ECLIPSE FUNDS
Supplement dated December 12, 2000
THE INFORMATION BELOW SUPPLEMENTS THE INFORMATION CONTAINED IN THE ECLIPSE
FUNDS' STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 2000. THIS SUPPLEMENT
SHOULD BE READ WITH THE STATEMENT OF ADDITIONAL INFORMATION AND ANY PREVIOUSLY
ISSUED SUPPLEMENT.
**
On December 12, 2000, Towneley Capital Management, Inc. ("Towneley"), the
manager to each series of Eclipse Funds (the "Funds"), sold certain segments of
its portfolio management businesses, including the business, operations and
activities that Towneley conducted relating to providing investment advisory
services to the Funds, to New York Life Investment Management Holdings LLC (the
"Transaction").
As a result of the Transaction, among other things, (1) New York Life Investment
Management LLC, 51 Madison Avenue, New York, NY 10010 ("NYLIM"), replaced
Towneley as the investment adviser to the Funds effective December 12, 2000,
pursuant to a new investment management agreement approved by the shareholders
of the Funds at a shareholder meeting held on December 5, 2000; (2) a new Board
of Trustees (the "Board") was elected; and (3) the Funds replaced certain
service providers with new service providers. The operations and management of
the Fund are not materially affected by the Transaction. The investment
personnel primarily responsible for the management of the Funds are expected to
remain unchanged since employees of Towneley devoted to the Funds have become,
or will become, employees of NYLIM.
**
The two sentences referring to Towneley Capital Management, Inc. and Eclipse
Financial Services, Inc. on the "Cover Page" are replaced in their entirety as
follows:
New York Life Investment Management LLC (the "Manager" or "NYLIM") serves as
investment manager to the Trust.
Additional copies of the Prospectus may be obtained without charge by writing or
telephoning:
MainStay Shareholder Services LLC
260 Cherry Hill Road
Parsippany, NJ 07054
1-800-695-2126
<PAGE>
**
The "Background of Trustees and Officers" section on page 19 is revised in its
entirety as follows:
BACKGROUND OF TRUSTEES AND OFFICERS
As of December 12, 2000, the Trustees and executive officers of the Trust, and
their principal occupations for the past five years, are listed below. A Trustee
deemed to be an "interested person" of the Trust for purposes of the 1940 Act is
indicated by an asterisk.
<TABLE>
<CAPTION>
=============================== =================== ==================================================================
Name, Age, Address Position(s) Held Principal Occupation(s) During Past Five Years
With Fund
=============================== =================== ==================================================================
<S> <C> <C>
STEPHEN C. ROUSSIN* (37) Trustee and Mr. Roussin has been Director and Chairman of MainStay
51 Madison Avenue President Institutional Funds Inc., 1997 to present; President and Chief
New York, NY 10010 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, NYLIFE Securities,
Inc., from 1997 to present; Manager and Chairman, MainStay
Shareholder Services LLC, from 1997 to present;
Director, Eagle Strategies Corp., from 1997 to present;
and Manager, President and Chief Executive Officer, New
York Life Investment Management LLC (formerly
MainStay Management LLC), 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 (73) Trustee Mr. Glacken has served as a Director of the MainStay
51 Madison Avenue Institutional Funds Inc. since their inception in January 1991.
New York, NY 10010 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 (53) Trustee Mr. Mulhearn has served as a Director of the MainStay
51 Madison Avenue Institutional Funds Inc. since their inception in January 1991.
New York, NY 10010 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 (49) Trustee Ms. Kerley has served as a Director of the MainStay
51 Madison Avenue Institutional Funds Inc. since their inception in January 1991.
New York, NY 10010 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.
PATRICK G. BOYLE (46) Executive Mr. Boyle has served as Senior Vice President, New York Life
51 Madison Avenue Vice President Investment Management Holdings LLC (formerly New York Life
New York, NY 10010 Operating Company LLC), 1999 to present; Senior Vice President,
Pension Department New York Life Insurance Company, 1991
to present; Director, NYLIFE Distributors, Inc., 1993 to
1996; Chairman, Monitor Capital Advisors LLC, 1996
to 2000, and Director, 1991 to present; Director, New
York Life International Investment Inc., 1995 to
present; Director, New York Life Trust Company, 1995 to
present; Director, NYL Capital Management Limited,
1994 to present; Member, American Council of Life
Insurance Pension Committee, 1992 to 1998; Director, MBL
Life Assurance Co., Inc., 1997 to present.
