As filed with the Securities and Exchange Commission on August 10, 2007
Registration No. __________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No.
(Check appropriate box or boxes)
THE MAINSTAY FUNDS
(Exact Name of Registrant as Specified in Charter)
51 Madison Avenue, New York, New York 10010
(Address of Principal Executive Offices)
(212) 576-7000
(Registrant's Area Code and Telephone Number)
Marguerite E.H. Morrison, Esq.
The MainStay Funds
51 Madison Avenue
New York, New York 10010
(Name and Address of Agent for Service)
With copies to:
Bibb L. Strench, Esq. Sander M. Bieber, Esq. Sutherland Asbill & Brennan LLP Dechert LLP 1275 Pennsylvania Avenue, NW 1775 I Street, NW Washington, D.C. 20004 Washington, D.C. 20006 |
Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on September 10, 2007 pursuant to Rule 488 under the Securities Act of 1933.
Title of securities being registered: Class I shares of beneficial interest, par value $0.01 per share, of the following series of the Registrant: MainStay Common Stock Fund.
An indefinite amount of the Registrant's securities has been registered under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at this time.
MCMORGAN FUNDS
MCMORGAN EQUITY INVESTMENT FUND
ONE BUSH STREET
SUITE 800
SAN FRANCISCO, CALIFORNIA 94104
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 20, 2007
September [24], 2007
Dear Shareholder:
We are inviting you to attend a special shareholder meeting (the "Special Meeting") of the McMorgan Equity Investment Fund (the "McMorgan Fund"), a series of McMorgan Funds, to be held at One Bush Street, Suite 800, San Francisco, California 94104, on Tuesday, November 20, 2007. This package contains information about the proposal to be presented at the Special Meeting and includes materials you will need to provide your voting instructions.
As a shareholder of the McMorgan Fund, you are being asked to consider and vote upon an Agreement and Plan of Reorganization that would govern the terms of the proposed reorganization of the McMorgan Fund into the MainStay Common Stock Fund (the "MainStay Fund"). If the proposed reorganization (the "Reorganization") is approved by the shareholders, you will become a shareholder of the MainStay Fund on the date that the Reorganization occurs. McMorgan Fund shareholders holding McMorgan Fund Class and Class Z shares will receive Class I shares of the MainStay Fund. A Proxy Statement/Prospectus that describes the Reorganization and compares the Funds is enclosed. To help you understand the proposal, we also are enclosing with this letter responses to commonly asked questions.
The Mainstay Fund is a series of The Mainstay Funds, which are mutual funds that are affiliated with McMorgan Funds through the New York Life Insurance Company organization. This Reorganization is part of a larger effort to integrate and consolidate the operations of McMorgan Funds into the general investment management operations of New York Life Investment Management, LLC ("NYLIM") to eliminate redundancies, achieve certain operating efficiencies and to create a stronger, more cohesive family of funds.
The McMorgan Fund and the MainStay Fund have compatible investment objectives and principal investment strategies. The McMorgan Fund is managed by McMorgan & Company LLC and sub-advised by NYLIM, which makes all of its portfolio investment decisions. The MainStay Fund is directly managed by NYLIM. Following the Reorganization, NYLIM will continue to be the portfolio manager for the shareholders who were formerly invested in the McMorgan Fund when they become shareholders of the MainStay Fund. Therefore, the Reorganization will maintain continuity of portfolio management for McMorgan Fund investors. In addition, after applicable waivers and
reimbursements, the MainStay Fund has lower annual fund operating expenses and is part of a fund complex that has greater growth prospects. NYLIM will pay substantially all of the expenses of completing the Reorganization, including proxy solicitation costs.
At a meeting held on June 6, 2007, the Board of Trustees of McMorgan Funds reviewed the proposal and recommended that the Reorganization be presented to you for consideration. Although the Board of Trustees has approved the Reorganization, the final decision is yours. If the Reorganization is not approved by shareholders, the McMorgan Fund Board will consider other options, which may include liquidating the McMorgan Fund, holding another shareholders' meeting requesting a vote on the same or modified proposal or continuing to operate the McMorgan Fund in its present form for a period of time.
Whether or not you plan to attend the Special Meeting in person, please read the Proxy Statement/Prospectus and cast your vote promptly. It is important that your vote be received by no later than the time of the Special Meeting.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. VOTING YOUR
SHARES EARLY WILL AVOID COSTLY FOLLOW-UP MAILINGS AND TELEPHONE SOLICITATIONS.
TO PROVIDE YOUR VOTING INSTRUCTIONS, YOU MAY USE ANY OF THE FOLLOWING
METHODS:
- BY INTERNET. Log onto the Internet site identified on your proxy card and follow the instructions on the website. In order to log on, you will need the control number found on your proxy card.
- BY MAIL. Complete, date and sign your proxy card and mail it in the enclosed postage-paid envelope.
- BY TELEPHONE. Have your voting instruction card available. Call
[1-800-317-8028] toll free. Enter your 12-digit control number from
your voting instruction card. Follow the simple instructions.
- BY ATTENDING THE MEETING. Vote in person at the Special Meeting.
If you have any questions before submitting your voting instructions, please call us toll-free at 1-800-831-1994. We are glad to help you understand the proposal and assist you. Thank you for your participation.
Sincerely,
/s/ Mark Taylor ---------------------------------------- Mark Taylor President McMorgan Funds |
MCMORGAN FUNDS
MCMORGAN EQUITY INVESTMENT FUND
ONE BUSH STREET
SUITE 800
SAN FRANCISCO, CALIFORNIA 94104
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 20, 2007
To Our Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special Meeting") of the McMorgan Equity Investment Fund (the "McMorgan Fund"), a series of McMorgan Funds, will be held at the offices of McMorgan & Company LLC, One Bush Street, Suite 800, San Francisco, California 94104, on Tuesday, November 20, 2007, at 10:00 a.m. Pacific Time.
At the Special Meeting, shareholders of the McMorgan Fund will be asked to consider and vote upon the following proposals:
1. To approve an Agreement and Plan of Reorganization providing for (i) the acquisition of all of the assets and the assumption of the known liabilities of the McMorgan Fund by the MainStay Common Stock Fund (the "MainStay Fund"), a series of The MainStay Funds, in exchange for Class I shares of the MainStay Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of the McMorgan Fund, (ii) the distribution of such Class I shares to the shareholders of the McMorgan Fund in exchange for the McMorgan Fund Class and Class Z shares of the McMorgan Fund held by such shareholders, and (iii) the subsequent liquidation and dissolution of the McMorgan Fund; and
2. To transact such other business as may properly come before the Special Meeting or any adjournments or postponements thereof.
Your attention is directed to the accompanying Proxy Statement/Prospectus for further information regarding the Special Meeting and Proposal No. 1 above. You may vote at the Special Meeting if you are the record owner of shares of the McMorgan Fund as of the close of business on August 8, 2007. If you attend the Special Meeting, you may vote your shares in person. Even if you do not attend the Special Meeting, you may authorize your proxy by following the instructions on the voting instruction card for authorizing your proxy on the internet or by touch-tone telephone, or by simply completing, signing and returning the enclosed proxy card by mail in the postage-paid envelope provided.
Your vote is very important to us. Whether or not you plan to attend the Special Meeting in person, please vote the enclosed proxy. If you have any questions, please contact McMorgan Funds for additional information by calling toll-free 1-800-831-1994.
By Order of the Board of Trustees,
/s/ Teresa Matzelle ---------------------------------------- Teresa Matzelle Secretary |
September [24], 2007
IMPORTANT NOTICE:
YOUR VOTE IS VERY IMPORTANT TO US NO MATTER HOW MANY SHARES YOU OWN. PLEASE
VOTE BY FOLLOWING THE ENCLOSED INSTRUCTIONS
TO AUTHORIZE YOUR PROXY OVER THE INTERNET OR BY TELEPHONE, OR BY
SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE
ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE. YOU CAN
HELP AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATIONS BY PROMPTLY VOTING
YOUR SHARES.
QUESTIONS AND ANSWERS RELATING TO THE PROPOSAL
WHAT ARE THE PROPOSED CHANGES TO THE MCMORGAN FUNDS?
You are being asked to approve the reorganization (the "Reorganization") of the McMorgan Equity Investment Fund (the "McMorgan Fund") into the MainStay Common Stock Fund (the "MainStay Fund").
As part of a larger restructuring plan, shareholders of the McMorgan Principal Preservation Fund are being asked to approve the reorganization of that fund into the MainStay Principal Preservation Fund, a newly formed fund in the MainStay Fund family. Additionally, shareholders of the McMorgan Intermediate Fixed Income Fund and the McMorgan Fixed Income Fund are being asked to approve the reorganization of those funds into the MainStay Institutional Bond Fund, a newly formed fund in the MainStay Fund family. Finally, the McMorgan Balanced Fund and the McMorgan High Yield Fund will be liquidated.
WHAT WILL I RECEIVE IN EXCHANGE FOR MY SHARES IF THE REORGANIZATION IS APPROVED?
If the Reorganization is approved, you will become a shareholder of the MainStay Fund on the date that the reorganization occurs and will receive Class I shares of the MainStay Fund in exchange for the shares that you hold in the McMorgan Fund.
WHAT DID THE TRUSTEES CONSIDER WHEN THEY APPROVED THE REORGANIZATION?
The Reorganization was suggested in large part due to the fact that the relatively small asset size of the McMorgan Funds did not justify the expense of operating the McMorgan Funds as a separate entity and that the prospects for asset growth within the McMorgan Funds were limited.
In reviewing the Reorganization, the Board of Trustees of the McMorgan Trust considered several factors, including the following:
- the investment management services to be provided to the MainStay Fund;
- the similarities between the investment objectives, strategies, restrictions and risks of the MainStay Fund compared to those of the McMorgan Fund;
- that the management fee rate for the MainStay Fund exceeded the current management fee rate for the McMorgan Fund, but that it was expected that the annual operating expense ratio (gross and net) of the Class I shares of the MainStay Fund would be lower than that of the McMorgan Fund Class shares and Class Z shares of the McMorgan Fund;
- the relatively small size and limited growth prospects of the McMorgan Fund, as well as the current plans of New York Life Investment Management LLC ("NYLIM") and its affiliates for marketing the shares of the MainStay Fund;
- the effect that the Reorganization would have on the services to be provided to, and the fees to be paid directly by, the McMorgan Fund shareholders;
- the entities that would provide services to the MainStay Fund other than the investment manager;
- the governance structure of the MainStay Fund and the MainStay Trust;
- the terms of the agreements relating to the Reorganization, including valuation procedures, expenses and potential unassumed liabilities;
- the tax consequences of the Reorganization; and
- alternatives to the Reorganization and other factors.
WILL THERE BE ANY CHANGES TO THE PORTFOLIO MANAGERS AS A RESULT OF THE PROPOSED CHANGES?
Currently, the McMorgan Fund is subadvised by NYLIM with Harvey Fram serving as the portfolio manager. Similarly, NYLIM serves as the investment adviser to the MainStay Fund. However, the MainStay Fund is co-managed by Harvey Fram and Migene Kim.
WILL THE INVESTMENT OBJECTIVE AND STRATEGY OF THE MAINSTAY FUND BE DIFFERENT FROM THE MCMORGAN FUND?
