SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__ )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement Confidential, for Use of
the Commission Only
(as permitted by
Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ECLIPSE FUNDS
(Name of Registrant as Specified in Its Charter/Declaration of Trust)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(4 and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Wesley G. McCain
Chairman
Eclipse Funds
November [2], 2000
Dear Shareholder:
Towneley Capital Management, Inc. ("Towneley"), your Fund's investment
adviser, has entered into an agreement with New York Life Investment Management
Holdings LLC ("NYLIM Holdings"), a subsidiary of New York Life Insurance
Company, pursuant to which NYLIM Holdings will acquire certain of the business
segments and operations of Towneley, including the business, operations and
activities that Towneley conducts relating to providing investment advisory
services to certain institutional and private accounts and to the Eclipse
no-load family of funds (the "Funds"). Towneley investment personnel currently
managing the Funds, including me, will become employees of New York Life
Investment Management LLC ("NYLIM LLC"), an affiliate of NYLIM Holdings. If
shareholders approve a new investment advisory agreement, NYLIM LLC would
perform investment advisory and administrative services for the Funds, but the
portfolio management of the Funds would remain substantially the same. A more
thorough description of the businesses of NYLIM Holdings, NYLIM LLC and their
affiliates is contained in the proxy statement.
Under NYLIM LLC's management, the Funds will have access to the greater
investment resources of NYLIM LLC and its affiliates. In addition, the Funds
will be distributed together with the MainStay Institutional Funds Inc., a
no-load fund family that will also be managed by NYLIM LLC (the "NYLIM Funds).
At the shareholder meeting on December [5], 2000, you will be asked to
approve a new management agreement for your Fund to take effect after the
closing of the transaction. The new agreement is the same in all material
respects as that currently in effect including advisory fees charged. NYLIM LLC
will provide fund administration services under the new agreement without any
increase in fees, and the new agreement will include other changes to conform to
the agreements for the NYLIM Funds to permit ease of administration. If the
agreement is approved, NYLIM LLC will manage the Funds following the
transaction, but the management team will remain the same. Approval of the new
advisory agreement is sought so that management of each Fund can continue
uninterrupted after the transaction, because the current agreement will
terminate automatically as a result of the transaction. At the shareholder
meeting, you also will be asked to ratify the selection of the independent
auditors and to elect new Trustees for Eclipse Funds (the "Trust").
After careful consideration, the Trust's Board of Trustees unanimously
approved each of the proposals and recommends that shareholders vote "FOR" each
proposal.
Your vote is important regardless of the number of shares you own.
Please read the proxy statement and cast your vote promptly. It is important
that your vote be received by no later than the time of the shareholder meeting
on December [5], 2000.
If you are a shareholder of more than one Fund, or have more than one
account registered in your name, you will receive one proxy card for each
account. Please vote and return each proxy card that you receive.
If you have any questions before you vote, please call 1-800-872-2710.
We'll help you get the answers you need promptly. We appreciate your
participation and prompt response in this matter and thank you for your
continued support.
Sincerely,
Wesley G. McCain
(enclosures)
<PAGE>
NOTICE OF A SPECIAL MEETING
OF THE SHAREHOLDERS OF
ECLIPSE FUNDS
Eclipse Ultra Short Term Income Fund
Eclipse Balanced Fund
Eclipse Mid Cap Value Fund
Eclipse Small Cap Value Fund
(each a "Fund" and collectively, the "Funds")
Notice is hereby given that a Special Meeting of the Shareholders (the
"Special Meeting") of the Funds, each a series of Eclipse Funds (the "Trust"),
will be held on December [5], 2000, at 10:00 a.m., Eastern time, at 470 Park
Avenue South, 16th Floor, New York, New York, 10016 for the following purposes:
1. To consider the election of four (4) Trustees to serve until their successors
are elected and qualified;
2. To approve or disapprove a new Investment Advisory Agreement between the
Trust, on behalf of each Fund, and New York Life Investment Management LLC
("NYLIM LLC"), a subsidiary of New York Life Insurance Company;
3. To ratify or reject the selection of PricewaterhouseCoopers LLP as
independent auditors for the Funds for the fiscal year ending December 31, 2000;
and
4. To transact such other business as may properly come before the Special
Meeting and any adjournments thereof.
Please read the enclosed proxy statement carefully for information
concerning the proposals to be placed before the Special Meeting.
Shareholders of record at the close of business on October [24], 2000
are entitled to notice of and to vote at the Special Meeting and at any
adjournments thereof. You are invited to attend the Special Meeting. If you
cannot do so, however, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY, AND RETURN
IT IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. Any shareholder
attending the Special Meeting may vote in person even though a proxy has already
been returned.
By Order of the Board of Trustees,
Sigrid A. Hess
Secretary
November [2], 2000
<PAGE>
ECLIPSE FUNDS
IMPORTANT NEWS FOR SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here is a brief overview of some matters affecting your Fund that
will be the subject of a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Your Fund's investment adviser, Towneley Capital Management, Inc.
("Towneley"), has agreed to sell certain segments of its portfolio
management businesses, including the business, operations and
activities that Towneley conducts relating to providing investment
advisory services to certain institutional and private accounts and to
the Eclipse no-load family of funds, to New York Life Investment
Management Holdings LLC ("NYLIM Holdings"), a subsidiary of New York
Life Insurance Company. Headquartered in New York, New York, NYLIM
Holdings and its affiliates encompass a broad range of specialties
including: retail and institutional mutual funds, direct institutional
asset management, guaranteed products, retirement plans, and full
service products for defined contribution and defined benefit plans.
To ensure that there is no interruption in the services that Towneley
currently provides to your Fund, we are asking the shareholders of each
Fund to approve a new investment advisory agreement with New York Life
Investment Management LLC ("NYLIM LLC"), an affiliate of NYLIM
Holdings. The most important matters to be voted upon by you are
approval of the new investment advisory agreement and the election of
Trustees. The following pages give you additional information about
NYLIM Holdings, NYLIM LLC, the new investment advisory agreement and
certain other matters. The Board Members of your Fund, including those
who are not affiliated with the Fund, Towneley, NYLIM Holdings, NYLIM
LLC or any of their affiliates, unanimously recommend that you vote FOR
these proposals.
Q. WHY DID YOU SEND ME THIS BOOKLET?
A. You are receiving these proxy materials -- a booklet that includes the
Proxy Statement and one or more proxy cards -- because you have the
right to vote on important proposals concerning your investment in the
Fund.
Q. WHY ARE MULTIPLE CARDS ENCLOSED?
A. If you own shares of more than one Fund, you will receive a proxy card
for each Fund that you own.
Q. WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT ADVISORY AGREEMENT?
A. The Investment Company Act of 1940, which imposes regulations on
investment companies such as your Fund, requires that fund shareholders
approve a new investment advisory agreement whenever there is an
assignment of an investment advisory agreement. The Towneley-NYLIM
Holdings transaction will result in such an assignment. Therefore, we
are seeking shareholder approval of the new investment advisory
agreement between NYLIM LLC and your Fund.
Q. HOW WILL THE TOWNELEY-NYLIM HOLDINGS TRANSACTION AFFECT ME AS A FUND
SHAREHOLDER?
A. The investment management of your Fund and its investment objectives
will not change as a result of the transaction. There will be no
increase in advisory fees. You will still own the same shares in the
same Fund. The Towneley investment personnel currently managing the
Funds will become employees of NYLIM LLC and will remain primarily
responsible for the management of the Funds in connection with the
transaction.
Under NYLIM LLC's management, the Funds will have access to the greater
investment resources of NYLIM LLC and its affiliates. In addition, the
Funds will be distributed together with the MainStay Institutional
Funds Inc., a no-load family of funds that will also be managed by
NYLIM LLC (the "NYLIM Funds").
Q. WILL THE INVESTMENT ADVISORY FEES INCREASE AS A RESULT OF THE
TRANSACTION?
A. No, the proposal to approve the new agreement seeks no increase in the
investment advisory fee rates paid by your Fund.
Q. WILL I CONTINUE TO BE ABLE TO PURCHASE SHARES WITHOUT ANY LOAD?
A. Yes, you will be able to continue to purchase shares of your Fund
without any sales load.
Q. WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A. As noted above, you are being asked to elect four (4) new members of
the Board. You are also being asked to vote for the ratification of the
Board's selection of the Fund's accountants.
Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A. After careful consideration, the Board Members of your Fund, including
those who are not affiliated with the Fund, Towneley, NYLIM Holdings,
NYLIM LLC or their affiliates, unanimously recommend that you vote FOR
the Proposals.
Q. WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
A. No, Towneley, NYLIM Holdings and/or their affiliates will bear these
costs.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications Corporation, Towneley's proxy
representative, at 1-800-xxx-xxxx.
<PAGE>
PRELIMINARY COPIES
ECLIPSE FUNDS
470 Park Avenue South
16th Floor
New York, New York 10016
(800) 872-2710
Eclipse Ultra Short Term Income Fund
Eclipse Balanced Fund
Eclipse Mid Cap Value Fund
Eclipse Small Cap Value Fund
(each, a "Fund" and collectively, the "Funds")
PROXY STATEMENT
November [2], 2000
This Proxy Statement provides you with information you should review
before voting on the matters listed in the Notice of Special Meeting (each a
"Proposal") on the previous page for the Funds, each a series of Eclipse Funds
(the "Trust"). The Trust's Board of Trustees (the "Board") is soliciting your
vote for a Special Meeting of Shareholders of each Fund (the "Special Meeting")
to be held at 470 Park Avenue South, 16th Floor, New York, New York 10016, on
December [5], 2000, at 10:00 a.m., Eastern time, and, if the Special Meeting is
adjourned, at any adjournment of that Meeting.
Solicitation of Proxies
The Trust's Board is soliciting votes from shareholders of a Fund only
with respect to the particular Proposals that affect that Fund. The solicitation
of votes is made by the mailing of this Proxy Statement, Notice of Special
Meeting and the accompanying proxy card which are first being mailed to
shareholders on or about November [2], 2000 or as soon as practicable
thereafter. The following table identifies the Funds entitled to vote on each
Proposal.
<PAGE>
Proposal
Fund
1. 2. 3.
Approval of Ratification
Investment of
Election of Advisory Selection of
Trustees Agreement Auditors
Ultra Short Term Income |X| |X| |X|
Balanced |X| |X| |X|
Mid Cap Value |X| |X| |X|
Small Cap Value |X| |X| |X|
Holders of record of shares of each Fund at the close of business on
October [24], 2000 (the "Record Date") will be entitled to one vote per share on
all business of the Special Meeting. The table below sets forth the number of
shares outstanding for each Fund as of the Record Date.
