<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
MainStay Institutional Funds Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
October __, 1997
Dear Shareholder:
We are pleased to announce a Special Meeting of Shareholders of MainStay
Institutional Funds Inc. (the "Company"), which is to be held at 10:00 a.m. EST
on November 17, 1997 at the offices of the Company. Formal notice of the
Meeting appears on the next page, followed by the proxy statement. You are
invited to attend the Meeting, however, if you are unable to be present, we urge
you to vote your shares by completing and returning the enclosed proxy card in
the envelope provided as soon as possible.
WHAT ARE THE PROPOSALS?
At the Meeting, you will be asked to consider election of the Board of
Directors, approval of a Management Agreement between the Company and MainStay
Management, Inc. (the "Manager") and approval of Sub-Advisory Agreements between
the Manager and each of MacKay-Shields Financial Corporation, Monitor Capital
Advisors, Inc. and New York Life Insurance Company for their respective Funds.
Shareholders will be asked to vote to eliminate or revise certain fundamental
investment restrictions of the Funds, and to ratify the selection of Price
Waterhouse LLP as independent certified public accountants of the Company.
After carefully considering each proposal, the Board of Directors, which
represents your interests in the management of MainStay Institutional Funs Inc.,
recommends that you vote FOR each of the proposals.
YOUR VOTE IS IMPORTANT.
Please take a moment now to sign and return your proxy card(s) in the
enclosed postage paid envelope. You will receive one proxy card for each Fund
you own. PLEASE COMPLETE AND RETURN EACH PROXY CARD YOU RECEIVE.
The Company has retained Shareholder Communications Corporation ("SCC"), a
professional proxy solicitation firm, to assist in the voting process. If we
have not obtained your vote after a reasonable period of time, you may receive a
telephone call from a representative of SCC reminding you to exercise your right
to vote.
Thank you for your cooperation.
Sincerely,
Alice T. Kane
Chairperson
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
51 MADISON AVENUE
NEW YORK, NY 10010
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of
MainStay Institutional Funds Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of the following series of MainStay Institutional Funds Inc. (the
"Company"): Bond Fund, EAFE Index Fund, Growth Equity Fund, Indexed Bond Fund,
Indexed Equity Fund, International Bond Fund, International Equity Fund, Money
Market Fund, Multi-Asset Fund, Short-Term Bond Fund and Value Equity Fund
(individually a "Fund" and collectively the "Funds"), will be held at the
offices of the Company, 51 Madison Avenue, New York, NY 10010, on November 17,
1997 at 10:00 a.m. for the following purposes, all of which are more fully
described in the accompanying Proxy Statement dated _________________, 1997.
1. To elect the Directors of the Company, each to hold office for the lifetime
of the Company or until his or her successor is duly elected and qualified;
2. To approve a Management Agreement between the Company on behalf of each of
the Funds and MainStay Management, Inc. (the "Manager") (the "Management
Agreement");
3. To approve Sub-Advisory Agreements between the Manager and: (a) MacKay-
Shields Financial Corporation ("MacKay-Shields") on behalf of the Bond Fund,
Growth Equity Fund, International Bond Fund, International Equity Fund,
Short-Term Bond Fund and Value Equity Fund; (b) Monitor Capital Advisors,
Inc. ("Monitor") on behalf of the EAFE Index Fund, Indexed Bond Fund,
Indexed Equity Fund, and Multi-Asset Fund; (c) New York Life Insurance
Company ("New York Life") on behalf of the Money Market Fund.
4. To eliminate or revise certain fundamental investment restrictions of the
Funds;
5. To ratify the selection of Price Waterhouse LLP as independent certified
public accountants of the Company for its fiscal year ending December 31,
1997; and
6. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
<PAGE>
The Directors have fixed the close of business on September 12, 1997 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting or any adjournment thereof. The enclosed proxy is being
solicited on behalf of the Directors.
By order of the Board of Directors,
Sara L. Badler
New York, New York
___________________, 1997
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD,
SIGN AND DATE IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE
IF MAILED IN THE UNITED STATES. IN ORDER TO SAVE THE FUND ANY ADDITIONAL EXPENSE
OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY PROMPTLY.
- --------------------------------------------------------------------------------
-2-
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
51 MADISON AVENUE
NEW YORK, NY 10010
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of MainStay Institutional Funds
Inc., a Maryland Corporation (the "Company"), to be voted at the Special Meeting
of Shareholders of Bond Fund, EAFE Index Fund, Growth Equity Fund, Indexed Bond
Fund, Indexed Equity Fund, International Bond Fund, International Equity Fund,
Money Market Fund, Multi-Asset Fund, Short-Term Bond Fund and Value Equity Fund
(individually a "Fund" and collectively the "Funds"), each a separate investment
series of the Company, to be held at the offices of the Company, 51 Madison
Avenue, New York, New York 10010 on November 17, 1997 at 10:00 a.m., and at any
adjournments thereof (collectively, the "Meeting"). The cost of the
solicitation (including printing and mailing this Proxy Statement, Notice of
Meeting and Proxy, as well as any necessary supplementary solicitation) will be
borne by the Funds in proportion to their average net assets. The Notice of
Meeting, Proxy Statement and Proxy are being mailed to shareholders on or about
__________________, 1997.
The presence in person or by proxy of the holders of record of a majority
of the shares of a series of the Company entitled to vote thereat shall
constitute a quorum at the Meeting for that Fund. If, however, such quorum
shall not be present or represented at the Meeting or if fewer shares are
present in person or by proxy than the minimum required to take action with
respect to any proposal presented at the Meeting, the holders of a majority of
the shares of the series present in person or by proxy shall have the power to
adjourn the Meeting with respect to that series, from time to time, without
notice other than announcement at the Meeting, until the requisite amount of
shares entitled to vote at the Meeting shall be present. At any such adjourned
Meeting, if the relevant quorum is subsequently constituted, any business may be
transacted which might have been transacted at the Meeting as originally called.
For purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" (that is, proxies from brokers
or nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are present but which have not been voted. For
this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval for Proposals Two, Three
and Four, for which the required vote is a percentage of the shares outstanding
and will have no effect on Proposals One and Two, for which the required vote is
a majority of the votes cast.
The Board of Directors has fixed the close of business on September 12,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting
<PAGE>
and at any adjournments thereof. Each share is entitled to one vote. The numbers
of outstanding voting Institutional Class and Institutional Service Class shares
of each Fund as of September 12, 1997 are indicated in the following table:
INSTITUTIONAL INSTITUTIONAL
CLASS SERVICE CLASS
----- -------------
Bond Fund
EAFE Index Fund
Growth Equity Fund
Indexed Bond Fund
Indexed Equity Fund
International Bond Fund
International Equity Fund
Money Market Fund
Multi-Asset Fund
Short-Term Bond Fund
Value Equity Fund
Additional information regarding share ownership of the Funds is included
as Exhibit A.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or as
otherwise provided therein. Accordingly, unless instructions to the contrary
are marked, proxies will be voted FOR the matters specified on the proxy card.
Any shareholder may revoke his proxy at any time prior to exercise thereof by
giving written notice to the Secretary of the Company at its offices at 51
Madison Avenue, New York, New York 10010, or by signing another proxy of a later
date or by personally casting his or her vote at the Meeting.
The most recent annual and semi-annual reports of the Funds, including
financial statements, have been previously mailed to shareholders. IF YOU HAVE
NOT RECEIVED THESE REPORTS OR WOULD LIKE TO RECEIVE ADDITIONAL COPIES FREE OF
CHARGE, PLEASE CONTACT THE COMPANY AT 51 MADISON AVENUE, NEW YORK, NEW YORK
10010, (800) 695-2126 EXT. 2055 AND THEY WILL BE SENT PROMPTLY BY FIRST-CLASS
MAIL.
To obtain the necessary representation at the Meeting, supplementary
solicitations may be made by mail, telephone, telegraph, facsimile or personal
contact by officers of the Company, employees of New York Life Insurance Company
("New York Life"), MacKay-Shields Financial Corporation ("MacKay-Shields"),
Monitor Capital Advisors, Inc. ("Monitor") or their affiliates, or proxy
solicitation firms. Shareholder Communications Corporation has been retained to
assist proxy solicitation activities at a cost of approximately $__________.
Shareholders' votes may be taken by telephone by representatives of Shareholders
Communication Corporation, subject to procedures designed to authenticate
shareholders' identities and confirm voting instructions.
-2-
<PAGE>
Votes Required
- --------------
The election of Directors, as set forth in Proposal One, will require a
vote of the holders of a majority of the total votes validly cast at the
Meeting. Approval of the Management Agreement, as set forth in Proposal Two,
will require a majority vote of the outstanding voting securities of each Fund.
The approval of the Sub-Advisory Agreements between the Manager and MacKay-
Shields, the Manager and Monitor and the Manager and New York Life as set forth
in Proposal Three requires a majority vote of the outstanding voting securities
of each Fund. The elimination or revision of certain fundamental investment
restrictions of the Funds, as set forth in Proposal Four, will require a
majority vote of the outstanding voting securities of each Fund. For purposes
of Proposals Two, Three and Four, a majority of the outstanding voting
securities of a Fund means the lesser of (1) 67% of the shares of that Fund
present at a meeting if the holders of more than 50% of the outstanding shares
of that Fund are present in person or by proxy, or (2) more than 50% of the
outstanding shares of that Fund. Ratification of the selection of the
independent certified public accountants, set forth in Proposal Five, will
require a vote of the holders of a majority of the total votes validly cast at
the Meeting.
- ----------------------------------------------------------------------------
PROPOSALS SHAREHOLDERS ENTITLED TO VOTE
- ----------------------------------------------------------------------------
Proposal One - ELECTION OF DIRECTORS All Funds
- ----------------------------------------------------------------------------
Proposal Two - APPROVAL OF MANAGEMENT All Funds
AGREEMENT
- ----------------------------------------------------------------------------
Proposal Three - A APPROVAL OF SUB-ADVISORY Bond Fund
AGREEMENT BETWEEN THE Growth Equity Fund
MANAGER AND MACKAY-SHIELDS International Bond Fund
International Equity Fund
Short-Term Bond Fund
Value Equity Fund
- ----------------------------------------------------------------------------
Proposal Three - B APPROVAL OF SUB-ADVISORY EAFE Index Fund
AGREEMENT BETWEEN THE Indexed Bond Fund
MANAGER AND MONITOR Indexed Equity Fund
Multi-Asset Fund
- ----------------------------------------------------------------------------
Proposal Three - C APPROVAL OF THE SUB-ADVISORY Money Market Fund
AGREEMENT BETWEEN THE
MANAGER AND NEW YORK LIFE
- ----------------------------------------------------------------------------
Proposal Four - ELIMINATION OR REVISION OF All Funds
CERTAIN FUNDAMENTAL
INVESTMENT RESTRICTIONS OF THE FUNDS
- ----------------------------------------------------------------------------
Proposal Five - RATIFICATION OF SELECTION OF All Funds
INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
- ----------------------------------------------------------------------------
-3-
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
ALL FUNDS
At the Meeting, five Directors will be elected, each to serve until he or
she resigns, dies or is removed and until his or her successor is duly elected
and qualified. The nominees are Patrick G. Boyle, Lawrence Glacken, Alice T.
Kane, Susan B. Kerley, and Robert P. Mulhearn who, if elected, will each serve
for an indefinite term. It is the intention of the persons named in the
enclosed proxy to nominate and vote in favor of the nominees.
Each of the nominees has consented to serve as a Director. All of the
nominees are currently Directors of the Company. The Board of Directors knows
of no reason why any of the nominees would be unable to serve, but in the event
of such unavailability, the proxies received will be voted for such substitute
nominees as the Board of Directors may recommend.