The Funds have similar investment objectives. The investment objective of the McMorgan Fund is to seek above-average total return consistent with reasonable risk. The investment objective of the MainStay Fund is to seek long-term growth of capital, with income as a secondary consideration. The portfolios of the two funds are very similar, except that the MainStay Fund is managed on a more concentrated basis than the McMorgan Fund.
ARE THERE INVESTMENT MINIMUMS FOR THE MAINSTAY CLASS I SHARES?
MainStay Class I shares have an initial investment minimum of $5,000,000 for individual investors and no investment minimum for institutional investors. However, existing McMorgan shareholders who receive Class I shares as part of the Reorganization will be exempted from the investment minimums and will also have the ability to open new Class I accounts in any MainStay Fund that offers Class I shares. Please note that if you subsequently close your account, you will need to satisfy the Class I investment minimums if you decide to purchase Class I shares of any MainStay fund at a later date.
WHAT ARE THE TAX IMPLICATIONS FOR THE PROPOSED CHANGES?
The Reorganization is structured as a tax-free reorganization that will not, cause a taxable event for shareholders. However, the McMorgan Fund will pay its annual dividend and capital gains distributions to shareholders as required.
IF APPROVED, WHEN WILL THE REORGANIZATION OCCUR?
If approved by shareholders, the Reorganization will take place on or about November 27, 2007.
WILL MCMORGAN FUND SHAREHOLDERS BEAR THE EXPENSES OF THE REORGANIZATION?
Except for commissions, transaction costs and other direct expenses of liquidating portfolio investments incurred by the McMorgan Fund in connection with the Reorganization, substantially all of the expenses relating to the Reorganization will be borne by
NYLIM.
HAS THE BOARD OF TRUSTEES OF THE MCMORGAN TRUST APPROVED THE REORGANIZATION?
Yes, the Board of Trustees of the McMorgan Trust has approved the Reorganization and recommends that shareholders vote "FOR" the Reorganization.
PROXY STATEMENT/PROSPECTUS
SEPTEMBER [24], 2007
MCMORGAN FUNDS
ONE BUSH STREET
SUITE 800
SAN FRANCISCO, CALIFORNIA 94104
(415) 788-9300
THE MAINSTAY FUNDS
51 MADISON AVENUE
NEW YORK, NEW YORK 10010
(212) 576-7000
PROXY STATEMENT FOR:
MCMORGAN EQUITY INVESTMENT FUND
PROSPECTUS FOR:
MAINSTAY COMMON STOCK FUND
INTRODUCTION
This combined Proxy Statement/Prospectus is being furnished in connection with the solicitation of proxies by the Board of Trustees of McMorgan Funds, a Delaware statutory trust (the "McMorgan Trust"), on behalf of the McMorgan Equity Investment Fund (the "McMorgan Fund"), for a Special Meeting of Shareholders of the McMorgan Fund ("Special Meeting"). The Special Meeting will be held on Tuesday, November 20, 2007 at 10:00 a.m. Pacific Time, at the offices of McMorgan & Company LLC, One Bush Street, Suite 800, San Francisco, California 94104.
As is more fully described in this Proxy Statement/Prospectus, shareholders of the McMorgan Fund will be asked to vote on the following proposals:
1. To approve an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for (i) the acquisition of all of the assets and the assumption of the known liabilities of the McMorgan Fund by the MainStay Common Stock Fund (the "MainStay Fund" and, together with the McMorgan Fund, the "Funds"), a series of The MainStay Funds (the "MainStay Trust"), in exchange for Class I shares of the MainStay Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of the McMorgan Fund, (ii) the distribution of such Class I shares to the shareholders of the McMorgan Fund in exchange for the McMorgan Fund Class and Class Z shares of the McMorgan Fund held by such shareholders, and (iii) the subsequent liquidation and dissolution of the McMorgan Fund (such transactions are collectively referred to as the "Reorganization"); and
2. To transact such other business as may properly come before the Special Meeting or any adjournments or postponements thereof.
Because shareholders of the McMorgan Fund are being asked to approve a transaction in which they will become shareholders of the MainStay Fund, this Proxy Statement/Prospectus also serves as a prospectus for the MainStay Fund.
This Proxy Statement/Prospectus, which should be read and retained for
future reference, sets forth concisely the information that shareholders of the
McMorgan Fund should know about the MainStay Fund before voting on the
Reorganization. A Statement of Additional Information ("SAI") dated September
[24], 2007 that relates to this Proxy Statement/Prospectus and contains
additional information about the Reorganization and the parties thereto, has
been filed with the U.S. Securities and Exchange Commission ("SEC") and is
incorporated herein by reference. The following documents, each of which has
additional information about the Funds, also have been filed with the SEC and
are incorporated by reference herein:
1. The McMorgan Fund Class and Class Z Prospectuses and Statement of Additional Information of the McMorgan Fund, each dated November 3, 2006, as supplemented (File Nos. 33-75708, 811-08370);
2. The Annual Report to Shareholders of the McMorgan Fund for the fiscal year ended June 30, 2007;
3. The Prospectus and Statement of Additional Information for The Mainstay Funds relating to the MainStay Fund, each dated March 1, 2007, as supplemented (File Nos. 33-02610, 811-04550);
4. The Annual Report to Shareholders of the MainStay Fund for the fiscal year ended October 31, 2006; and
5. The Semi-Annual Report to Shareholders of the MainStay Fund for the period ended April 30, 2007.
You may receive a copy of the most recent prospectuses, statements of
additional information and annual and semi-annual shareholder reports for each
of the Funds, without charge, by contacting NYLIFE Distributors LLC, attn:
MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey
07054, or by calling toll-free 1-800-MAINSTAY (1-800-624-6782).
McMorgan Trust and MainStay Trust are both open-end management investment companies. The Funds are each considered to be diversified. Additional information about the Funds has been filed with the SEC. You may copy and review information about each Fund (including the SAI) at the SEC's Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at 202-551-8090. Reports and other information about the Funds are available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov. You may obtain copies of this information, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.
THE SEC HAS NOT APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS, OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
SUMMARY................................................................... 1
The Reorganization..................................................... 1
McMorgan Trust Board Recommendations................................... 3
COMPARATIVE INFORMATION RELATING TO THE REORGANIZATION.................... 3
Comparison of Investment Objectives and Principal Investment
Strategies.......................................................... 3
Comparison of Investment Restrictions.................................. 5
Comparison of Risks.................................................... 7
Comparison of Fees and Expenses........................................ 8
Relative Performance
Comparison of Governing Instruments.................................... 12
Comparison of Investment Management Agreements......................... 14
Comparison of Dividends and Other Distributions........................ 15
Comparison of Minimum Initial and Subsequent Purchase Amounts.......... 15
Other Comparative Information.......................................... 15
INFORMATION ABOUT THE REORGANIZATION...................................... 16
Reasons for the Reorganization......................................... 16
Board Considerations................................................... 16
The Reorganization Agreement........................................... 19
Tax Consequences of the Reorganization................................. 20
Expenses of the Reorganization......................................... 21
McMorgan Trust Board................................................... 21
Capitalization......................................................... 21
INFORMATION ABOUT MANAGEMENT AND OTHER SERVICE PROVIDERS.................. 22
Investment Advisers.................................................... 22
Portfolio Managers..................................................... 23
Other Service Providers................................................ 23
SHAREHOLDER GUIDE......................................................... 24
VOTING INFORMATION........................................................ 41
OTHER INFORMATION......................................................... 42
EXHIBIT A: FORM OF AGREEMENT AND PLAN OF REORGANIZATION.................. A-1
EXHIBIT B: FINANCIAL HIGHLIGHTS OF THE MAINSTAY FUND..................... B-1
EXHIBIT C: PRINCIPAL SHAREHOLDERS OF THE FUNDS........................... C-1
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SUMMARY
This Summary is qualified in its entirety by reference to the additional information contained elsewhere in this Proxy Statement/Prospectus and the Reorganization Agreement, a copy of which is attached to this Proxy Statement/Prospectus as Exhibit A. Shareholders should read this entire Proxy Statement/Prospectus carefully. For more complete information about the Funds, please read each Fund's prospectus.
THE REORGANIZATION
At a meeting held on June 6, 2007, the Board of Trustees of McMorgan Trust (the "McMorgan Trust Board") approved the Reorganization Agreement by a unanimous vote. The Board of Trustees of MainStay Trust (the "MainStay Trust Board") separately approved the Reorganization Agreement at a meeting held on June 7, 2007, also by a unanimous vote. The Reorganization Agreement provides for:
- the acquisition of all of the assets and the assumption of the known liabilities of the McMorgan Fund by the MainStay Fund in exchange for Class I shares of the MainStay Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of the McMorgan Fund;
- the distribution of such Class I shares of the MainStay Fund to the shareholders of the McMorgan Fund in exchange for the McMorgan Fund Class and Class Z shares of the McMorgan Fund held by such shareholders; and
- the subsequent liquidation and dissolution of the McMorgan Fund.
The Reorganization is subject to approval by the shareholders of the McMorgan Fund. The Reorganization, if approved by shareholders, is scheduled to be effective upon the close of business on November 27, 2007, or on such later date as the parties may agree (the "Closing Date"). As a result of the Reorganization, each shareholder of the McMorgan Fund will become the owner of the number of full and fractional shares of the MainStay Fund, having an aggregate net asset value equal to the aggregate net asset value of the shareholder's McMorgan Fund shares as of the close of business on the Closing Date. The McMorgan Fund offers McMorgan Fund Class and Class Z shares. In the Reorganization, shareholders of both classes of the McMorgan Fund will receive Class I shares of the MainStay Fund. See "Information About the Reorganization," below.
The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes. See "Information About the Reorganization -- Tax Consequences of the Reorganization," below.
In considering whether to approve the Reorganization, you should note that:
- The Funds have similar investment objectives and substantially similar principal investment strategies.
- Both Funds employ the same portfolio management team and investment process with very similar investment results over the common period of management.
- Shareholders of the McMorgan Fund will have the ability as MainStay Fund shareholders to: (1) exchange their shares for shares of other investment portfolios of
the MainStay Trust; and (2) purchase shares of other investment portfolios of the MainStay Trust without being subject to any applicable sales loads or investment minimums.
- Shareholders of the McMorgan Fund will become shareholders of a mutual fund complex that offers approximately 70 mutual funds, substantially more than the McMorgan Trust.
- McMorgan Fund shareholders will benefit from the lower net operating expenses of the Class I shares of the MainStay Fund. After applicable waivers and expense reimbursements, net annual fund operating expenses of the MainStay Fund Class I shares (0.62%, excluding underlying fund operating expenses) are currently lower than the annual fund operating expenses (net of voluntary fee waivers) of McMorgan Fund Class shares (0.75%) and Class Z shares (1.00%) of the McMorgan Fund. In addition, the McMorgan Fund waivers and expense reimbursements are voluntary and therefore may be discontinued at any time, whereas the MainStay Fund waivers and expense reimbursements are contractual and can be changed or terminated only with board approval.