Number of Shares Outstanding as of the Record Date
Fund Total Shares Outstanding
Ultra Short Term Income
Balanced
Mid Cap Value
Small Cap Value
The appointed proxies will vote in their discretion on any other
business as may properly come before the Special Meeting or any adjournments or
postponements thereof. Additional matters would include only matters that were
not anticipated as of the date of this Proxy Statement.
Shareholder Reports
Copies of the Trust's Annual Report for the fiscal year ended December
31, 1999, and its Semi-Annual Report for the period ended June 30, 2000, have
previously been mailed to shareholders. This Proxy Statement should be read in
conjunction with the Annual and Semi-Annual Reports. You can obtain copies of
those Reports, without charge, by writing to the Fund's shareholder servicing
agent, Eclipse Financial Services, Inc., P.O. Box 2196, Peachtree City, GA
30269, or by calling 1-800-872-2710.
GENERAL OVERVIEW
New York Life Investment Management Holdings LLC ("NYLIM Holdings"),
Wesley G. McCain, Towneley Capital Management, Inc. ("Towneley") and the
shareholders of Towneley have entered into an Asset Purchase Agreement, dated as
of October 6, 2000. Under the Towneley Asset Purchase Agreement, NYLIM Holdings
has agreed to pay Towneley approximately $10 million in exchange for
substantially all of Towneley's assets relating to the Eclipse Funds business
and Towneley's business of providing investment management services to
individual and institutional clients, including Towneley's proprietary
analytical models (the "Transaction"). Dr. McCain and several trusts established
by him are the registered owners of all of the outstanding shares of Towneley.
NYLIM Holdings has also agreed to make quarterly "earn-out" payments to
Dr. McCain in the third, fourth and fifth years following completion of the
Transaction. The amount of each earn-out payment will be calculated by
multiplying 0.000375 by the value at the end of the quarter of (a) the assets
(including the assets in the Eclipse Funds) formerly managed by Towneley that
New York Life Investment Management LLC, a registered investment adviser and an
affiliate of NYLIM Holdings ("NYLIM LLC"), will manage after completion of the
transaction, (b) the assets in any other mutual funds and investment advisory
accounts managed by the Eclipse team at NYLIM LLC, and (c) a percentage to be
agreed on a case-by-case basis of the assets in any other investment products
developed, but not managed, by the Eclipse team.
In connection with the Transaction, Dr. McCain, as well as portfolio
manager Kathy O'Connor and quantitative analyst Jeffrey Sanders, will enter into
employment agreements with NYLIM LLC. All other Towneley personnel will also be
offered positions with NYLIM LLC.
Under Dr. McCain's employment agreement, the percentage of Dr. McCain's
professional time devoted to NYLIM LLC matters will decrease over the six-year
term of the agreement. NYLIM Holdings is not acquiring Towneley's hedge fund
business, which Dr. McCain and Mr. Sanders will continue to operate following
the completion of the Transaction. In addition, NYLIM Holdings, Dr. McCain and
Towneley will enter into a license agreement that will enable Towneley, Dr.
McCain and Mr. Sanders to continue to use the proprietary model acquired by
NYLIM Holdings.
The transactions under the Towneley Asset Purchase Agreement are
subject to a number of conditions, including a condition that the shareholders
of the Eclipse Funds approve a new investment management agreement with NYLIM
LLC, that the Trustees of the Eclipse Funds resign and that the shareholders of
the Eclipse Funds elect new trustees, and a condition that consents be obtained
from Towneley clients (including the Eclipse Funds) representing annualized
investment management fee revenues (taking into account additional contributions
to and withdrawals from mutual funds and investment advisory accounts, but not
taking into account market fluctuations) that are at least 80% of such revenues
as of March 31, 2000. Other conditions include those relating to antitrust
approvals, the absence of legal proceedings or governmental actions to prevent
the Transaction, the accuracy of representations and warranties in the Towneley
Asset Purchase Agreement, and the absence of any material adverse effect on the
transferred business since December 31 ,1999. The Transaction is expected to
close by the end of the year.
Fund operations are not expected to be materially affected by the
Transaction. NYLIM Holdings does not currently anticipate that there will be any
changes in the investment personnel primarily responsible for the management of
the Funds in connection with the Transaction. Employees of Towneley devoted to
Fund operations will become employees of NYLIM LLC. As part of the NYLIM family
of no-load funds, the Funds will be distributed by NYLIFE Distributors, Inc.
under the "Eclipse" name and the Funds' shareholder servicing agent will be
MainStay Shareholder Services, Inc. Following the Transaction, NYLIM Holdings
anticipates that it will evaluate capabilities across the NYLIM Holdings
companies and, where appropriate, will consider changes designed to maximize
investment capabilities and achieve expense and resource efficiencies.
NYLIM Holdings was established in December 1999 for the purpose of
holding the ownership of the asset management subsidiaries of New York Life
Insurance Company. NYLIM LLC, the proposed new investment adviser for the
Eclipse Funds, commenced operations in April, 2000 and is a wholly owned
subsidiary of NYLIM Holdings and, along with the other asset management
subsidiaries of NYLIM Holdings (collectively, the "Asset Management
Subsidiaries"), has more than $115 billion in assets under management. NYLIM
Holdings and the Asset Management Subsidiaries are committed to delivering high
quality, value added investment management products and services to clients.
The Asset Management Subsidiaries provide comprehensive money
management and investment services, and their component businesses encompass a
broad range of specialties, including: retail and institutional mutual funds,
direct institutional asset management, guaranteed products, retirement plans,
and full service products for defined contribution and defined benefit plans.
NYLIM Holdings' principal executive offices are located at 51 Madison
Avenue, New York, New York 10010.
Information regarding NYLIM Holdings and its affiliates contained
herein has been furnished to the Funds by NYLIM Holdings and its affiliates for
use herein and NYLIM Holdings and its affiliates are responsible for the
accuracy and completeness thereof.
MATTERS TO BE ACTED UPON
PROPOSAL NO. 1
ELECTION OF TRUSTEES
The Board has nominated four individuals (the "Nominees") for election
to the Trust's Board. Shareholders are being asked to elect the Nominees to
serve as Trustees, each to serve until his or her successor is duly elected and
qualified. Pertinent information about each Nominee is set forth below. Each
Nominee has consented to serve as a Trustee if elected. The Trust's current
Trustees have decided to step down upon completion of the Transaction.
The Nominees are being nominated to provide uniformity across the
Boards of the Trustees/Directors of the Eclipse Funds and the NYLIM Funds. In
evaluating the Nominees, the Trustees took into account their background and
experience, including their familiarity with the issues relating to these types
of funds and investments as well as their careers in business, finance,
marketing and other areas. The Trustees also considered the experience of the
Nominees as Directors of the NYLIM Funds.
Information Regarding Nominees
Below are the names, ages, business experience during the past five
years and other Trusteeships of the Nominees. An asterisk (*) has been placed
next to the name of each Nominee who would constitute an "interested person," as
defined in the Investment Company Act of 1940 as amended, (the "Investment
Company Act"), by virtue of that person's affiliation with any of the Funds,
Towneley, NYLIM Holdings, NYLIM LLC or any of their affiliates. The business
address of each Nominee is 51 Madison Avenue, New York, New York 10010.
Name and Age Position(s) Held Principal Occupation(s)
With Fund During Past Five Years
Stephen C. Roussin* Mr. Roussin has been Director
(Age 37) and Chairman of MainStay
Institutional Funds Inc., 1997
to present; President and Chief
Operating Officer, New York Life
Investment Management Holdings
LLC, (formerly, New York Life
Asset Management LLC) from 1999
to present; President and Chief
Operating Officer, New York Life
Investment Management LLC
(formerly, New York Life Asset
Management Operating Company
LLC), from 1999 to present;
President, Chief Executive
Officer and Trustee, The
MainStay Funds, from 1997 to
present; Senior Vice President,
New York Life Insurance Company,
from 1997 to present; Director,
New York Life Trust Company,
from 1997 to present; Manager,
New York Life Benefit Services
LLC (formerly, Director, New
York Life Benefit Services
Inc.), from 1997 to present;
Director, New York Life
Securities, Inc., from 1997 to
present; Manager and Chairman,
MainStay Shareholder Services
LLC (formerly, MainStay
Shareholder Services Inc.), from
1997 to present; Director, Eagle
Strategies Corp., from 1997 to
present; and Manager, President
and Chief Executive Officer,
MainStay Management LLC
(formerly, MainStay Management
Inc.), from 1997 to March 2000,
and Chairman and Manager, from
March 2000 to present; Director,
NYLIFE Distributors Inc., from
1997 to present, Chairman, from
March 2000 to present, and
Senior Vice President, from 1997
to March 2000; Chairman and
Director, New York Life Trust
Company, FSB, from June 2000 to
present. Previously, he served
as Senior Vice President of
Smith Barney from 1994 to 1997
and Division Sales Manager of
Prudential Securities from 1989
to 1994.
Lawrence Glacken Mr. Glacken has served as a
(Age 73) Director of the MainStay
Institutional Funds Inc. since
their inception in January 1991.
He served as Vice President of
Investment Banking for The First
Boston Corporation from 1964 to
1987 and has been retired since
1987.
Robert P. Mulhearn Mr. Mulhearn has served as a
(Age 53) Director of the MainStay
Institutional Funds Inc. since
their inception in January 1991.
He was a Managing Director at
Morgan Stanley from 1979 to
1987. Mr. Mulhearn has been a
Private Investor from 1987 to
present.
Susan B. Kerley Ms. Kerley has served as a
(Age 49) Director of the MainStay
Institutional Funds Inc. since
their inception in January 1991.
She has been President of Global
Research Associates since 1990.
From 1988 to 1990, she served as
Manager of Special Investments
at Rockefeller & Co. She was
Director of Research at Rogers,
Casey and Barksdale from
1983-1988. She has also served
as a Director of Citifunds from
1991 to present.
Executive Officers of the Trust
The Trust's officers are elected by the Board and hold office until
they resign, are removed or are otherwise disqualified to serve. The current
executive officers of the Trust, together with such person's position with the
Trust and principal occupation for the last five years, are listed below. The
business address for each of the officers is 470 Park Avenue South, 16th Floor,
New York, NY 10016.
Name and Age Position(s) Held Principal Occupation(s)
With the Trust During Past Five Years
Wesley G. McCain Chairman of the Mr. McCain is the founder and
(Age 58) Board and the has been Chairman of Towneley
President Capital Management, Inc. since
1971. Mr. McCain is a trustee of
the Van Eck Funds and the Van
Eck World Wide Insurance Trust,
and a director of the Van
Eck/Chubb Funds, Inc. He is a
Public Advisor to Pacific
Exchange Stock and Options. He
was a director of the Peregrine
Fund from 1995 to 1998. He is a
general partner of Pharaoh
Partners, L.P., which is the
general partner of Libre
Partners, L.P. He is also a
trustee of Libre Group Trust, a
director of Libre Investments
(Cayman) Ltd., a member of
Pharaoh Partners (Cayman) LDC,
and Chairman of Millbrook
Associates, Inc. and of Eclipse
Financial Services, Inc. He is a
Chartered Financial Analyst and
a member of the Association for
Investment Management and
Research. In addition to
managing investment portfolios,
Mr. McCain's experience includes
economic and financial
consulting to a diversified
corporate clientele.