Certain information concerning the Directors is set forth as follows:
================================================================================
Name, Positions with the Approximate Number
Company, Age, Principal of Shares Beneficially
Occupations During the Past Year First Year Term as Owned Directly or
Five Years and Other Became a Director Will Indirectly as of
Directorships/Trusteeships Director Expire September 12, 1997
================================================================================
PATRICK G. BOYLE, DIRECTOR* Indefinite
Senior Vice President,
Pension Department, New
York Life Insurance
Company, 1991 to present;
Vice President, Pension
Department, New York Life
Insurance Company, 1988 to
1991; Pension Vice
President, Pension
Department, New York Life
Insurance Company, 1986 to
1988; Assistant Vice
President, Pension
Department, New York Life
Insurance Company, 1985 to
1986; Director, NYLIFE
Distributors Inc., 1993 to
1996; Chairman, Monitor
Capital Advisors, Inc.,
1986 to present, and
Director, 1991 to present;
Director, New York Life
Benefit Services, Inc.,
1994 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 present.
Age: 43
================================================================================
-4-
<PAGE>
LAWRENCE GLACKEN, DIRECTOR Indefinite
Retired, 1987 to present;
Vice President, Investment
Banking, The First Boston
Corporation, 1964 to 1987.
Age: 69
================================================================================
ALICE T. KANE, DIRECTOR AND Indefinite
CHAIRPERSON OF THE BOARD OF
DIRECTORS*
Executive Vice President,
New York Life Insurance
Company, 1992 to present;
General Counsel, New York
Life Insurance Company,
1992 to 1995; Senior Vice
President and General
Counsel, New York Life
Insurance Company, 1986 to
1992; Corporate Secretary,
New York Life Insurance
Company, 1989 to 1994;
Vice President and General
Counsel, New York Life
Insurance Company, 1985 to
1986; Trustee and
Chairperson, The MainStay
Funds, 1994 to present;
Director, New York Life
Foundation, 1992 to 1995;
Director, New York Life
International Investment
Inc., 1988 to present;
Director, NYLIFE Inc.,
1990 to present; Vice
President, NYLIFE Inc.,
1989 to present; and
Secretary, NYLIFE Inc.,
1989 to 1994; Director,
MacKay-Shields Financial
Corporation, 1994 to
present; Director, New
York Life Benefit
Services, Inc. (pension
consultant and third party
administrator), 1994 to
present; Director, NYLIFE
Securities, Inc.
(registered
broker-dealer), 1994 to
present; Director, Eagle
Strategies Corp.
(registered investment
adviser), 1994 to present;
Director, NYLIFE
Distributors Inc., 1994 to
present; Director,
Greystone Realty
Corporation, 1994 to
present; Director, Monitor
Capital Advisors, Inc.,
1994 to present; Director,
NYL Management Limited,
1995 to present; Director,
Sanus Corp. Health
Systems, 1984 to 1995;
Director, NYLCare Health
Plans, Inc. (formerly
Sanus Corp. Health
Systems), November 1995 to
present; Director, New
York Life Trust Company (a
limited purpose trust
company), 1995 to present;
Director, Japan Gamma
Asset Management Limited,
1995 to present; Director,
New York Life Worldwide
Holding, Inc., 1995 to
present; Director, New
York Life and Health
Insurance Company, 1996 to
present; Director, NYLINK
Insurance Agency
Incorporated, 1996 to
present; Director,
MainStay Shareholder
Services Inc., 1997 to
present; Director, NASD
Regulation, Inc., 1996 to
present; Member, Board of
Governors of the National
-5-
<PAGE>
Association of Securities
Dealers, Inc., 1994 to
1996; Member, American
Council of Life Insurance
Deputies Solvency
Oversight Committee, 1991
to 1995; Board of
Governors, Association of
Life Insurance Counsel,
1992 to 1996.
Age: 49
================================================================================
SUSAN B. KERLEY, DIRECTOR Indefinite
President, Global Research
Associates, 1990 to
present; Manager, Special
Investments, Rockefeller &
Co., 1988 to 1990;
Director of Research,
Rogers, Casey and
Barksdale, 1983 to 1988;
Director, Landmark Funds,
1991 to present.
Age: 45
================================================================================
ROBERT P. MULHEARN, DIRECTOR Indefinite
Private Investor, 1987 to
present; Managing
Director, Morgan Stanley,
1979 to 1987.
Age: 50
================================================================================
- -------------------------
* "Interested person," as defined in the Investment Company Act of 1940.
During the Company's fiscal year ended December 31, 1996, the Board of
Directors met five times. The Company's Board of Directors has a standing Audit
Committee which is comprised of the Directors who are not "interested persons"
as defined in the Investment Company Act of 1940 (the "Independent Directors").
The Board also has a Valuation Committee. During the Company's fiscal year
ended December 31, 1996, the Audit Committee met twice and the Valuation
Committee met one time. The Audit Committee reviews reports prepared by the
Company's independent auditors, recommends approval of audit services and fees,
evaluates the independence of the independent auditors and recommends whether to
retain the independent auditors. The Valuation Committee reviews the valuations
of certain of the Funds' portfolio securities.
As of September 2, 1997, the Directors and officers of the Company as a
group owned less than 1% of the shares of any class of shares of beneficial
interest of each of the Funds. Additional information regarding the Company's
executive officers is included in Exhibit B.
Compensation of Directors
- -------------------------
The Independent Directors of the Company receive from the Company an annual
retainer of $24,000 and a fee of $1,000 for each Board of Directors meeting and
for each Board committee meeting attended and are reimbursed for all out-of-
pocket expenses related to attendance at such meetings. Directors who are
affiliated with New York Life Insurance Company do not receive compensation from
the Company.
For the fiscal year ended December 31, 1996, the Directors received the
following compensation from the Company:
-6-
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation
Aggregate From Registrant
Name of Director Compensation and Fund Complex
from the Company Paid to Directors
=============================================================================================
<S> <C> <C>
Lawrence Glacken $30,000 $30,000
=============================================================================================
Susan B. Kerley $30,000 $30,000
=============================================================================================
Robert P. Mulhearn $30,000 $30,000
=============================================================================================
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY VOTE FOR THE ELECTION OF THE NOMINEES TO SERVE AS DIRECTORS OF THE
COMPANY.
PROPOSAL TWO
APPROVAL OF MANAGEMENT AGREEMENT
ALL FUNDS
Management has proposed, and the Board of Directors has approved, a
restructuring of certain entities providing services to the Company. Under the
current structure, MacKay-Shields Financial Corporation, 9 West 57th Street, New
York, NY 10019, is the investment adviser to the Bond Fund, Growth Equity Fund,
International Bond Fund, International Equity Fund, Short-Term Bond Fund and
Value Equity Fund. Monitor Capital Advisors, Inc., 504 Carnegie Center,
Princeton, NJ 80540, is the investment adviser to the EAFE Index Fund, Indexed
Bond Fund, Indexed Equity Fund and Multi-Asset Fund. New York Life Insurance
Company, 51 Madison Avenue, New York, NY 10010, serves as the investment adviser
to the Money Market Fund. Additional information regarding the Funds' current
investment advisory and administrative arrangements is included as Exhibit C.
Under the proposed structure, a newly formed entity, MainStay Management,
Inc., would serve as manager to each of the Funds pursuant to a Management
Agreement with the Company. The Manager would have responsibility for oversight
of the portfolio management services provided by MacKay-Shields, Monitor and New
York Life and for managing the Funds' business affairs. A copy of the proposed
form of Management Agreement is included as Exhibit D. MacKay-Shields, Monitor
or New York Life (collectively, the "Sub-Advisers") would serve as sub-adviser
of each of the Funds and thereby retain primary day-to-day portfolio management
responsibility for the Funds and continue to provide the same services it
currently provides to each Fund.
MainStay Management, Inc., whose address is Morris Corporate Center I,
Building A, 300 Interpace Parkway, Parsippany, New Jersey 07054, is a newly-
organized Delaware
-7-
<PAGE>
corporation. MainStay Management, Inc. is an indirect, wholly-owned subsidiary
of New York Life Insurance Company and a wholly-owned subsidiary of NYLIFE Inc.
Additional information regarding the principal executive officer and directors
of MainStay Management, Inc. is included as Exhibit E.
In addition to engaging the services of the Sub-Advisers, the Manager's
administrative functions pursuant to the proposed Management Agreement would
include furnishing the Company with office facilities and providing ordinary
clerical, recordkeeping and bookkeeping services. The Manager would assume all
the administrative duties performed by New York Life, which currently serves as
administrator of the Funds. Those persons currently associated with New York
Life who perform such duties will continue to perform them on behalf of the
Manager. Accordingly, there should not be any change in, or disruption of the
administrative services provided to the Funds.
With respect to each Fund, the Manager would be paid a fee equal to the
aggregate of the current investment advisory and administrative fee for that
Fund. Thus, there would be no increase in fees paid for investment advisory and
administrative services under the proposed structure. All applicable voluntary
expense limitations would remain in effect under the proposed structure. The
proposed fees and the current fees are as follows:
Proposed Management Fees (includes fees for investment advisory and
-------------------------------------------------------------------
administrative services) and Current Investment Advisory and Administrative Fees
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Advisory Fee
Rate Paid for Administrative Fee
the Year Ended Rate Paid for Fiscal
Proposed Current December 31, Current Year Ended December
Fund Management Fee Advisory Fee 1996* Administrative Fee 31, 1996*
---- -------------- ------------ ---- ------------------ --------
==================================================================================================================================
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Bond Fund 0.75% 0.20% 0.20% 0.55% 0.44%
==================================================================================================================================
EAFE Index Fund 0.95% 0.15% 0.15% 0.80% 0.51%
==================================================================================================================================
Growth Equity Fund 0.85% 0.25% 0.25% 0.60% 0.60%
==================================================================================================================================
Indexed Bond Fund 0.50% 0.10% 0.10% 0.40% 0.25%
==================================================================================================================================
Indexed Equity Fund 0.50% 0.10% 0.08% 0.40% 0.27%
==================================================================================================================================
International Bond Fund 0.80% 0.30% 0.30% 0.50% 0.37%
==================================================================================================================================
International Equity Fund 0.85% 0.35% 0.35% 0.50% 0.43%
==================================================================================================================================
Money Market Fund 0.50% 0.10% 0.10% 0.40% 0.23%
==================================================================================================================================
Multi-Asset Fund 0.65% 0.15% 0.l5% 0.50% 0.45%
==================================================================================================================================
Short-Term Bond Fund 0.60% 0.15% 0.15% 0.45% 0.26%
==================================================================================================================================
Value Equity Fund 0.85% 0.25% 0.25% 0.60% 0.60%
==================================================================================================================================
</TABLE>
* Reflects applicable voluntary expense limitations.
-8-
<PAGE>
Board Consideration
- -------------------
At a meeting held on September 9, 1997, the Board of Directors, including
the Directors who are not interested parties to the Management Agreement or
interested persons of such parties, considered the proposed restructuring of the
entities providing services to the Company and the services to be provided by
the Manager under the Management Agreement. The Board concluded that it would
be in the best interests of the Company and its shareholders to enter into the
Management Agreement with the Manager. In coming to that conclusion, the
Directors examined information which included the fees and expenses of the Funds
under the current investment advisory and administrative structure and the
proposed management structure. The Board also examined the proposed management
fees in relation to comparative fees for other funds within each Fund's Lipper
peer group.
