, bonds, debentures, notes,
government obligations, or other evidences of indebtedness. MainStay MAP may
also invest during such periods without limit in cash, preferred stock, money
market investments, or other debt or debt-related instruments. If a Fund adopts
a temporary defensive position, it may not achieve its investment objectives.
4
<PAGE> 9
The investment restrictions of MainStay MAP will be substantially similar
to those of MAP, with certain exceptions. MainStay MAP's fundamental investment
restrictions regarding investment in real estate; investment in commodities and
commodities contracts; making of loans to other persons; diversification of both
the industries and the issuers in which the Fund is permitted to invest; and
acting as an underwriter for the securities of other issuers, will be
substantially similar to those of MAP. The Trustees of MainStay MAP (the
"Trustees") have also adopted a fundamental investment restriction followed by
MAP pertaining to the percentage of total assets that the Fund is permitted to
borrow from banks as a temporary measure. As adopted, however, the fundamental
restriction will permit MainStay MAP to borrow only up to 5% of its total assets
for temporary purposes, instead of the 10% limitation that was followed by MAP.
The Trustees have also adopted a fundamental investment restriction followed by
MAP limiting the amount of voting securities or any other class of securities of
any one issuer that the Fund may own. In adopting this latter restriction,
however, the Trustees increased the percentage limitation from 8% to 10% of the
voting securities of any one issuer.
With respect to MainStay MAP, the Trustees did not adopt certain of MAP's
restrictions that either are no longer required under certain state securities
laws or are not required under the Federal securities laws. These restrictions
pertain to investment by the Fund in oil, gas or mineral leases; investment by
the Fund in the securities of unseasoned issuers; investment by the Fund in
securities that are also held in certain amounts by the Directors or officers of
the Fund; pledging of Fund assets; joint and several participation by the Fund
in securities trading accounts; and investment by the Fund in the securities of
companies for the purpose of exercising control over them.
Moreover, certain fundamental restrictions of MAP (changeable only with the
approval of a majority of shareholders) were adopted by the Trustees as
non-fundamental restrictions of MainStay MAP. These restrictions may be changed
by the affirmative vote of a majority of the Trustees without shareholder
approval. The investment restrictions that the Trustees adopted as
non-fundamental restrictions of MainStay MAP pertain to short sales of
securities; purchases of securities on margin; investment in securities which
are not readily marketable; and investment in securities of other registered
investment companies.
The slight differences in investment restrictions are not expected to
affect the manner in which Markston International will manage the assets of
MainStay MAP compared to the manner in which Markston Investment Management
currently manages the assets of MAP.
Each Fund may, to similar degrees, purchase or engage in the following
other investment instruments and techniques: short-term investments; cash or
cash equivalents; repurchase agreements; when-issued securities; preferred
stock; and U.S. government securities. For additional information on each Fund's
investment restrictions, the instruments which it may purchase, and the
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 stock, as well as securities convertible
into, or exchangeable for, common stock. Investment in common stock and
securities convertible into, or exchangeable for, common stock is particularly
subject to the risk of changing economic, stock market, industry and company
conditions, which can adversely affect the value of a Fund's holdings. Over
time, equity securities can fluctuate in value, sometimes due to factors
unrelated to the issuer of the securities, and such fluctuations can be
pronounced. Changes in the value of a Fund's investments will result in changes
in the value of the Fund's shares and thus its total return to investors. Like
an investment in MAP, an investment in MainStay MAP will not be insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
As part of its investment management strategy, Markston International, like
Markston Investment Management, will attempt to invest in equity securities that
it believes are undervalued and have the potential for future growth. There can
be no guarantee, however, that an assessment of the future value of a
5
<PAGE> 10
given company will be accurate. In the event that the market does not come to
share the investment adviser's assessment of the growth potential of a
particular company, the securities of that company held by the Fund may
experience a decline in value. As a consequence, the Fund may experience a
decline in net asset value, and shareholders may lose money.
In addition, like MAP, MainStay MAP may invest up to 10% of its net assets
in the securities of foreign issuers. Investing in foreign securities involves
special risks. These include the risks of currency fluctuations, political or
economic instability in the country of issue and the possible imposition of
exchange controls or other laws or restrictions. Fluctuations in currency
exchange rates can have a positive or negative affect on the value of a Fund's
shares, depending upon whether the foreign currencies are appreciating or
depreciating relative to the U.S. dollar. In addition, foreign markets may not
be as liquid as U.S. securities markets and securities prices in foreign markets
are generally subject to economic, financial, political and social factors that
are different from the factors to which the prices of securities in U.S. markets
are subject. With respect to some foreign countries, there may be the
possibility of expropriation or confiscatory taxation, limitations on liquidity
of securities, or political or economic developments which could affect the
foreign investments of a 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 a 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 AND DISTRIBUTORS
MAP. Investment advisory services have been provided to MAP by Markston
Investment Management, a New Jersey partnership between Markston International,
Inc. and MBL Sales Corporation. Markston International, Inc. is wholly owned by
Michael J. Mullarkey, Roger Lob and other Markston Investment Management
employees, and is a 49% general partner of Markston Investment Management. MBL
Sales Corporation is an indirect wholly-owned subsidiary of MBL Life Assurance
Company ("MBL Life") and is a 51% partner of Markston Investment Management.
MBL Life has sold its individual life and individual and group annuity
businesses to SunAmerica, Inc. and, as a result, will be ceasing operations.
Markston Investment Management will, however, remain as the investment adviser
to MAP until MAP is reorganized as MainStay MAP. Thereafter, Markston Investment
Management will be dissolved. Once the Reorganization is complete, investment
advisory services will be provided to MainStay MAP by Markston International LLC
("Markston International").
First Priority Investment Corporation ("First Priority"), a registered
broker/dealer under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., serves as the distributor of
MAP's shares.
MainStay MAP. MainStay Management, Inc. ("MainStay Management"), whose
address is 300 Interpace Parkway, Building A, Parsippany, New Jersey 07054, will
serve as the manager to MainStay MAP. MainStay Management is a direct subsidiary
of NYLIFE Inc., which is a direct subsidiary of New York Life Insurance Company.
Following the Reorganization, Markston International will serve as the
sub-adviser to MainStay MAP pursuant to a Sub-Advisory Agreement dated April 30,
1999 between MainStay Management and Markston International. Markston
International is a recently organized New York limited liability company
6
<PAGE> 11
that is registered with the SEC as an investment adviser. Markston International
is wholly owned by Michael J. Mullarkey and Roger Lob and will continue the
investment advisory services conducted previously by Markston Investment
Management. Under the supervision of MainStay Management, Markston International
will be responsible for making the specific decisions about buying, selling and
holding securities for MainStay MAP; selecting brokers and brokerage firms to
trade on behalf of MainStay MAP; maintaining accurate records for MainStay MAP;
and, if possible, negotiating for MainStay MAP favorable commissions and fees
with the brokers and brokerage firms. For these services, Markston International
will be paid a monthly fee by MainStay Management.