Sigrid A. Hess Executive Vice Ms. Hess is a Vice President of
(Age 59) President and Towneley Capital Management,
Secretary Inc., where she has been
employed since 1977. Ms. Hess
also serves as Secretary of
Eclipse Financial Services,
Inc., the Trust's shareholder
servicing agent.
John A. Flanagan Vice President, Mr. Flanagan has been Vice
(Age 54) Treasurer President, New York Life
Insurance Company, 1999 to the
present; Vice President and
Treasurer, New York Life
Investment Management Holdings
LLC, (formerly, New York Life
Asset Management LLC) from 1999
to present; Vice President and
Treasurer, New York Life
Investment Management LLC, from
1999 to the present; Vice
President and Chief Financial
Officer, The MainStay Funds,
from 1999 to present; Treasurer,
Principal Financial and
Accounting Officer, MainStay
Institutional Funds Inc., from
1999 to present; Treasurer,
MainStay VP Series Fund, Inc.,
from 1999 to present; Manager,
Senior Vice President and Chief
Financial Officer, MainStay
Management LLC (formerly,
MainStay Management Inc.), from
1999 to present; Manager,
MainStay Shareholder Services
LLC (formerly, MainStay
Shareholder Services Inc.), from
1999 to the present; Senior Vice
President and Chief Financial
Officer, NYLIFE Distributors
Inc., from 1999 to the present.
He served as Treasurer of Strong
Funds and Senior Vice President
of Strong Capital Management,
Inc. from 1997 to 1998 and was a
Partner at the predecessor to
PricewaterhouseCoopers LLP
(Coopers & Lybrand, L.L.P.) from
1994 to 1997.
Sylvia McCormick Vice President Ms. McCormick has been employed
(Age 53) by Towneley Capital Management,
Inc. since 1973. She is
President of Eclipse Financial
Services, Inc., the Trust's
shareholder servicing agent.
Antoinette B. Cirillo Assistant Ms. Cirillo has been Assistant
(Age 46) Treasurer Treasurer of The MainStay Funds
from 1992 to the present,
Assistant Treasurer of MainStay
Institutional Funds Inc. from
1992 to the present, and
Assistant Treasurer of MainStay
VP Series Fund, Inc. from 1993
to the present, and was
Corporate Vice President,
Assistant Vice President,
Director and Senior Accountant
of Mutual Fund Accounting
Operations, NYLIFE Distributors,
Inc. and MainStay Management LLC
from 1988 to 1999. She held
various positions in New York
Life Insurance Company from 1987
to 1988.
Patrick J. Farrell Assistant Mr. Farrell has been Vice
(Age 40) Treasurer President, Corporate Vice
President and Assistant
Treasurer of NYLIFE
Distributors, Inc. and MainStay
Management LLC from 1996 to
present, Assistant Treasurer of
MainStay Funds from 1996 to
present, Assistant Treasurer of
MainStay Institutional Funds
Inc. from 1996 to present and
Assistant Treasurer of MainStay
VP Series Fund from 1996 to the
present. He was Vice President
of Alliance Capital Management
Corporation from 1988 to 1996.
Upon the closing of the Transaction, it is anticipated that the
foregoing officers will resign and that persons who are directors, officers
and/or employees of NYLIM Holdings or its affiliates, which may include certain
of the individuals named above, will become officers of the Trust.
Trustees Not Standing for Reelection
Below are the names, ages, business experience during the past five
years and other Trusteeships of the current Trustees of the Trust. An asterisk
(*) has been placed next to the name of each Trustee who would constitute an
"interested person," as defined in the Investment Company Act. The business
address of each Nominee is 470 Park Avenue, New York, New York 10016.
Wesley G. McCain* Trustee, Mr. McCain is the founder and
(Age 58) Chairman of has been Chairman of Towneley
the Board Capital Management, Inc. since
and President 1971. Mr. McCain is a trustee of
the Van Eck Funds and the Van
Eck World Wide Insurance Trust,
and a Trustee of the Van
Eck/Chubb Funds, Inc. He is a
Public Advisor to Pacific
Exchange Stock and Options. He
was a Trustee of the Peregrine
Fund from 1995 to 1998. He is a
general partner of Pharaoh
Partners, L.P., which is the
general partner of Libre
Partners, L.P. He is also a
trustee of Libre Group Trust, a
Trustee of Libre Investments
(Cayman) Ltd., a member of
Pharaoh Partners (Cayman) LDC,
and Chairman of Millbrook
Associates, Inc. and of Eclipse
Financial Services, Inc. He is a
Chartered Financial Analyst and
a member of the Association for
Investment Management and
Research. In addition to
managing investment portfolios,
Mr. McCain's experience includes
economic and financial
consulting to a diversified
corporate clientele.
Sigrid A. Hess* Trustee, Ms. Hess is Vice President and
(Age 59) Executive Vice Secretary of Towneley Capital
President and Management, Inc., where she has
Secretary been employed since 1977. Ms.
Hess also serves as Secretary of
Eclipse Financial Services,
Inc., the Trust's shareholder
servicing agent.
John C. Novogrod Trustee Mr. Novogrod is a partner of the
(Age 58) law firm of Kirkland & Ellis
since 1997. Prior to this, he
was a partner of Novogrod &
Kurlander from 1991 to 1995, and
a partner of Schiff, Hardin &
Waite from 1995 to 1997.
Yung Wong Trustee Mr. Wong is a Trustee of Back
(Age 61) Bay Funds, Inc., a California
Daily Tax Free Income Fund,
Inc., Connecticut Daily Tax Free
Income Fund, Inc., Daily Tax
Free Income Fund, Inc.,
Delafield Fund, Inc., Michigan
Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal
Income Fund, Inc., North
Carolina Daily Municipal Income
Fund, Inc., Short Term Income
Fund, Inc., Virginia Daily
Municipal Income Fund, Inc.,
Georgia Daily Municipal Income
Fund, Inc., and PAX World Money
Market Fund, Inc. He is also a
trustee of Florida Daily
Municipal Income Fund,
Institutional Daily Income Fund,
and Pennsylvania Daily Municipal
Income Fund. Dr. Wong was a
Trustee of Shaw Investment
Management (H.K.) Limited (an
asset management and direct
investment firm) from 1994 to
1995.
John C. Van Eck Trustee Mr. Van Eck is Chairman of the
(Age 85) Board and President of Van Eck
Funds and Van Eck Worldwide
Insurance Trust (mutual funds).
He is Chairman of Van Eck
Associates Corporation, an
investment adviser, and Van Eck
Securities Corporation, a broker
dealer.
Ownership of Fund Shares
Appendix 2 hereto sets forth the number of shares of each class of each
Fund owned directly or beneficially by the current Trustees. To the best of the
Trust's knowledge, as of August 31, 2000, none of the current Trustees owned 1%
or more of the outstanding shares of any class of a Fund, and the current
Trustees of the Funds owned, as a group, less than 1% of the shares of each
class of each Fund.
Meetings
During the fiscal year ended December 31, 1999, the current Board held
four (4) regular meetings. Each Trustee attended 100% of the total number of
Board meetings and meetings held by all committees of the Board on which he or
she served.
Committees
Audit Committee. The Board has an Audit Committee whose function is to
assist the Board in fulfilling its responsibilities to shareholders of the Funds
relating to accounting and reporting, internal controls and the adequacy of
auditing relative thereto. The Committee currently consists of Messrs. Novogrod,
Wong, and Van Eck. During the fiscal year ended December 31, 1999, the Committee
met once.
Remuneration of Trustees and Officers
For service on the Board, each Trustee who is not an "interested
person" of the adviser is entitled to receive (i) an annual retainer of $2,000;
(ii) $750 per meeting for each Board meeting in which the Trustee participates
and (iii) reimbursement for out-of-pocket expenses. None of the Trustees is
entitled to receive pension or retirement benefits.
The following table sets forth the compensation paid to each of the
current Trustees for the fiscal year ended December 31, 1999. Trustees and
officers of the Trust who are also Trustees, officers or employees of Towneley
or MainStay Management LLC are not entitled to receive any compensation from the
Trust.
Aggregate Total Compensation
Compensation from the Trust Paid
Name of Person, Position From the Trust to Trustees
Sigrid A. Hess $0 $0
Trustee, Executive Vice President and
Secretary
Wesley G. McCain $0 $0
Trustee, Chairman and President
John C. Novogrod $5,000 $5,000
Trustee
John C. Van Eck $5,000 $5,000
Trustee
Yung Wong $5,000 $5,000
Trustee
The effectiveness of this Proposal 1 is conditioned on the consummation
of the Transaction. Accordingly, in the event that the Transaction is not
consummated, each of the current Trustees will continue to serve until his or
her successor is duly elected and qualified.
Vote Required
The affirmative vote of a plurality of all outstanding shares of the
Trust represented in person or by proxy and entitled to vote at the Special
Meeting is required to approve the election of each Nominee.
The Board unanimously recommends that shareholders vote "FOR" each of
the Nominees under Proposal No. 1.
PROPOSAL NO. 2
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Introduction
Shareholders of each of the Funds are being asked to approve a new
Investment Advisory Agreement (the "New Agreement") between the Trust, on behalf
of their Fund, and NYLIM LLC (also referred to in this section as the
"Manager"). Approval of the New Agreement is sought so that the management of
each Fund can continue uninterrupted after the Transaction, because the current
Investment Advisory Agreement (the "Current Agreement") will terminate
automatically as a result of the Transaction.
Towneley's goal is to complete the Transaction during the fourth
quarter of 2000. As a result of the Transaction, certain of the business
segments and operations of Towneley will be purchased by NYLIM Holdings. The
sale of certain assets of Towneley resulting from the Transaction may be deemed
under the Investment Company Act to be an assignment of the Current Agreement.
The Current Agreement provides for its automatic termination upon an assignment.
Accordingly, the New Agreement between NYLIM LLC and the Trust on behalf of the
Funds is proposed for approval by shareholders of each Fund. A form of the New
Agreement is attached as Exhibit A to this Proxy Statement and the description
of its terms in this section is qualified in its entirety by reference to
Exhibit A.
Towneley Capital Management, Inc., located at 470 Park Avenue South,
16th Floor, New York, New York 10016, has served as investment adviser to each
Fund pursuant to the Current Agreement since the commencement of operations of
the Funds. The terms of the New Agreement will be the same in all material
respects as those of the Current Agreement, including advisory fees charged.