MARC J. BROOKMAN (36) Executive Mr. Brookman has served as Vice President of New York Life
51 Madison Avenue Vice President Insurance Company from 1998 to present; Senior Vice
New York, NY 10010 President-Product Development MainStay Institutional Funds, Inc.
and Retirement Plans, 1998 to present; National Sales
Director, Vice President, United Asset Management
Retirement Plan Services, 1996 to 1998.
JEFFERSON C. BOYCE (42) Senior Vice Mr. Boyce has served as Senior Vice President New York Life
51 Madison Avenue President Insurance Company, 1994 to present; Senior Vice President The
New York, NY 10010 MainStay Funds, 1995 to present; Director, Monitor Capital
Advisors LLC, 1991 to 2000 and Senior Vice President, 1996 to
2000; Director, MSC Holding, Inc., 1992 to present and
Secretary, 1994 to present, Director, Eagle Strategies Corp.,
1993 to present, Director, NYLIFE Equity, Inc., 1993 to present,
President and Chief Executive Officer, NYLIFE Distributors,
Inc., 1996 to present and Director, 1993 to present Director,
NYLIFE LLC, 1993 to present; Director, NYLIFE Structured Asset
Management Company Ltd., 1993 to present; Director, CNP Realty
Investments, Inc., 1994 to present; Director, New York Life
Benefit Services, LLC, 1994 to present; Director, NYLIFE
Depositary Corporation, present; Director, NYLIFE SFD Holding
Inc. (formerly NAFCO, Inc.), 1994 to present; Director,
President and Chief Executive Officer, NYLIFE Securities Inc.,
1996 to present; Chairman and Director, MainStay Shareholder
Services LLC, 1997 to present.
RICHARD W. ZUCCARO (50) Tax Vice Mr. Zuccaro has served as Vice President, New York Life
51 Madison Avenue President Insurance Company, 1995 to present; Tax Vice President, NYLIFE
New York, NY 10010 Securities Inc., 1987 to present; Tax Vice President, NYLIFE SFD
Holding Inc., 1990 to present; Tax Vice President, NYLIFE
Depositary Inc., 1990 to present; Tax Vice President NYLIFE LLC,
1990 to present; Tax Vice President NYLIFE Insurance Company of
Arizona, 1990 to present; Tax Vice President, NYLIFE Realty
Inc., 1991 to present; Tax Vice President NYLICO Inc., 1991 to
present; Tax Vice President, New York Life Fund Inc., 1991 to
present, Tax Vice President, New York Life International
Investment, Inc., 1991 to present; Tax Vice President NYLIFE
Funding Inc., 1991 to present Tax Vice President, NYLCO, 1991 to
present; Tax Vice President, NYLIFE Equity Inc., 1991 to
present; Tax Vice President MainStay VP Series Fund, Inc., 1991
to present; Tax Vice President, CNP Realty Investments, Inc.,
1991 to present; Tax Vice President, New York Life Worldwide Holding,
Inc., 1992 to present; Tax Vice President, NYLIFE Structured
Asset Management Company Ltd., 1992 to present; Tax Vice President,
The MainStay Funds, 1991 to present; Tax Vice President Eagle
Strategies Corp. (registered investment adviser), 1993 to
present; Tax Vice President, NYLIFE Distributors Inc., 1993 to
present; Vice President & Assistant Controller, New York Life
Insurance and Annuity Corp., 1995 to present; Vice President,
NYLCare Health Plans, Inc., 1995 to present; Vice President
-Tax, New York Life and Health Insurance Co., 1996 to present;
Tax Vice President New York Life Trust Company, 1996 to present;
Tax Vice President, Monitor Capital Advisors LLC, 1996 to 2000;
Tax Vice President, NYLINK Insurance Agency Incorporated, 1996
to present; Tax Vice President, MainStay Shareholder Services
LLC, 1997 to present.