MainStay MAP's shares will be distributed by NYLIFE Distributors, Inc.
("NYLIFE") in its capacity as principal underwriter and distributor of the
Trust's shares. NYLIFE Securities, Inc., an affiliated company of NYLIFE, as
well as other registered broker-dealers, sell shares of the Trust pursuant to
dealer agreements with NYLIFE.
COMPARISON OF FEES AND EXPENSES
Management and Advisory Fees. Under the terms of an Investment Advisory
Agreement between MAP and Markston Investment Management, MAP currently pays
Markston Investment Management a basic fee, which accrues daily and is paid
quarterly, adjusted for investment performance, at an annual rate of 0.50% of
the first $200 million of the Fund's daily net asset value, 0.45% of the next
$100 million, 0.40% of the next $100 million, and 0.35% of any net asset value
in excess of $400 million. The basic fee may be increased or decreased by an
amount (the "adjustment amount") determined according to a formula based upon
MAP's performance in relation to the Standard & Poor's 500 Composite Stock Index
(the "Index") over certain designated periods. The maximum allowable adjustment
is 0.30% per annum (0.00577% per week) for performance better or worse by 12
percentage points or more than the performance of the Index. The basic fee may
be increased or decreased by an "adjustment rate" equal to 0.05% per annum
(0.00096% per week) for each full two percentage points that MAP's performance
(including reinvestment of cash dividends) is better or worse, respectively,
than the investment record for the Index. During the fiscal year ended December
31, 1998, Markston Investment Management received an advisory fee at an annual
rate of 0.35% of MAP's average monthly net assets (which reflects a downward
performance adjustment).
Under the terms of a Management Agreement between MainStay MAP and MainStay
Management, MainStay MAP will pay MainStay Management a monthly fee at an annual
rate of 0.75% of the Fund's average daily net assets. Unlike MAP's advisory fee,
MainStay MAP's management fee will not be subject to a performance adjustment.
Under the terms of a Sub-Advisory Agreement between MainStay Management and
Markston International, MainStay Management will pay Markston International a
monthly fee at an annual rate of 0.45% of MainStay MAP's average daily net
assets up to the first $250 million, 0.40% of the next $250 million, and 0.35%
of any amount in excess of $500 million.
Distribution and Shareholder Servicing Fees. Effective as of the close of
business on April 30, 1999, MAP closed to all new share purchases, including
automatic purchases, pending the Reorganization. Prior to that time, First
Priority distributed 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 retained the sales charge paid by investors. The
sales charge began at 4.75% of the offering price of the shares, but was reduced
over successive breakpoints beginning at an investment of $50,000. First
Priority reallowed 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 have been increased, from time to time, to 100% of
the sales charge, as a sales incentive. First Priority also assumed certain
expenses in connection with the offer and sale of MAP's shares, including the
expenses of printing and distributing prospectuses and preparing, printing and
distributing advertising and sales literature.
Following the Reorganization, MainStay MAP will be offered to the public in
multiple classes of shares. All classes will be identical, except that they will
have different initial sales charges, deferred sales charges, distribution and
shareholder servicing arrangements and fees.
As noted above, MAP shareholders will receive Class I shares of MainStay
MAP as a result of the Reorganization. Following the Reorganization, those
shareholders will be able to purchase additional Class I shares of MainStay MAP
and also will be able to purchase Class A, B, or C shares of other portfolios
offered by The MainStay Funds. Class I shares will not be subject to an initial
or a deferred sales charge or
7
<PAGE> 12
to a distribution or service fee. However, Class A, B, and C shares of other
portfolios offered by The MainStay Funds are subject to such charges and fees.
Following the closing of the Reorganization, Class I shareholders of
MainStay MAP who were shareholders of MAP on the date of the Reorganization will
also be able to exchange any of their Class I shares for Class A shares of other
portfolios offered by The MainStay Funds. Class A shares of the portfolios of
The MainStay Funds are subject to a maximum initial sales charge of up to 5.50%
of the purchase price and a 12b-1 distribution fee of 0.25%. Class I
shareholders of MainStay MAP who were shareholders of MAP on the date of the
Reorganization will not, however, pay an initial sales charge on the exchange of
any Class I shares of MainStay MAP for Class A shares of other portfolios
offered by The MainStay Funds. Such Class A shares will, however, be subject to
the applicable 12b-1 fee. For additional information, see "Exchanges" below.
Total Expenses. For the fiscal year ended December 31, 1998, MAP incurred
total fees and expenses at an annual rate of .70% of its average monthly net
assets, after expense reimbursement. During the two-year period following the
commencement of operations of MainStay MAP, total annual fees and expenses of
Class I shares of MainStay MAP will not exceed 1.00% of the average daily net
assets of that class, after expense reimbursement, as described below. For the
first two years from the date that MainStay MAP commences operations, MainStay
Management has contractually agreed to assume the operating expenses of Class I
shares of MainStay MAP to the extent that the total operating expenses
(excluding taxes, interest, brokerage commissions and any extraordinary
expenses) of Class I shares exceed 1.00% of the average daily net assets
attributable to that class on an annual basis. Thereafter, however, MainStay
Management may discontinue assuming such expenses. In addition, if at any time
during the two-year period following the end of the two-year expense limitation
period the total operating expenses of Class I shares of MainStay MAP fall below
1.00% of the net assets attributable to that class, MainStay MAP will reimburse
MainStay Management for expenses paid pursuant to the expense limitation, but
only to the extent that such reimbursements do not cause the expense ratio of
Class I shares to exceed 1.00%.
Comparative Fee Table. The following tables show (1) the shareholder fees
applicable to shares of MAP and Class I shares of MainStay MAP, and (2) the
annual operating expenses incurred by shares of MAP for the 12 months ended
December 31, 1998, and the annual operating expenses expected to be incurred by
Class I shares of MainStay MAP for its first year of operations.
8
<PAGE> 13
<TABLE>
<CAPTION>
MAINSTAY MAP
MAP CLASS I AND PRO FORMA
---- ---------------------
<S> <C> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of public offering price)...................... 4.75% None
Maximum Deferred Sales Charge (Load) on Sale of Shares (as a
percentage of the lesser of original price or redemption
proceeds)................................................. None None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends................................................. None None
Redemption Fee.............................................. None None
Exchange Fee................................................ None None
ANNUAL FUND OPERATING EXPENSES (1)
(Expenses that are deducted from Fund assets)
Management Fees............................................. 0.35% 0.75%
Distribution and/or Service (12b-1) Fees.................... None None
Other Expenses.............................................. 0.42% 0.37%(2)
---- ----
Total Annual Fund Operating Expenses........................ 0.77%(4) 1.12%
==== ====
Expense Reimbursement....................................... -- 0.12%
---- ----
Net Expenses................................................ -- 1.00%(3)
==== ====
</TABLE>
- ---------------
(1) As a percentage of average net assets.
(2) Estimated.