- While the two Funds were managed identically over the common period up to June 2006, the McMorgan Fund has more securities in its portfolio than the MainStay Fund, and the MainStay Fund's tracking error to its relevant benchmark was modestly increased in comparison to McMorgan Fund's tracking error in an effort to provide MainStay Fund shareholders with enhanced returns. The returns of the two Funds have been very similar since that change was made, but it is expected that over time, this change will offer the potential for enhanced returns to shareholders of the MainStay Fund, although there may be no certainty as to this result. Investors should note that this change may make the returns of the MainStay Fund slightly more volatile than the returns of the McMorgan Fund.
- Given the similarity in the investment strategies of these Funds, the McMorgan Trust Board believes that the Reorganization of the McMorgan Fund into the MainStay Fund, versus a different course of action, such as liquidation or a reorganization with a different fund, is considered the most favorable option for shareholders of the McMorgan Fund.
- The MainStay Fund has implemented a small account fee with respect to certain types of accounts. Shareholder invested in the MainStay Fund through such accounts with a balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually).
- Although an individual investor investing in the Class I shares of the MainStay Fund ordinarily must initially invest at least $5,000,000 and thereafter may make an additional investment of any amount, McMorgan Fund shareholders receiving Class I shares of the MainStay Fund in the Reorganization will not be subject to any minimum purchase amounts for subsequent Class I share purchases after the Reorganization. There is no minimum initial or subsequent purchase amounts for institutional investors. Please note that if you subsequently close your account, you will need to satisfy the Class I investment minimums if you decide to purchase Class I shares of the MainStay Fund at a later date.
- New York Life Investment Management LLC ("NYLIM"), and not the Funds, will pay substantially all of the expenses of the Reorganization.
- The Reorganization is intended to qualify as a tax-free event for the McMorgan Fund shareholders for federal income tax purposes.
- The Reorganization will not result in a dilution of the economic interests of the McMorgan Fund shareholders because McMorgan Fund shareholders will receive MainStay Fund shares with the same aggregate value as their McMorgan Fund shares.
- Prior to the Closing Date, NYLIM intends to transition the McMorgan Fund's portfolio securities to more closely align with the holdings of the MainStay Fund's investment objective and strategies. As a result of this transition process, the McMorgan Fund will experience portfolio turnover of approximately 15% to 25%, may realize capital gains (which may be passed to McMorgan Fund shareholders), and the McMorgan Fund will incur associated transaction costs estimated to be approximately $40,000.
Approval of the Reorganization will require the affirmative vote of the holders of a majority of the outstanding shares of the McMorgan Fund entitled to vote and present in person or by proxy, as specified under the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules thereunder. Shares of the McMorgan Fund will be voted collectively, and not on a class-by-class basis. See "Voting Information," below.
MCMORGAN TRUST BOARD RECOMMENDATIONS
For the reasons set forth below in "Reasons for the Reorganization," the Trustees of the McMorgan Trust, including all of the Trustees who are not "interested persons" of the McMorgan Trust (as defined in the 1940 Act) (the "Independent Trustees"), have concluded that the Reorganization is in the best interests of the shareholders of the McMorgan Fund, and that the interests of the McMorgan Fund's existing shareholders would not be diluted as a result of the Reorganization.
THE MCMORGAN TRUST BOARD RECOMMENDS THAT YOU VOTE "FOR" THE REORGANIZATION.
COMPARATIVE INFORMATION RELATING TO THE REORGANIZATION
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
This section will help you compare the investment objectives and principal investment strategies of the McMorgan Fund and the MainStay Fund. Please be aware this is only a summary. More information may be found in each Fund's prospectus.
INVESTMENT OBJECTIVES. The Funds have similar investment objectives. The investment objective of the McMorgan Fund is to seek above-average total return consistent with reasonable risk. The investment objective of the MainStay Fund is to seek long-term growth of capital, with income as a secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES. Each Fund has substantially similar principal investment strategies. Each Fund seeks to identify companies that are considered to have a high probability of outperforming the S&P 500(R) Index over the following six to twelve months. The McMorgan Fund invests at least 80% of its net assets in equity securities, while the MainStay Fund normally invests 80% of its assets (net assets plus the amount of any borrowings) in common stocks. While the
McMorgan Fund's 80% policy may permit it to invest in a wider range of equity securities than common stocks, such as preferred stocks or convertible securities, in practice, each Fund normally invests in common stocks of well-established U.S. companies, primarily those with large-capitalizations.
The underlying process used by both Funds to select stocks is based on a quantitative process that ranks stocks based on traditional value measures, earnings quality and technical factors. These stocks are then generally held in larger or smaller proportions, based on their relative attractiveness. On occasion, trading strategies that seek to realize returns over shorter periods may be employed. Each Fund invests in companies with market capitalizations that, at the time of investment, are similar to companies in the S&P 500(R) Index and/or the Russell(R) 1000 Index or have market capitalizations similar to such companies. Each Fund is managed with a core orientation (including growth and value equities). Each Fund uses a bottom up approach that assesses stocks based on their individual strengths, rather than focusing on the underlying sectors/industries of those stocks or on general economic trends.
NYLIM, as sub-adviser to the McMorgan Fund and as manager of the MainStay Fund, may sell a security held by either Fund if it no longer believes that the security will contribute to meeting the investment objective of the Fund. In considering whether to sell a security, NYLIM may evaluate, among other things, the relative valuation of the security compared to the Fund's universe and the security's industry, and meaningful changes in the issuer's financial condition.
OTHER COMPARATIVE INVESTMENT INFORMATION
Information in the table below is as of June 30, 2007, unless otherwise indicated.
MCMORGAN FUND MAINSTAY FUND
---------------- ---------------------
NET ASSETS OF FUND $211,490,133 $283,590,860
NUMBER OF HOLDINGS 410 280
PORTFOLIO COMPOSITION 100% Equities 99.99% Equities
0.0% Cash 0.01% Cash
PRIMARY BENCHMARK S&P 500(R) Index S&P 500(R) Index
SECONDARY BENCHMARK None Russell(R) 1000 Index
PERCENTAGE OF TOTAL ASSETS 21.51% 21.06%
UNDER MANAGEMENT IN
TOP 10 HOLDINGS
PORTFOLIO TURNOVER RATE 98% 144% (as of October
31, 2006)
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TOP TEN HOLDINGS: NAME % NET ASSETS NAME % NET ASSETS
----------------- ------------------------ ------------ ------------------------------ ------------
ExxonMobil Corporation 4.23 ExxonMobil Corporation 4.17
Citigroup, Inc. 2.50 Citigroup, Inc. 2.46
General Electric Company 2.24 General Electric Company 2.20
Chevron Corporation 2.01 Chevron Corporation 2.02
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MCMORGAN FUND MAINSTAY FUND
--------------------------------------- ---------------------------------------------
Pfizer Inc. 1.98 Microsoft Corporation 1.99
Microsoft Corporation 1.88 Pfizer Inc. 1.95
IBM 1.83 IBM 1.80
Altria Group, Inc. 1.68 Verizon Communications 1.53
J.P. Morgan Chase & Co. 1.61 Hewlett-Packard Company 1.53
Verizon Communications 1.55 Bank of New York Company, Inc. 1.38
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COMPARISON OF INVESTMENT RESTRICTIONS
The Funds have substantially similar fundamental investment restrictions. As fundamental policies, these investment restrictions may not be changed with respect to a Fund without shareholder approval. Shareholder approval for this purpose means approval by the lesser of (1) more than 50% of the outstanding voting securities of the Fund, or (2) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of a Fund are present or represented by proxy. A table comparing the fundamental investment restrictions of the Funds is shown below:
FUNDAMENTAL
INVESTMENT
RESTRICTION MCMORGAN FUND MAINSTAY FUND
----------------- --------------------------------------------------------- ----------------------------------------------------
LOANS The McMorgan Fund may not make loans to other persons The MainStay Fund may make loans to the extent
except (a) through the lending of its portfolio permitted under the 1940 Act, as such may be
securities up to 33 1/3 percent of its total assets, (b) interpreted or modified by regulatory authorities
through the purchase of debt securities, loan having jurisdiction, from time to time.
participations and/or engaging in direct corporate loans
in accordance with its investment objectives and
policies, and (c) to the extent the entry into a
repurchase agreement is deemed to be a loan. The McMorgan
Fund may also make loans to other investment companies to
the extent permitted by the 1940 Act or any exemptions
therefrom that may be granted by the SEC.
BORROWINGS The McMorgan Fund may not borrow money, except to the The MainStay Fund may borrow money to the extent
extent permitted by the 1940 Act or any rules, exemptions permitted under the 1940 Act, as such may be
or interpretations thereunder that may be adopted, interpreted or modified by regulatory authorities
granted or issued by the SEC. having jurisdiction, from time to time.
COMMODITIES The McMorgan Fund may not purchase or sell physical The MainStay Fund may not purchase physical
commodities unless acquired as a result of ownership of commodities or contracts relating to physical
securities or other instruments and provided that this commodities, except as permitted under the 1940 Act
restriction shall not prevent the McMorgan Fund from and other applicable laws, rules and regulations, as
purchasing or selling futures contracts and options such may be interpreted or modified by regulatory
thereon or from investing in securities or other authorities having jurisdiction, from time to time.
instruments backed by physical commodities.
SENIOR The McMorgan Fund may not issue senior The MainStay Fund may issue senior securities, to
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SECURITIES securities, except as permitted under the 1940 Act or any the extent permitted under the 1940 Act, as such may
rules, exemptions or interpretations thereunder that may be interpreted or modified by regulatory authorities
be adopted, granted or issued by the SEC. having jurisdiction, from time to time.
UNDERWRITING The McMorgan Fund may not act as an underwriter of The MainStay Fund may act as an underwriter of
securities, except that, in connection with the securities within the meaning of the 1933 Act, to
disposition of a security, a Fund may be deemed to be an the extent permitted under the 1933 Act, as such may
"underwriter" as that term is defined in the Securities be interpreted or modified by regulatory authorities
Act of 1933, as amended (the "1933 Act"). having jurisdiction, from time to time.
DIVERSIFICATION As to 75% of its total assets, the McMorgan Fund may not The MainStay Fund is a "diversified company" as that
OF ASSETS purchase the securities of any one issuer (other than term is defined in the 1940 Act, as interpreted or
securities issued by the U.S. government or its agencies modified by regulatory authorities having
or instrumentalities), if immediately after such purchase jurisdiction, from time to time.
more than 5% of the value of the McMorgan Fund's total
assets would be invested in securities of such issuer.