NYLIM LLC will provide fund administration services under the New Agreement
without any increase in fees, and the New Agreement will include other changes
to conform to the agreements for the NYLIM Funds to permit ease of
administration. Also, the same portfolio managers, as employees of NYLIM LLC,
will continue to manage each Fund. Towneley does not anticipate that the
Transaction will cause any reduction in the quality of services now provided to
the Funds. In addition, NYLIM LLC has undertaken that for the initial two-year
term of the New Agreement, there will be no increase in the ordinary operating
expense ratios of the Funds from that of the twelve months' ended December 31,
2000. Provided however, this limitation shall not limit increases in transfer
agency expenses incurred by the Funds in accordance with the transfer agency
expense arrangements in effect prior to the closing of the Transaction.
The following table shows the date when each Fund commenced operations,
the date of the Current Agreement, as amended, and the dates when the Current
Agreement was approved by the Board on behalf the applicable Fund and by the
applicable Fund's shareholders (or, in some cases, a Fund's sole initial
shareholder).
<TABLE>
<S> <C> <C> <C> <C>
Date of Date Current Date Current
Current Investment Investment
Investment Advisory Advisory Agreement
Commencement Advisory Agreement Last Last Approved by
of Agreement Approved by the Shareholders
Fund Operations Board
Ultra Short 12/27/94 12/27/94 12/15/99 12/27/94
Term Income
Balanced 5/1/89 1/7/87, as amended 12/15/99 6/13/90
3/15/89 and 3/16/90
Mid Cap Value 12/27/94 12/27/94 12/15/99 12/27/94
Small Cap Value 1/7/87 1/7/87, as amended 12/15/99 6/13/90
3/15/89 and 3/16/90
</TABLE>
At the October 20, 2000 meeting of the Board, the New Agreement was
approved unanimously by the Board, including by all of the Trustees who are not
interested parties to the New Agreement or interested persons of such parties.
The New Agreement as approved by the Board is submitted for approval by the
shareholders of each Fund to which the New Agreement applies. The New Agreement
must be voted upon separately by the shareholders of each Fund to which it
pertains.
If the New Agreement is approved by shareholders, it will take effect
immediately after the closing of the Transaction. The New Agreement will remain
in effect through December 31, 2002, and, unless earlier terminated, will
continue from year to year thereafter, provided that each such continuance is
approved annually with respect to each Fund (i) by the Board or by the vote of a
majority of the outstanding voting securities of the particular Fund, and, in
either case, (ii) by a majority of the Trust's Trustees who are not parties to
the New Agreement or "interested persons" of any such party (other than as
Trustees of the Trust).
Comparison of the Terms of the New Agreement and the Current Agreement
The terms of the New Agreement will be the same in all material
respects as those of the Current Agreement, except for the effective date,
initial term and the parties. Certain conforming changes are proposed to conform
to the current form of advisory agreement for the NYLIM Funds, as discussed in
detail below.
Under the Current Agreement, Towneley provides an investment program
for each Fund, makes the day-to-day investment decisions for each Fund, executes
the purchase and sale orders for the portfolio transactions of each Fund, and
generally manages each Fund's investments. In addition, Towneley provides
persons satisfactory to the Board to serve as officers of the Trust. The Current
Agreement also provides that Towneley is required to pay the fees of the Trust's
administrator. This arrangement is described in more detail below under the
caption "Administration."
The New Agreement requires NYLIM LLC, subject to the supervision of the
Board, to administer each Fund's business affairs and manage the investment
operations of each Fund and the composition of the portfolio of each Fund,
including the purchase, retention and disposition of securities thereof, in
accordance with the investment objectives, policies and restrictions of each
Fund, as stated in the currently effective Prospectus.
Specifically, the New Agreement provides that the Manager shall (i)
furnish each Fund with office facilities; (ii) be responsible for the financial
and accounting records required to be maintained by each Fund (excluding those
being maintained by the Fund's custodian and transfer agent except as to which
the Manager has supervisory functions) and other than those being maintained by
the Fund's subadviser, if any; and (iii) furnish each Fund with ordinary
clerical, bookkeeping and recordkeeping services at such office facilities.
Administration
Under the Current Agreement, the Trust is required to retain an
administrator acceptable to Towneley, which administrator's expenses are to be
paid by Towneley out of its management fee. Pursuant to an administration
agreement dated January 1, 1998, the Trust retained MainStay Management LLC (the
"Administrator"), 300 Interpace Parkway, Building A, Parsippany, NJ 07054, to
administer all aspects of the Trust's operations except those which are the
responsibility of Towneley. The Administrator is a wholly-owned subsidiary of
New York Life Insurance Company. In connection with its responsibilities as
administrator, the Administrator performs such supervisory, administrative, and
clerical functions as are necessary in order to provide effective administration
of the Trust, including maintaining certain books and records; authorizing the
payment of Fund expenses and maintaining control over daily cash balances;
monitoring the availability of funds for investment; overseeing and confirming
portfolio holdings with the Funds' custodian and Towneley; coordinating and
controlling on a daily basis the administrative and professional services
rendered to the Trust by others, including Towneley, the custodian and the
transfer and dividend disbursing agent, and the Trust's shareholder servicing
agent, as well as accounting, auditing and other services performed for the
Trust; calculating the net asset value of the Trust's shares; providing the
Trust with adequate conference facilities for all board meetings; overseeing the
preparation and filing with the SEC of the Trust's registration statement,
prospectus and statement of additional information; and preparing and filing all
required state Blue Sky filings.
For providing such services, the Administrator receives a fee, computed
daily and paid monthly in arrears, from Towneley based on the average combined
daily net asset value of the Funds ("Combined Assets") to be calculated at the
annual rate of 0.15% of the Combined Assets up to $50 million, plus 0.12% of
such Combined Assets in excess of $50 million but not in excess of $100 million,
plus 0.08% of such Combined Assets in excess of $100 million but not in excess
of $150 million; plus 0.05% of such Combined Assets in excess of $150 million
but not in excess of $750 million and 0.02% of the Combined Assets in excess of
$750 million. In addition, for any Fund, Towneley shall pay the Administrator a
monthly fee of $625 until such time as the Fund's average daily net asset value
during the preceding month exceeded $20 million. For the fiscal year ended
December 31, 1999, the Administrator received $316,631, from Towneley for the
Funds.
The administration contract can be terminated by either party on 60
days' written notice to the other and will terminate automatically upon the
termination of the Investment Advisory Agreement. The administration contract
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator, or of reckless disregard of its
obligations thereunder, the Administrator shall not be liable for any action or
failure to act in accordance with its duties.
The New Agreement wraps the administrative agreement and the advisory
agreement into one agreement. Under the New Agreement, NYLIM LLC is responsible
for both investment advice and administration without any increase in the Fund's
current advisory fee. It is expected that NYLIM LLC will retain its affiliate,
MainStay Management LLC, the current administrator, to perform the same duties.
Accordingly, Fund administration is not expected to change.
Best Execution
Under the New Agreement, the Manager, and any sub-adviser to whom such
authority has been delegated, shall determine the securities to be purchased or
sold by each Fund and will place orders pursuant to its determination with or
through such persons, brokers or dealers (including NYLIFE Securities Inc.) in
conformity with the policy with respect to brokerage as set forth in the Trust's
registration statement and prospectus or as the Trustees may direct from time to
time. It is recognized that, in providing a Fund with investment supervision or
the placing of orders for portfolio transactions, the Manager or any sub-adviser
will give primary consideration to securing the most favorable price and
efficient execution. Consistent with this policy, the Manager or any sub-adviser
may consider the financial responsibility, research and investment information
and other services provided by brokers or dealers who may effect or be a party
to any such transaction or other transactions to which other clients of the
Manager or any sub-adviser may be a party. It is understood that none of the
Funds, the Trust nor the Manager or sub-adviser has adopted a formula for
allocation of a Fund's investment transaction business. It is also understood
that it is desirable for each Fund that the Manager or any sub-adviser have
access to supplemental investment and market research and security and economic
analyses provided by certain brokers who may execute brokerage transactions at a
higher cost to a Fund than may result when allocating brokerage to other brokers
on the basis of seeking the most favorable price and efficient execution.
Therefore, the Manager or any sub-adviser is authorized to place orders for the
purchase and sale of securities for a Fund with such certain brokers, subject to
review by the Trust's Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Manager or any sub-adviser in connection with
its services to other clients.
Aggregation
The New Agreement also provides that on occasions when the Manager or
any sub-adviser deems the purchase or sale of a security to be in the best
interests of a Fund as well as other clients, the Manager or any subadviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be so sold or purchased in order
to obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Manager or any
sub-adviser in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to that Fund and to such other clients. The
Current Agreement does not address aggregation.
Delegation
While the Current Agreement permits the Manager to engage other
contractors at its expense to aid in the fulfillment of its responsibilities,
the New Agreement specifically provides that with respect to any or all series
of the Trust, including the Funds, the Manager may enter into one or more
contracts ("Sub-Advisory or Sub-Administration Contract") with a sub-adviser or
sub-administrator in which the Manager delegates to such sub-adviser or
sub-administrator any or all its duties specified in this Agreement, provided
that each Sub-Advisory or Sub-Administration Contract meets all requirements of
the Investment Company Act and the Rules thereunder.
Advisory Fees
This Proposal to approve the New Agreement seeks no increase in
advisory fees for any of the Funds. The annual advisory fees that NYLIM LLC is
entitled to receive from each Fund under the New Agreement at an annual rate
based on average daily net assets of the Fund are listed in the following table.
Fund Advisory Fee
Ultra Short Term Income .40%
Balanced .75%
Mid Cap Value .90%
Small Cap Value 1.00%
Exclusivity
Like the Current Agreement, the New Agreement provides that the
services of NYLIM LLC to a Fund are not to be deemed to be exclusive, and NYLIM
LLC shall be free to render investment advisory or other services to others
(including other investment companies) and to engage in other activities, so
long as its services under the New Agreement are not impaired thereby.
Limitation of Liability
Like the Current Agreement, the New Agreement provides that NYLIM LLC
shall not be liable to the Trust for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that NYLIM LLC shall not be
protected against any liability to the Trust to which NYLIM LLC would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or reckless disregard by NYLIM LLC of its
obligations and duties under the New Agreement, in connection with the services
rendered by NYLIM LLC thereunder.
Duration
If approved by the shareholders, the New Agreement shall become
effective on the date the Transaction is consummated, and will have an initial
term of two years. Thereafter, the New Agreement will be continued from year to
year, provided that its continuation is specifically approved at least annually
in conformity with the Investment Company Act and the Rules thereunder. The
Current Agreement contains a comparable provision.