(3) For the first two years from the date that MainStay MAP commences
operations, MainStay Management has contractually 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 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.
(4) First Priority agreed to assume the operating expenses of MAP (excluding
taxes, interest, brokerage commissions, and extraordinary expenses) to the
extent such daily expenses exceeded 1.00% on an annualized basis of MAP's
daily net assets through December 31, 1998. After reimbursement by First
Priority, MAP's total annual operating expenses were 0.70%.
Example of Effect on Fund Expenses. The following Example is intended to
help you compare the cost of investing in MAP with the cost of investing in
MainStay MAP.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
your shareholder fees and the annual operating expenses shown in the tables
above remain the same. Shareholders should note that the expenses reflected
below for MAP include a 4.75% initial sales charge. Although your actual costs
may be higher or lower, based upon these assumptions your costs would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
MAP................................................ $550 $709 $883 $1,384
MainStay MAP....................................... $114 $356 $617 $1,363
</TABLE>
9
<PAGE> 14
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
Effective as of the close of business on April 30, 1999, MAP closed to all
new share purchases, including automatic purchases, pending the Reorganization.
The Directors of MAP believe that closing MAP to new share purchases will help
facilitate a smooth and efficient transition of its business and operations.
Although MAP shareholders cannot purchase new shares of MAP at this time, they
can redeem their MAP shares through the closing date of the Reorganization.
Following the Reorganization, shareholders may, of course, purchase additional
shares of MainStay MAP. The following discussion of MAP's purchase procedures is
qualified by the foregoing statement.
Except as set forth below, the purchase and redemption procedures that will
be followed by MainStay MAP will be substantially similar to those followed by
MAP.
Purchases. Prior to the close of business on April 30, 1999, shares of MAP
were offered for sale at net asset value plus an initial sales charge, as set
forth below, and were not subject to a distribution or service fee.
<TABLE>
<CAPTION>
SALES CHARGE AS % OF
---------------------
AMOUNT OF PURCHASE OFFERING NET AMOUNT
AT OFFERING PRICE PRICE INVESTED
- ------------------ -------- ----------
<S> <C> <C>
Less than $50,000........................................... 4.75% 4.99%
$50,000 up to $99,999....................................... 4.25% 4.44%
$100,000 up to $249,999..................................... 3.60% 3.73%
$250,000 up to $499,999..................................... 2.40% 2.46%
$500,000 up to $999,999..................................... 1.60% 1.63%
$1,000,000 or more.......................................... 1.00% 1.01%
</TABLE>
Class I shares of MainStay MAP will be offered for sale at net asset value
and will not be subject to an initial or a deferred sales charge, or to a
distribution or service fee.
Prior to the close of business on April 30, 1999, for investments by mail,
MAP required a minimum initial investment of at least $250 and minimum
subsequent investments of at least $50. This minimum initial investment did not
apply to periodic investment plans, or Individual Retirement Accounts. In
addition, investments of less than the minimum purchase requirements were
permitted on behalf of participants in a pension, profit-sharing, or other
employee benefit plan or trust meeting the requirements of Section 401 of the
Internal Revenue Code, if the average investment for all participants under the
plan or trust met the minimum purchase requirements for MAP. MAP's Directors
reserved the right to change or waive the minimum purchase requirements.
MainStay MAP will require a minimum initial investment of at least $500,
and minimum subsequent investments of at least $50. MainStay MAP may waive
initial and subsequent investment minimums for certain purchases, when deemed
appropriate, including but not limited to, purchases by certain qualified
retirement plans, New York Life employee and agent investment plans, investments
resulting from distributions by other New York Life products and products
distributed by NYLIFE, and purchases by certain individual investors including
those made by the Trustees, and employees, officers, directors, or agents of New
York Life and its subsidiaries.
Like MAP, MainStay MAP will allow both initial and subsequent purchases of
Class I shares by telephone, subject to certain conditions. Although the
procedures that will be followed by MainStay MAP for telephone purchases will be
substantially similar to those followed by MAP, MainStay MAP will require higher
minimum purchase amounts for telephone transactions than those required by MAP.
Prior to the close of business on April 30, 1999, initial and subsequent
purchases by telephone for shares of MAP were required to be made in an amount
not less than $1,000, and payment was required to be received by 4:00 p.m.
eastern time on the same day that the order was placed in order to receive the
net asset value calculated at 4:00 p.m. eastern time that day.
Initial and subsequent purchases by telephone for Class I shares of
MainStay MAP must be made in an amount not less than $5,000. With respect to
initial purchases, orders received by 4:00 p.m. eastern time will receive the
net asset value calculated that day at 4:00 p.m. eastern time, and payment must
be received in good order within three business days, otherwise the order will
be cancelled and the purchaser may be liable to the Fund for fees and any
losses. With respect to subsequent purchases, payment must be received
10
<PAGE> 15
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. MAP shareholders may make redemption requests by telephone in
amounts up to $25,000. Proceeds of redemption requests in amounts in excess of
$1,000 may be transmitted by wire to the shareholder; proceeds of redemption
requests in amounts less than $1,000 will be mailed. MAP requires a signature
guarantee for redemption requests in amounts greater than $25,000 and for
requests that the proceeds of the redemption be mailed to an address other than
the address of record for the shares redeemed. MAP permits systematic
withdrawals in amounts not less than $50 per withdrawal provided that at the
time the systematic withdrawal plan is initiated, the account value is at least
$5,000.
MainStay MAP will permit redemptions by telephone in amounts of at least
$5,000 but not in excess of $100,000. Telephone redemption requests will be
limited to one request every thirty days, and will not be honored for
certificated shares, shares purchased within the ten days preceding the
redemption request, or for accounts for which the recordholder's address has
been changed within the preceding 30 days. MainStay MAP will require a signature
guarantee for all redemption requests in excess of $100,000, for which the
proceeds are requested to be mailed to an address other than the shareholder's
address of record, or where the shareholder's record address has been changed
within the preceding 30 days. In order to participate in a systematic withdrawal
plan, the shareholder's account value must be at least $10,000 at the time of
the participation request and each systematic withdrawal must be in an amount of
at least $100.
MainStay MAP reserves the right to charge a $12 annual account fee (maximum
of $36 per social security number or tax I.D. number) on accounts with balances
less than $250. This fee will not be charged, however, on retirement plan
accounts, accounts with automatic investment plans or accounts for which
tracking data is not available. In order to maintain an open account in MAP, a
minimum of $250 must be maintained in the account at all times.
Exchanges. Exchanges are not available for MAP shares. Class I
shareholders of MainStay MAP who were shareholders of MAP on the date of the
Reorganization will be able to exchange any Class I shares, including additional
Class I shares purchased after the Reorganization and Class I shares acquired
through dividend reinvestment, for Class A shares of any other portfolio of The
MainStay Funds, without the imposition of an initial sales charge. Once Class I
shares have been exchanged for Class A shares, they may not be exchanged back
into Class I shares. Class A shares purchased other than through an exchange of
Class I shares will be subject to the initial sales charge applicable to Class A
shares. Class A shares of portfolios of The MainStay Funds are exchangeable only
into Class A shares of other portfolios of The MainStay Funds. MainStay MAP will
permit five telephone exchanges per year, free of charge. However, a $10 fee
will be charged for each exchange in excess of five within one year, and
additional exchanges may be denied.