JOHN FLANAGAN (53) Treasurer Mr. Flanagan has served as Vice President and Treasurer, New
51 Madison Avenue (Principal York Life Investment Management LLC, 1999 to present; Vice
New York, NY 10010 Financial and President, New York Life Insurance Company, 1999 to present;
Accounting Vice President and Chief Financial Officer, The MainStay Funds,
Officer) and 1999 to present; Director, Vice President and Chief Financial
Secretary Officer, New York Life Investment Management (formerly MainStay
Management LLC), 1999 to present; Director, Vice President and
Chief Financial Officer, MainStay Shareholder Services LLC, 1999
to present; Senior Vice President and Chief Financial Officer,
NYLIFE Distributors, Inc., 1999 to present; Treasurer, Strong
Funds and Senior Vice President, Strong Capital Management,
Inc., 1997 to 1998; Partner, predecessor to
PricewaterhouseCoopers LLP, 1994 to 1997.
PATRICK J. FARRELL (41) Assistant Mr. Farrell has served as Managing Director, New York Life
51 Madison Avenue Treasurer and Investment Management LLC, 1998 to present; Corporate Vice
New York, NY 10010 Assistant President, New York Life Insurance Company, 1996 to 1998;
Secretary Assistant Treasurer, The MainStay Funds, 1996 to
present; Assistant Treasurer, MainStay Institutional Funds, 1996 to
present, Assistant Treasurer, Eclipse Funds, 1996 to present,
Assistant Treasurer, MainStay VP Funds, 1996 to present.
Previously, he was Vice President, Alliance Fund
Services, 1988 to 1996.
</TABLE>
**
The "Compensation Table" on page 22 is revised in its entirety as follows:
<TABLE>
<CAPTION>
======================================================================================================================
COMPENSATION TABLE
(Year Ended December 31, 1999)
Pension or
Aggregate Retirement Benefits Estimated Annual Total Compensation
Compensation from Accrued As Part of Benefits Upon From Fund Complex
Name of Trustee the Trust(1) Trust Expenses Retirement Paid to Trustees (1),(2)
========================== ====================== ====================== ====================== ======================
<S> <C> <C> <C> <C>
Lawrence Glacken(3) N/A N/A N/A $24,000(5)
Sigrid A. Hess4 $0 $0 $0 $0
Susan B. Kerley(3) N/A N/A N/A $23,000(5)
Wesley G. McCain(4) $0 $0 $0 $0
Robert P. Mulhearn(3) N/A N/A N/A $23,000(5)
John C. Novogrod(4) $5,000 $0 $0 $5,000
Stephen C. Roussin(3) N/A N/A N/A $0
John C. Van Eck(4) $5,000 $0 $0 $5,000
Yung Wong(4) $5,000 $0 $0 $5,000
---------------
</TABLE>
(1) Trustees of the Trust not affiliated with the Manager, Towneley Capital
Management, Inc. ("Towneley") or New York Life Investment Management LLC
(formerly MainStay Management LLC) receive from the Trust an annual retainer
of $2,000 and a fee of $750 for each Board meeting attended and are
reimbursed for all out-of-pocket expenses relating to attendance at such
meetings. Officers of the Trust and Trustees who are affiliated with the
Manager, Towneley or New York Life Investment Management LLC do not receive
compensation from the Trust. The following table sets forth information
regarding compensation of Trustees by the Trust for the fiscal year ended
December 31, 1999.
(2) The Fund Complex consists of Eclipse Funds and MainStay Institutional Funds
Inc.
(3) Accepted appointment as a Trustee of the Trust on December 12, 2000.
(4) Resigned as Trustee of the Trust on December 12, 2000.
(5) Compensation data is for the fiscal period ended October 31, 1999.
**
The "Manager" section on page 22 is revised in its entirety as follows:
MANAGER
Pursuant to a Management Contract with the Funds dated December 12, 2000 (the
"Management Contract"), the Manager, subject to the supervision of the Board,
administers each Fund's business affairs and manages 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. Under the Management Contract, the Manager
is responsible for both investment advice and administration without any
increase in the Funds' current advisory fees.