Termination
The New Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Board or by vote of a majority of the Fund's
outstanding voting securities (as defined in the Investment Company Act), or by
NYLIM LLC, on not more than sixty (60) nor less than thirty (30) days' written
notice to the other party. The Current Agreement can be terminated without
penalty by the Trust on 60 days' written notice when authorized either by
majority vote of its outstanding voting shares or by a vote of a majority of its
Board, or by the Manager on 60 days' written notice. Like the New Agreement, the
Current Agreement will automatically terminate in the event of its "assignment"
as defined in the Investment Company Act.
Expenses
The New Agreement and the Current Agreement contain similar provisions
relating to respective parties' responsibilities for bearing certain expenses of
each Fund.
Under the New Agreement, the applicable Fund generally pays all fees
and expenses incurred in connection with its management, except that NYLIM LLC
is specifically responsible for the salaries and expenses of all personnel of
the Trust and the Manager, except the fees and expenses of Trustees who are not
interested persons of the Manager or the Trust, and all expenses incurred by
NYLIM LLC in connection with managing the investment operations of each Fund and
administering the ordinary course of each Fund's business other than those
assumed by that Fund. Each Fund assumes and pays its expenses, including but not
limited to: (i) the fees and expenses of Trustees who are not interested persons
of the Manager or of the Trust; (ii) the fees and expenses of the Fund's
custodian which relate to (A) the custodial function and the recordkeeping
connected therewith, (B) the maintenance of the required accounting records of
the Fund not being maintained by the Manager, (C) the pricing of the Fund's
shares, including the cost of any pricing service or services which may be
retained pursuant to the authorization of the Trustees of the Trust, and (D) for
both mail and wire orders, the cashiering function in connection with the
issuance and redemption of the Fund's shares; (iii) the fees and expenses of the
Trust's transfer and dividend disbursing agent, which may be the custodian,
which relate to the maintenance of each shareholder account; (iv) the charges
and expenses of legal counsel and independent accountants for the Trust; (v)
brokers' commissions and any issue or transfer taxes chargeable to the Trust in
connection with its securities transactions on behalf of the Funds; (vi) all
taxes and business fees payable by the Trust or the Funds to federal, state or
other governmental agencies; (vii) the fees of any trade association of which
the Trust may be a member; (viii) the cost of share certificates, if any,
representing Fund shares; (ix) the fees and expenses involved in registering and
maintaining registrations of the Trust and of its shares with the SEC,
registering the Trust as a broker or dealer and qualifying its shares and/or,
complying with notice and other applicable requirements under state securities
laws including the preparation and printing of the Trust's registration
statements and prospectuses for filing under federal and state securities laws
for such purposes; (x) allocable communications expenses with respect to
investor services and all expenses of shareholders' and Trustees' meetings and
of preparing, printing and mailing reports to shareholders in the amount
necessary for distribution to the shareholders; (xi) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Trust's business; and (xii) any expenses assumed by the
Funds pursuant to a plan of distribution adopted in conformity with Rule 12b-1
under the Investment Company Act.
Under the Current Agreement, each Fund is responsible for payment of
all the Trust's expenses with respect to that Fund, including a list of expenses
similar to those enumerated above.
Expense Limitations
Towneley has contractually agreed to waive fees of 0.20% of the Ultra
Short Term Income Fund's average daily net assets through December 31, 2001.
NYLIM LLC will enter into a similar agreement to extend until December 31, 2002.
In addition, NYLIM LLC has undertaken that for the initial two-year term of the
New Agreement, there will be no increase in the ordinary operating expense
ratios of the Funds from that of the twelve months' ended December 31, 2000.
Information About NYLIM LLC
New York Life Investment Management, LLC is a Delaware limited
liability company. It currently has its principal offices at 51 Madison Avenue,
New York, New York 10010. NYLIM LLC is registered with the Securities and
Exchange Commission ("SEC") as an investment adviser.
The following table provides information with respect to the current
Directors and principal executive officers of NYLIM LLC:
Principal Executive Officers and Directors of NYLIM LLC
Positions and Offices Other Principal
Name with NYLIM LLC Position(s) Held
Gary E. Wendlandt Chairman, Manager Mr. Wendlandt has served as
and Chief Executive Executive Vice President, New
Officer York Life Insurance Company from
1999 to present; Trustee, The
MainStay Funds from March 2000
to present; Chief Executive
Officer, New York Life
Investment Management Holdings
LLC from 1999 to present;
Manager, Chairman and Chief
Executive Officer, New York Life
Investment Management Holdings
LLC (formerly New York Life
Asset Management LLC), from
March 2000 to present; Chairman
and Manager, New York Life
Investment Management LLC, from
March 2000 to present; Manager,
New York Life Benefit Services
LLC, Manager, Monitor Capital
Advisors LLC, Manager, MainStay
Management LLC, Manager,
MainStay Shareholder Services
LLC, President and Manager,
Madison Square Advisors LLC, and
Director, NYLife Distributors
Inc., from March 2000 to
present. Previously, he was
Executive Vice President and
Chief Investment Officer of
MassMutual Life Insurance
Company from 1993 to 1999.
Stephen C. Roussin President and Chief Mr. Roussin has been Director
Operating Officer and Chairman of MainStay
Institutional Funds Inc., 1997
to present; President and Chief
Operating Officer, New York Life
Investment Management Holdings
LLC, (formerly, New York Life
Asset Management LLC) from 1999
to present; President and Chief
Operating Officer, New York Life
Investment Management LLC
(formerly, New York Life Asset
Management Operating Company
LLC), from 1999 to present;
President, Chief Executive
Officer and Trustee, The
MainStay Funds, from 1997 to
present; Senior Vice President,
New York Life Insurance Company,
from 1997 to present; Director,
New York Life Trust Company,
from 1997 to present; Manager,
New York Life Benefit Services
LLC (formerly, Director, New
York Life Benefit Services
Inc.), from 1997 to present;
Director, New York Life
Securities, Inc., from 1997 to
present; Manager and Chairman,
MainStay Shareholder Services
LLC (formerly, MainStay
Shareholder Services Inc.), from
1997 to present; Director, Eagle
Strategies Corp., from 1997 to
present; and Manager, President
and Chief Executive Officer,
MainStay Management LLC
(formerly, MainStay Management
Inc.), from 1997 to March 2000,
and Chairman and Manager, from
March 2000 to present; Director,
NYLIFE Distributors Inc., from
1997 to present, Chairman, from
March 2000 to present, and
Senior Vice President, from 1997
to March 2000; Chairman and
Director, New York Life Trust
Company, FSB, from June 2000 to
present. Previously, he served
as Senior Vice President of
Smith Barney from 1994 to 1997
and Division Sales Manager of
Prudential Securities from 1989
to 1994.
Ravi Akhoury Manager and Mr. Akhoury has served as
Vice Chairman Chairman and Chief Executive
Officer of MacKay Shields LLC
(formerly MacKay Shields
Financial Corporation) from 1992
to present; and Senior Managing
Director since 1996. He joined
MacKay Shields in 1984 as a
Director, became a Managing
Director in 1988 and President
in 1989. He also serves as
Manager, Chairman and Chief
Executive Officer, MacKay
Shields Domestic General
Partner, LLC; Manager and Vice
Chairman, New York Life
Investment Management Holdings
LLC, (formerly, New York Life
Asset Management LLC)(formerly
New York Life Asset Management
LLC), from 1999 to present;
Director, New York Life
International, Inc.; Director,
New York Life International
India Fund LLC; Manager, New
York Life Benefit Services LLC
(formerly, Director, New York
Life Benefit Services, Inc.);
Manager, NYLIFE LLC; and
Director, NYLI-VB Asset
Management Co, LLC. Previously,
Mr. Akhoury was associated with
Fischer, Francis, Trees and
Watts from 1980 to 1984 where he
served as Vice President.
Seymour Sternberg Manager Mr. Sternberg has served as
Chairman of the Board, President
and Chief Executive Officer of
New York Life Insurance Company
since 1997; Manager, New York
Life Investment Management
Holdings LLC (formerly New York
Life Asset Management LLC), 1999
to present. He also currently
serves as Director, Express
Scripts, Inc.; Director, New
York Life Insurance and Annuity
Corporation; Director, New York
Life International, Inc.;
Director, Chairman, Chief
Executive Officer and President,
NYLIFE HealthCare Management,
Inc.; Manager and President,
NYLIFE LLC. Previously he held
various positions at MassMutual
Life Insurance Company, most
recently Executive Vice
President from 1976 to 1989.
Howard I. Atkins Manager Mr. Atkins has served as
Executive Vice President and
Chief Financial Officer of New
York Life Insurance Company from
1996 to present; Manager, New
York Life Investment Management
Holdings LLC, (formerly, New
York Life Asset Management
LLC)(formerly New York Life
Asset Management LLC), 1999 to
present. He also serves as
Director, Express Scripts, Inc.;
Director, Executive Vice
President and Chief Financial
Officer, New York Life Insurance
and Annuity Corporation;
Director, New York Life
International, Inc.; Executive
Vice President, NYLIFE
HealthCare Management, Inc.;
Manager, NYLIFE LLC. Previously,
Mr. Atkins served as Executive
Vice President and Chief
Financial Officer at Midlantic
Corporation from 1991 to 1995,
and after its merger with PNC,
Executive Vice President from
1995 to 1996.
The principal business address of each person named is 51 Madison Avenue, New
York, New York 10010.
Information About Towneley
Towneley Capital Management, Inc. is a Delaware corporation. It
currently has its principal offices at 470 Park Avenue South, 16th Floor, New
York, New York 10016.
The following tables contain a list of the principal executive officers
and Directors of Towneley and identifies those individuals serving as officers
and/or Trustees of the Trust that are also officers and/or Directors of
Towneley. Towneley is registered with the SEC as an investment adviser.
Principal Executive Officers and Directors of Towneley
Positions and Offices Other Principal
Name with Investment Adviser Position(s) Held
Wesley G. McCain Chairman, Director Mr. McCain is a trustee of the
Van Eck Funds and the Van Eck
World Wide Insurance Trust, and
a Trustee of the Van Eck/Chubb
Funds, Inc. He is a Public
Advisor to Pacific Exchange
Stock and Options. He was a
Trustee of the Peregrine Fund
from 1995 to 1998. He is a
general partner of Pharaoh
Partners, L.P., which is the
general partner of Libre
Partners, L.P. He is also a
trustee of Libre Group Trust, a
Trustee of Libre Investments
(Cayman) Ltd., a member of
Pharaoh Partners (Cayman) LDC,
and Chairman of Millbrook
Associates, Inc. and of Eclipse
Financial Services, Inc. He is a
Chartered Financial Analyst and
a member of the Association for
Investment Management and
Research.
Kathy O'Connor Vice President
Joan Sabella Vice President
Tracy Thatcher Kuntz Vice President
Sigrid A. Hess Vice President Ms. Hess is Trustee, Executive
and Secretary Vice President and Secretary of
the Eclipse Funds. She also
serves as Secretary of Eclipse
Financial Services, Inc., the
shareholder servicing agent of
the Eclipse Funds.