DIVIDEND POLICIES
MAP distributes semi-annually any net investment income, such as dividends,
and distributes annually any net realized capital gains. MainStay MAP will
distribute all of its net investment income and any net capital gains at least
quarterly.
In order for MAP to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, it must distribute
substantially all of its taxable net income and net realized capital gains to
its shareholders. Prior to the closing of the Reorganization, MAP will pay out
any dividends and capital gains applicable to 1998.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary of the proposed Plan is
qualified in its entirety by reference to the Plan attached to this Proxy
Statement/Prospectus as Exhibit A.
The Plan provides that MainStay MAP, a newly created portfolio of The
MainStay Funds, will acquire all of the assets of MAP in exchange for Class I
shares of MainStay MAP and the assumption by MainStay MAP of all of the
liabilities of MAP on the Closing Date, which shall occur on the business day
next following the Valuation Date. The value of MAP's assets to be acquired by
MainStay MAP shall be the value of such assets computed on the Valuation Date.
The number of full and fractional Class I shares of MainStay MAP to be issued
shall equal the number of full and fractional shares of MAP outstanding on the
11
<PAGE> 16
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 Class I 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 Class I 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 Class I shares due such shareholders.
Ownership of MainStay MAP Class I shares will be shown on the books of
MainStay MAP's transfer agent. Class I 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, to MainStay MAP 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 Class I shares of beneficial interest of MainStay MAP
will be issued to shareholders of MAP in accordance with the procedures under
the Plan, as described above. Each share will be fully paid and non-assessable
by MainStay MAP when issued, will be transferable without restrictions, and will
have no preemptive or conversion rights. See "Comparative Information on
Shareholder Rights" below for additional information with respect to the Class I
shares of MainStay MAP.
Federal Income Tax Consequences. The Reorganization is intended to qualify
for Federal income tax purposes as a tax-free reorganization under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, with no gain or loss
recognized by MainStay MAP, MAP, or shareholders of either Fund as a consequence
of the Reorganization. As a condition to the closing of the Reorganization, each
Fund will receive an opinion from Dechert Price & Rhoads, counsel to MainStay
MAP, to the effect that the Reorganization will qualify as a tax-free
reorganization for Federal income tax purposes, based on certain assumptions and
representations made by the Funds.
Shareholders of MAP should consult their tax advisers regarding the effect,
if any, of the proposed Reorganization in light of their individual
circumstances. BECAUSE THE FOREGOING DISCUSSION RELATES ONLY TO THE FEDERAL
INCOME TAX CONSEQUENCES OF THE REORGANIZATION, SHAREHOLDERS OF MAP SHOULD ALSO
CONSULT THEIR TAX ADVISERS AS TO STATE, LOCAL AND OTHER TAX CONSEQUENCES, IF
ANY, OF THE REORGANIZATION.
12
<PAGE> 17
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
MAP MAINSTAY MAP COMBINED
----------- ------------ -----------
<S> <C> <C> <C>
Net assets Class I................................... $60,414,243 $0 $60,414,243
Net asset value per share Class I.................... $24.58 $0 $24.58
Shares outstanding Class I........................... 2,457,556 0 2,457,556
</TABLE>
Considerations of the Board of Directors of MAP. In determining whether to
recommend that MAP shareholders 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 the fact that certain of MAP's expenses in connection with
the Reorganization will be borne by MainStay Management.
7. The Directors considered other alternatives available to MAP, including
its liquidation.
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 the Reorganization
will receive Class I shares of MainStay MAP. MainStay Management has
agreed further not to impose on these shareholders an initial sales
charge on the exchange of any of their Class I shares of MainStay MAP
for Class A shares of other portfolios of The MainStay Funds.
In reaching the decision to recommend that the shareholders of MAP vote to
approve the Reorganization, the Directors of MAP concluded that participation by
MAP in the Reorganization is in the best interests of its shareholders and that
the interests of existing shareholders of MAP will not be diluted as a result of
the Reorganization.
13
<PAGE> 18
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 MAP and not because of such shareholder's
acts or omissions or for some other reason. Thus, the risk of a shareholder of
MainStay MAP incurring financial loss on account of shareholder liability is
considered remote because it is limited to circumstances in which MainStay MAP
itself would be unable to meet its obligations. Under Delaware law, MAP
shareholders generally have no personal liability for the obligations of MAP.
ADDITIONAL INFORMATION
Information concerning the operation and management of MainStay MAP is
incorporated herein by reference from its Prospectus dated May 1, 1999, a copy
of which is attached hereto and incorporated by reference herein. Additional
information concerning MainStay MAP, and the Reorganization, is included in its
Statement of Additional Information ("SAI") dated May 1, 1999, which has been
filed with the SEC and is incorporated by reference in its Prospectus attached
hereto. A copy of the SAI for MainStay MAP is available upon request and without
charge by calling NYLIFE Distributors at 1-800-624-6782.
Information concerning the operation and management of MAP is included in
its Prospectus dated May 1, 1998, as supplemented May 1, 1998, August 6, 1998,
September 24, 1998, and March 31, 1999. Additional information concerning MAP is
included in its SAI dated May 1, 1998. That SAI has been filed with the SEC and,
along with MAP's Prospectus, as supplemented, is incorporated by reference
herein. Copies of the Prospectus, as supplemented, SAI, and Annual Report dated
December 31, 1998 for MAP are available upon request and without charge by
calling First Priority at 1-800-559-5535.
Reports and other information filed by The MainStay Funds, on behalf of
MainStay MAP, and by MAP, including charter documents, can be inspected and
copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Information on the operation of the public
reference room may be obtained by calling the SEC at 1-800-SEC-0330. Copies of
such materials are available on the SEC's Internet site at http://www.sec.gov
and can also be obtained, after payment of a duplicating fee, from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20459, at prescribed rates.
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<PAGE> 19
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, 1-800-559-5535, 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.
Shareholders of record of MAP at the close of business on April 30, 1999
(the "Record Date") will be entitled to vote at the Meeting or any adjournment
thereof. The holders of a majority of the shares of MAP outstanding at the close
of business on the Record Date present in person or represented by proxy will
constitute a quorum for the Meeting. Shareholders are entitled to one vote for
each share held, and each fractional share will be entitled to a proportionate
fractional vote. As of March 23, 1999, there were issued and outstanding
2,549,741 shares of common stock of MAP.
In the event that a quorum is not present at the Meeting, or a quorum is
present at the Meeting but sufficient votes to approve the Plan are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. If a quorum is not present, the persons named as
proxies will vote those proxies which they are entitled to vote FOR the Plan in
favor of such an adjournment and will vote those proxies which they are required
to vote AGAINST the Plan against any such adjournment.