INDUSTRY The McMorgan Fund may not purchase the securities of The MainStay Fund may not "concentrate" its
CONCENTRATION issuers conducting their principal business activities in investments in a particular industry or group of
the same industry (other than securities issued or industries, except as permitted under the 1940 Act,
guaranteed by the U.S. government, its agencies or as interpreted or modified by regulatory authorities
instrumentalities, or securities issued by other having jurisdiction, from time to time, provided
investment companies) if immediately after such purchase that, without limiting the generality of the
the value of the McMorgan Fund's investments in such foregoing: (a) this limitation will not apply to the
industry would exceed 25% of the value of the net assets MainStay Fund's investments in: (i) securities of
of the McMorgan Fund. other investment companies; (ii) securities issued
or guaranteed as to principal and/or interest by the
For the purposes of this fundamental investment U.S. government, its agencies or instrumentalities;
restriction, the McMorgan Fund may use the industry or (iii) repurchase agreements (collateralized by
classifications provided by Bloomberg, L.P., the Morgan the instruments described in clause (ii)); (b)
Stanley Capital International/Standard & Poor's Global wholly-owned finance companies will be considered to
Industry Classification Standard ("GICS") or any other be in the industries of their parents if their
reasonable industry classification system. The McMorgan activities are primarily related to financing the
Fund relies on the GICS classification. The McMorgan activities of the parents; and (c) utilities will be
Fund's reliance on a particular classification system is divided according to their services, for example,
not a fundamental investment restriction and, therefore, gas, gas transmission, electric and gas, electric
may be changed without shareholder approval. and telephone will each be considered a separate
industry.
For the purposes of this fundamental investment
restriction, the MainStay Fund may use the industry
classifications provided by Bloomberg, L.P., the
Morgan Stanley Capital International/Standard &
Poor's GICS or any other reasonable industry
classification system.
REAL ESTATE The McMorgan Fund may not purchase or sell real estate The MainStay Fund may purchase or sell real estate
unless acquired as a result of ownership of securities or or any interest therein to the extent permitted
other instruments and provided that this restriction under the 1940 Act, as such may be interpreted or
shall not prevent the McMorgan Fund from investing modified by regulatory authorities having
directly or indirectly in portfolio instruments secured jurisdiction, from time to time.
by real estate or interests therein or acquiring
securities of real estate investment trusts or other
issuers that deal in real estate.
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In addition to the fundamental investment restrictions described above, the Funds are subject to certain non-fundamental investment restrictions. Unlike the investment restrictions deemed to be fundamental policies described above, the non-fundamental investment restrictions described below may be changed by the respective Board of Trustees of the McMorgan Trust or the MainStay Trust without the approval of shareholders. None of these policies are deemed by NYLIM to result in a meaningful difference in the way it manages the Funds.
MCMORGAN FUND. The McMorgan Fund has a non-fundamental investment policy of not investing more than 5% of its respective net assets in warrants, including within that amount no more than 2% in warrants which are not listed on the New York Stock Exchange or American Stock Exchange, except warrants acquired as a result of holdings of common stocks. While not designated as non-fundamental policies, the McMorgan Fund generally invests less than 5% of its total assets in reverse repurchase agreements, does not purchase or sell futures contracts on debt securities or debt security indices and invests at least 80% of its assets in common stocks.
MAINSTAY FUND. The MainStay Fund has the following non-fundamental investment policies:
- The MainStay Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Section 12(d)(1)(F) or Section 12(d)(1)(G) of the 1940 Act, which are provisions that govern the extent to which one investment company may own shares of another investment company.
- The MainStay Fund may not invest more than 5% of its total assets in reverse repurchase agreements.
- The MainStay Fund may not purchase or sell futures contracts on debt securities or indices of debt securities.
- The MainStay Fund has adopted a non-fundamental policy to invest at least 80% of the value of its assets (net assets plus the amount of any borrowing for investment purposes) in the particular type of investments suggested by its name. Furthermore, the MainStay Fund has adopted a policy to provide the MainStay Fund's shareholders with at least 60 days prior notice of any change in the policy of the MainStay Fund to invest at least 80% of its assets in the manner described.
While not designated as non-fundamental policies, the McMorgan Fund generally invests in a manner that is consistent with the non-fundamental policies of the MainStay Fund set forth above.
COMPARISON OF RISKS
Because the Funds share compatible investment objectives, and have principal investment strategies and investment portfolios that are substantially similar, an investment in the MainStay Fund is subject to similar risks as an investment in the McMorgan Fund. While the two Funds were managed identically over the common period up to June 2006, the MainStay Fund's tracking error to its relevant benchmark was modestly increased in comparison to McMorgan Fund's tracking error in an effort to provide MainStay Fund shareholders with enhanced returns. This means that the portfolio of the MainStay Fund was made more concentrated than its benchmark. The returns of the two Funds have been very similar since that change was made, but it is expected that over time, this change will offer the potential for enhanced returns to shareholders of the MainStay Fund, although there may be no guarantee as to this result. Investors should note that this change may make the returns of the MainStay Fund more volatile than the returns of the McMorgan Fund. As a result, the Reorganization
is not expected to expose shareholders of the McMorgan Fund to materially different principal risks. The principal risks to which shareholders of both Funds are exposed include:
GENERAL RISKS OF INVESTING IN COMMON STOCKS AND OTHER EQUITY SECURITIES. The Funds are subject to the risks involved with investing in common stocks and other equity securities, which include (without limitation):
- CHANGING ECONOMIC CONDITIONS: Equity securities may fluctuate as a result of general economic conditions, including changes in interest rates.
- INDUSTRY AND COMPANY CONDITIONS: Certain industries may come in and out of favor with investors. In addition, changing technology and competition may make equity securities volatile.
- SECURITY SELECTION: A manager may not be able to consistently select equity securities that appreciate in value, or to anticipate changes which can adversely affect the value of the Fund's holdings. Investments in smaller and mid-size companies may be more volatile than investments in larger companies.
GROWTH STOCK INVESTING RISK. The principal risk of growth stocks is that investors expect growth companies to increase their earnings at a rate that is generally higher than the rate expected for non-growth companies. If these expectations are not met, the market price of the stock may decline significantly, even if earnings show an absolute increase. Growth company stocks also typically lack the dividend yield that can cushion stock prices in market downturns.
VALUE STOCK INVESTING RISK. The principal risk of investing in value stocks is that they may never reach what the Fund's portfolio manager believes is their full value or that they may even go down in value.
LENDING OF PORTFOLIO SECURITIES RISK. Portfolio securities may be loaned to brokers, dealers and financial institutions to realize additional income under guidelines adopted by the Board of Trustees. A risk of lending portfolio securities, as with other extensions of credit, is the possible loss of rights in the collateral should the borrower fail financially. In determining whether to lend securities, the Fund's adviser or sub-adviser or their agent will consider all relevant facts and circumstances, including the creditworthiness of the borrower. Both Funds generally follow the same securities lending procedures.
PORTFOLIO TURNOVER RISK. Due to their trading strategies, the Funds may experience a portfolio turnover rate of over 100%. Funds with high turnover rates (over 100%) often have higher transaction costs (which are paid by the fund) and may generate short-term capital gains (on which you will pay taxes, even if you do not sell any shares by year-end).
COMPARISON OF FEES AND EXPENSES
The following discussion compares the fees and expenses of the Funds before and after the Reorganization. Expenses of the McMorgan Fund are as of June 30, 2007, while expenses of the MainStay Fund are as of October 31, 2006. Pro Forma Combined expenses, which are as of April 30, 2007, show estimated expenses of the MainStay Fund after giving effect to the proposed Reorganization. Pro forma numbers are estimated in good faith and are hypothetical.
It is important to note that if the Reorganization is implemented, shareholders of the McMorgan Fund will be subject to the actual fees and expenses of the Class I shares of the MainStay Fund, which may not be the same as the Pro Forma Combined fees and expenses.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
MCMORGAN FUND (MCMORGAN FUND CLASS AND CLASS Z) AND MAINSTAY FUND (CLASS I)
MCMORGAN MAINSTAY
FUND MCMORGAN MAINSTAY FUND (CLASS I)
(MCMORGAN FUND FUND PRO FORMA
FUND CLASS) (CLASS Z) (CLASS I) COMBINED
----------- --------- --------- --------------
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM SHAREHOLDER'S
INVESTMENT):
Maximum Sales Charge (Load) None None None None
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales Charge None None None None
(Load) (as a percentage of the
lesser of the original
offering price or redemption
proceeds)
Redemption Fee (as a percentage None None None None
of redemption proceeds)
Exchange Fee None None None None
Maximum Account Fee None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS):
Management Fees [0.50](1) [0.50%](1) 0.60%(1) 0.60%(1)
Distribution and/or Service None 0.25%(2) None None
(12b-1) Fees
Other Expenses [0.30%](3) [0.30%](3) 0.36%(3) 0.27%(3)
Acquired (Underlying) Fund Fees None None 0.01% 0.01%
and Expenses
Total Annual Fund Operating [0.80%](4) [1.05%](4) 0.97%(5) 0.88%(5)
Expenses
Less Waivers/ Reimbursements -- -- -0.34%(5) -0.25%(5)
Net Annual Fund and Underlying -- -- 0.63%(5) 0.63%(5)
Fund Expenses
Net Annual Fund Operating -- -- 0.62%(5) 0.62%(5)
Expenses (excluding Underlying
Fund Operating Expenses)
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(1) The management fee is an annual percentage of each Fund's average daily net assets. Through and until August 1, 2008, NYLIM has contractually agreed to waive (and must continue such waiver unless NYLIM obtains approval of the MainStay Trust Board to discontinue it) a portion of its management fee with respect to the MainStay Fund so that the management fee is 0.60% up to $500 million and 0.55% in excess of $500 million. Without this contractual waiver, the actual management fee would be 0.70% up to $500 million and 0.65% in excess of $500 million.
(2) Because the 12b-1 fee is an ongoing fee charged against the assets of Class Z shares of the McMorgan Fund, long-term shareholders may indirectly pay an amount that is more than the economic equivalent of paying other types of sales charges.
(3) "Other Expenses" include, among other things, fees payable for transfer agency services, which may differ between the classes.
(4) McMorgan & Company has voluntarily agreed to waive fees or reimburse expenses so that the total operating expenses (exclusive of taxes, interest, brokerage and extraordinary expenses) of the McMorgan Fund do not exceed the annual rates of 0.75% and 1.00% of the average daily net assets attributable to McMorgan Fund Class and Class Z shares, respectively. This voluntary action by McMorgan & Company may be discontinued at any time. The McMorgan Fund's advisory agreement provides that McMorgan & Company may recoup the amount of any management fee waivers or expense reimbursements from the Fund if such action does not cause the McMorgan Fund to exceed
existing expense limitations and the recoupment is made within the three fiscal years after the year in which McMorgan & Company incurred the expense.
(5) NYLIM has entered into a written expense limitation agreement under which it has agreed to waive a portion of the MainStay Fund's management fee or reimburse the expenses of Class I shares of the Fund so that the class' total ordinary operating expenses (total annual operating expenses excluding taxes, interest, litigation, extraordinary expenses, and brokerage and other transaction expenses relating to the purchase or sale of portfolio investments) do not exceed 0.62% of the average daily net assets attributable to Class I shares. This expense limitation may be modified or terminated only with the approval of the MainStay Trust Board. NYLIM may recoup the amount of any management fee waivers or expense reimbursements from the Fund pursuant to the agreement if such action does not cause the Fund to exceed existing expense limitations and the recoupment is made within three years after the year in which NYLIM incurred the expense.