The Board noted in particular that the fees paid by the Funds for advisory
and administrative services would not increase under the proposed management
structure. The Board members also considered the information provided to them
regarding MainStay Management, Inc. and its qualifications to act as Manager to
the Funds. The Board reviewed information presented by management regarding the
anticipated benefits to the Funds and their shareholders from the proposed new
management structure. The Board noted that the new structure would centralize
overall management responsibility for the Funds and offer the potential for more
efficient management supervision. The Board also considered that the proposed
new structure would allow for continuity of portfolio management services
provided to the Funds because each Fund's current investment adviser would
continue to be responsible for day-to-day portfolio management of the Fund as
the Fund's Sub-Adviser. The proposed structure would also provide continuity of
administrative services since those persons associated with New York Life, the
Fund's current administrator, would continue to perform the same services as on
behalf of MainStay Management Inc. In addition, the Board noted that the Funds
could benefit from an additional level of oversight of the portfolio management
services provided to the Funds through the Manager without subjecting the Funds
to an increase in the fees paid for investment advisory and administrative
services. Finally, the Board noted that the terms of the proposed Management
Agreement were substantially similar to the terms of the Funds' current
Investment Advisory and Administration Agreements.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS APPROVAL OF THE MANAGEMENT AGREEMENT WITH MAINSTAY MANAGEMENT, INC.
If approved by a majority vote of the outstanding shares of each Fund, the
Management Agreement will become effective on the first business day following
shareholder approval and will remain in force for a period of two years, and
from year to year thereafter, subject to approval annually by the Board of
Directors or by a majority vote of the outstanding shares of each Fund, and
also, in either event, approval by a majority of those Directors who are not
parties to the Management Agreement or interested persons of any such party at a
meeting called for the purpose of voting on such approval. If the shareholders
of any one or more of the Funds should fail to approve the Management Agreement,
that Fund's current investment adviser may continue
-9-
<PAGE>
to serve as investment adviser under its current Investment Advisory Agreement
with respect to that Fund, and MainStay Management, Inc. would, with Board
approval, enter into an administration agreement substantially identical to the
current Administration Agreement with New York Life. MainStay Management, Inc.
may serve as Manager under the Management Agreement with respect to those Funds
whose shareholders approve the Management Agreement.
PROPOSAL THREE
APPROVAL OF SUB-ADVISORY AGREEMENTS BETWEEN
THE MANAGER AND MACKAY-SHIELDS; BETWEEN
THE MANAGER AND MONITOR; AND BETWEEN
THE MANAGER AND NEW YORK LIFE
ALL FUNDS
In connection with the restructuring of the entities providing investment
advisory and administrative services to the Funds, it is proposed that the
Manager enter into a Sub-Advisory Agreement with MacKay-Shields on behalf of
each of the Funds for which MacKay-Shields currently serves as Investment
Adviser, i.e., the Bond Fund, Growth Equity Fund, International Bond Fund,
International Equity Fund, Short-Term Bond Fund and Value Equity Fund.
Likewise, it is proposed that with respect to the EAFE Index Fund, Indexed Bond
Fund, Indexed Equity Fund and Multi-Asset Fund, the Manager enter into a Sub-
Advisory Agreement with Monitor, the current investment adviser to these Funds.
It is also proposed that the Manager enter into a Sub-Advisory Agreement with
New York Life, the current investment adviser to the Money Market Fund.
Such an arrangement would provide for the maintenance of continuity of the
day-to-day portfolio management of the Funds with the additional benefit of the
Manager serving in an oversight capacity. A copy of the proposed form of
composite Sub-Advisory Agreement is included as Exhibit F.
Pursuant to the proposed Sub-Advisory Agreements between the Manager and
MacKay-Shields, Monitor or New York Life on behalf of each Fund, the Sub-
Adviser, subject to the supervision of the Board of Directors of the Company and
the Manager, shall manage the investment operations of each Fund and the
composition of the portfolio of each Fund, including the purchase, retention and
disposition of Fund assets, in accordance with the investment objectives,
policies and restrictions of the Fund.
MacKay-Shields, whose address is 9 West 57th Street, New York, New York
10019, was incorporated in 1969 as an independent investment advisory firm and
was privately held until 1984 when it became a wholly owned but autonomously
managed subsidiary of New York Life Insurance Company. As of June 30, 1997,
MacKay-Shields managed over $26.9 billion in assets. Additional information
regarding the principal executive officers and directors of MacKay-Shields is
included as Exhibit G.
-10-
<PAGE>
Monitor, whose address is 504 Carnegie Center, Princeton, New Jersey 08540,
is a wholly-owned subsidiary of NYLIFE Inc. and an indirect wholly-owned
subsidiary of New York Life Insurance Company. Monitor, a registered investment
adviser incorporated in 1988, specializes in quantitative investment techniques
such as enhanced indexing and asset allocation. As of June 30, 1997, Monitor
managed assets totaling approximately $2.2 billion, mainly of index funds.
Additional information regarding the principal executive officer and directors
of Monitor is included as Exhibit H.
New York Life, whose address is 51 Madison Avenue, New York, New York
10010, is a mutual life insurance company organized under the laws of the state
of New York. As of June 30, 1997, New York Life had total assets of
approximately $86 billion and managed approximately $24 billion in assets for
qualified retirement plans. Additional information regarding the principal
executive officer and directors of New York Life is included as Exhibit I.
Under the proposed Sub-Advisory Agreements, the Manager, NOT THE FUNDS,
WOULD PAY MACKAY-SHIELDS, MONITOR OR NEW YORK LIFE THE FOLLOWING ANNUAL FEE
RATES ON BEHALF OF EACH FUND FOR ITS SERVICES AS SUB-ADVISER. AS SHOWN BELOW,
THE SUB-ADVISORY FEES TO BE PAID TO MACKAY-SHIELDS, MONITOR AND NEW YORK LIFE BY
THE MANAGER UNDER THE PROPOSED SUB-ADVISORY AGREEMENTS ARE EQUAL TO THE
INVESTMENT ADVISORY FEE RATES WHICH ARE CURRENTLY IN EFFECT FOR EACH OF THE
FUNDS WITH RESPECT TO MACKAY-SHIELDS, MONITOR AND NEW YORK LIFE. THE PROPOSED
SUB-ADVISORY FEES AND THE CURRENT INVESTMENT ADVISORY FEES ARE AS FOLLOWS:
Proposed Sub-Advisory Fees Rates (to be paid by Manager, NOT the Funds)
-----------------------------------------------------------------------
and Current Investment Advisory Fee Rates
-----------------------------------------
<TABLE>
<CAPTION>
Proposed Current Rate Paid for
Sub-Advisory Advisory Fee the Year Ended
Fund Fee Rate Rate December 31, 1996
==========================================================================================================
==========================================================================================================
<S> <C> <C> <C>
Bond Fund 0.20% 0.20% 0.20%
==========================================================================================================
EAFE Index Fund 0.15% 0.15% 0.15%
==========================================================================================================
Growth Equity Fund 0.25% 0.25% 0.25%
==========================================================================================================
Indexed Bond Fund 0.10% 0.10% 0.10%
==========================================================================================================
Indexed Equity Fund 0.10% 0.10% 0.08%*
==========================================================================================================
International Bond Fund 0.30% 0.30% 0.30%
==========================================================================================================
International Equity Fund 0.35% 0.35% 0.35%
==========================================================================================================
Money Market Fund 0.10% 0.10% 0.10%
==========================================================================================================
Multi-Asset Fund 0.15% 0.15% 0.15%
==========================================================================================================
Short-Term Bond Fund 0.15% 0.15% 0.15%
==========================================================================================================
Value Equity Fund 0.25% 0.25% 0.25%
==========================================================================================================
</TABLE>
- ------------------------
* Reflects voluntary expense limitation.
-11-
<PAGE>
Information regarding comparable funds advised by MacKay-Shields and
Monitor is included as Exhibits J and K, respectively.
Portfolio Transactions
- ----------------------
Pursuant to the proposed Sub-Advisory Agreements, a Fund's Sub-Adviser will
place orders for the purchase and sale of portfolio investments for the Fund's
accounts with brokers or dealers selected by it in its discretion. In effecting
purchases and sales of portfolio securities for the account of a Fund, the
Fund's Sub-Adviser will seek the best price and execution of the Fund's orders.
In doing so, a Fund may pay higher commission rates than the lowest available
when the Fund's Sub-Adviser believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. Consistent with the foregoing primary consideration, the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. and
such other policies as the Directors may determine, the Sub-Advisers may
consider sales of shares of the respective Funds as a factor in the selection of
broker-dealers to execute each Fund's portfolio transactions. NYLIFE Securities
Inc. may act as a broker for the Company in accordance with applicable
regulations. For the fiscal year ended December 31, 1996, none of the Funds
paid brokerage commissions to affiliated brokers.
Board Consideration
- -------------------
At a meeting held on September 9, 1997, the Board of Directors, including
the Directors who are not interested parties to the Sub-Advisory Agreements or
interested persons of such parties considered the Sub-Advisory Agreements in
connection with the proposed restructuring of the entities providing services to
the Funds and determined that it would be in the best interests of the Funds to
approve the Sub-Advisory Agreements with MacKay-Shields, Monitor, and New York
Life. In coming to that conclusion, the Directors examined information which
included the nature and quality of portfolio management services provided by
MacKay-Shields, Monitor, and New York Life and the past performance of the
Funds. The Directors also examined the fees and expenses of the Funds and the
fees to be paid to the Sub-Advisers by the Manager, noting in particular that
the fees to be paid to the Sub-Advisers under the proposed Sub-Advisory
Agreements would not represent an increase from the current fee arrangements.
The Board noted the continued quality of services provided by MacKay-Shields,
Monitor, and New York Life and the desirability of retaining continuity in the
management of the Funds' assets. The Board also noted that the terms of the
proposed Sub-Advisory Agreements are substantially identical to the terms of the
Funds' current Investment Advisory Agreements.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS APPROVAL OF THE SUB-ADVISORY AGREEMENTS BETWEEN THE MANAGER AND
MACKAY-SHIELDS; BETWEEN THE MANAGER AND MONITOR; AND BETWEEN THE MANAGER AND NEW
YORK LIFE ON BEHALF OF THE FUNDS.
If approved by a majority vote of the outstanding shares of each Fund, the
Sub-Advisory Agreements will become effective on the first business day
following shareholder approval and
-12-
<PAGE>
will remain in force for a period of two years, and from year to year
thereafter, subject to approval annually by the Board of Directors or by a
majority vote of the outstanding shares of each Fund, and also, in either event,
approval by a majority of those Directors who are not parties to the Sub-
Advisory Agreements or interested persons of any such party at a meeting called
for the purpose of voting on such approval. Approval of Proposal Three is
contingent upon shareholders approving Proposal Two. Accordingly, if the
shareholders of one or more of the Funds should fail to approve the Management
Agreement for any Fund, the proposed Sub-Advisory Agreement will not be put into
effect with respect to that Fund, and MacKay-Shields, Monitor, or New York Life
shall continue to serve as investment adviser to that Fund under its current
Investment Advisory contract with the Company. Similarly, if the shareholders of
one or more of the Funds should fail to approve a Sub-Advisory Contract between
the Manager and MacKay-Shields, between the Manager and Monitor, or between the
Manager and New York Life, Proposal Two relating to the Management Agreement
shall not take effect with respect to that Fund and MacKay-Shields, Monitor, or
New York Life shall continue to serve as investment adviser to that Fund under
its current Investment Advisory Contract with the Company.
PROPOSAL FOUR
ELIMINATION OR REVISION OF CERTAIN FUNDAMENTAL
INVESTMENT RESTRICTIONS OF THE FUNDS
ALL FUNDS
(CERTAIN CHANGES ARE PROPOSED FOR ALL FUNDS, BUT SOME CHANGES APPLY ONLY TO
CERTAIN FUNDS AS INDICATED BELOW)
Pursuant to the Investment Company Act of 1940 (the "1940 Act"), each of
the Funds has adopted certain fundamental investment restrictions and policies
("fundamental restrictions"), which are set forth in the Funds' prospectus or
statement of additional information, and which may be changed only with
shareholder approval. Restrictions and policies that a Fund has not
specifically designated as being fundamental are considered to be "non-
fundamental" and may be changed by the Fund's Board without shareholder
approval.