Approval of the Plan and the Reorganization will require the affirmative
vote of the holders of a majority of the outstanding voting securities of MAP.
The Plan will not be approved, and the Reorganization will not be effected,
unless the requisite vote is provided by shareholders of MAP.
"Broker non-votes" are shares held in a broker's street name for which the
broker indicates that instructions have not been received from the beneficial
owners or other persons entitled to vote, and the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be voted for or against any adjournment or proposal. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment
and against the proposal because the required vote is a percentage of the shares
outstanding.
The Directors of MAP know of no other business to be brought before the
Meeting. However, if any other matters properly come before the Meeting, proxies
will be voted in accordance with the judgment of the persons named as proxies.
To the best of MAP's knowledge, as of March 23, 1999, no person owned
beneficially more than 5% of MAP's outstanding shares.
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<PAGE> 20
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this th day of , 1999, by and between The MainStay Funds
("MainStay"), a Massachusetts business trust, on behalf of its MainStay MAP
Equity Fund series (the "Successor Fund"), and MAP-Equity Fund, a Delaware
corporation (the "Reorganizing Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Reorganizing Fund to the Successor Fund in exchange solely for (1) the
assumption by the Successor Fund of all of the liabilities of the Reorganizing
Fund and (2) the issuance by MainStay to the Reorganizing Fund of Class I shares
of beneficial interest of the Successor Fund. The aggregate number of Class I
shares of the Successor Fund (the "Successor Fund Shares") issued to the
Reorganizing Fund will be equal to the number of shares of common stock
("Shares") of the Reorganizing Fund outstanding immediately before the
Reorganization. These transactions will be immediately followed by a pro rata
distribution by the Reorganizing Fund of the Successor Fund Shares it receives
in the exchange described above to the holders of corresponding Reorganizing
Fund Shares in exchange for those Reorganizing Fund Shares and in liquidation of
the Reorganizing Fund, all upon the terms and conditions hereinafter set forth
in this Agreement.
WHEREAS, MainStay and the Reorganizing Fund are registered open-end,
management investment companies;
WHEREAS, MainStay is authorized to issue its shares of beneficial interest
in separate series, including the Successor Fund, each of which maintains a
separate and distinct portfolio of assets;
WHEREAS, the shares of beneficial interest of MainStay with respect to the
Successor Fund are authorized to be issued in multiple classes, including a
class designated "Class I";
WHEREAS, the parties intend that the Successor Fund shall have nominal, if
any, assets and liabilities prior to the transaction contemplated by this
Agreement and shall continue the investment operations of the Reorganizing Fund
thereafter, and that in this regard certain actions shall be taken as described
in this Agreement;
WHEREAS, the Board of Trustees of MainStay, including MainStay's
Independent Trustees, on behalf of the Successor Fund, has determined that the
exchange of all of the assets of the Reorganizing Fund for Successor Fund Shares
and the assumption of all of the liabilities of the Reorganizing Fund by the
Successor Fund is in the best interests of the Successor Fund and its
shareholders and that the interests of the existing shareholders of the
Successor Fund, if any, would not be diluted as a result of this transaction;
WHEREAS, the Board of Directors of the Reorganizing Fund, consisting solely
of the Reorganizing Fund's Independent Directors, has determined that the
exchange of all of the assets of the Reorganizing Fund for Successor Fund Shares
and the assumption of all of the liabilities of the Reorganizing Fund by the
Successor Fund is in the best interests of the Reorganizing Fund and its
shareholders and that the interests of the existing shareholders of the
Reorganizing Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the promises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ALL REORGANIZING FUND ASSETS TO THE SUCCESSOR FUND IN EXCHANGE
FOR THE SUCCESSOR FUND SHARES, THE ASSUMPTION OF ALL REORGANIZING FUND
LIABILITIES, AND THE TERMINATION OF THE REORGANIZING FUND
1.1 Subject to the terms and conditions herein set forth, and on the basis
of the representations and warranties contained herein, the Reorganizing Fund
agrees to transfer all of its assets as set forth in paragraph 1.2 to the
Successor Fund, and MainStay on behalf of the Successor Fund agrees in exchange
therefor (a) to issue to the Reorganizing Fund Successor Fund Shares and (b) to
assume all of the liabilities of the Reorganizing Fund as set forth in paragraph
1.3. Such transactions shall take place at the closing provided for in paragraph
3.1 (the "Closing"). The number of Successor Fund Shares to be issued by
MainStay on behalf of the Successor Fund will be identical to the number of
Reorganizing Fund Shares outstanding on the Valuation Date provided for in
paragraph 2.1.
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<PAGE> 21
1.2 The assets of the Reorganizing Fund to be acquired by the Successor
Fund shall consist of all property, including, without limitation, all cash,
securities, commodities and futures interests, claims (whether absolute or
contingent, known or unknown, accrued or unaccrued) and dividends or interest
receivable which are owned by the Reorganizing Fund and any deferred expenses
shown as an asset on the books of the Reorganizing Fund (the "Reorganizing Fund
Assets") on the Valuation Date provided for in paragraph 2.1.
1.3 The Reorganizing Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Valuation Date provided for in
paragraph 2.1. The Successor Fund shall assume all liabilities, expenses, costs,
charges and reserves reflected on an unaudited statement of assets and
liabilities of the Reorganizing Fund prepared by the Reorganizing Fund, or its
agent, as of the Valuation Date, in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
Successor Fund shall assume only those liabilities of the Reorganizing Fund
reflected on that unaudited statement of assets and liabilities and shall not
assume any other liabilities.
1.4 Immediately after the transfer of assets provided for in paragraph 1.1,
the Reorganizing Fund will distribute pro rata to the Reorganizing Fund's
shareholders of record, determined as of the close of business on the Valuation
Date (the "Reorganizing Fund Shareholders"), the Successor Fund Shares received
by the Reorganizing Fund pursuant to paragraph 1.1, and the Reorganizing Fund
will terminate in accordance with paragraph 1.7. Such distribution will be
accomplished by the transfer of the Successor Fund Shares then credited to the
account of the Reorganizing Fund on the books of the Successor Fund to open
accounts on the share records of the Successor Fund in the names of the
Reorganizing Fund Shareholders and representing the respective pro rata number
of the Successor Fund Shares due such shareholders.
1.5 Ownership of Successor Fund Shares will be shown on the books of the
Successor Fund's transfer agent. Shares of the Successor Fund will be issued in
the manner described in the Successor Fund's prospectus and statement of
additional information.
1.6 Reorganizing Fund Shareholders holding certificates representing their
ownership of Shares of the Reorganizing Fund shall surrender such certificates
or deliver an affidavit with respect to lost certificates, in such form and
accompanied by such surety bonds as the Reorganizing Fund may require
(collectively, an "Affidavit"), to the Reorganizing Fund prior to the Closing
Date. Any Reorganizing Fund Share certificate which remains outstanding on the
Closing Date shall be deemed to be canceled, shall no longer evidence ownership
of any Shares of the Reorganizing Fund and shall instead evidence ownership of
corresponding Successor Fund Shares. The Successor Fund will not issue share
certificates in the Reorganization.