Steven Confessore Vice President
Maggie Goodman Vice President
Except for Ms. Kuntz, whose address is 23197 La Cadena Drive # 103, Laguna
Hills, CA 92653, the principal business address of each person named is 470 Park
Avenue South, 16th Floor, New York, New York 10016.
Common Officers and Trustees of Eclipse Funds and Towneley
Name Position(s) with the Trust Position(s) with Towneley
Wesley G. McCain Chairman and Trustee Chairman
Sigrid A. Hess Trustee, Executive Vice Vice President and Secretary
President and Secretary
The following table sets forth the amount of investment advisory fees
that have been paid by the Funds to Towneley during each Fund's most recent
fiscal year.
Advisory Fees Paid to Towneley Capital Management, Inc.
for the Fiscal Year Ended December 31, 1999
Total Investment Net Advisory
Fund Advisory Fees Waiver Fees Paid
Ultra Short Term Income $32,290 $32,290 $0
Balanced $673,283 $0 $673,283
Mid Cap Value $918,205 $0 $918,205
Small Cap Value $2,183,901 $0 $2,183,901
From time to time, Towneley receives brokerage and research services
from brokers that execute securities transactions for certain of the Funds. The
commission paid by a Fund to a broker that provides such services to Towneley
may be greater than the commission would be if the Fund used a broker that does
not provide the same level of brokerage and research services. Additionally,
Towneley may use such services for clients other than the specific Fund or Funds
from which the related commissions are derived. The Funds have not effected any
brokerage transactions in portfolio securities with Towneley or any other
affiliated person of the Trust.
Evaluation by the Board
In determining whether or not it was appropriate to approve the New
Agreement and to recommend their approval to shareholders, the Board, including
the Trustees who are not interested persons of Towneley (the "Independent
Trustees"), considered various materials and representations provided by
Towneley and met with representatives of NYLIM Holdings, NYLIM LLC and New York
Life Insurance Company. The Independent Trustees were advised by independent
legal counsel with respect to these matters. The Board of Trustees met on
October 10, 2000 and October 20, 2000, to review and consider, among other
things, information relating to the New Agreement. During the course of these
meetings, the Independent Trustees met separately with their counsel to discuss
the Transaction and its effect on the Funds.
Information considered by the Trustees included, among other things,
information regarding NYLIM Holdings and NYLIM LLC (and their affiliated
companies) and their personnel, operations, financial condition and investment
philosophy. NYLIM LLC also provided information regarding NYLIM LLC's
arrangements for distribution of shares of its funds, its legal compliance
capabilities, and the arrangements for NYLIM LLC's shareholder services. The
Board of Trustees also reviewed the terms of the New Agreement and the Current
Agreement.
Also in connection with approval of the New Agreement, the Trustees of
the Funds met with officers of NYLIM LLC and its affiliates. During that visit,
personnel from NYLIM LLC and its distributor were available to discuss
operations and to answer questions concerning the proposed investment advisory
and other arrangements. In addition, the Independent Trustees of the Funds were
advised by counsel to such Trustees with respect to their fiduciary duties in
connection with approval of the proposed arrangement.
During the course of its deliberations, the Board also considered
certain additional benefits of the Transaction for the Funds and their
shareholders from the combination of Towneley and the existing NYLIM Holdings
and NYLIM LLC businesses. These include the seasoned NYLIM mutual fund
administration operations; the potential of increased distribution opportunities
for the Funds, in light of the strong distribution capabilities and global reach
of NYLIM Holdings and its affiliates; improved shareholder servicing; and the
potential for economies of scale to be achieved in light of existing NYLIM
Holdings and NYLIM LLC businesses.
After consideration of the above factors, and such other factors and
information it considered relevant, the Board unanimously approved the New
Agreement and voted to recommend its approval by the Funds' shareholders.
The effectiveness of this Proposal No. 2 is conditioned on the
consummation of the Transaction. Accordingly, in the event that the Transaction
is not consummated, Towneley will continue to manage the Funds pursuant to the
Current Agreement.
Vote Required
Shareholders of each Fund must separately approve the applicable New
Investment Management Agreement with respect to that Fund. Approval of this
Proposal No. 2 by a Fund requires an affirmative vote of the lesser of (i) 67%
or more of the Fund's shares present at the Special Meeting if more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the outstanding shares of the Fund.
The Board unanimously recommends that shareholders vote "FOR" this Proposal No.
2.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Funds are being asked to ratify the selection of the accounting
firm of PricewaterhouseCoopers LLP ("PWC") to act as the independent auditors
for the Trust for the fiscal year ending December 31, 2000.
At a meeting of the Board held on March 10, 1999, the Board, including
a majority of Independent Trustees, selected PWC to act as the independent
auditors for the fiscal year ending December 31, 2000.
On August 13, 1999, McGladrey & Pullen, LLP ("McGladrey") resigned as
independent accountants of the Trust pursuant to an agreement by PWC to acquire
McGladrey's investment company practice. The McGladrey partners and
professionals serving the Funds at the time of the acquisition joined PWC. On
September 22, 1999, the Trust, with the approval of the Trustees and its Audit
Committee, engaged PWC as its independent accountants. PWC or McGladrey, its
predecessor has served as independent auditors for the Trust with respect to its
financial statements since the Trust's inception.
PWC has advised the Trust that it is an independent auditing firm and
has no direct financial or material indirect financial interest in the Trust.
Representatives of PWC are not expected to be at the Special Meeting, but have
been given the opportunity to make a statement if they wish, and will be
available telephonically should any matter arise requiring their participation.
Vote Required
The affirmative vote of a majority of all outstanding shares of the
Trust represented in person or by proxy and entitled to vote at the Special
Meeting is required to approve this Proposal No. 3.
The Board recommends that shareholders vote "FOR" this Proposal No. 3.
GENERAL INFORMATION
Other Matters to Come Before the Meeting
Management of the Funds does not know of any matters to be presented at
the Special Meeting other than those described in this Proxy Statement. If other
business should properly come before the Meeting, the proxy holders will vote
thereon in accordance with their best judgment.
Section 15(f) of the Investment Company Act
NYLIM Holdings and Towneley intend to use their reasonable best efforts
to assure compliance with the conditions of Section 15(f) of the Investment
Company Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser or any affiliated persons thereof to receive any amount or
benefit in connection with a transaction that results in a change in control of
or identity of the investment adviser to an investment company as long as two
conditions are met. First, no "unfair burden" may be imposed on the investment
company as a result of the transaction relating to the change in control, or any
express or implied terms, conditions or understandings applicable thereto. As
defined in the Investment Company Act, the term "unfair burden" includes any
arrangement during the two-year period after the change in control whereby the
investment adviser (or predecessor or successor adviser), or any interested
person of any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other services), or from
any person in connection with the purchase or sale of securities or other
property to, from, or on behalf of the investment company (other than bona fide
ordinary compensation as principal underwriter of the investment company).
Second, during the three year period immediately following the change in
control, at least 75% of an investment company's board of Trustees must not be
"interested persons" of the investment adviser or the predecessor investment
adviser within the meaning of the Investment Company Act.
Voting Rights
Shareholders of record on October [24], 2000 (the "Record Date") are
entitled to be present and to vote at the Special Meeting or any adjourned
meeting. As of the Record Date, each Fund offered one class of shares to the
public. The presence in person or by proxy of a Fund's shareholders entitled to
cast a majority in number of votes is necessary to constitute a quorum for the
transaction of business. In the event that a quorum of shareholders is not
represented at the Special Meeting with respect to one or more Funds, the
Meeting may be adjourned by a majority of the applicable Fund's shareholders
present in person or by proxy until a quorum exists. If there are insufficient
votes to approve a Proposal, the persons named as proxies may propose one or
more adjournments of the Special Meeting to permit additional time for the
solicitation of proxies, in accordance with applicable law. Adjourned meetings
must be held within a reasonable time after the date originally set for the
meeting (but not more than 60 days after the Record Date). Solicitation of votes
may continue to be made without any obligation to provide any additional notice
of the adjournment. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
Proposal and will vote against any such adjournment those proxies to be voted
against the Proposal.
The Funds expect that, before the Special Meeting, broker-dealer firms
holding shares of the Funds in "street name" for their customers will request
voting instructions from their customers and beneficial owners. If these
instructions are not received by the date specified in the broker-dealer firms'
proxy solicitation materials, the Funds understand that the broker-dealers that
are members of the New York Stock Exchange may vote on the items to be
considered at the Special Meeting on behalf of their customers and beneficial
owners under rules of the New York Stock Exchange.
For purposes of determining the presence of a quorum for transacting
business at the Special Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but which have not been voted in favor of the
Proposal. Broker non-votes are proxies received by a Fund from brokers or
nominees when the broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter. Accordingly, shareholders are urged to forward
their voting instructions promptly. Abstentions and broker non-votes will not be
counted in favor of, but will have no other effect on, Proposal 1, and will have
the effect of a "no" vote on Proposals 2 and 3.
Some shares of a Fund may be held by Towneley affiliates in various
capacities and will be voted in the following manner: shares of a Fund held of
record by the Towneley Capital Management Pension Plan and Trust and the
Towneley Capital Management 401(k) and Profit Sharing Plan shall be voted in
favor of each of the Proposals by each plan's trustee, Wesley G. McCain. Shares
of a Fund held of record by a Towneley separately managed account under an
agreement pursuant to which Wesley G. McCain is given the power to vote shares
as trustee or custodian shall be voted in favor of each of the Proposals.
The number of shares that you may vote is the total of the number shown
on the proxy card accompanying this Proxy Statement. Shareholders are entitled
to one vote for each full share and a proportionate vote for each fractional
share held. Any shareholder giving a proxy has the power to revoke it by mail
(addressed to the Secretary at the principal executive office of the Trust at
the address shown at the beginning of this Proxy Statement) or in person at the
Special Meeting, by executing a superseding proxy or by submitting a notice of
revocation to the Trust.
Beneficial Owners
To the best of the Trust's knowledge, as of August 31, 2000, no person
owned beneficially more than 5% of any class of any Fund, except as set forth in
Appendix 1.
Expenses
Towneley, NYLIM, and/or one or more of their affiliates will pay the
expenses of the Funds in connection with this Notice and Proxy Statement and the
Special Meeting, including the printing, mailing, solicitation and vote
tabulation expenses, legal fees, and out-of-pocket expenses. The Funds will not
bear the expenses of the Proxy Statement or the Meeting.
Additional Proxy Solicitation Information
In addition to solicitation by mail, certain officers and
representatives of the Trust, officers and employees of Towneley and certain
financial services firms and their representatives, who will receive no extra
compensation for their services, may solicit proxies by telephone, telegram or
personally.