Certain of the fundamental restrictions that the Funds have adopted in the
past reflect regulatory, business or industry conditions, practices or
requirements which at one time, for a variety of reasons, led to the imposition
of restrictions upon the ability of the Funds to manage their investment
operations. With the passage of time and the development of new practices,
these restrictions appear unnecessary or unwarranted. Other restrictions were
imposed by certain states but are no longer required since the U.S. Congress
preempted the States from imposing such restrictions with the enactment of the
National Securities Markets Improvement Act of 1996. Other fundamental
restrictions reflect federal regulatory requirements which remain in effect, but
which are not required to be stated as fundamental restrictions. Also, as new
Funds have been created over a period of years, substantially similar
fundamental restrictions often have been phrased in different ways, sometimes
resulting in minor but unintended differences in effect or potentially giving
rise to unintended differences in interpretation.
-13-
<PAGE>
Accordingly, the Board has approved revisions to the Funds' fundamental
restrictions in order to simplify, modernize and make more uniform those
investment restrictions that are required to be fundamental, and to eliminate
those fundamental restrictions that are not legally required. Existing
fundamental restrictions that are not required to be fundamental would be re-
classified as non-fundamental restrictions.
The Board believes that eliminating the disparities among the Funds'
fundamental restrictions will enhance management's ability to manage efficiently
and effectively the Funds' assets, particularly in changing regulatory and
investment environments. In addition, by minimizing the number of policies that
can be changed only by shareholder vote, the Board and the Funds will have
greater flexibility to modify Fund policies, as appropriate, in response to
changing markets and in light of new investment opportunities and instruments.
The Funds will then be able to avoid the costs and delays associated with a
shareholder meeting when making changes to its non-fundamental investment
policies that, at a future time, the Board considers desirable. Although the
proposed changes in fundamental restrictions will allow the Funds greater
investment flexibility to respond to future investment opportunities, the Board
does not anticipate that the changes, individually or in the aggregate, will
result at this time in a material change in the level of investment risk
associated with an investment in any Fund.
The text and a summary description of each proposed change to the Funds'
fundamental restrictions are set forth below.
The text below also describes those non-fundamental restrictions that would
be adopted by the Board in conjunction with the elimination of fundamental
restrictions under this Proposal. Any non-fundamental restriction may be
modified or eliminated by the Board at any future date without any further
approval of shareholders.
If the proposed changes are approved by shareholders of the respective
Funds at the Meeting, the Funds' prospectus and statement of additional
information will be revised, as appropriate, to reflect those changes.
A. STATE-IMPOSED FUNDAMENTAL RESTRICTIONS
--------------------------------------
Funds to which this change applies: All Funds
One of the provisions of the National Securities Markets Improvement Act of
1996 is the preemption of substantive state regulation of securities issued by
investment companies registered with the Securities and Exchange Commission
under the 1940 Act. States are no longer able to impose their own investment
restrictions or require additional disclosure in offering documents as a
condition of registration in that state. In the past, the Funds have adopted a
number of fundamental investment restrictions in order to comply with provisions
of various state securities laws. In light of the new legislation, it is
proposed that certain of the Funds' fundamental restrictions based on state
securities laws be eliminated.
The following are state-imposed investment restrictions proposed to be
eliminated:
-14-
<PAGE>
1. A Fund may not pledge, mortgage or hypothecate its assets , except that a
Fund may enter into transactions in options, forward currency contracts,
futures and options on futures as described in the Prospectus and in the SAI
(the deposit of assets in escrow in connection with the writing of secured
put and covered call options and the purchase of securities on a when-issued
or delayed delivery basis and collateral arrangements with respect to
initial or variation margin deposits for future contracts and related
options contracts will not be deemed to be pledges of a Fund's assets).
2. A Fund may not purchase or sell oil, gas or mineral programs or interests in
oil, gas or mineral leases.
3. A Fund may not purchase or sell real estate limited partnership interests.
Even with the elimination of the above fundamental restrictions, it is not
expected that the Funds will pledge, mortgage or hypothecate their assets,
except to the extent currently permitted; purchase or sell oil, gas or mineral
programs or interests in oil, gas or mineral leases; or invest in limited
partnership interests in real estate. Thus, elimination of these restrictions
should not increase the risk profile of any Fund.
B. FUNDAMENTAL RESTRICTIONS WHICH ARE NOT REQUIRED TO BE FUNDAMENTAL
-----------------------------------------------------------------
Funds to which this change applies: All Funds except International Bond
Fund and International Equity Fund
Certain of the Funds' fundamental restrictions are not required to be
fundamental, i.e., they are not required to be designated as restrictions that
can be changed only with shareholder approval. It is proposed that these
fundamental restrictions, which are listed below, be changed from fundamental to
non-fundamental and re-stated as appropriate. This change will provide for
flexibility in revising these restrictions in the future should industry or
regulatory conditions warrant and will enable the Funds to avoid the additional
expense of a shareholder solicitation in connection with future revisions.
Furthermore, the same investment restriction is fundamental for some Funds and
non-fundamental for others. For purposes of consistency and ease of
administration, it is recommended that each of these investment restrictions be
changed to non-fundamental for all of the Funds.
It is proposed that the classification of the following investment
restrictions be changed from fundamental to non-fundamental:
1. A Fund may not (except for the International Bond Fund and International
Equity Fund) purchase securities on margin, except for use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities, but it may make margin deposits in connection with transactions
in options, futures and options on futures;
-15-
<PAGE>
2. A Fund may not (except for the International Bond Fund and International
Equity Fund) make short sales of securities, except short sales against the
box.
Restriction 1 above would be restated in the form of the following non-
fundamental restriction:
1. A Fund may not purchase securities on margin, except that the Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute the purchase
of securities on margin.
Restriction 2 above would be restated in the form of the following non-
fundamental restriction:
1. A Fund may not sell securities short, except for covered short sales or
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions in
options, futures and forward contracts are deemed not to constitute short
sales of securities.
C. FUNDAMENTAL RESTRICTIONS PROPOSED TO BE REVISED OR ELIMINATED IN ORDER TO
-------------------------------------------------------------------------
INCREASE FLEXIBILITY AND CONSISTENCY AMONG FUNDS
------------------------------------------------
1. Funds to which this change applies: All Funds
Under the requirements of the 1940 Act, and as stated in the Funds'
fundamental restriction below, a Fund, subject to certain exceptions, may not
invest in a security if such investment would cause 25% or more in the aggregate
of the market value of the total assets of a Fund to be invested in the
securities of one or more issuers in any particular industry. It is proposed
that the fundamental restriction be amended to provide that at such time as the
1940 Act is amended to permit a Fund to elect to be "periodically industry
concentrated," (i.e., a fund that does not concentrate its investments in a
particular industry would be permitted, but not required, to invest 25% or more
of its assets in a particular industry), the Funds would elect to be so
classified. Such a provision would provide flexibility to the Funds should the
1940 Act be amended and would avoid the cost of a shareholder solicitation
should the Board determine that electing to be periodically industry
concentrated would be appropriate and beneficial for a Fund.
Current Text
------------
1. A Fund may not invest in a security if, as a result of such investment, more
than 25% of its total assets would be invested in the securities of issuers
in any particular industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (or repurchase agreements with respect thereto).
-16-
<PAGE>
Proposed Text
-------------
1. A Fund may not invest in a security if, as a result of such investment, 25%
or more of its total assets would be invested in the securities of issuers
in any particular industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (or repurchase agreements with respect thereto) and at
such time that the 1940 Act is amended to permit a registered investment
company to elect to be "periodically industry concentrated," (i.e., a fund
that does not concentrate its investments in a particular industry would be
permitted, but not required, to invest 25% or more of its assets in a
particular industry) the Funds elect to be so classified and the foregoing
limitation shall no longer apply with respect to the Funds.
2. Funds to which this change applies: All Funds
Under the 1940 Act and the Funds' fundamental restriction stated below, the
Funds are restricted from issuing senior securities. In order to provide
maximum flexibility to the operations of the Funds while ensuring that the
Funds' policies with respect to issuing senior securities continue to comply
with the provisions of the 1940 Act, it is proposed that the restriction on
issuing senior securities be revised to stated that the Funds may not issue
senior securities, except to the extent permitted by the 1940 Act.
Current Text
------------
1. A Fund may not borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that a Fund may (i) borrow from banks or
enter into reverse repurchase agreements, but only if immediately after each
borrowing there is asset coverage of 300%, and (ii) enter into transactions
in options, forward currency contracts, futures and options on futures as
described in this Prospectus and in the SAI (the deposit of assets in escrow
in connection with the writing of secured put and covered call options and
the purchase of securities on a when-issued or delayed delivery basis and
collateral arrangements with respect to initial or variation margin deposits
for future contracts and related options contracts will not be deemed to be
pledges of a Fund's assets).
Proposed Text
-------------
1. A Fund may not borrow money or issue senior securities, except that a Fund
may (i) borrow from banks or enter into reverse repurchase agreements, but
only if immediately after each borrowing there is asset coverage of 300%,
and (ii) issue senior securities to the extent permitted under the 1940 Act.
-17-
<PAGE>
3. Funds to which this change applies: All Funds
Each of the Funds has a fundamental restriction prohibiting it from
purchasing or selling commodities or commodity contracts. With respect to the
International Bond Fund and International Equity Fund, however, the fundamental
restriction provides that those funds may purchase or sell currencies on a spot
or forward basis and may enter into futures contracts on securities, currencies
or on indexes of such securities or currencies, or any other financial
instruments and options on such futures contracts. It is proposed that this
provision be expanded to include the other Funds, subject to the restrictions on
each Fund's investments contained in the prospectus and Statement of Additional
Information and that the fundamental restriction for all of the Funds be
restated to create a single, uniform restriction. The proposed revision would
provide clarity with respect to the investments intended to be prohibited by the
fundamental restriction and is not intended to result in a change to the primary
investments or investment techniques of any Fund.
Current Text
- ------------
1. A Fund may not purchase or sell commodities, commodities contracts, or oil,
gas or mineral programs or interests in oil, gas or mineral leases (other
than securities of companies that invest in or sponsor those programs),
except that, subject to restrictions described in the Prospectus and
elsewhere in this Statement of Additional Information (i) a Fund may enter
into futures contracts and options on futures contracts; (ii) a Fund may
enter into forward foreign currency contracts and foreign currency options;
and (iii) the International Bond Fund and International Equity Fund may
purchase or sell currencies on a spot or forward basis and may enter into
futures contracts on securities, currencies or on indexes of such securities
or currencies, or any other financial instruments, and may purchase and sell
options on such futures contracts.
Proposed Text
- -------------
1. A Fund may not purchase or sell commodities or commodities contracts, except
that, subject to restrictions described in the Prospectus and in the
Statement of Additional Information (i) a Fund may enter into futures
contracts on securities, currencies or on indexes of such securities or
currencies, or any other financial instruments and options on such futures
contracts; (ii) a Fund may enter into spot or forward foreign currency
contracts and foreign currency options.