1.7 The legal existence of the Reorganizing Fund shall be terminated as
promptly as reasonably practicable after the Closing Date.
2. VALUATION
2.1 The value of the Reorganizing Fund's assets to be acquired by the
Successor Fund hereunder shall be the value of such assets computed as of the
close of business on the New York Stock Exchange on
June 8, 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.
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
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<PAGE> 22
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.
(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
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<PAGE> 23
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 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.
(p) Insofar as the following relate to the Reorganizing Fund, the
registration statement filed by MainStay on Form N-14 relating to the
shares of the Successor Fund that will be registered with the Commission
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
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<PAGE> 24
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 the Reorganizing Fund, Markston, 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 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
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<PAGE> 25
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 transactions 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 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, 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> 26
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 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
7
<PAGE> 27
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 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 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.
8
<PAGE> 28
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 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
9
<PAGE> 29
materiality to a large extent upon the opinions of officers and other
representatives of the Reorganizing Fund), no facts have come to their attention
that lead them to believe that the N-14 Registration Statement as of its date,
as of the date of the Shareholders Meeting, and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein regarding the Reorganizing Fund or necessary
to make the statements therein regarding the Reorganizing Fund, in light of the
circumstances under which they were made, not misleading. Such opinion may state
that such counsel does not express any opinion or belief as to the financial
statements or other financial data, or as to the information relating to
MainStay or the Successor Fund, contained in the N-14 Registration Statement and
that such opinion is solely for the benefit of the Successor Fund, MainStay, its
Trustees and its officers. Such opinion shall also include such other matters
incident to the transactions contemplated hereby as MainStay may reasonably
request.
In this paragraph 7.6, references to the N-14 Registration Statement
include and relate to only the text of such N-14 Registration Statement and not
to any exhibits or attachments thereto or to any document incorporated by
reference therein.
Each of the foregoing conditions precedent may be waived by MainStay.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF MAINSTAY AND THE REORGANIZING
FUND
If any of the conditions set forth below do not exist on or before the
Closing Date, either party to this Agreement shall, at its option, not be
required to consummate the transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Reorganizing Fund in accordance with the provisions of the Reorganizing Fund's
Articles of Incorporation and By-Laws and certified copies of the resolutions
evidencing such approval shall have been delivered to MainStay.
8.2 On the Closing Date, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency which seeks to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities deemed necessary by
MainStay or the Reorganizing Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Successor Fund or the Reorganizing Fund.
8.4 The N-14 Registration Statement shall have become effective under the
1933 Act and no stop orders suspending such effectiveness shall have been
instituted or, to the knowledge of either party to the Agreement, contemplated
by the Commission and the parties shall have received any other authorizations
necessary under state securities laws to consummate the transaction contemplated
by this Agreement.
8.5 MainStay and the Reorganizing Fund shall have received the opinion of
Dechert Price & Rhoads addressed to MainStay on behalf of the Successor Fund and
to the Reorganizing Fund substantially to the effect that for federal income tax
purposes:
(a) The transfer by the Reorganizing Fund of all of its assets to the
Successor Fund in exchange for Successor Fund Shares and the assumption by
the Successor Fund of all of the Reorganizing Fund's liabilities, and the
distribution of the Successor Fund Shares to the Reorganizing Fund
Shareholders, as provided in this Agreement, will constitute a
reorganization within the meaning of Section 368(a)(1) of the Code, and the
Successor Fund and the Reorganizing Fund are each a "party to the
reorganization" within the meaning of Section 368(b) of the Code.
(b) In accordance with Sections 361(a), 361(c)(1) and 357(a) of the
Code, no gain or loss will be recognized by the Reorganizing Fund as a
result of such transactions.
(c) In accordance with Section 1032(a) of the Code, no gain or loss
will be recognized by the Successor Fund as a result of such transactions.
(d) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by the shareholders of the Reorganizing Fund on the
distribution to them by the Reorganizing Fund of the Successor Fund Shares
in exchange for their shares of the Reorganizing Fund.
10
<PAGE> 30
(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 to the transactions.
(g) In accordance with Section 1223(1) of the Code, a shareholder's
holding period for the Successor Fund Shares will be determined by
including the period for which the shareholder held the shares of the
Reorganizing Fund exchanged therefor, provided that the shareholder held
such shares of the Reorganizing Fund as a capital asset.
(h) In accordance with Section 1223(2) of the Code, the holding period
of the Successor Fund with respect to the Reorganizing Fund Assets will
include the period for which such Assets were held by the Reorganizing
Fund.
(i) In accordance with Section 381(a) of the Code, the Successor Fund
will succeed to the tax attributes of the Reorganizing Fund described in
Section 381(c) of the Code.
8.6 No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain or
prohibit or obtain damages or other relief in connection with this Agreement or
the transactions contemplated herein.
8.7 The Commission shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the transactions contemplated by this Agreement under
Section 25(c) of the 1940 Act.
8.8 Either party, at its option, may waive compliance by the other party
with any condition contained in this Section 8, other than the conditions
contained in Sections 8.1 and 8.4.
9. BROKERAGE FEES AND EXPENSES
9.1 The Reorganizing Fund and MainStay on behalf of the Successor Fund each
represents and warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
9.2 Except as described in this Section 9.2, none of the fees or expenses
of counsel, accountants, agents, or representatives of MainStay incurred in
connection with the Reorganization shall be borne by the Reorganizing Fund, and
no such fees and expenses of the Reorganizing Fund shall be borne by MainStay.
The printing, postage, and solicitation expenses (including the fees and
expenses of a proxy solicitor) incurred in connection with the Reorganization
shall be borne by MainStay Management, Inc. MainStay Management, Inc. will also
bear Commission 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
11
<PAGE> 31
be delivered to MainStay or its designees each account, book, record or other
document of the Reorganizing Fund required to be maintained by Section 31(a) of
the 1940 Act and Rules 31a-1 to 31a-3 thereunder (regardless of whose possession
they are in).
12. TERMINATION
This Agreement may be terminated by a party at or, in the case of
Subsection 12(c) below, at any time prior to, the Closing Date by a vote of a
majority of its Board as provided below:
(a) By the Reorganizing Fund if the conditions set forth in Section 6
or 8 are not satisfied as specified in said Section;
(b) By MainStay on behalf of the Successor Fund if the conditions set
forth in Section 7 or 8 are not satisfied as specified in said Section;
(c) By either MainStay on behalf of the Successor Fund or by the
Reorganizing Fund by notice to the other stating that the terminating
party's Board has determined, in the exercise of its fiduciary duties under
applicable state law and the 1940 Act, that consummation of the
Reorganization is no longer in the best interests of the terminating party
and its shareholders; and
(d) By mutual consent.