Shareholder Communications Corporation (the "Solicitor") has been
engaged to assist in the solicitation of proxies, at an estimated cost of
$_____. As noted above, this cost will be borne by Towneley, NYLIM Holdings
and/or one or more of their affiliates, not by the Funds. As the date of the
Special Meeting approaches, certain Fund shareholders may receive a telephone
call from a representative of the Solicitor if their votes have not yet been
received. Authorization to permit the Solicitor to execute proxies may be
obtained by telephonic instructions from shareholders of a Fund. Proxies that
are obtained telephonically will be recorded in accordance with the procedures
set forth below. The Board believes that these procedures are reasonably
designed to ensure that both the identity of the shareholder casting the vote
and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Solicitor
representative is required to ask for each shareholder's full name, address,
social security or employer identification number, title (if the shareholder is
authorized to act on behalf of an entity, such as a corporation), and the number
of shares owned, and to confirm that the shareholder has received the proxy
materials in the mail. If the information solicited agrees with the information
provided to the Solicitor, then the Solicitor representative has the
responsibility to explain the process, read the Proposals on the proxy card(s),
and ask for the shareholder's instructions on the Proposals. Although the
Solicitor representative is permitted to answer questions about the process, he
or she is not permitted to recommend to the shareholder how to vote, other than
to read any recommendation set forth in the Proxy Statement. The Solicitor will
record the shareholder's instructions on the card. Within 72 hours, the
shareholder will be sent a letter or mailgram to confirm his or her vote and
asking the shareholder to call the Solicitor immediately if his or her
instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Special Meeting, but does
not wish to give a proxy by telephone or electronically, the shareholder may
still submit the proxy card(s) originally sent with the Proxy Statement or
attend in person. Should shareholders require additional information regarding
the proxy or replacement proxy card(s), they may contact the Solicitor toll-free
at 1-800-xxx-xxxx. As explained above, any proxy given by a shareholder is
revocable until voted at the Special Meeting.
Shareholders may also provide their voting instructions through
telephone touch-tone voting or Internet voting. These options require
shareholders to input a control number which is located on each voting
instruction card. After inputting this number, shareholders will be prompted to
provide their voting instructions on the Proposals. Shareholders will have an
opportunity to review their voting instructions and make any necessary changes
before submitting their voting instructions and terminating their telephone call
or Internet link. Shareholders who vote on the Internet, in addition to
confirming their voting instructions prior to submission, will also receive an
e-mail confirming their instructions.
Shareholder Proposals
The Funds are not required to hold annual meetings of shareholders and
currently do not intend to hold such meetings unless shareholder action is
required in accordance with the Investment Company Act. A shareholder proposal
to be considered for inclusion in the proxy statement at any subsequent meeting
of shareholders must be submitted a reasonable time before the proxy statement
for that meeting is mailed. Whether a proposal is submitted in the proxy
statement will be determined in accordance with applicable federal and state
laws. The timely submission of a proposal does not guarantee its inclusion.
Please complete the enclosed proxy card(s) and return the card(s)
promptly in the enclosed self-addressed, postage-paid envelope.
By Order of the Board,
Sigrid A. Hess
Secretary
<PAGE>
EXHIBIT A
FORM OF NEW
INVESTMENT ADVISORY AGREEMENT
ECLIPSE FUNDS
Eclipse Ultra Short Term Income Fund
Eclipse Balanced Fund
Eclipse Mid Cap Value Fund
Eclipse Small Cap Value Fund
MANAGEMENT AGREEMENT
This Agreement is made as of the ____ day of ______________, 2000
between Eclipse Funds, a Massachusetts business trust ("Trust"), on behalf of
Eclipse Ultra Short Term Income Fund, Eclipse Balanced Fund, Eclipse Mid Cap
Value Fund and Eclipse Small Cap Value Fund (each a "Fund" and collectively,
"Funds"), each a separate series of the Trust, and New York Life Investment
Management Company LLC, a Delaware limited liability company ("Manager").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act");
WHEREAS, the shares of beneficial interest of the Trust ("Shares") are
divided into separate series, each of which is established by resolution of the
Board of Trustees of the Trust and the Trustees may from time to time terminate
such series or establish and terminate additional series; and
WHEREAS, the Trust desires to retain the Manager to render investment
advisory and related administrative services to each of the Funds, and the
Manager is willing to render such services on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Trust hereby appoints New York Life Investment Management
Company LLC to act as manager to each of the Funds for the period and on the
terms set forth in this Agreement. The Manager accepts such appointment and
agrees to render the services herein described, for the compensation herein
provided.
2. Duties as Manager. Subject to the supervision of the Trustees of the Trust,
the Manager shall administer each Fund's business affairs and manage the
investment operations of each Fund and the composition of the portfolio of each
Fund, including the purchase, retention and disposition thereof, in accordance
with the investment objectives, policies and restrictions of each Fund, as
stated in its currently effective Prospectus (as hereinafter defined) and
subject to the following understandings:
(a) The Manager shall (i) furnish each Fund with office facilities; (ii) be
responsible for the financial and accounting records required to be maintained
by each Fund (excluding those being maintained by the Fund's custodian and
transfer agent except as to which the Manager has supervisory functions) and
other than those being maintained by the Fund's subadviser, if any; and (iii)
furnish each Fund with ordinary clerical, bookkeeping and recordkeeping services
at such office facilities.
(b) The Manager shall provide supervision of each Fund's investments and
determine from time to time what investments or securities will be purchased,
retained, sold or lent by each Fund, and what portion of each Fund's assets will
be invested or held uninvested as cash.
(c) The Manager shall use its best judgment in the performance of its duties
under this Agreement.
(d) The Manager, in the performance of its duties and obligations under this
Agreement, shall act in conformity with the Declaration of Trust, By-Laws and
Prospectus (each as hereinafter defined) of the Trust and with the instructions
and directions of the Trustees of the Trust, and will conform to and comply with
the requirements of the 1940 Act and all other applicable federal and state laws
and regulations.
(e) The Manager, and any subadviser to whom such authority has been delegated,
shall determine the securities to be purchased or sold by each Fund and will
place orders pursuant to its determination with or through such persons, brokers
or dealers (including NYLIFE Securities Inc.) in conformity with the policy with
respect to brokerage as set forth in the Trust's Registration Statement and
Prospectus (each as hereinafter defined) or as the Trustees may direct from time
to time. It is recognized that, in providing a Fund with investment supervision
or the placing of orders for portfolio transactions, the Manager or any
subadviser will give primary consideration to securing the most favorable price
and efficient execution. Consistent with this policy, the Manager or any
subadviser may consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who may effect or
be a party to any such transaction or other transactions to which other clients
of the Manager or any subadviser may be a party. It is understood that none of
the Funds, nor the Trust or the Manager or subadviser has adopted a formula for
allocation of a Fund's investment transaction business. It is also understood
that it is desirable for each Fund that the Manager or any subadviser have
access to supplemental investment and market research and security and economic
analyses provided by certain brokers who may execute brokerage transactions at a
higher cost to a Fund than may result when allocating brokerage to other brokers
on the basis of seeking the most favorable price and efficient execution.
Therefore, the Manager or any subadviser is authorized to place orders for the
purchase and sale of securities for a Fund with such certain brokers, subject to
review by the Trust's Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Manager or any subadviser in connection with
its services to other clients.
On occasions when the Manager or any subadviser deems the purchase or
sale of a security to be in the best interest of a Fund as well as other
clients, the Manager or any subadviser, to the extent permitted by applicable
laws and regulations, may, but shall be under no obligation to, aggregate the
securities to be so sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as expenses incurred
in the transaction, will be made by the Manager or any subadviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to that Fund and to such other clients.
(f) The Manager shall maintain all books and records with respect to each Fund's
securities transactions required by sub-paragraphs (b)(5), (6), (9) and (10) and
paragraph (f) of Rule 31a-1 under the 1940 Act and any other books and records
required to be maintained by it under the 1940 Act and the Rules thereunder and
shall render to the Trust's Trustees such periodic and special reports as the
Trustees may reasonably request.
(g) The Manager shall provide the Trust's custodian on each business day with
information relating to the execution of all portfolio transactions pursuant to
standing instructions.
(h) With respect to any or all series of the Trust, including the Funds, the
Manager may enter into one or more contracts ("Sub-Advisory Contract or
Sub-Administration Contract") with a subadviser or sub-administrator in which
the Manager delegates to such subadviser or sub-administrator any or all its
duties specified in this Agreement, provided that each Sub-Advisory Contract or
Sub-Administration Contract meets all requirements of the 1940 Act and rules
thereunder.
3. Manager Personnel. The Manager shall authorize and permit any of its
directors, officers and employees who may be elected or appointed as Trustees or
officers of the Trust to serve in the capacities in which they are elected or
appointed. Services to be furnished by the Manager under this Agreement may be
furnished through the medium of any of such directors, officers or employees.
4. Books and Records. The Manager shall keep each Fund's books and records
required to be maintained by it, pursuant to paragraph 2 hereof. The Manager
agrees that all records which it maintains for a Fund are the property of that
Fund, and it will surrender promptly to that Fund any of such records upon the
Fund's request. The Manager further agrees to preserve for the periods
prescribed by Rule 31a-2 as promulgated by the Securities and Exchange
Commission (the "Commission") under the 1940 Act any such records as are
required to be maintained by the Manager pursuant to paragraph 2 hereof.
5. Services Not Exclusive. The services furnished by the Manager hereunder are
not to be deemed exclusive and the Manager shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby.
6. Documents. The Trust has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust of the Trust, filed with the Massachusetts Secretary of
State (such Declaration of Trust, as in effect on the date hereof and as amended
from time to time, is herein called the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof and as
amended from time to time, are herein called the "By-Laws");
(c) Certified Resolutions of the Trustees of the Trust authorizing the
appointment of the Manager and approving the form of this Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of 1933, as
amended, on Form N-lA (the "Registration Statement"), as filed with the
Commission, relating to each Fund and each Fund's Shares and all amendments
thereto;
(e) Notification of Registration of the Trust under the 1940 Act on Form N-8A as
filed with the Commission and all amendments thereto; and
(f) Each form of Prospectus and Statement of Additional Information of the Trust
(such Prospectuses and Statement of Additional Information, as currently in
effect and as amended or supplemented from time to time, being herein called
collectively the "Prospectus").