EXPENSE EXAMPLES. The Examples are intended to help you compare the cost of investing in a Fund with the cost of investing in other mutual funds. The Examples assume that you invest $10,000 in a Fund for the time periods indicated and reflects what you would pay if you redeemed all your shares at the end of each time period shown or if you continued to hold them. The Examples also assume that your investment has a 5% return each year, that the Fund's operating expenses remain the same in each year of the time periods shown, that all dividends and distributions are reinvested, and that applicable fee and expense waivers and reimbursements are in effect for the first year of the periods indicated below. There is no sales charge (load) on reinvested dividends. Your actual costs may be higher or lower than those shown.
EXAMPLES
FUND AND CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------- ------ ------- ------- -------- MCMORGAN FUND $ [82] $[255] $[444] $ [990] (MCMORGAN FUND CLASS) MCMORGAN FUND (CLASS Z) $[107] $[334] $[579] $[1,283] MAINSTAY FUND (CLASS I) $ 64 $ 275 $ 503 $ 1,159 MAINSTAY FUND (CLASS I) $ 64 $ 225 $ 401 $ 908 PRO FORMA COMBINED |
SUMMARY OF DIFFERENCES IN FEES AND EXPENSES
Management Fees The gross management fee of the MainStay Fund,
which does not take fee and expense waivers into
account, is higher than the McMorgan Fund's current
management fee. Nonetheless, following the
Reorganization, as shareholders of Class I shares
of the MainStay Fund, current McMorgan Fund Class
and Class Z shareholders of the McMorgan Fund are
expected to pay lower net operating expenses.
Distribution Fees The McMorgan Fund has adopted a distribution plan
pursuant to Rule 12b-1 with respect to Class Z
shares, whereby the McMorgan Fund may reimburse all
or part of certain expenses incurred in connection
with the promotion and distribution of the Class Z
shares, up to an annual rate of 0.25% of the
average daily net asset value of the Class Z
shares. McMorgan Fund Class shares of the McMorgan
Fund and Class I shares of the MainStay Fund have
not adopted such a plan.
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Other Expenses Other Expenses for the McMorgan Fund were lower in
fiscal year 2006 than the Other Expenses of the
MainStay Fund in fiscal year 2006 and on an
estimated pro forma basis after giving effect to
the Reorganization.
Annual Fund Operating Fees After applicable waivers and expense
reimbursements, net annual fund operating expenses
of the MainStay Fund Class I shares (0.62%,
excluding underlying fund operating expenses) are
currently lower than the annual fund operating
expenses (net of voluntary fee waivers) of McMorgan
Fund Class shares (0.75%) and Class Z shares
(1.00%) of the McMorgan Fund. In addition, the
McMorgan Fund waivers and expense reimbursements
are voluntary and therefore may be discontinued at
any time. On the other hand, the MainStay Fund
waivers and expense reimbursements are contractual
and will continue in effect after the
Reorganization. The expense limitation may be
modified or terminated only with the approval of
the MainStay Trust Board.
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RELATIVE PERFORMANCE
The bar charts and tables below indicate some of the risks of investing in the Funds. The bar charts show you how the Funds' performance has varied over the last 10 years (or, in the case of the MainStay Fund, the life of the MainStay Fund). The table shows how the Funds' average annual total returns (before and after taxes) for one year and five year periods, and for ten year periods or the life of the Fund, as applicable, compare to those of broad-based securities market indices. Average Annual Total Returns reflect actual service and/or distribution fees. Absent applicable expense limitations and/or fee waivers/reimbursements, performance would have been lower. Performance data for the classes varies based on differences in their fee and expense structures.
After-tax returns are calculated using the historical highest individual federal marginal tax rates and do not reflect the impact of state and local taxes. In some cases, the return after taxes may exceed the return before taxes due to an assumed benefit from any losses on a sale of Fund shares at the end of the measurement period. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
As with all mutual funds, past performance (before and after taxes) is not necessarily an indication of how the Funds will perform in the future.
MCMORGAN FUND. The inception date of McMorgan Fund Class shares is July 14, 1994. The inception date of the Class Z shares is February 1, 2001. The assets of each class of the McMorgan Fund are invested in an identical portfolio of securities and the performance of each class will be similar, varying only to the extent of differences in each class' fees and expenses.
MAINSTAY FUND. Performance figures for Class I shares, first offered on December 28, 2004, include historical performance of Class A shares of the MainStay Fund (not offered in this Proxy statement/Prospectus) from inception (June 1, 1998) through December 27, 2004, adjusted for differences in expenses and fees. After-tax returns are shown for Class B shares of the MainStay Fund (not offered in this Proxy Statement/Prospectus). Had after-tax returns been shown for Class I shares, such performance would vary to the extent of the differences in the fee and expense structures of the classes.
CALENDAR YEAR TOTAL RETURN
[McMorgan Equity Investment Fund Bar Chart - McMorgan Fund Class]
33.84% 27.76% 11.54% -6.39% -10.56% -25.79% 23.44% 6.80% 6.85% 16.13% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 |
Best quarter: 20.25%, for the quarter ended December 31, 1998.
Worst quarter: -18.69%, for the quarter ended September 30, 2002.
[MainStay Common Stock Fund Bar Chart - Class I]
30.04% -2.47% -17.55% -25.35% 25.06% 9.80% 6.86% 16.22% 1999 2000 2001 2002 2003 2004 2005 2006 |
Best quarter: 30.04%, for the quarter ended December 31, 1999.
Worst quarter: -25.35%, for the quarter ended December 31, 2002.
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 2006)
LIFE OF
1 YEAR 5 YEARS 10 YEARS FUND
------ ------- -------- -------
MCMORGAN FUND
Return Before Taxes
McMorgan Fund Class 16.13% 3.95% 6.84% --
Class Z 15.86% 3.69% 6.57% --
Return After Taxes on Distributions (McMorgan Fund Class) 15.72% 3.66% 6.28% --
Return After Taxes on Distributions and Sale of Fund Shares
(McMorgan Fund Class) 10.49% 3.24% 5.75% --
S&P 500(R) Index(1) 15.79% 6.19% 8.42% --
MAINSTAY FUND
Return Before Taxes (Class I) 16.22% 4.94% -- 5.47%
Return After Taxes on Distributions (Class B) 9.37% 3.36% -- 4.27%
Return After Taxes on Distributions and Sale of Fund Shares
(Class B) 6.76% 2.94% -- 3.76%
S&P 500(R) Index (reflects no deduction for fees, expenses, or
taxes)(1) 15.79% 6.19% -- 4.74%
Russell 1000(R) Index (reflects no deduction for fees, expenses,
or taxes)(2) 15.46% 6.82% -- 5.15%
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(1) The S&P 500(R) Index is an unmanaged index widely regarded as the standard for measuring large-cap U.S. stock market performance. Total returns assume reinvestment of all dividends and capital gains. You cannot invest directly in an index. The MainStay Fund has selected the S&P 500(R) Index as its primary benchmark index in replacement of the Russell 1000(R) Index. The MainStay Fund selected the S&P 500(R) Index because it believes that this index is more reflective of the Fund's investment style. The MainStay Fund has chosen to retain the Russell 1000(R) Index as a secondary benchmark.
(2) The Russell 1000(R) Index measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 92% of the total market capitalization of the Russell 3000(R) Index. The Russell 3000(R) Index measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. Total returns assume reinvestment of all dividends and capital gains. You cannot invest directly in an index.
COMPARISON OF GOVERNING INSTRUMENTS
The following is only a summary of certain characteristics of the Trust Instrument of the McMorgan Trust (the "McMorgan Trust Instrument"), the MainStay Funds Declaration of Trust (the "MainStay Declaration of Trust") and the respective By-Laws of the McMorgan Trust and the MainStay Trust, and is not a complete description of those documents. Shareholders should refer to the McMorgan Trust Instrument, MainStay Declaration of Trust, the By-Laws of both Funds, applicable Delaware law and applicable Massachusetts law directly for more complete information. Certain characteristics of the operations of the Delaware and Massachusetts law applicable to the McMorgan Trust and MainStay Trust, respectively, are summarized below. The following is not a complete description of these laws.
FORMS OF ORGANIZATION
The McMorgan Fund is a series of the McMorgan Trust, an open-end management investment company registered with the SEC under the 1940 Act. The McMorgan Trust is organized as a Delaware statutory trust, and is governed by the McMorgan Trust Instrument, By-Laws, and by applicable Delaware and federal law. The McMorgan Fund offers two classes of shares, McMorgan Fund Class and Class Z shares.
The MainStay Fund is a series of MainStay Trust, an open-end management investment company registered with the SEC under the 1940 Act. The MainStay Trust is organized as a Massachusetts business trust, and is governed by the MainStay Declaration of Trust, By-Laws, and by applicable Massachusetts and federal law. The MainStay Fund offers four classes of shares, Class A, Class B, Class C and Class I shares.
The Trustees for both the McMorgan Trust and the MainStay Trust oversee the actions of the investment adviser of the respective Funds, decide on general policies and oversee the officers of the McMorgan Trust and MainStay Trust, who conduct and supervise the daily business of the Funds.
LIABILITY AND INDEMNIFICATION OF TRUSTEES, OFFICERS AND EMPLOYEES
The McMorgan Trust Instrument and MainStay Declaration of Trust each (1)
disclaims personal liabilities for Trustees acting in their capacity as such;
(2) disclaims personal liabilities for acts and omissions of officers and
employees of the McMorgan Trust and the MainStay Trust, respectively; and (3)
generally provides for indemnification for Trustees against liabilities and
expenses incurred with regard to actions brought against the Trustees in their
capacity as such.
SHAREHOLDER LIABILITY AND INDEMNIFICATION
Under Delaware law, shareholders generally are not personally liable for the obligations of a Delaware statutory trust. A shareholder is entitled to the same limitation of liability extended to stockholders of private, for-profit corporations. Similar statutory or other authority, however, limiting shareholder liability does not exist in certain states. As a result, to the extent that McMorgan Trust or a shareholder is subject to the jurisdiction of courts to those states, the courts may not apply Delaware law, thereby subjecting the shareholder to liability. To guard against this risk, the McMorgan Trust Instrument: (1) contains an express disclaimer of shareholder liability for debts, liabilities, obligations and expenses incurred by, contracted for, or otherwise existing with respect to the McMorgan Trust or by or on behalf of any McMorgan Trust series; (2) provides for indemnification out of the assets belonging to the applicable series of the McMorgan Trust for any shareholder held personally liable solely by reason of having been a shareholder of a series of McMorgan Trust and not because of that shareholder's acts or omissions or some other reason; and (3) provides that McMorgan Trust will
assume the defense of any claim made against a shareholder of a series of the McMorgan Trust for any act or obligation of the series and satisfy any judgment thereon from the assets of the series. In addition, notice of disclaimer of shareholder liability will normally be given in each agreement, obligation, or instrument entered into or executed by McMorgan Trust or a series of McMorgan Trust. Thus, the risk of a shareholder incurring financial loss beyond his or her investment because of shareholder liability is limited to circumstances in which: (1) a court refuses to apply Delaware law; (2) no contractual limitation of liability is in effect; and (3) the applicable series is unable to meet its obligations to indemnify a shareholder.