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, New Jersey 07054, Attention: Stephen C. Roussin or to
MAP-Equity Fund, 520 Broad Street, Newark, New Jersey 07102-3111, Attention:
Judith C. Keilp with a copy to Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036, Attention: Richard M. Phillips.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY;
ACKNOWLEDGEMENTS
15.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts.
15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
15.5 It is expressly agreed that the obligations of MainStay hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of MainStay personally, but bind only the trust property of
the Successor Fund, as provided in the Declaration of Trust of MainStay. The
execution and delivery by such officers shall not be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Successor Fund as provided in the
Declaration of Trust of MainStay.
12
<PAGE> 32
15.6 The parties acknowledge that the Successor Fund's manager, MainStay
Management, Inc., has agreed with the Successor Fund that for the two-year
period following the commencement of the Successor Fund's operations, the total
operating expenses (excluding taxes, interest, brokerage commissions and any
extraordinary expenses) of Class I Shares of the Successor Fund will be limited
to not more than 1.00% per annum of the average daily net assets attributable to
Class I Shares of the Successor Fund. MainStay Management, Inc. has agreed to
waive its management fee or reimburse expenses (excluding taxes, interest,
brokerage commissions and any extraordinary expenses) of Class I Shares of the
Successor Fund to the extent required to do so to satisfy this expense
limitation provision.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President.
The MainStay Funds
on behalf of the
MainStay MAP Equity Fund
By:
Title:
MAP-Equity Fund
By:
Title:
13
<PAGE> 33
EXHIBIT B
PROSPECTUS OF MAINSTAY MAP CLASS I SHARES
<PAGE> 34
MainStay MAP Equity Fund Prospectus May 1, 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> 35
What's Inside?
MAP Equity Fund............................................................. 3
Account Policies: Buying, Selling and Exchanging Shares..................... 6
Decide How to Receive Your
Earnings.................................................................... 12
Understand the Tax
Consequences................................................................ 13
Know With Whom You're
Investing................................................................... 14
Financial
Highlights.................................................................. 15
2
<PAGE> 36
MAP EQUITY FUND
INVESTMENT OBJECTIVES -- 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.
INVESTMENT PROCESS -- In pursuing the Fund's investment objective, Markston
International, LLC, the Fund's Subadviser, seeks to identify securities that are
out of favor but where a catalyst exists for turning such securities into
investments that the Subadviser believes will have improved performance (i.e.,
value opportunities). Factors examined by the Subadviser 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
Subadviser 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 Subadviser
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 Subadviser 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.
PRINCIPAL RISKS -- The net asset value of the Fund will fluctuate and you could
lose money by investing in the Fund. An investment in the Fund is not a deposit
in a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Investment in common stocks, securities convertible into common stocks and other
equity securities 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. The total return for a convertible security will
be partly dependent upon the performance of the underlying common stock into
which it can be converted. The principal risk of investing in value stocks is
that they may never reach what the Subadviser believes is their full value or
that they may even go down in value. In addition, different types of stocks tend
to shift in and out of favor depending on market and economic conditions and
therefore the Fund's performance may be lower or higher than that of funds that
invest in other types of equity securities (such as those emphasizing growth
stocks).
TEMPORARY DEFENSIVE INVESTMENTS -- In times of unusual or adverse conditions, or
during periods when the Subadviser 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 without limit in cash,
preferred stock, money market investments or other debt or debt-related
instruments. During such times, the Fund may not invest in accordance with its
investment objectives or investment strategies and, as a result, the Fund may
not achieve its investment objectives.
3
<PAGE> 37
FEES AND EXPENSES OF THE FUND
The table below describes the fees and expenses that you may pay if you buy and
hold Class I shares of the Fund.
<TABLE>
<CAPTION>
MAP EQUITY FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR
INVESTMENT)
MAXIMUM SALES CHARGE (LOAD)
IMPOSED ON PURCHASES OF
SHARES (as a percentage of
offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of redemption
proceeds) None
Exchange Fee *
Maximum Account 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 0.37%(1)
---
Total Annual Fund Operating
Expenses 1.12%(2)
===
Fee Waiver 0.12%
Net Expenses 1.00%
<CAPTION>
</TABLE>
* Except for systematic exchanges, exchanges processed via MainStay's automated
system and as to certain accounts for which tracking data is not available,
after five exchanges per calendar year, a $10 fee will be imposed per
exchange.
** An annual account fee of $12 (subject to a maximum of $36 per social
security/tax I.D. number) will be charged on accounts with balances below
$250. There are exceptions. See "Account Policies: Buying, Selling, and
Exchanging Shares."
1. Estimated.
2. The Manager has contractually agreed to limit total annual fund operating
expenses to 1.00% for Class I shares for a period of two years from the date
of this prospectus, after which time the Manager may discontinue the
limitation. For a two-year period following expiration of the expense
limitation, the Manager may be entitled to reimbursement for a portion of
expenses paid pursuant to the expense limitation.
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. There is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
EXPENSES
AFTER
- ---------------------
1 year $ 114
3 years $ 356
5 years $ 617
10 years $1,363
</TABLE>
4
<PAGE> 38
PAST PERFORMANCE
The bar chart and table indicate 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, the MAP-Equity Fund is to be
reorganized as the MainStay MAP Equity Fund on or about June 9, 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 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.
[MAP Equity Fund Bar Chart]
<TABLE>
<CAPTION>
'89' 28.18
<S> <C>
'90' -5.09
'91' 27.69
'92' 10.53
'93' 8.67
'94' 2.76
'95' 32.50
'96' 23.82
'97' 27.99
'98' 24.23
</TABLE>
ANNUAL RETURNS
(by calendar year 1989-1998)
BEST AND WORST QUARTERLY RETURNS
(1989-1998)
<TABLE>
<CAPTION>
MAP EQUITY FUND (CLASS I) RETURN QUARTER/YEAR
<S> <C> <C>
Highest Return/Best Quarter 18.69% 4/98
Lowest Return/Worst Quarter -14.62% 3/90
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
as of 12/31/98
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
MAP Equity Fund
Class I 18.33% 20.62% 16.90%
S&P 500* 28.58% 24.06% 19.21%
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is considered to be generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
5
<PAGE> 39
Account Policies: Buying, Selling and Exchanging Shares
General Instructions: Buying and Selling Shares
Shares are not available for purchase until on or about June 9, 1999.
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
<S> <C> <C> <C> <C> <C>
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 9, 1999, certain Send overnight orders to: documentation, if required.
institutional investors and The MainStay Funds
employees, retiring employees, c/o Boston Financial Mail your request to:
former employees, retirees, Data Services The MainStay Funds
current and formerly affiliated 2 Heritage Drive P.O. Box 8401
sales agents and retired sales North Quincy, MA 02171-2138 Boston, MA 02266-8401
agents of MBL Life Assurance
Corp. and its affiliates, You must ask to sell your shares in
including individual retirement writing and have your signature
accounts, qualified pension guaranteed for:
plans, deferred benefit plans
and other pension or profit - amounts of $100,000 or more
sharing or incentive plans, for - accounts which have had a change of
such persons. 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 MainStay
Shareholder Services, Inc., the Fund's
Transfer Agent, ("MSS") to ensure that
your signature guarantee will be
processed correctly.