7. Expenses. (a) In connection with the services rendered by the Manager under
this Agreement, the Manager will bear all of the following expenses:
(i) the salaries and expenses of all personnel of the Trust and the Manager,
except the fees and expenses of Trustees who are not interested persons of the
Manager or of the Trust, and
(ii) all expenses incurred by the Manager in connection with managing the
investment operations of each Fund and administering the ordinary course of each
Fund's business, other than those assumed by that Fund herein;
(b) Each Fund assumes and will pay its expenses, including but not limited to
those described below (where any such category applies to more than one series
of the Trust, each Fund shall be liable only for its allocable portion of the
expenses):
(i) the fees and expenses of Trustees who are not interested persons of the
Manager or of the Trust;
(ii) the fees and expenses of the Fund's custodian which relate to (A) the
custodial function and the recordkeeping connected therewith, (B) the
maintenance of the required accounting records of the Fund not being maintained
by the Manager, (C) the pricing of the Fund's Shares, including the cost of any
pricing service or services which may be retained pursuant to the authorization
of the Trustees of the Trust, and (D) for both mail and wire orders, the
cashiering function in connection with the issuance and redemption of the Fund's
Shares;
(iii) the fees and expenses of the Trust's transfer and dividend disbursing
agent, which may be the custodian, which relate to the maintenance of each
shareholder account,
(iv) the charges and expenses of legal counsel and independent accountants for
the Trust;
(v) brokers' commissions and any issue or transfer taxes chargeable to the Trust
in connection with its securities transactions on behalf of the Funds;
(vi) all taxes and business fees payable by the Trust or the Funds to federal,
state or other governmental agencies;
(vii) the fees of any trade association of which the Trust may be a member;
(viii) the cost of share certificates, if any, representing Fund Shares;
(ix) the fees and expenses involved in registering and maintaining registrations
of the Trust and of its Shares with the Commission, registering the Trust as a
broker or dealer and qualifying its shares and/or complying with notice and
other applicable requirements under state securities laws, including the
preparation and printing of the Trust's registration statements and prospectuses
for filing under federal and state securities laws for such purposes;
(x) allocable communications expenses with respect to investor services and all
expenses of shareholders' and Trustees' meetings and of preparing printing and
mailing reports to shareholders in the amount necessary for distribution to the
shareholders;
(xi) litigation and indemnification expenses and other extraordinary expenses
not incurred in the ordinary course of the Trust's business; and
(xii) any expenses assumed by the Funds pursuant to a Plan of Distribution
adopted in conformity with Rule 12b-1 under the 1940 Act.
(c) Fees and expenses of legal counsel, of registering shares and complying with
state securities laws, of holding meetings and of communicating with
shareholders as described in subparagraph (b) above include an allocable portion
of the cost of maintaining an internal legal and compliance department.
8. Organization Expenses. Each Fund hereby agrees to reimburse the Manager for
the organization expenses of, and the expenses incurred in connection with, the
initial offering of any Shares of that Fund.
9. Compensation. For the services provided and the facilities furnished pursuant
to this Agreement, the Trust will pay to the Manager as full compensation
therefor a fee at an annual rate of the following percentage of the average
daily net assets of each Fund.
Eclipse Ultra Short Term Income Fund 0.40%
Eclipse Balanced Fund 0.75%
Eclipse Mid Cap Value Fund 0.90%
Eclipse Small Cap Value Fund 1.00%
This fee will be computed daily and will be paid to the
Manager monthly. This fee will be chargeable only to the respective Fund, and no
other series of the Trust shall be liable for the fee due and payable hereunder.
No Fund shall not be liable for any expense of any other series of the Trust.
10. Standard of Care. Subject to applicable law, the Manager shall not be liable
for any error of judgment or for any loss suffered by a Fund in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
11. Duration and Termination. This Agreement shall continue in effect with
respect to a Fund for a period of more than two years from the date hereof only
so long as such continuance is specifically approved at least annually with
respect to that Fund in conformity with the requirements of the 1940 Act and the
Rules thereunder; provided, however, that this Agreement may be terminated with
respect to any Fund at any time, without the payment of any penalty, by the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Fund, or by the Manager at any
time, without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
12. Other Business. Nothing in this Agreement shall limit or restrict the right
of any director, officer or employee of the Manager who may also be a Trustee,
officer, or employee of the Trust to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
business, whether of a similar or dissimilar nature, nor limit or restrict the
Manager's right to engage in any other business or to render services of any
kind to any other corporation, trust, firm, individual or association.
13. Independent Contractor. Except as otherwise provided herein or authorized by
the Trustees of the Trust from time to time, the Manager shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent any Fund or the Trust in any way or otherwise be deemed an
agent of any Fund or the Trust.
14. Trust Materials. During the term of this Agreement, the Trust agrees to
furnish the Manager at its principal office all Prospectuses, proxy statements,
reports to shareholders, sales literature or other materials prepared for
distribution to shareholders of a Fund or to the public, which refer to the
Manager in any way, prior to use thereof and not to use such materials if the
Manager reasonably objects in writing within five business days (or such other
time as may be mutually agreed) after receipt thereof. In the event of
termination of this Agreement, the Trust will continue to furnish to the Manager
copies of any of the above-mentioned materials which refer in any way to the
Manager. The Trust shall furnish or otherwise make available to the Manager such
other information relating to the business affairs of each Fund as the Manager
at any time, or from time to time, reasonably requests in order to discharge its
obligations hereunder.
15. Amendment. This Agreement may be amended in writing by mutual consent, but
the consent of each of the Funds, if required, must be obtained in conformity
with the requirements of the 1940 Act and the Rules thereunder.
16. Notice. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Manager at Morris Corporate Center I, Building
A, 300 Interpace Parkway, Parsippany, New Jersey 07054; or (2) to the Trust at
51 Madison Avenue, New York, NY 10010.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the
State of New York.
18. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. As
used in this Agreement, terms shall have the same meaning as such terms have in
the 1940 Act. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is made less restrictive by a rule,
regulation or order of the Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order. This Agreement may be signed in counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
ECLIPSE FUNDS, on behalf of the
Funds By:
Name:
Title:
NEW YORK LIFE INVESTMENT MANAGEMENT COMPANY LLC
By:
Name:
Title
Appendix 1
Beneficial Owners of More than 5% of a Fund
as of August 31, 2000
Name and Address Percent Amount and Nature
of Beneficial Owner of Fund of Beneficial Ownership
Ultra Short Term Income Fund
FTC & Co.* [#] [#]
DataLynx House Account Beneficial
P.O. Box 173136
Denver, CO 80217-3136
Hopke Partnership TCM* [#] [#]
c/o Rochdale Securities Corp. Beneficial
570 Lexington Avenue Floor 8
New York, NY 10022-6837
Richard C. Dalsemer [#] [#]
2554 Santa Lucia Avenue Record
Carmel, CA 93923-9105
Balanced Fund
Mellon Bank as Trustee* [#] [#]
Agent Omnibus Beneficial
135 Santilli Way
Everett, MA 02149-1906
FTC & Co.* [#] [#]
DataLynx House Account Beneficial
P.O. Box 173136
Denver, CO 80217-3136
Vernat Company* [#] [#]
Trust Department Beneficial
P.O. Box 800
Brattleboro, VT 05302-0800
Mid Cap Value Fund
American Express Trust Company* [#] [#]
American Express Retirement Services Beneficial
FBO NIBCO 401(K)
ATTN Chris Hunt N10/996
P.O. Box 534
Minneapolis, MN 55440-0534
FTC & Co.* [#] [#]
DataLynx House Account Beneficial
PO Box 2052
Jersey City, NJ 07303-2052
Small Cap Value Fund
National Financial Services Corp* [#] [#]
200 Liberty Street Beneficial
One World Financial Center
New York, NY 10281-1003
Charles Schwab & Co. Inc.* [#] [#]
Mutual Funds Department Beneficial
101 Montgomery Street
San Francisco, CA 94104-4122
The Northern Trust Company TTEE* [#] [#]
Guident Corporation Beneficial
FBD Master Investment Trust U/A 3-22-99
P.O. Box 92-956
Chicago, IL 60675-2956
Boston Safe Deposit & Trust TTEE* [#] [#]
TWA Pilots DAP/401(k) Plan U/A Date 10-1-92 Beneficial
Attn: Jennifer Lacoria
135 Santilli Highway
Everett, MA. 02149-1906
* Each of these entities is the shareholder of record and may be deemed to be
the beneficial owner of the shares listed for certain purposes under the
securities laws, although in certain instances they may not have an economic
interest in these shares and would, therefore, ordinarily disclaim any
beneficial ownership therein.
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Appendix 2
Trustee Shareholdings
Amount and Nature
of Beneficial
Ownership Percent of
Fund Name Name of Beneficial Owner Fund
<PAGE>
PRELIMINARY COPIES
ECLIPSE FUNDS
(the "Trust")
[Eclipse Ultra Short Term Income Fund] [Eclipse Balanced Fund]
[Eclipse Mid Cap Value Fund] [Eclipse Small Cap Value Fund]
(the "Fund")
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD
OF TRUSTEES OF ECLIPSE FUNDS
IF THIS PROXY CARD IS PROPERLY EXECUTED AND RETURNED, YOUR SHARES WILL BE VOTED
BY THE PROXIES IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION
IS MADE, YOUR SHARES WILL BE VOTED BY THE PROXIES FOR APPROVAL OF THE PROPOSALS.
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee
or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
Signature(s)
Dated: __________________, 2000
Please refer to the Proxy Statement for a discussion of these matters. This
proxy card is solicited in connection with the special meeting of the
shareholders the Fund to be held at 10:00 a.m., Eastern Time, on December [5],
2000, and at any adjournment thereof. THIS PROXY CARD, WHEN PROPERLY EXECUTED,
DIRECTS WESLEY G. MCCAIN AND SIGRID A. HESS TO VOTE THE SHARES LISTED ON THE
FRONT OF THIS CARD AS DIRECTED AND REVOKES ALL PRIOR PROXY CARDS.
YOUR VOTE IS IMPORTANT!
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL TOLL FREE 1-888-xxx-xxxx OR
LOG ON TO WWW.xxxx.COM
*** CONTROL NUMBER XXX XXX XXX XXX XX ***
Please vote the shares listed on the front of this card by filling in the
appropriate box below, as shown, using blue or black ink or dark pencil. Do not
use red ink.
[ ] [box is filled in solidly] EXAMPLE
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
1. To elect four (4) Trustees to serve until their successors are elected and
qualified;
FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT [ ]
Stephen C. Roussin Lawrence Glacken
Robert P. Mulhearn Susan B. Kerley
Note: If you do not wish your shares voted "For" a particular Nominee, mark the
"For All Except" box and strike a line through the name(s) of the Nominee(s).
Your shares will be voted for the remaining Nominee(s).
2. To approve a new Investment Advisory Agreement between the Trust, on behalf
of the Fund, and New York Life Investment Management LLC ("NYLIM LLC");
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the selection of PricewaterhouseCoopers LLP as independent auditors
for the Funds for the fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS, INCLUDING ANY ADJOURNMENT OF THE MEETING, AS MAY PROPERLY COME BEFORE
THE MEETING.
<PAGE>