4. Funds to which this change applies: All Funds but International Bond Fund
and International Equity Fund
Each of the Funds, other than the International Bond Fund and International
Equity Fund, has a fundamental restriction prohibiting it from maintaining a
short position. Each of the Funds also is subject to an investment restriction
prohibiting it from making short sales, except short sales against the box. The
Board has determined that it is not necessary to have two restrictions
-18-
<PAGE>
prohibiting similar investment techniques. Furthermore, there is no regulatory
requirement to have a fundamental restriction prohibiting a Fund from
maintaining a short position, and the International Bond Fund and International
Equity Fund are not subject to this restriction. Consequently, the Board has
determined that the fundamental restriction prohibiting a Fund from maintaining
a short position should be eliminated. As discussed above, it is proposed that
the short sales restriction have continued applicability to the Funds but that
its classification be changed from fundamental to non-fundamental.
Current Text Proposed to be Eliminated
- --------------------------------------
A Fund (except for the International Bond Fund and International Equity
Fund) may not maintain a short position, or purchase, write or sell puts, calls,
straddles, spreads or combinations thereof, except as set forth in the
Prospectus and in the Statement of Additional Information for transactions in
options, futures and options on futures.
PROPOSAL FIVE
RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ALL FUNDS
The Board of Directors recommends that the shareholders of the Company
ratify the selection of Price Waterhouse LLP, independent certified public
accountants, to audit the accounts of the Company for the fiscal year ending
December 31, 1997. Their selection was approved by the unanimous vote, cast in
person, of the Directors of the Company, including the Directors who are not
"interested persons" of the Company within the meaning of the 1940 Act, at a
meeting held on March 4, 1997 with respect to each of the Funds. Price
Waterhouse LLP has audited the accounts of the Company since the Company's
commencement of business in 1991 and has informed the Company that Price
Waterhouse does not have any direct financial interest or any material indirect
financial interest in the Company. Representatives of Price Waterhouse LLP are
not expected to be present at the Meeting but have been given the opportunity to
make a statement if they so desire, and will be available should any matters
arise requiring their presence.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE FOR THE RATIFICATION OF THE
SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF
THE COMPANY.
Other Matters
- -------------
Management does not know of any matters to be presented at the Meeting
other than those mentioned in this Proxy Statement. If any of the persons
listed above is unavailable for election as a Director, an event not now
anticipated, or if any other matters properly come before
-19-
<PAGE>
the Meeting, the shares represented by proxies will be voted with respect
thereto in accordance with the best judgment of the person or persons voting the
proxies.
The Company does not hold annual or regular meetings of its shareholders.
Proposals of shareholders which are intended to be presented at a future
shareholders' meeting must be received by the Company by a reasonable time prior
to the Company's solicitation of proxies relating to such future meeting.
Shareholder proposals must meet certain requirements and there is no guarantee
that any proposal will be presented at a shareholders' meeting.
If the accompanying form of proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the proxy. However, if no instructions are specified, shares
will be voted for the election of the Directors and for the other proposals.
By order of the Board of Directors,
Sara L. Badler
Secretary
________________, 1997
New York, New York
-20-
<PAGE>
Exhibit A
Share Ownership of the Funds
The following table sets forth the information concerning beneficial
ownership, as of September 12, 1997, of the Funds' shares by each person who
beneficially owns more than five percent of the voting securities of any Fund:
Name and Shares Percentage of
Address of Beneficially Outstanding
Name of Fund Shareholder Owned Shares Owned
------------ ----------- ----- ------------
<PAGE>
Exhibit B
Additional Information Regarding the Company's Executive Officers
Principal
Position(s) Year Became Occupation(s)
Name and Age with Company an Officer During Past 5 Years
------------ ------------ ---------- -------------------
Linda M. Livornese President Vice President,
Age: 45 Pension
Department, New
York Life
Insurance Company,
1990 to present;
Pension Vice
President, Pension
Department, New
York Life
Insurance Company,
1988-1990;
Assistant Vice
President, Pension
Department, New
York Life
Insurance Company,
1986-1988; Vice
President NYLIFE
Distributors,
Inc., 1993 to
present; Vice
President, NYLIFE
Securities, Inc.,
1992 to present.
Jefferson C. Boyce Senior Vice Senior Vice
Age: 40 President President, New
York Life
Insurance Company,
1994 to present;
Senior Vice
President, The
MainStay Funds,
1995 to present;
Director, Monitor
Capital Advisors,
Inc., 1991 to
present and
Senior Vice
President, 1996 to
present; 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 Inc., 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, Inc.,
1994 to present;
Director, NYLIFE
Depositary
Corporation, 1994
to present;
Director, NYLIFE
Realty Inc., 1994
to present;
Director, NYLIFE
SFD Holdings 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, Inc.,
1997 to present;
Chief
Administrative
Officer, Pension,
Mutual Funds,
Structured
Finance, Corporate
Quality, Human
Resources and
Employees' Health
Departments, New
York Life
Insurance Company,
1992 to 1994; Vice
<PAGE>
President, Pension
Department, New
York Life
Insurance Company,
1989 to 1992.
Robert S. Fenster Vice President Vice President,
Age: 47 Pension
Department, New
York Life
Insurance Company,
1988 to present;
Director, New York
Life Trust
Company, 1995 to
present.
Michael J. Harrington Vice President Vice President,
Age: 47 Pension
Department, New
York Life
Insurance Company,
1989 to present.
Richard W. Zuccaro Tax Vice Vice President,
Age: 47 President New York Life
Insurance Company,
1995 to present;
Vice President
Tax, New York Life
Insurance Company,
1986 to 1995; Tax
Vice President,
NYLIFE 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
Inc., 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, NYLCO
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,
and Assistant
Controller, 1991
to 1995; 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
-2-
<PAGE>
Trust Company, 1996
to present; Tax
Vice President,
Monitor Capital
Advisors, Inc.,
1996 to present;
Tax Vice President,
NYLINK Insurance
Agency
Incorporated, 1996
to present; Tax
Vice President,
MainStay
Shareholder
Services, Inc.,
1997 to present.
Anthony W. Polis Treasurer Vice President,
Age: 53 (Principal New York Life
Financial and Insurance Company,
Accounting 1988 to present;
Officer) Director, Vice
President and
Chief Financial
Officer, NYLIFE
Securities, Inc.,
1988 to present;
Vice President and
Chief Financial
Officer, NYLIFE
Distributors Inc.,
1993 to present;
Vice President and
Chief Financial
Officer, Eagle
Strategies Corp.,
1993 to present;
Vice President and
Chief Financial
Officer, MainStay
Shareholder
Services Inc.,
1997 to present;
Vice President and
Chief Financial
Officer, The
MainStay VP Series
Fund, Inc., 1993
to present;
Assistant
Treasurer,
MainStay VP Series
Fund, Inc., 1992
to 1993; Vice
President and
Treasurer, Eclipse
Financial Asset
Trust, 1992 to
present; Vice
President, Drexel
Burnham Lambert
Incorporated, DBL
Tax-Free Fund
Inc., DBL Cash
Fund Inc., The
Drexel Burnham
Fund, Drexel
Series Trust,
Fenimore
International Fund
Inc., BT
Investment Trust
and BT Tax Free
Investment Trust,
1983 to 1988;
Assistant
Treasurer, Drexel
Bond-Debenture
Trading Fund, 1983
to 1988.
-3-
<PAGE>
Exhibit C
Additional Information Regarding Current Investment
Advisory and Administrative Arrangements
CURRENT INVESTMENT ADVISORY AGREEMENTS
MacKay-Shields Financial Corporation ("MacKay-Shields") currently serves as
the investment adviser to the Bond Fund, Growth Equity Fund, Short-Term Bond
Fund and Value Equity Fund, pursuant to a Master Investment Advisory Agreement,
dated December 28, 1990, between the Company and MacKay-Shields, and to the
International Bond Fund and International Equity Fund pursuant to a supplement
thereto dated December 6, 1994. Monitor Capital Advisors, Inc. ("Monitor")
currently serves as the investment adviser to the EAFE Index Fund, Indexed Bond
Fund, Indexed Equity Fund and Multi-Asset Fund, pursuant to a Master Investment
Advisory Agreement, dated December 28, 1990, between the Company and Monitor.
New York Life Insurance Company ("New York Life") currently serves as the
investment adviser to the Money Market Fund pursuant to a Master Investment
Advisory Agreement, dated December 28, 1990, between the Company and New York
Life.
Each Master Investment Advisory Agreement was most recently approved by the
Board of Directors, including a majority of the Directors who are not
"interested persons" of the Company or the investment advisers, on March 4,
1997, and by the shareholders of the Company on April 30, 1992.
For the fiscal year ended December 31, 1996, the amount of the advisory fee
paid by each Fund to MacKay-Shields, Monitor or New York Life was as follows:
<TABLE>
<CAPTION>
Year Ended
Fund 12/31/96
- ---- --------
<S> <C>
EAFE Index Fund $ 124,284
Growth Equity Fund 1,186,388
Indexed Equity Fund 502,686
International Equity Fund 395,717
Multi-Asset Fund 461,408
Value Equity Fund 1,768,836
Bond Fund 355,167
Indexed Bond Fund 123,798
International Bond Fund 141,296
Money Market Fund 100,230
Short-Term Bond Fund 98,265
</TABLE>
<PAGE>
CURRENT ADMINISTRATION AGREEMENTS
New York Life serves as the Funds' administrator (the "Administrator")
pursuant to the Master Administration Agreement, dated December 28, 1990, and a
supplement thereto for the International Bond Fund and International Equity Fund
dated December 6, 1994, between the Company and the Administrator. The Master
Administration Agreement was most recently approved by the Board of Directors,
including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company or the Administrator on March 4, 1997.
For the fiscal year ended December 31, 1996, the amount of the
administration fee paid by each Fund to New York Life was as follows:
<TABLE>
<CAPTION>
Year Ended
Fund 12/31/96
- ---- --------
<S> <C>
EAFE Index Fund $ 662,846
Growth Equity Fund 2,847,330
Indexed Equity Fund 2,010,753
International Equity Fund 565,311
Multi-Asset Fund 1,538,025
Value Equity Fund 4,245,206
Bond Fund 976,711
Indexed Bond Fund 495,190
International Bond Fund 235,493
Money Market Fund 400,921
Short-Term Bond Fund 294,794
</TABLE>
In connection with the voluntary expense limitation, the Administrator
assumed the following expenses for the Funds for the fiscal year ended December
31, 1996.
<TABLE>
<CAPTION>
Year Ended
Fund 12/31/96
- ---- --------
<S> <C>
EAFE Index Fund $ 238,764(2)
Growth Equity Fund N/A(1)
Indexed Equity Fund 753,575
International Equity Fund 82,203
Multi-Asset Fund 164,519(3)
Value Equity Fund N/A(1)
Bond Fund 188,561
Indexed Bond Fund 189,996
International Bond Fund 61,961
Money Market Fund 170,221
Short-Term Bond Fund 122,335
</TABLE>
-2-
<PAGE>
(1) Fund had no expense limitation during period.
(2) Administrator assumed $676,954, the Adviser assumed $76,621.
(3) Fund expense limitation expired December 31, 1996.
SHAREHOLDER SERVICES PLAN
The Company has adopted a Shareholder Services Plan with respect to the
Institutional Service Class of shares of each Fund. Under the terms of the
Plan, each Fund is authorized to pay to New York Life, as compensation for
service activities rendered by New York Life, its affiliates or independent
third-party service providers, to the shareholders of the Institutional Service
Class of a Fund, a shareholder services fee at the rate of 0.25% on an
annualized basis of the average daily net asset value of the Institutional
Service Class of the Fund.
-3-
<PAGE>
Exhibit D
FORM OF
C O M P O S I T E
-----------------
MAINSTAY INSTITUTIONAL FUNDS INC.