</TABLE>
IN WRITING
6
<PAGE> 40
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
<S> <C> <C> <C> <C> <C>
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 wire 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.
MainStay charges a $10 fee per
transaction. 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>
BY TELEPHONE
7
<PAGE> 41
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
<S> <C> <C> <C> <C> <C>
AUTOINVEST
Not Applicable. Investors who are authorized for
AutoInvest can call MSS toll free at
1-800-MAINSTAY to make scheduled
systematic investments from a designated
bank account or to buy shares by using
electronic debits from a designated bank
account.
PAYROLL DEDUCTION
For making automatic investments through
a payroll deduction.
DIVIDEND REINVESTMENT
For automatically reinvesting dividends
and distributions in the Fund or another
MainStay Fund.
SYSTEMATIC WITHDRAWAL PLAN
To make regular redemptions, choose
the plan when you open your account or
call MSS to request a form to add the
plan. Complete the form, specifying
the amount and frequency of
withdrawals you would like.
Withdrawals must be at least $100. You
must have at least $10,000 in your
account at the time of request and
shares must not be in certificate
form. You should not use a systematic
withdrawal plan when you are regularly
buying shares. You will be paying
sales charges to replace the shares
you're selling.
SYSTEMATIC EXCHANGES
For regular, systematic exchanges from
one MainStay Fund to another.
TELEPHONE EXCHANGES
For telephone exchanges from one
MainStay Fund to another.
</TABLE>
AUTOMATICALLY
8
<PAGE> 42
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
<S> <C> <C> <C> <C> <C>
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) every day 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 MSS
receives your order in good Your shares will be sold at the next
order. This means all the NAV calculated after MSS receives your
necessary information, order in good order. MainStay will
signatures and documentation make the payment within 7 days after
has been received. receiving your 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 Subadviser,
in consultation with the
Manager, may, in its judgment,
determine that an adjustment to
NAV should be made because
intervening events have caused
the Fund's NAV to be materially
inaccurate.
</TABLE>
NAV
9
<PAGE> 43
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TO OPEN AN ACCOUNT TO BUY MORE SHARES TO SELL SHARES
<S> <C> <C> <C> <C> <C>
MINIMUM INVESTMENTS* If you buy shares by check and quickly There will be no redemption during any
decide to sell them, the Fund will period in which the right of
Initial $500 withhold payment for 10 days from the redemption is suspended or date of
Subsequent $50 date the check is received. payment is postponed because the New
York Stock Exchange is closed or
*The minimum initial investment Minimum investment for subsequent trading on the Exchange is restricted
amount is waived for purchase purchases: $50 or the SEC deems an emergency to
by the Trustees, New York Life exist.
and its subsidiaries and their
employees, officers, directors REDEMPTIONS-IN-KIND
or agents.
The Fund reserves the right to pay
All investments must be in U.S. certain redemptions, either totally or
dollars and drawn on a U.S. partially, by a distribution in kind
bank. Except under certain of securities (instead of cash) from
circumstances, third-party the Fund's portfolio.
checks cannot be accepted. If
your check doesn't clear, your CONVENIENT, YES . . . BUT NOT
order will be canceled and you RISK-FREE
could be liable for losses or
fees. We also reserve the right Telephone redemption privileges are
to limit the number of checks convenient, but you give up some
processed at one time. security. When you sign the
Telephone purchase orders must application to buy shares, you agree
be at least $5,000 per Fund. that neither The MainStay Funds nor
Wires are not accepted when the MSS will be liable for following phone
New York Stock Exchange or instructions that they reasonably
banks are closed. believe are genuine. When using the
MainStay Audio Response System, you
The Fund reserves the right to bear the risk of any loss from your
charge a $12 annual account fee errors unless the Fund or MSS fail to
(maximum of $36 per social use established safeguards for your
security or tax I.D. number) on protection. These safeguards are among
accounts with balances less those currently in place at
than $250. The fee is not MainStay Funds:
charged on retirement plan
accounts, accounts with - all phone calls are tape recorded;
automatic investment plans and and
accounts for which tracking - written confirmation of every
data is not available. transaction is sent to your address
of record.
</TABLE>
OTHER
10
<PAGE> 44
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 Rule 12b-1
fee is imposed on Class A shares. Class I shareholders should request and read
carefully the prospectus for any MainStay Fund they wish to exchange into before
they place an exchange request. 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.
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 for redemptions under the systematic withdrawal plan.
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. Exchanges are limited to five
exchanges per account in each calendar year without imposition of transaction
fees; subsequent exchanges will incur a $10 fee or may be denied. The
processing fee will not be charged on systematic exchanges, on exchanges
processed via MainStay's automated system, and on certain accounts for which
tracking data is not available.
- - change or discontinue its exchange privilege after notifying shareholders, 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.
11
<PAGE> 45
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 quarterly. 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
12
<PAGE> 46
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.
BACKUP WITHHOLDING
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to you if you
fail to provide the Fund with your correct taxpayer identification number or to
make required certifications, or if you have been notified by the IRS that you
are subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
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.
The Government includes tax-exempt income when computing the amount of Social
Security or other benefits that are subject to tax.
c
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 federal, state, and local taxation, see the SAI.
DON'T OVERLOOK SALES CHARGES
The amount you pay in sales charges reduces gains and increases losses for tax
purposes.
13
<PAGE> 47
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 Subadviser.
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 Subadviser.
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 Subadviser. Under the supervision of the
Manager, the Subadviser 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 Subadviser 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 MAP-Equity Fund since
1981, and Roger Lob has been a portfolio manager for the MAP-Equity Fund 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 facilitates
the Fund's diversification while allowing each manager to focus his research on
a limited number of companies.
YEAR 2000
The services provided to the Fund by the Manager, the Subadviser, and the Fund's
other service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities trades, pricing and account services. The
Manager, the Subadviser, and the Fund's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems that they use. The Fund has no reason to believe
these steps will not be sufficient to avoid any material adverse impact on the
Fund, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to the
Manager, the Subadviser and the Fund's other service providers at this time but
could have a material adverse impact on operations of the Fund and the Manager,
the Subadviser, and the Fund's other service providers. In addition, companies
in which the Fund invests may experience Year 2000 Issue difficulties which
could adversely impact their business and adversely affect the value of the
securities issued by them.
14
<PAGE> 48
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(1)............................................. 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>
- --------
<TABLE>
<C> <S>
(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, the MAP-Equity Fund is to be reorganized as
the MainStay MAP Equity Fund on or about June 9, 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 will be available for purchase on or about June 10,
1999. Total return does not reflect the sales commission
(maximum 4.75%) charged on Fund shares.
</TABLE>
15
<PAGE> 49
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.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