Unlike Delaware, in Massachusetts there is no statute relating to business trusts that entitles shareholders of a Massachusetts business trust to the same limitation of liability as is extended to shareholders of a Massachusetts corporation. Under Massachusetts law, shareholders of MainStay Trust could, under certain circumstances, be held personally liable as partners for MainStay Trust's obligations. Even if, however, MainStay Trust was held to be a partnership, the possibility of shareholders incurring financial loss for that reason appears remote because the MainStay Declaration of Trust contains an express disclaimer of shareholder liability for obligations of the MainStay Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of MainStay Trust or the Trustees of the MainStay Trust. The MainStay Declaration of Trust also provides for indemnification out of MainStay Trust's property for any shareholder held personally liable for MainStay Trust's obligations. Thus, the Trustees of the MainStay Trust believe the risk of shareholder liability is also remote for MainStay Fund shareholders.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
The McMorgan Trust Instrument provides that the shareholders have the power to vote only with respect to: (1) the election of Trustees to the extent and as provided therein; (2) the removal of Trustees as provided therein; and (3) any additional matter relating to the McMorgan Trust as may be required by law, by the McMorgan Trust Instrument or as the Trustees may consider desirable. Except when a larger quorum is required by the applicable governing documents or other law, one-third of the outstanding shares entitled to vote in person or by proxy constitutes a quorum for the transaction of business at a shareholders' meeting. Matters presented at a meeting may be decided by a majority of the shares voted in person or by proxy, except with respect to the election of Trustees, which requires a plurality, or unless otherwise specifically required by the applicable governing documents or other law, including the 1940 Act.
The MainStay Declaration of Trust provides that its shareholders shall have
the power to vote only: (1) for the election of Trustees to the extent and as
provided therein; (2) for the removal of Trustees to the extent and as provided
therein; (3) with respect to any investment advisory or management contract; (4)
for the termination of the MainStay Trust to the extent and as provided therein;
(5) with respect to amendments of the MainStay Declaration of Trust to the
extent and as provided therein; (6) with respect to any merger, consolidation or
sale of assets involving the MainStay Trust; (7) with respect to incorporation
of the MainStay Trust; (8) to the same extent as stockholders of Massachusetts
business corporations as to whether a claim should be brought as a class action
or derivatively on behalf of the MainStay Trust, a series of the MainStay Trust
or shareholders; (9) with respect to any plan adopted pursuant to Rule 12b-1
under the 1940 Act; and (10) on such additional matters relating to the MainStay
Trust as may be required or authorized by law, the MainStay Declaration of
Trust, or the By-laws or any registration of the MainStay Trust with the SEC or
any State, or as the Trustees may consider desirable.
A majority of the holders of shares entitled to vote, represented in person or by proxy, is necessary to establish a quorum for the transaction of business at a meeting of shareholders. Except when a larger vote is required by law, by the MainStay Declaration of Trust, or by By-laws of the MainStay Trust, a majority of votes may decide any matter presented to the shareholders at the meeting, except that Trustees are elected by a plurality of votes.
COMPARISON OF INVESTMENT MANAGEMENT AGREEMENTS
The Reorganization will result in shareholders moving from the McMorgan Fund, with McMorgan & Company as the investment adviser and NYLIM as the sub-adviser, to the MainStay Fund with NYLIM as the investment adviser. The principal terms of the Investment Advisory Agreement between the McMorgan Trust and McMorgan & Company that governs the management of the McMorgan Fund's assets (the "McMorgan Advisory Agreement") are substantially similar to the principal terms of the Amended and Restated Management Agreement between the MainStay Funds and NYLIM for the management of the MainStay Fund's assets (the "MainStay Advisory Agreement"). For information on the advisory fees paid to McMorgan & Company and NYLIM with respect to each Fund and pursuant to these agreements, please see "Comparison of Fees and Expenses," above.
ADVISORY SERVICES
Each agreement contains substantially similar provisions regarding the advisory services to be provided. The adviser to each Fund is obligated to manage the investment and reinvestment of the assets of its respective Fund. Each adviser is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions is obtained. NYLIM is explicitly required pursuant to the MainStay Advisory Agreement to keep all books and records of the MainStay Fund. The McMorgan Advisory Agreement contains no such explicit requirement, although, under that agreement, McMorgan & Company has undertaken to provide administrative duties which may generally be understood to include recordkeeping.
NYLIM is explicitly authorized under the MainStay Advisory Agreement to delegate any or all of its duties to one or more sub-advisers or sub-administrators. The McMorgan Advisory Agreement contains no similar provision; however, neither does it prohibit such delegation.
INVESTMENT ADVISER LIABILITY
The McMorgan Advisory Agreement provides that McMorgan & Company will not be liable for the losses of the McMorgan Fund with respect to its obligations and duties under its Advisory Agreement in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the adviser. The MainStay Advisory Agreement provides that NYLIM will not be liable for the losses of the MainStay Fund with respect to its obligations and duties under agreement in the absence of willful misfeasance, bad faith or gross negligence by NYLIM. Additionally, both advisory agreements provide for indemnification of the adviser, its general partner, and the shareholders, directors, officers and employees against certain losses by the McMorgan Fund.
TERMINATION OF THE AGREEMENTS
Each agreement is subject to annual renewal by vote of the Fund's Trustees or by vote of the majority of the outstanding shares of the Fund. Each agreement otherwise allows for the termination of the agreement upon a majority vote of either the Trustees or the outstanding shares, upon 60 days' written notice to either party by the other or, as required under the 1940 Act, upon its assignment.
EXEMPTIVE ORDER
Each Fund and its investment adviser may rely on an exemptive order (the "Order") from the SEC permitting the investment adviser, on behalf of the Fund and subject to the approval of the Board of the Fund, including a majority of the Independent Trustees, to hire or terminate an unaffiliated sub-adviser and to modify any existing or future subadvisory agreement with an unaffiliated sub-adviser without shareholder approval. This authority is subject to certain conditions. The Fund would notify shareholders and provide them with certain information required by the Order within 90 days of hiring a new sub-adviser. The MainStay Fund, unlike the McMorgan Fund, has received shareholder approval to allow NYLIM, its investment adviser, to hire or terminate an unaffiliated sub-adviser and to modify any existing or future subadvisory agreement with an unaffiliated sub-adviser without shareholder approval. NYLIM has no current intention to employ an unaffiliated sub-adviser for the MainStay Fund.
COMPARISON OF DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund declares and pays income dividends, if any, quarterly, and capital gains, if any, annually. Each Fund pays dividends and other distributions on a per-share basis.
COMPARISON OF MINIMUM INITIAL AND SUBSEQUENT PURCHASE AMOUNTS
An investor investing in McMorgan Fund Class shares of the McMorgan Fund ordinarily must invest at least $5,000 ($250 for retirement plans), and thereafter may make additional investments of at least $250. There are no investment minimums for Class Z shares of the McMorgan Fund. An individual investor investing in the Class I shares of the MainStay Fund ordinarily must initially invest at least $5,000,000 and thereafter may make an additional investment of any amount. McMorgan Fund shareholders receiving Class I shares of the MainStay Fund in the Reorganization will not be subject to any minimum purchase amounts for subsequent Class I share purchases after the Reorganization; provided, however, that if a shareholder redeems all Class I shares of the MainStay Fund held by the shareholder, such shareholder will need to meet the minimum initial investment amount described above with respect to any new purchases of Class I shares. With respect to the MainStay Fund, there is no minimum initial or subsequent purchase amounts for institutional investors.
OTHER COMPARATIVE INFORMATION
The McMorgan Fund and MainStay Fund are series of different trusts that have different boards of trustees and certain different officers. The McMorgan Board has three independent Trustees and one interested Trustee; the MainStay Board has seven independent Trustees and one interested Trustee. See the Statement of Additional Information of the McMorgan Fund dated November 3, 2006, as supplemented, and the Statement of Additional Information of the MainStay Fund dated March 1, 2007, as supplemented, for a list of their respective Trustees and officers. The Funds also have different Chief Compliance Officers that oversee compliance programs that, while separate, are coordinated in many respects. The procedures followed by the Funds that are designed to prevent market timing are substantially the same.
The Funds also have different independent accountants and legal counsel. The fiscal year-end for both Funds is October 31.
INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
The Reorganization is part of a larger restructuring plan (the "Restructuring Plan") proposed by McMorgan and NYLIM. The consolidation will be effected by reorganizing certain funds in the McMorgan Trust into existing and new funds of the MainStay Trust, by liquidating the remaining funds in the McMorgan Trust, and by dissolving the McMorgan Trust. The Restructuring Plan was proposed by McMorgan and NYLIM in large part due to the fact that the relatively small asset size of the McMorgan Trust did not justify the expense of operating the McMorgan Trust as a separate entity and that the prospects for asset growth within the McMorgan Trust were limited.
After reviewing the alternatives, McMorgan and NYLIM concluded that the best option for the shareholders of the McMorgan Fund was to combine the McMorgan Fund with the MainStay Fund in the Reorganization. McMorgan and NYLIM reasoned that the Reorganization would provide McMorgan Fund shareholders with the consistency of a substantially similar investment strategy and with the same investment team at a lower level of net operating expenses. At the same time, McMorgan and NYLIM offer McMorgan Fund shareholders the opportunity to exchange their McMorgan Fund shares for the Class I shares of the other funds in the MainStay Trust, and to purchase additional Class I shares of such funds, without sales load or minimum investment requirements.
With the addition of the assets of the McMorgan Fund, the MainStay Fund expects to benefit from the Reorganization primarily by reducing the gross expense ratio of the MainStay Fund. McMorgan and NYLIM expect to benefit from the Reorganization by retaining the assets of the McMorgan Fund, increasing the assets of the MainStay Fund, and reducing their respective obligations to subsidize the expenses of the McMorgan Fund and the MainStay Fund.
BOARD CONSIDERATIONS
NYLIM presented an initial restructuring proposal to the McMorgan Trust Board in May 2006. The McMorgan Trust Board, including its three independent trustees, considered this proposal at meetings held on May 16, 2006, May 22, 2006, August 23, 2006, and November 30, 2006. NYLIM presented a revised restructuring proposal to the McMorgan Trust Board in March 2007. The McMorgan Trust Board considered the revised proposal at a meeting held on March 15, 2007 and approved the Restructuring Plan, including the Reorganization, at a meeting held on June 6, 2007. The final terms of and documentation for the Reorganization were then ratified and approved by the McMorgan Trust Board at a meeting held on [August 21, 2007.]
In conjunction with these meetings, the McMorgan Trust Board requested and received written materials and oral presentations from NYLIM and McMorgan & Company relating to the Reorganization. The independent trustees also had the opportunity to speak by telephone or in person with certain of the trustees and officers of the MainStay Trust. In addition, the McMorgan Trust Board was familiar with the past services and performance of NYLIM and its affiliates (as the current sub-adviser, administrator, accounting agent, and transfer agent for the McMorgan Fund), and had reviewed these services and performance at the same or previous meetings. During the deliberations of the McMorgan Trust Board, the McMorgan Trust was advised by outside fund counsel and the independent trustees were advised by separate independent trustees counsel.