[BOND FUND]
[EAFE INDEX FUND]
[GROWTH EQUITY FUND]
[INDEXED BOND FUND]
[INDEXED EQUITY FUND]
[INTERNATIONAL BOND FUND]
[INTERNATIONAL EQUITY FUND]
[MONEY MARKET FUND]
[MULTI-ASSET FUND]
[SHORT-TERM BOND FUND]
[VALUE EQUITY FUND]
MANAGEMENT AGREEMENT
Agreement, made as of the ___ day of ____________, 1997 between MAINSTAY
INSTITUTIONAL FUNDS INC., a Maryland corporation (the "Company"), on behalf of
the [Bond Fund, EAFE Index Fund, Growth Equity Fund, Indexed Bond Fund, Indexed
Equity Fund, International Bond Fund, International Equity Fund, Money Market
Fund, Multi-Asset Fund, Short-Term Bond Fund, and Value Equity Fund](the
"Fund"), a separate series of the Company, and MainStay Management, Inc., a
Delaware corporation (the "Manager").
W I T N E S S E T H :
---------------------
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the shares of beneficial interest of the Company (the "Shares")
are divided into separate series, each of which is established pursuant to a
written instrument executed by the Board of Directors of the Company and the
Directors may from time to time terminate such series or establish and terminate
additional series;
WHEREAS, the Shares of each Fund are divided into Institutional Class
Shares and Institutional Service Class Shares; and
<PAGE>
WHEREAS, the Fund desires to retain the Manager to render investment
advisory and related administrative services to the Fund, and the Manager is
willing to render such services on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Fund hereby appoints MainStay Management, Inc. to act as
-----------
manager to the Fund for the period and on the terms set forth in this Agreement.
The Manager accepts such appointment and agrees to render the services herein
described, for the compensation herein provided.
2. Duties as Manager. Subject to the supervision of the Directors of the
-----------------
Company, the Manager shall administer the Fund's business affairs and manage the
investment operations of the Fund and the composition of the portfolio of the
Fund, including the purchase, retention and disposition thereof, in accordance
with the investment objectives, policies and restrictions of the Fund, as stated
in the Prospectus (as hereinafter defined) and subject to the following
understandings:
(a) The Manager shall (i) furnish the Fund with office facilities; (ii) be
responsible for the financial and accounting records required to be maintained
by the 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 sub-adviser, if any; and (iii)
furnish the Fund with ordinary clerical, bookkeeping and recordkeeping services
at such office facilities.
(b) The Manager shall provide supervision of the Fund's investments and
determine from time to time what investments or securities will be purchased,
retained, sold or lent by the Fund, and what portion of the Fund's assets will
be invested or held uninvested as cash.
(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 Articles of Incorporation, By-Laws
and Prospectus (each as hereinafter defined) of the Company and with the
instructions and directions of the Directors of the Company and will conform to
and comply with the requirements of the 1940 Act and all other applicable
federal and state laws and regulations.
(e) The Manager, and any sub-adviser to whom such authority has been delegated,
shall determine the securities to be purchased or sold by the Fund and will
place orders pursuant to its determination with or through such persons, brokers
or dealers (including NYLIFE Securities Inc.) in conformity with the policy with
respect to brokerage as set forth in the Company's Registration Statement and
Prospectus (each as hereinafter defined) or as the Directors may direct from
time to time. It is recognized that, in providing the Fund with investment
supervision or the placing of orders for portfolio transactions, the 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-
-2-
<PAGE>
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 neither
the Fund, the Company nor the Manager or sub-adviser has adopted a formula for
allocation of the Fund's investment transaction business. It is also understood
that it is desirable for the Fund that the 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 the Fund than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the Manager or any sub-adviser is authorized to place
orders for the purchase and sale of securities for the Fund with such certain
brokers, subject to review by the Company's Directors from time to time with
respect to the extent and continuation of this practice. It is understood that
the services provided by such brokers may be useful to the Manager or any sub-
adviser in connection with its services to other clients.
On occasions when the Manager or any sub-adviser deems the purchase or sale
of a security to be in the best interest of the Fund as well as other clients,
the Manager or any sub-adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so sold or purchased in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as expenses incurred in the
transaction, will be made by the Manager or any sub-adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to such other clients.
(f) The Manager shall maintain all books and records with respect to the Fund's
securities transactions required by sub-paragraphs (b)(5), (6), (9) and (10) and
paragraph (f) of Rule 31a-1 under the 1940 Act and any other books and records
required to be maintained by it under the 1940 Act and the Rules thereunder and
shall render to the Company's Directors such periodic and special reports as the
Directors may reasonably request.
(g) The Manager shall provide the Company'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 Company, including the Fund, 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 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 Directors
or officers of the Company
-3-
<PAGE>
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 or affiliates of the
Manager.
4. Books and Records. The Manager shall keep the 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 the Fund are the property of the
Fund, and it will surrender promptly to the Fund any of such records upon the
Fund's request. The Manager further agrees to preserve for the periods
prescribed by Rule 31a-2 as promulgated by 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 Company 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) Articles of Incorporation of the Company, filed with the Secretary
of State of Maryland (such Articles of Incorporation, as in effect on the date
hereof and as amended from time to time, are herein called the "Articles of
Incorporation");
(b) By-Laws of the Company (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 Directors of the Company 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
Securities and Exchange Commission (the "Commission") relating to the Fund and
the Fund's Shares and all amendments thereto;
(e) Notification of Registration of the Company under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus and Statement of Additional Information of the Fund
(such Prospectus and Statement of Additional Information, as currently in effect
and as amended or supplemented from time to time, being herein called the
"Prospectus").
7. Expenses. (a) In connection with the services rendered by the Manager
--------
under this Agreement, the Manager will bear all of the following expenses:
-4-
<PAGE>
(i) the salaries and expenses of all personnel of the Company and the
Manager, except the fees and expenses of Directors who are not interested
persons of the Manager or of the Company; and
(ii) all expenses incurred by the Manager in connection with managing
the investment operations of the Fund and administering the ordinary course of
the Fund's business, other than those assumed by the Fund herein;
(b) The 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 Company, the Fund shall be liable only for its allocable portion of the
expenses):
(i) the fees and expenses of Directors who are not interested persons
of the Manager or of the Company;
(ii) the fees and expenses of the Fund's custodian which relate to (A)
the custodial function and the recordkeeping connected therewith, (B) the 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 Directors of
the Company, 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 Company'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 Company;
(v) brokers' commissions and any issue or transfer taxes chargeable
to the Company in connection with its securities transactions on behalf of the
Fund;
(vi) all taxes and business fees payable by the Fund to federal, state
or other governmental agencies;
(vii) the fees of any trade association of which the Company may be a
member;
(viii) the cost of share certificates representing the Fund's Shares;
-5-
<PAGE>
(ix) the fees and expenses involved in registering and maintaining
registrations of the Company and of its Shares with the Commission, registering
the Company as a broker or dealer and qualifying its Shares under state
securities laws, including the preparation and printing of the Company'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 Directors' 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 Fund's business; and
(xii) any expenses assumed by the Fund pursuant to a Plan of
Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
(c) Fees and expenses of legal counsel, registering shares, holding
meetings and 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. The 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 a Fund.
9. Compensation. For the services provided and the facilities furnished
------------
pursuant to this Agreement, the Company 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.
[Bond Fund 0.75%
EAFE Index Fund 0.95%
Growth Equity Fund 0.85%
Indexed Bond Fund 0.50%
Indexed Equity Fund 0.50%
International Equity Fund 0.85%
International Bond Fund 0.80%
Money Market Fund 0.50%
Multi-Asset Fund 0.65%
Short-Term Bond Fund 0.60%
Value Equity Fund 0.85%]
-6-
<PAGE>
This fee will be computed daily and will be paid to the Manager monthly.
This fee will be chargeable only to the Fund, and no other series of the Company
shall be liable for the fee due and payable hereunder. The Fund shall not be
liable for any expense of any other series of the Company.
10. Standard of Care. The Manager shall not be liable for any error of
-----------------
judgment or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.
11. Duration and Termination. This Agreement shall continue in effect with
-------------------------
respect to the 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 the 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 the Fund at any time, without the payment of any penalty, by the
Directors of the Company or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, or by the Manager at any
time, without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
12. Other Business. Nothing in this Agreement shall limit or restrict the
--------------
right of any of the Manager's directors, officers, or employees who may also be
a Director, officer, or employee of the Company to engage in any other business
or to devote his time and attention in part to the management or other aspects
of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Manager's right to engage in any other business or to render
services of any kind to any other corporation, trust, firm, individual or
association.
13. Independent Contractor. Except as otherwise provided herein or authorized
----------------------
by the Directors of the Company 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 the Fund or the Company in any way or
otherwise be deemed an agent of the Fund or the Company.
14. Company Materials. During the term of this Agreement, the Company agrees
------------------
to furnish the Manager at its principal office all Prospectuses, proxy
statements, reports to shareholders, sales literature or other material prepared
for distribution to shareholders of the Fund or to the public, which refer to
the Manager in any way, prior to use thereof and not to use such material if the
Manager reasonably objects in writing within five business days (or such other
time as may be mutually agreed) after receipt thereof. In the event of
termination of this Agreement, the Company will continue to furnish to the
Manager copies of any of the above-mentioned materials which refer in any way to
the Manager. The Company shall furnish or otherwise make available to the
Manager such other information relating to the business affairs of the Fund as
the Manager at any time, or from time to time, reasonably requests in order to
discharge its obligations hereunder.
-7-
<PAGE>
15. Amendment. This Agreement may be amended in writing by mutual consent, but
---------
the consent of the Fund, 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 Company 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. Use of Name. The Fund may use any name including the word "MainStay" only
-----------
for so long as this Agreement or any other Investment Advisory Agreement between
the Manager or any other affiliate of New York Life Insurance Company and the
Company or any extension, renewal or amendment thereof remains in effect,
including any similar agreement with any organization which shall have succeeded
to the Manager's business as investment adviser. At such time as such an
agreement shall no longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such name or any other name indicating that it is
advised by or otherwise connected with the Manager or any organization which
shall have so succeeded to its business.
19. 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.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS INSTRUMENT TO BE
EXECUTED BY THEIR OFFICERS DESIGNATED BELOW AS OF THE DAY AND YEAR FIRST ABOVE
WRITTEN.
MAINSTAY INSTITUTIONAL FUNDS INC., on
behalf of
_________________________ FUND,
a series
By: ________________________________
Name:
Title:
-8-
<PAGE>
MAINSTAY MANAGEMENT, INC.
By: ________________________________
Name:
-9-
<PAGE>
Exhibit E
Additional Information Regarding Principal Executive Officers and
Directors of MainStay Management, Inc.
<TABLE>
<CAPTION>
Position with MainStay
Name and Address Management, Inc. Principal Occupation
---------------- ---------------- --------------------
<S> <C> <C>
Ravi Akhoury Director Chairman and Chief
9 West 57th Street Executive Officer,
New York, NY 10019 MacKay-Shields Financial
Corporation
Jefferson C. Boyce Director Senior Vice President,
51 Madison Avenue New York Life Insurance
New York, NY 10010 Company
Alice T. Kane Director, President Executive Vice President,
51 Madison Avenue and Chief Executive New York Life Insurance
New York, NY 10010 Officer Company
Frank Mistero Director Senior Vice President,
51 Madison Avenue New York Life Insurance
New York, NY 10010 Company
Stephen C. Roussin Director, Senior Vice Senior Vice President,
51 Madison Avenue President and Chief New York Life Insurance
New York, NY 10010 Operations Officer Company
Walter W. Ubl Director Senior Vice President,
51 Madison Avenue New York Life Insurance
New York, NY 10010 Company
</TABLE>
<PAGE>
Exhibit F
FORM OF
C O M P O S I T E
-----------------
[BOND FUND]
[EAFE INDEX FUND]
[GROWTH EQUITY FUND]
[INDEXED BOND FUND]
[INDEXED EQUITY FUND]
[INTERNATIONAL BOND FUND]
[INTERNATIONAL EQUITY FUND]
[MONEY MARKET FUND]
[MULTI-ASSET FUND]
[SHORT-TERM BOND FUND]
[VALUE EQUITY FUND]
SUB-ADVISORY AGREEMENT
Agreement made as of ______________, 1997 (the "Agreement") between
MainStay Management, Inc., a Delaware corporation (the "Manager"), and [MacKay-
Shields Financial Corporation, a Delaware corporation] [Monitor Capital
Advisors, Inc., a Delaware corporation] [New York Life Insurance Company, a
mutual life insurance company organized under the laws of the state of New York]
(the "Sub-Adviser") (the "Agreement").