The Management Contract was approved on October 20, 2000 by the Board, including
a majority of the Trustees who are not interested persons (as defined in the
Investment Company Act of 1940) of the Trust or the Manager. The Management
Contract was approved by the public shareholders of each Fund at a special
meeting held on December 5, 2000. The Management Contract 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
Management Contract or "interested persons" of any such party (other than as
Trustees of the Trust).
Under the Management Contract, the Manager has authorized any of its Trustees,
officers and employees who may be elected or appointed as Trustee or officers of
the Trust to serve in the capacities in which they are elected or appointed.
For its services under the Management Contract, the Manager receives fees from
each Fund, accrued daily and payable monthly, at the following annual rates,
which are expressed as a percentage of the average daily net assets of each
Fund:
Ultra Short Term Income Fund 0.40%
Balanced Fund 0.75%
Mid Cap Value Fund 0.90%
Small Cap Value Fund 1.00%
The Manager has contractually agreed to waive advisory fees of 0.20% of the
Ultra Short Term Income Fund's average daily net assets through December 31,
2002, and the Manager is also voluntarily waiving the remaining 0.20% through
December 31, 2002. The Manager may discontinue all or part of the voluntary
waiver at any time after that date.
For the initial two-year term of the Management Contract, the Manager has
undertaken that there will be no increase in the annual ordinary operating
expense ratios (excluding transfer agency expenses) of the Funds above those for
the twelve months ended December 31, 2000 (excluding transfer agency expenses).
In the case of transfer agency expenses, the Manager has also undertaken that
during the initial two-year period, any increase in a Fund's transfer agency
expenses above those that would have been experienced by that Fund if the old
transfer agency agreement (i.e., pre-Transaction) were still in effect will be
borne by the Manager.
The Management Contract provides that the Manager shall not be liable to a Fund
for any error or judgment by the Manager or for any loss sustained by a Fund
except in the case of the Manager's willful misfeasance, bad faith, gross
negligence or reckless disregard of duty. The Management Contract also provides
that it shall terminate automatically if assigned and that it may be terminated
without penalty by either party upon no more than 60 days' nor less than 30
days' written notice.
Prior to December 12, 2000 and since the inception of each Eclipse Fund,
Towneley served as investment adviser for Eclipse Funds. On December 12, 2000,
Towneley sold 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 Funds, to New York Life Investment Management
Holdings LLC (the "Transaction"). As a result of the Transaction, NYLIM replaced
Towneley as the investment adviser to the Funds effective December 12, 2000. The
Transaction did not result in any increase in advisory fees for any of the
Funds.
For the fiscal year ended December 31, 1999, Towneley received a fee from the
Balanced Fund equal to 0.75% of the Fund's average daily net assets, from the
Mid Cap Value Fund equal to 0.90% of the Fund's average daily net assets, from
the Small Cap Value Fund equal to 1.00% of the Fund's average daily net assets,
and from the Ultra Short Term Income Fund equal to 0.00% of the Fund's average
daily net assets (Towneley contractually waived 0.20% and voluntarily waived the
remainder of the Fund's fee).
For the fiscal years ended December 31, 1997, December 31, 1998 and December 31,
1999, Towneley voluntarily waived fees of $19,113, $27,820 and $32,290,
respectively, (in each case, its entire fee) for the Ultra Short Term Income
Fund.
For the fiscal years ended December 31, 1997, December 31, 1998 and December 31,
1999, the fees payable by the Balanced Fund under its management contract with
Towneley were $681,825, $779,459, and $673,283, respectively. During the years
ended December 31, 1997 and December 31, 1998, Towneley voluntarily waived fees
for the Balanced Fund totaling $153,387 and $136,778, respectively.
For the fiscal years ended December 31, 1997, December 31, 1998 and December 31,
1999, the fees payable by the Mid Cap Value Fund under its management contract
with Towneley were $470,307, $1,038,228, and $918,205, respectively, and
Towneley voluntarily waived fees totaling $82,079 in 1997 and $70,826 in 1998.