In evaluating the Reorganization, the McMorgan Trust Board, including the independent trustees, considered the following factors, among others:
Investment Management. The McMorgan Trust Board reviewed the investment management services to be provided by the MainStay Fund. The McMorgan Fund and the MainStay Fund employ substantially the same portfolio management team. Although the investment objectives, strategies, restrictions and risks of the MainStay Fund are substantially similar to those of the McMorgan Fund, the MainStay Fund holds more portfolio securities than the McMorgan Fund and the tracking error of the MainStay Fund is higher than that of the McMorgan Fund. Since NYLIM became the sub-adviser of the McMorgan Fund in February 2005, the gross investment return (before expenses) of MainStay Fund has been slightly higher than that of the McMorgan Fund. The McMorgan Trust Board compared the terms of the existing advisory and sub-advisory agreements with McMorgan and NYLIM and the terms of the new investment advisory agreement with NYLIM.
Fund Fees and Expenses. The McMorgan Trust Board compared the management fees and estimated annual operating expenses of the McMorgan Fund and the MainStay Fund. It was noted that the management fee rate for the MainStay Fund exceeded the current management fee rate for the McMorgan Fund. However, after applicable waivers and expense reimbursements, it was expected that the net annual operating expense ratio of the Class I shares of the MainStay Fund would be significantly lower than that of the McMorgan Fund Class shares and Class Z shares of the McMorgan Fund. In addition, before such waivers and expense reimbursements, it was expected that the gross annual operating expense ratio of the Class I shares of the MainStay Fund after consummation of the Reorganization would be lower than that of the McMorgan Fund Class shares and significantly lower than that of the Class Z shares of the McMorgan Fund. The lower gross annual operating expense ratio would be due primarily to the combination of assets of the McMorgan Fund and the MainStay Fund, the sharing of common expenses within the much larger MainStay Trust, and, with respect to the Class Z shares, the elimination of the 0.25% Rule 12b-1 fee. It was noted NYLIM had represented that, for two years, it would not recommend further changes in the fees or expenses of the MainStay Fund, subject to its fiduciary duty to manage the MainStay Fund in the best interests of shareholders. It was also noted that any reduction in the gross annual operating expenses of the MainStay Fund that exceeded the NYLIM waivers and expense reimbursements, or that could be recouped by NYLIM, would inure to the benefit of NYLIM, not the MainStay Fund.
Distribution. The McMorgan Trust Board considered the relatively small size and limited growth prospects of the McMorgan Fund, as well as the current plans of NYLIM and its affiliates for marketing the shares of the MainStay Fund. The MainStay Trust is more widely distributed than the McMorgan Trust, creating a potential for growth in the assets of the MainStay Fund. Larger asset size can reduce transaction costs and improve portfolio diversification. Larger asset size also can give rise to economies of scale, as fixed costs are spread across a larger asset base and as breakpoints in asset-based fees, such as advisory fees, are achieved. It was noted that the Class Z shares of the McMorgan Fund currently pay a 0.25% Rule 12b-1 fee to help finance the distribution of those shares and that the Class I shares of the MainStay Fund do not charge such a fee. Absent the adoption of a Rule 12b-1 plan by the MainStay Trust Board and the shareholders of the MainStay Fund, any financing for the distribution of the Class I shares would need to be provided by NYLIM or its affiliates.
Shareholder Services and Fees. The McMorgan Trust Board reviewed the effect of the Reorganization on the services to be provided to, and the fees to be paid directly by, the McMorgan Fund shareholders. It was noted that McMorgan Fund shareholders currently are permitted to
exchange their shares for the Class I shares of other investment portfolios of the MainStay Trust and to purchase additional Class I shares from those portfolios, without incurring a sales load or meeting a minimum investment requirement, and that shareholders would retain such purchase and exchange privileges as shareholders of the MainStay Fund after the Reorganization. It was also noted that the MainStay Trust offered certain additional shareholder services, including an enhanced website and a 24 hour telephone call center.
Other Service Providers. The McMorgan Trust Board considered the entities that would provide services to the MainStay Fund other than the investment manager. The McMorgan Fund and the MainStay Fund are served by the same distributor, administrator and accounting agent, sub-administrator and sub-accounting agent, transfer agent, sub-transfer agent and custodian, while the MainStay Fund employs a different independent registered public accounting firm and different outside legal counsel.
Governance. The McMorgan Trust Board considered the governance structure of the MainStay Fund and the MainStay Trust. The MainStay Fund is managed by a Board of Trustees and officers, is governed by laws and organizational documents, and uses certain internal policies and procedures that are different from those of the McMorgan Fund. Among other things, the McMorgan Trust Board reviewed the qualifications of the MainStay Trust Board and officers and the compliance program and compliance history of the MainStay Trust. The McMorgan Trust Board also reviewed material differences in the laws, organizational documents and internal policies and procedures applicable to the MainStay Fund, and noted that after the Reorganization, the MainStay Trust Board and officers would have a duty to all shareholders of the MainStay Trust.
The Reorganization Agreement. The McMorgan Trust Board considered the terms of the Reorganization Agreement, including valuation procedures, expenses and potential unassumed liabilities. It was noted that McMorgan Fund shareholders would receive MainStay Fund shares with the same aggregate value as their McMorgan Fund shares using the valuation procedures of the MainStay Fund. It was also noted that NYLIM is required to pay substantially all of the expenses of the Reorganization, except for the transaction costs and taxes associated with the liquidation of portfolio securities of the McMorgan Fund. The McMorgan Trust Board also noted that the McMorgan Trust, on behalf of the McMorgan Fund, and the MainStay Trust, on behalf of the MainStay Fund, have each agreed to indemnify the other Fund for certain losses as provided in the Reorganization Agreement.
Tax Consequences. The McMorgan Trust Board reviewed the tax consequences of the Reorganization. It was noted that the Reorganization was intended to qualify as a tax-free transaction for federal income tax purposes and that the closing of the Reorganization was conditioned on the receipt of a legal opinion regarding certain federal income tax consequences of the transaction. It was noted that most of the shareholders of the McMorgan Fund were tax exempt entities.
Alternatives. The McMorgan Trust Board reviewed potential alternatives to the Reorganization, including keeping the McMorgan Fund in the McMorgan Trust as a standalone entity, liquidating the McMorgan Fund, merging the McMorgan Fund into a different fund within the MainStay family, and seeking an unaffiliated investment manager for the McMorgan Trust. The Reorganization was considered a better option for shareholders than keeping the McMorgan Fund in the McMorgan Trust or liquidating the McMorgan Fund, since the growth prospects of the McMorgan Fund were limited and the Reorganization provided shareholders the opportunity to receive substantially similar investment and other services at a reduced cost. In addition, it was not clear how long McMorgan was willing to subsidize the McMorgan Trust as a standalone entity. As to merging
the McMorgan Fund into a different fund within the MainStay family, the MainStay Fund was deemed to be the best fit because of the similarity of its investment strategy and investment team and its expense structure. Seeking an unaffiliated investment manager for the McMorgan Trust was not considered a viable option because of the relatively small size of the McMorgan Trust and the advisory and other relationships between McMorgan and many of the shareholders of the McMorgan Trust.
Other Factors. The McMorgan Trust Board also considered, among other factors, the ability of the existing shareholders of the McMorgan Fund to redeem their shares at net asset value, or to exchange their shares for the Class I shares of other MainStay funds, before the Reorganization; the general stability, reputation, financial condition, and resources of McMorgan, NYLIM and their affiliates; the fact that many of the current shareholders of the McMorgan Fund are investment advisory clients of or are otherwise associated with McMorgan; the potential benefits of the Reorganization to McMorgan, NYLIM, the MainStay Fund and their affiliates; and the continuation after the Reorganization of certain insurance and indemnification protections for the independent trustees of the McMorgan Trust.
McMorgan Trust Board Conclusions. Based on these and other factors, the McMorgan Trust Board determined that the Reorganization was in the best interests of the McMorgan Fund and the McMorgan Fund's shareholders and that the interests of existing shareholders of the McMorgan Fund would not be diluted as a result of the Reorganization. The McMorgan Trust Board also resolved to call a meeting of the shareholders of the McMorgan Fund and recommend to shareholders that they vote to approve the Reorganization.
MainStay Trust Board Conclusions. At its June 7, 2007 meeting, the MainStay Trust Board determined that the Reorganization was in the best interests of the MainStay Fund and the MainStay Fund's shareholders and that the interests of existing shareholders of the MainStay Fund would not be diluted as a result of the Reorganization.
THE REORGANIZATION AGREEMENT
The terms and conditions of the Reorganization are set forth in the Reorganization Agreement. Below is a summary of the significant provisions of the Reorganization Agreement, which is qualified in its entirety by reference to the Reorganization Agreement, a form of which is attached as Exhibit A.
The Reorganization Agreement contemplates the transfer of all of the assets of the McMorgan Fund and the assumption of all of the known liabilities of the McMorgan Fund by the MainStay Fund in exchange for shares of the MainStay Fund having an aggregate net asset value equal to the aggregate net asset value of the McMorgan Fund. The McMorgan Fund would then distribute to its shareholders the portion of the shares of the MainStay Fund to which each such shareholder is entitled, with each shareholder receiving shares of the MainStay Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of the McMorgan Fund held by that shareholder as of the close of business on the day of the closing of the Reorganization. Thereafter, the McMorgan Fund would be liquidated and dissolved.
If shareholders of the McMorgan Fund approve the Reorganization, NYLIM intends to transition the McMorgan Fund's portfolio securities prior to the Closing Date to more closely align with the holdings of the MainStay Fund. To accomplish this transition, NYLIM intends to sell certain of the McMorgan Fund's portfolio securities, while buying other securities. Any purchases of securities made by the McMorgan Fund during this period will be consistent with the investment policies and objectives of both Funds. It is expected that as a result of this transition process, the McMorgan Fund will experience portfolio turnover of approximately 15% to 25%, may realize capital
gains (which would be passed to McMorgan Fund shareholders), and will incur associated transaction costs estimated to be approximately $40,000, which will be borne by McMorgan Fund shareholders.
Shareholders of the McMorgan Fund will continue to be able to redeem or exchange their shares, as well as exchange their shares for Class I shares of other MainStay Funds. Redemption or exchange requests received after the Closing Date will be treated as requests received by the MainStay Fund for the redemption or exchange of its shares.
Generally, the Reorganization Agreement may be amended, modified or supplemented in such manner as may be deemed necessary or advisable by the authorized officers of the McMorgan Trust or the MainStay Trust, on behalf of either the McMorgan Fund or the MainStay Fund, respectively. In addition, the McMorgan Trust, on behalf of the McMorgan Fund, and the MainStay Trust, on behalf of the MainStay Fund, have each agreed to indemnify the other Fund for certain losses as provided in the Reorganization Agreement.
The obligations of the Funds under the Reorganization Agreement are subject to various conditions, including approval of the shareholders of the McMorgan Fund. The Reorganization Agreement also requires that each of the Funds take, or cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transaction contemplated by the Reorganization Agreement. The Reorganization Agreement may be terminated by the Boards of Trustees of either Fund if circumstances should develop that, in the opinion of either Board, make proceeding with the Reorganization Agreement inadvisable for the Fund it oversees.