Whereas, the Manager has entered into a Management Agreement, dated
_____________, 1997 (the "Management Agreement"), with MainStay Institutional
Funds Inc. (the "Company"), an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), on behalf
of the [Bond Fund, EAFE Index Fund, Growth Equity Fund, Indexed Bond Fund,
Indexed Equity Fund, International Bond Fund, International Equity Fund, Money
market Fund, Multi-Asset Fund, Short-Term Bond Fund and Value Equity Fund] (the
"Fund"), a series of the Company;
WHEREAS, under the Management Agreement, the Manager has agreed to provide
certain investment advisory and related administrative services to the Fund;
WHEREAS, the Management Agreement permits the Manager to delegate certain
of its investment advisory duties under the Management Agreement to a sub-
adviser; and
WHEREAS, the Manager desires to retain the Sub-Adviser to furnish certain
investment advisory services with respect to the fund and the Sub-Adviser is
willing to furnish such services;
<PAGE>
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Appointment. The Manager hereby appoints the Sub-Adviser as an investment
-----------
sub-adviser with respect to the Fund for the period and on the terms set forth
in this Agreement. The Sub-Adviser accepts that appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. Duties as Sub-Adviser. Subject to the supervision of the Board of Directors
---------------------
of the Company and the Manager, the Sub-Adviser shall manage the investment
operations of the Fund and the composition of the portfolio of the Fund,
including the purchase, retention and disposition thereof, in accordance with
the investment objectives, policies and restrictions of the Fund, as specified
in the currently effective Prospectus (as hereinafter defined) and statement of
additional information and subject to the following understandings:
(a) The Sub-Adviser shall provide supervision of the Fund's investments
and determine from time to time what investments or securities will be
purchased, retained, sold or lent by the Fund, and what portion of the Fund's
assets will be invested or held uninvested as cash.
(b) The Sub-Adviser shall use its best judgment in the performance of
its duties under this Agreement.
(c) The Sub-Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus (each as hereinafter defined) of the
Company and with the instructions and directions of the Board of Directors and
the Manager and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and regulations.
(d) The Sub-Adviser shall determine the securities to be purchased or
sold by the Fund and will place orders pursuant to its determination with or
through such persons, brokers or dealers (including NYLIFE Securities Inc.) in
conformity with the policy with respect to brokerage as set forth in the
Company's Registration Statement and Prospectus (each as hereinafter defined) or
as the Board of Directors may direct from time to time. It is recognized that,
in providing the Fund with investment supervision or the placing of orders for
portfolio transactions, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Consistent with this
policy, the Sub-Adviser may consider the financial responsibility, research and
investment information and other services provided by brokers or dealers who may
effect or be a party to any such transaction or other transactions to which
other clients of the Sub-Adviser may be a party. It is understood that none of
the Fund, the Company, the Manager nor the Sub-Adviser has adopted a formula for
allocation of the Fund's investment transaction business. It is also understood
that it is desirable for the Fund that the Sub-Adviser have access to
supplemental investment and market research and security and economic analyses
provided by certain brokers who may execute brokerage transactions at a higher
cost to the Fund than may result when allocating brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the Sub-Adviser is authorized to place orders for the purchase and
sale of securities for the Fund with such certain brokers, subject to review by
-2-
<PAGE>
the Company's Board of Directors 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 Sub-Adviser in connection with its services
to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be so sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund and
to such other clients.
(e) The Sub-Adviser shall maintain all books and records with respect
to the Fund's securities transactions required by sub-paragraphs (b)(5), (6),
(9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act and any other
books and records required to be maintained by it under the 1940 Act and the
Rules thereunder and shall render to the Manager and to the Company's Directors
such periodic and special reports as the Manager or the Directors may reasonably
request.
(f) The Sub-Adviser shall provide the Fund's Custodian on each business
day with information relating to the execution of all portfolio transactions
pursuant to standing instructions.
3. Sub-Adviser Personnel. The Sub-Adviser shall authorize and permit any of
---------------------
its directors, officers and employees who may be elected or appointed as
Directors or officers of the Company to serve in the capacities in which they
are elected or appointed. Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of such directors,
officers, or employees.
4. Books and Records. The Sub-Adviser shall keep the Fund's books and records
-----------------
required to be maintained by it, pursuant to paragraph 2 hereof. The Sub-Adviser
agrees that all records which it maintains for the Fund are the property of the
Fund, and it will surrender promptly to the Fund any of such records upon the
Fund's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 as promulgated by the Commission under the 1940 Act any
such records as are required to be maintained by the Sub-Adviser pursuant to
paragraph 2 hereof.
5. Services Not Exclusive. The services furnished by the Sub-Adviser hereunder
----------------------
are not to be deemed exclusive and the Sub-Adviser shall be free to furnish
similar or different services to others so long as its services under this
Agreement are not impaired thereby.
6. Documents. The Manager has delivered to the Sub-Adviser copies of each of
---------
the following documents and will deliver to it all future amendments and
supplements, if any:
-3-
<PAGE>
(a) Articles of Incorporation of the Company, filed with the Secretary
of State of Maryland (such Articles of Incorporation, as in effect on the date
hereof and as amended from time to time, are herein called the "Articles of
Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified Resolutions of the Board of Directors of the Company
authorizing the appointment of the Sub-Adviser 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
Securities and Exchange Commission (the "Commission") relating to the Fund and
the Fund's Shares and all amendments thereto;
(e) Notification of Registration of the Company under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus and Statement of Additional Information of the Fund
(such Prospectus and Statement of Additional Information, as currently in effect
and as amended or supplemented from time to time, being herein called the
"Prospectus").
7. Expenses. During the term of this Agreement, the Sub-Adviser will bear all
--------
expenses incurred by it in connection with its services under this Agreement.
The Sub-Adviser shall not be responsible for any expenses incurred by the
Company, the Fund or the Manager.
8. Compensation. For the services provided and the expenses assumed by the
------------
Sub-Adviser pursuant to this Agreement, the Manager, not the Company or the
Fund, will pay to the Sub-Adviser a fee, computed daily and payable monthly, at
an annual rate of the following percentage of each Fund's average daily net
assets:
[Bond Fund 0.20%
EAFE Index Fund 0.15%
Growth Equity Fund 0.25%
Indexed Bond Fund 0.10%
Indexed Equity Fund 0.10%
International Equity Fund 0.35%
International Bond Fund 0.30%
Money Market Fund 0.10%
Multi-Asset Fund 0.15%
Short-Term Bond Fund 0.15%
Value Equity Fund 0.25%]
9. Standard of Care. Subject to the applicable law, the Sub-Adviser shall not
-----------------
be liable for any error of judgment or for any loss suffered by the Fund in
connection with the
-4-
<PAGE>
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
10. Duration and Termination. This Agreement shall continue in effect for a
------------------------
period of more than two years from the date hereof only so long as such
continuance is specifically approved at least annually with respect to the Fund
in conformity with the requirements of the 1940 Act and the Rules thereunder.
Notwithstanding the foregoing, this Agreement may be terminated: (a) at any time
without penalty by the Fund upon the vote of a majority of the Directors or by
vote of the majority of the Fund's outstanding voting securities, upon sixty
(60) days' written notice to the Sub-adviser, (b) by the Manager at any time
without penalty upon sixty (60) days' written notice to the Sub-Adviser or
immediately upon material breach by the Sub-Adviser or immediately if, in the
reasonable judgment of the Manager, the Sub-Adviser becomes unable to discharge
its duties and obligations under this Agreement, or (c) by the Sub-Adviser at
any time without penalty, upon sixty (60) days' written notice to the Fund. This
Subadvisory Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act) or the assignment or termination of the
Management Agreement.
11. Other Business. Nothing in this Agreement shall limit or restrict the
--------------
right of any of the Sub-Adviser's directors, officers, or employees who may also
be a Director, officer, or employee of the Company to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit or restrict the Sub-Adviser's right to engage in any other business or to
render services of any kind to any other corporation, trust, firm, individual or
association.
12. Amendment. No provision of this Agreement may be changed, waived,
---------
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those Directors who are
not parties to this Agreement or interested persons of any such party, and (ii)
by a vote of a majority of the Fund's outstanding voting securities (unless in
the case of (ii), the Company receives an SEC order or no-action letter
permitting it to modify the Agreement without such vote).
13. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
14. Notice. Any notice or other communication required to be given pursuant to
------
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Manager at Morris Corporate Center I, Building
A, 300 Interpace Parkway, Parsippany, New Jersey 07054; or (2) to the Sub-
Adviser at [9 West 57th Street, New York, NY 10019] [504 Carnegie Center,
Princeton, NJ 08540] [51 Madison Ave., New York, NY 10010].
15. Miscellaneous. The captions in this Agreement are included for convenience
-------------
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect
-5-
<PAGE>
their construction or effect. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. As used in this Agreement, the
terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is made less restrictive by a rule,
regulation or order of the Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order. This Agreement may be signed in counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
MAINSTAY MANAGEMENT, INC.
By: ____________________________________
Name:
Title:
[MACKAY-SHIELDS FINANCIAL CORPORATION]
[MONITOR CAPITAL ADVISORS, INC.]
[NEW YORK LIFE INSURANCE COMPANY]
By: ____________________________________
Name:
Title:
-6-
<PAGE>
Exhibit G
Additional Information Regarding Principal Executive Officer and
Directors of MacKay-Shields Financial Corporation
<TABLE>
<CAPTION>
Position with
MacKay-Shields Financial
Name and Address Corporation Principal Occupation
---------------- ----------- --------------------
<S> <C> <C>
Ravi Akhoury Chairman and Chief Chairman and Chief
9 West 57th Street Executive Officer Executive Officer,
New York, NY 10019 MacKay-Shields
Financial Corporation
Alice T. Kane Director Executive Vice
51 Madison Avenue President, New York
New York, NY 10010 Life Insurance Company
Richard M. Kernan, Jr. Director Executive Vice
51 Madison Avenue President and Chief
New York, NY 10010 Investment Officer, New
York Life Insurance
Company
Denis Laplaige President, Managing President, Managing
9 West 57th Street Director and Chief Director and Chief
New York, NY 10019 Investment Officer Investment Officer,
MacKay-Shields
Financial Corporation.
Donald K. Ross Director Retired Chairman and
953 Cherokee Lane Chief Executive
Franklin Lakes, NJ 07417 Officer, New York Life
Insurance Company.
Seymour Sternberg Director Chairman, Chief
51 Madison Avenue Executive Officer and
New York, NY 10010 President, New York
Life Insurance Company.
</TABLE>
<PAGE>
Exhibit H
Additional Information Regarding Principal Executive Officer and
Directors of Monitor Capital Advisors, Inc.
<TABLE>
<CAPTION>
Position with Monitor
Name and Address Capital Advisors, Inc. Principal Occupation
---------------- ---------------------- --------------------
<S> <C> <C>
Jefferson C. Boyce Director Senior Vice President,
51 Madison Avenue New York Life Insurance
New York, NY 10010 Company
James Mehling President and Director President and Director,
504 Carnegie Center Monitor Capital
Princeton, NJ 08540 Advisors, Inc.