For the fiscal years ended December 31, 1997, December 31, 1998 and December 31,
1999, the fees paid by the Small Cap Value Fund under its management contract
with Towneley were $1,781,313, $1,978,256, and $2,183,901, respectively.
**
The "Administrator" section on page 24 is revised in its entirety as follows:
ADMINISTRATOR
Pursuant to the Management Contract, the Manager is responsible for providing
both investment advisory and administrative services to the Funds, and the
Manager may delegate any or all of its duties under the Management Contract to a
sub-adviser or sub-administrator. The Manager is a wholly-owned subsidiary of
New York Life Insurance Company. In connection with its responsibilities as
administrator, the Manager 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 Custodian; coordinating and controlling on a daily
basis the administrative and professional services rendered to the Trust by
others, including the custodian and the transfer, dividend disbursing and
shareholder servicing agents, 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.
Prior to December 12, 2000, the Trust had retained the Manager (or its
affiliated predecessor, Mainstay Management LLC) pursuant to an administration
agreement dated January 1, 1998 whereby the Manager's fees were paid by Towneley
out of its management fee. For providing the administrative services, the
Manager received 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 paid the Manager 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 years ended December 31, 1997, December 31, 1998, and
December 31, 1999, the Manager received $302,223, $316,284, and $316,631,
respectively, for the Funds.
Because of the services rendered to the Trust by the Manager, the Trust itself
requires no employees other than its officers, none of whom receive compensation
from the Trust and all of whom are employed by the Manager.
**
A new "Distributor" section is inserted after the "Administrator" section on
page 24 as follows:
DISTRIBUTOR
NYLIFE Distributors Inc. serves as the Trust's distributor and principal
underwriter (the "Distributor") pursuant to a Distribution Agreement. The
Distributor is not obligated to sell any specific amount of the Trust's shares,
and receives no compensation from the Trust pursuant to the Distribution
Agreement.
The Trust anticipates making a continuous offering of its shares, although it
reserves the right to suspend or terminate such offering at any time. The
Distribution Agreement was approved by the Board of Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust or the Distributor, nor have any direct or indirect
financial interests in the operation of the distribution plan or in any related
agreement (the "Independent Trustees") at a meeting held on December 12, 2000.
The Distribution Agreement is subject to annual approval by the Board of
Trustees. The Distribution Agreement is terminable with respect to a Fund at any
time, without payment of a penalty, by vote of a majority of the Trust's
Trustees who are not "interested persons" (as defined in the Investment Company
Act of 1940) of the Trust, upon 60 days' written notice to the Distributor, by
vote of a majority of the outstanding voting securities of that Fund, upon 60
days' written notice to the Distributor, or by the Distributor, upon 60 days'
written notice to the Trust. The Distribution Agreement will terminate in the
event of its assignment.
**
The "Transfer Agent, Dividend Disbursing Agent and Custodian" section on page 24
is revised in its entirety as follows:
TRANSFER AGENT, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT, AND
CUSTODIAN
MainStay Shareholder Services LLC ("MSS") is the Funds' Transfer Agent and
Dividend Disbursing and Shareholder Servicing Agent. MSS, whose address is 260
Cherry Hill Road, Parsippany, NJ 07054, is an indirect wholly owned subsidiary
of New York Life Insurance Company. MSS provides customer service, is
responsible for preparing and sending statements, confirms and checks, and keeps
certain financial and accounting records. MSS is paid a per account fee and
out-of-pocket expenses by the Funds. MSS has entered into an agreement with
Boston Financial Data Services ("BFDS"), whose address is 2 Heritage Drive,
North Quincy, MA 02171. BFDS will perform certain of the services for which MSS
is responsible. Currently, BFDS has delegated this responsibility to its
affiliate, National Financial Data Services, 330 West 9th Street, Kansas City,
Missouri 64105. In addition, the Fund or MSS may contract with other service
organizations, including affiliates of MSS and broker-dealers and other
financial institutions, each of which will establish a single omnibus account
for their clients with the Fund. The service organizations will provide
shareholder services to the shareholders within the omnibus accounts and receive
service fees for those services from the Fund.
The Bank of New York, 48 Wall Street, New York, New York 10286, is the custodian
for assets held by the Funds.
**