Patrick G. Boyle Chairman Senior Vice President,
51 Madison Avenue New York Life Insurance
New York, NY 10010 Company
Alice T. Kane Director Executive Vice
51 Madison Avenue President, New York Life
New York, NY 10010 Insurance Company
Richard M. Kernan, Jr. Director Executive Vice President
51 Madison Avenue and Chief Investment
New York, NY 10010 Officer, New York Life
Insurance Company
</TABLE>
<PAGE>
Exhibit I
Additional Information Regarding Principal Executive Officer
and Directors of New York Life Insurance Company
<TABLE>
<CAPTION>
Position with New York
Name and Address Life Insurance Company Principal Occupation
---------------- ---------------------- --------------------
<S> <C> <C>
Seymour Sternberg Chairman, Chief Chairman, Chief
51 Madison Avenue Executive Officer and Executive Officer and
New York, NY 10010 President, New York Life President, New York
Insurance Company. Life Insurance Company.
</TABLE>
<PAGE>
Exhibit J
Information Regarding Comparable Funds Advised by
MacKay-Shields Financial Corporation
<TABLE>
<CAPTION>
Rate Paid Proposed
Current for Year Sub-
Size (in 000s) Advisory Ended Advisory
Fund as of 6/30/97 Fee Rate 12/31/96 Fee Rate
---- -------------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay Institutional
International Bond Fund $ 52,775 0.30% 0.30% 0.30%
MainStay International
Bond Fund 32,526 0.45%* 0.25% N/A
MainStay Institutional
International Equity Fund 141,107 0.35% 0.35% 0.35%
MainStay International
Equity Fund 83,724 0.60% 0.60% N/A
MainStay VP
International Equity
Portfolio 29,989 0.60% 0.60% N/A
</TABLE>
_______________________
* NYLIFE Distributors Inc. and MacKay-Shields have jointly agreed to waive a
portion of their fees payable by the International Bond Fund until such
time as the Fund reaches $50 million in assets.
<PAGE>
Exhibit K
Information Regarding Comparable Funds Advised by
Monitor Capital Advisors, Inc.
<TABLE>
<CAPTION>
Rate Paid Proposed
Current for Year Sub-
Size (in 000s) Advisory Ended Advisory
Fund as of 6/30/97 Fee 12/31/96 Fee Rate
---- ------------- --- -------- --------
<S> <C> <C> <C> <C>
MainStay Institutional $842,619 0.10%* ----- 0.10%
Indexed Equity Fund
MainStay VP Indexed 352,971 0.10% 0.10% N/A
Equity Portfolio
MainStay Equity Index 329,825 0.10% 0.10% N/A
Fund
</TABLE>
________________________
* The Fund's administrator, New York Life Insurance Company, and Monitor
Capital Advisors, Inc. have voluntarily agreed to limit the total expenses
(excluding interest, taxes, brokerage commissions, litigation and
indemnification expenses, and other extraordinary expenses and any class-
specific expenses) of the Fund to an annual rate of 0.30% of the Fund's
Institutional Class shares' average daily net assets and 0.55% of the
Fund's Institutional Service Class shares' average daily net assets.
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES AND FOR
--- ---
EACH OF THE FOLLOWING PROPOSALS:
Proposal 1 - Election of Directors:
Patrick G. Boyle
Lawrence Glacken
Alice T. Kane
Susan B. Kerley
Robert P. Mulhearn
[ ] FOR ALL [ ] AGAINST ALL
[ ] FOR ALL EXCEPT [to withhold authority
to vote for any nominee
listed above, strike a
line through the name of
the nominee(s)]
Proposal 2 - Approval of Management Agreement
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3A - Approval of Sub-Advisory Agreement Between the Manager and
MacKay-Shields Financial Corporation
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4 - Elimination or Revision of Certain Fundamental Investment
Restrictions
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] To vote against the proposed changes to one or more of the
specific fundamental investment restrictions, but to approve the
others, place an "X" in the box at left AND indicate the
number(s) (as set forth in the proxy statement) of the investment
restriction(s) you do not want to change on this line:
_________________________________________________________________
Proposal 5 - Ratification of the Selection of Price Waterhouse LLP as
Independent Certified Public Accountants of the Company
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL OF THE NOMINEES AND FOR ALL OF THE PROPOSALS.
--- ---
YOUR SHAREHOLDER VOTE IS IMPORTANT!
Please vote, sign and mail your proxy ballot (this card) in the enclosed
postage-paid envelope today, no matter how many shares you own. A majority of
each Fund's shares must be represented in person or by proxy. Please vote so
your Fund can avoid the expense of another mailing.
Code 1
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 17, 1997
The undersigned hereby appoints A. Thomas Smith III, Sara L. Badler and
Nancy Brenner, and each of them, his or her attorneys and proxies with full
power of substitution to vote and act with respect to all shares of the MainStay
Institutional Funds Inc. listed in the accompanying proxy statement (the
"Funds") held by the undersigned at the Special Meeting of Shareholders of the
Funds to be held at 10:00 a.m., Eastern Time, on November 17, 1997, at the
offices of the MainStay Institutional Funds Inc., 51 Madison Avenue, New York,
NY 10010, and at any adjournment thereof (the "Meeting"), and instructs them to
vote as indicated on the matters referred to in the Proxy Statement for the
Meeting, receipt of which is hereby acknowledged, with discretionary power to
vote upon such other business as may properly come before the Meeting.
YOUR SHAREHOLDER VOTE IS IMPORTANT!
PLEASE VOTE BY MARKING YOUR PROXY
ON THE REVERSE SIDE, SIGN AND DATE IT
AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
This proxy must be signed by the beneficial owner
of Fund shares. If signing as attorney, executor,
guardian or in some representative capacity or as
an officer of a corporation, please add title as
such.
Receipt of the Notice of Special Meeting and Proxy
Statement is hereby acknowledged.
Dated ____________________, 1997
______________________________________
Signature(s) of Shareholder(s)
______________________________________
Signature(s) of Shareholder(s)
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES AND FOR
--- ---
EACH OF THE FOLLOWING PROPOSALS:
Proposal 1 - Election of Directors:
Patrick G. Boyle
Lawrence Glacken
Alice T. Kane
Susan B. Kerley
Robert P. Mulhearn
[ ] FOR ALL [ ] AGAINST ALL
[ ] FOR ALL EXCEPT [to withhold authority
to vote for any nominee
listed above, strike a
line through the name of
the nominee(s)]
Proposal 2 - Approval of Management Agreement
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3A - Approval of Sub-Advisory Agreement Between the Manager and
Monitor Capital Advisors, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4 - Elimination or Revision of Certain Fundamental Investment
Restrictions
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] To vote against the proposed changes to one or more of the
specific fundamental investment restrictions, but to approve the
others, place an "X" in the box at left AND indicate the
number(s) (as set forth in the proxy statement) of the investment
restriction(s) you do not want to change on this line:
_________________________________________________________________
Proposal 5 - Ratification of the Selection of Price Waterhouse LLP as
Independent Certified Public Accountants of the Company
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL OF THE NOMINEES AND FOR ALL OF THE PROPOSALS.
--- ---
YOUR SHAREHOLDER VOTE IS IMPORTANT!
Please vote, sign and mail your proxy ballot (this card) in the enclosed
postage-paid envelope today, no matter how many shares you own. A majority of
each Fund's shares must be represented in person or by proxy. Please vote so
your Fund can avoid the expense of another mailing.
Code 2
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 17, 1997
The undersigned hereby appoints A. Thomas Smith III, Sara L. Badler and
Nancy Brenner, and each of them, his or her attorneys and proxies with full
power of substitution to vote and act with respect to all shares of the MainStay
Institutional Funds Inc. listed in the accompanying proxy statement (the
"Funds") held by the undersigned at the Special Meeting of Shareholders of the
Funds to be held at 10:00 a.m., Eastern Time, on November 17, 1997, at the
offices of the MainStay Institutional Funds Inc., 51 Madison Avenue, New York,
NY 10010, and at any adjournment thereof (the "Meeting"), and instructs them to
vote as indicated on the matters referred to in the Proxy Statement for the
Meeting, receipt of which is hereby acknowledged, with discretionary power to
vote upon such other business as may properly come before the Meeting.
YOUR SHAREHOLDER VOTE IS IMPORTANT!
PLEASE VOTE BY MARKING YOUR PROXY
ON THE REVERSE SIDE, SIGN AND DATE IT
AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
This proxy must be signed by the beneficial owner
of Fund shares. If signing as attorney, executor,
guardian or in some representative capacity or as
an officer of a corporation, please add title as
such.
Receipt of the Notice of Special Meeting and Proxy
Statement is hereby acknowledged.
Dated ____________________, 1997
______________________________________
Signature(s) of Shareholder(s)
______________________________________
Signature(s) of Shareholder(s)
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES AND FOR
--- ---
EACH OF THE FOLLOWING PROPOSALS:
Proposal 1 - Election of Directors:
Patrick G. Boyle
Lawrence Glacken
Alice T. Kane
Susan B. Kerley
Robert P. Mulhearn
[ ] FOR ALL [ ] AGAINST ALL
[ ] FOR ALL EXCEPT [to withhold authority
to vote for any nominee
listed above, strike a
line through the name of
the nominee(s)]
Proposal 2 - Approval of Management Agreement
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3A - Approval of Sub-Advisory Agreement Between the Manager and
New York Life Insurance Company
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4 - Elimination or Revision of Certain Fundamental Investment
Restrictions
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] To vote against the proposed changes to one or more of the
specific fundamental investment restrictions, but to approve the
others, place an "X" in the box at left AND indicate the
number(s) (as set forth in the proxy statement) of the investment
restriction(s) you do not want to change on this line:
_________________________________________________________________
Proposal 5 - Ratification of the Selection of Price Waterhouse LLP as
Independent Certified Public Accountants of the Company
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL OF THE NOMINEES AND FOR ALL OF THE PROPOSALS.
---- ---
YOUR SHAREHOLDER VOTE IS IMPORTANT!
Please vote, sign and mail your proxy ballot (this card) in the enclosed
postage-paid envelope today, no matter how many shares you own. A majority of
each Fund's shares must be represented in person or by proxy. Please vote so
your Fund can avoid the expense of another mailing.
Code 3
<PAGE>
MAINSTAY INSTITUTIONAL FUNDS INC.
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 17, 1997
The undersigned hereby appoints A. Thomas Smith III, Sara L. Badler and
Nancy Brenner, and each of them, his or her attorneys and proxies with full
power of substitution to vote and act with respect to all shares of the MainStay
Institutional Funds Inc. listed in the accompanying proxy statement (the
"Funds") held by the undersigned at the Special Meeting of Shareholders of the
Funds to be held at 10:00 a.m., Eastern Time, on November 17, 1997, at the
offices of the MainStay Institutional Funds Inc., 51 Madison Avenue, New York,
NY 10010, and at any adjournment thereof (the "Meeting"), and instructs them to
vote as indicated on the matters referred to in the Proxy Statement for the
Meeting, receipt of which is hereby acknowledged, with discretionary power to
vote upon such other business as may properly come before the Meeting.
YOUR SHAREHOLDER VOTE IS IMPORTANT!
PLEASE VOTE BY MARKING YOUR PROXY
ON THE REVERSE SIDE, SIGN AND DATE IT
AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
This proxy must be signed by the beneficial owner
of Fund shares. If signing as attorney, executor,
guardian or in some representative capacity or as
an officer of a corporation, please add title as
such.
Receipt of the Notice of Special Meeting and Proxy
Statement is hereby acknowledged.
Dated ____________________, 1997
______________________________________
Signature(s) of Shareholder(s)
______________________________________
Signature(s) of Shareholder(s)