TAX CONSEQUENCES OF THE REORGANIZATION
The Reorganization is intended to qualify for Federal income tax purposes as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, pursuant to this treatment, neither the McMorgan Fund nor its shareholders, nor the MainStay Fund nor its shareholders, are expected to recognize any gain or loss for Federal income tax purposes from the transactions contemplated by the Reorganization Agreement (provided that shareholders may recognize taxable income to the extent the McMorgan Fund pays dividends or other distributions prior to the Reorganization). As a condition to the closing of the Reorganization, the Funds will receive an opinion from the law firm of Sutherland Asbill & Brennan LLP to the effect that the Reorganization will qualify as a tax-free reorganization for Federal income tax purposes. That opinion will be based in part upon certain assumptions and representations made by the Funds.
Immediately prior to the Reorganization, the McMorgan Fund and the MainStay Fund, to the extent necessary, will pay a dividend or dividends which, together with all previous dividends, is intended to have the effect of distributing to its shareholders all of its investment company taxable income for taxable years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and all of its net capital gain, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any available capital loss carryforward). Any such distributions will result in McMorgan Fund taxable shareholders recognizing taxable income.
While neither the McMorgan Fund nor the MainStay Fund are aware of any adverse state or local tax consequences of the proposed Reorganization, they have not requested any ruling or opinion with respect to such consequences and shareholders should consult their own tax adviser with respect to such matters.
EXPENSES OF THE REORGANIZATION
Except for commissions, transaction costs and other direct expenses of liquidating portfolio investments incurred by the McMorgan Fund in connection with the Reorganization, the expenses relating to the Reorganization will be borne by NYLIM. The costs of the Reorganization include, but are not limited to, preparation of the registration statement, printing and distributing this Proxy Statement/Prospectus, legal fees, accounting fees, securities registration fees, expenses of holding shareholders' meetings, transfer taxes (if any), the fees of banks and transfer agents, and any and all other fees and expenses incurred with respect to the transactions contemplated herein.
MCMORGAN TRUST BOARD
Upon consummation of the Restructuring Plan, the independent trustees will resign from the McMorgan Trust and their responsibilities for the McMorgan Trust will cease. NYLIM has agreed to make a one time payment to the independent trustees in recognition of their past services to the McMorgan Trust, the additional time and effort expended by them in reviewing the Restructuring Plan, and their availability to consult on matters relating to the McMorgan Trust after the Restructuring Plan is consummated. The amount of such payments will range from $22,000 to $76,500 and was based on a formula which took into account the current compensation of each independent trustee and the number of years each independent trustee served on the McMorgan Trust Board. The McMorgan Trust does not maintain a retirement plan for its independent trustees, and no payment will be made to the independent trustees by the McMorgan Trust or the McMorgan Fund. NYLIM has also agreed to maintain liability insurance coverage for the independent trustees for six years, and to indemnify the independent trustees from certain liabilities and expenses for three years, following the Reorganization. These insurance and indemnification obligations are subject to certain limitations and were designed to continue, in part, similar obligations that the McMorgan Trust currently owes to the independent trustees and that will not be available once the McMorgan Trust ceases.
CAPITALIZATION
The following table shows the capitalization of the McMorgan Fund and the MainStay Fund as of April 30, 2007, and on a pro forma basis as of that date after giving effect to the Reorganization:
NET ASSET
VALUE PER SHARES
NET ASSETS: SHARE: OUTSTANDING:
------------ --------- ------------
MCMORGAN FUND
MCMORGAN FUND CLASS $301,784,162 $27.64 7,300,290
CLASS Z $ 14,213,200 $27.61 514,727
MAINSTAY FUND
CLASS I $188,259,726 $15.55 12,108,479
PRO FORMA MAINSTAY FUND
CLASS I $215,997,382 $15.55 13,892,472
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INFORMATION ABOUT MANAGEMENT AND OTHER SERVICE PROVIDERS
INVESTMENT ADVISERS
MCMORGAN FUND. McMorgan & Company, One Bush Street, Suite 800, San Francisco, California 94104, serves as the investment manager of the McMorgan Fund. The predecessor company to McMorgan & Company was founded in 1969. McMorgan & Company is an indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York Life"). McMorgan & Company also manages private accounts, consisting primarily of retirement plans and health and welfare funds for jointly trusted plans. As of June 30, 2007, McMorgan & Company had approximately $9 billion of assets under management.
The McMorgan Fund is sub-advised by NYLIM, 51 Madison Avenue, New York, New York 10010. NYLIM commenced operations in April 2000, and is an independently managed, wholly-owned subsidiary of New York Life. As of June 30, 2007, NYLIM and its affiliates managed approximately $237 billion in assets. Prior to NYLIM becoming the sub-adviser to the McMorgan Fund on February 15, 2005, McMorgan & Company was the sole investment adviser for the McMorgan Fund.
As sub-adviser to the McMorgan Fund, NYLIM, under the supervision of McMorgan & Company, is responsible for making the specific decisions about buying, selling and holding securities; selecting brokers and brokerage firms to trade for it; and maintaining accurate records. For these services, NYLIM is paid a fee by McMorgan & Company, and not by the McMorgan Fund, in the amount of 0.25% of the average daily net assets of the McMorgan Fund; provided, however, that if McMorgan & Company, pursuant to the terms of the Advisory Agreement or other agreement, is required to reimburse the McMorgan Fund for expenses or waive any expense for the McMorgan Fund, then an amount equal to 50% of such reimbursement or waiver is deducted from the fee paid to NYLIM.
A discussion regarding the basis for the McMorgan Trust Board's approval of the McMorgan Advisory Agreement and Subadvisory Agreements of the McMorgan Fund is available in the McMorgan Funds' Annual Reports covering the fiscal period ended June 30, 2007.
MAINSTAY FUND. NYLIM, 51 Madison Avenue, New York, New York 10010, serves as the MainStay Fund's manager. In conformity with the stated policies of the MainStay Fund, NYLIM
administers the MainStay Fund's business affairs and manages the investment operations of the MainStay Fund and the composition of the portfolio of the MainStay Fund, subject to the supervision of the Company Board. NYLIM commenced operations in April 2000 and is an independently managed, indirect wholly-owned subsidiary of New York Life. NYLIM provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required for MainStay Fund.
A discussion regarding the basis for the MainStay Trust Board's approval of the MainStay Advisory Agreement is available in the MainStay Funds' Annual Report covering the fiscal year ended October 31, 2006.
PORTFOLIO MANAGERS
The portfolios of the Funds are managed by Harvey Fram, CFA. In addition, Migene Kim, CFA also serves as portfolio manager of the MainStay Fund.
HARVEY FRAM, CFA. Mr. Fram is currently a Director at NYLIM. Prior to joining NYLIM in 2000, Mr. Fram was a Portfolio Manager and Research Strategist at Monitor Capital Advisors LLC (a former subsidiary of NYLIM). Mr. Fram is responsible for the management of quantitative equity portfolios. Prior to joining Monitor Capital Advisers LLC, he was a quantitative equity research analyst at ITG, a technology based equity brokerage firm. Mr. Fram was awarded his Chartered Financial Analyst (CFA) designation in 1999 and has an MBA from the Wharton School at the University of Pennsylvania.
MIGENE KIM, CFA. Ms. Kim is has been part of the management team for the Funds since 2007. Prior to joining NYLIM in 2005, Ms. Kim spent seven years as a quantitative research analyst at INVESCO's Structured Products Group. She started her career as an analyst at the Market Risk Management Group of Chase Manhattan Bank in 1993. Ms. Kim earned her MBA in Financial Engineering from the MIT Sloan School of Management and is a summa cum laude graduate in Mathematics from the University of Pennsylvania where she was elected to Phi Beta Kappa. She is also a CFA charterholder.
OTHER SERVICE PROVIDERS
DISTRIBUTOR. NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, New Jersey 07054, a limited liability company organized under the laws of Delaware, serves as McMorgan Trust's and MainStay Trust's distributor and principal underwriter (the "Distributor"). The Distributor is an indirect, wholly-owned subsidiary of New York Life Insurance Company, LLC.
TRANSFER AGENT. NYLIM Service Company LLC, ("NYLIM SC") 169 Lackawanna Avenue, Parsippany, New Jersey 07054, provides transfer agency and dividend disbursing agent services for the Funds. As part of these services, NYLIM SC maintains records pertaining to the sale and redemption of Fund shares and will distribute each Fund's cash dividends to shareholders. NYLIM SC is a wholly-owned subsidiary of New York Life Investment Management Holdings LLC.
The McMorgan Trust, on behalf of the McMorgan Fund, and NYLIM SC, on behalf of the MainStay Fund, have entered into a Sub-Transfer Agency and Service Agreement with Boston Financial Data Services, Inc. ("BFDS"), located at 30 Dan Road, Canton, Massachusetts 02021-2809. Under the Agreement, BFDS is paid a fee per account, and receives transaction fees and reimbursements for out-of-pocket expenses incurred in performing certain transfer agency and shareholder recordkeeping services. In connection with providing these services, BFDS deposits cash received in connection with mutual fund transactions in demand deposit accounts with State Street Bank and Trust ("State Street") and retains the interest earnings generated from these accounts.
ADMINISTRATOR. NYLIM serves as the administrator and accounting services agent for the Funds. The services include overseeing the sub-administrator's day-to-day administration of matters necessary to the Funds' operations, maintaining the books and records of the Funds, calculating each Fund's net asset value in accordance with the provisions of the Fund's current prospectus, and preparing various government reports, tax returns, and proxy materials on behalf of the Funds.
SUB-ADMINISTRATION AND SUB-ACCOUNTING AGENT. State Street, 200 Clarendon Street, P.O. Box 9130, Boston, Massachusetts, 02116, provides sub-administration and sub-accounting services to the Funds pursuant to an agreement with the managers of the Funds. These services include calculating daily net asset values of the Funds, maintaining general ledger and sub-ledger accounts for the calculation of the Funds' respective net asset values, and assisting the managers of the Funds in conducting various aspects of the Funds' administrative operations. For providing these services to the Funds, State Street is compensated by the Funds' respective managers.
CUSTODIAN. State Street serves as custodian for both Funds.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Tait, Weller & Baker LLP, 1818 Market Street, Suite 2400, Philadelphia, PA 19103, serves as the independent registered public accounting firm for McMorgan Trust. KPMG LLP, 1601 Market Street, Philadelphia, Pennsylvania 19103-2499, serves as the independent registered public accounting firm for MainStay Trust.
SHAREHOLDER GUIDE
The following pages are intended to help you understand the costs associated with buying, holding and selling the MainStay Fund's Class I shares.
SUMMARY OF CLASS I SHARES
CLASS I
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Initial sales charge None
Contingent deferred sales charge (CDSC) None
Ongoing distribution and/or service fee
(Rule 12b-1 fee) None
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Shareholder service fee None Redemption fee None Purchase maximums None Initial sales charge None Small Account Fee $20 |
CLASS I CONSIDERATIONS
- You pay no initial sales charge or CDSC on an investment in Class I shares.
- You do not pay any ongoing service or distribution fees.
- You may buy Class I shares if you are an:
- INSTITUTIONAL INVESTOR
- that is an employer-sponsored, association or other group retirement plan or employee benefit trust with a service arrangement through NYLIM Retirement Plan Services or NYLIFE Distributors LLC;
- that is a financial institution, endowment, foundation or corporation with a service arrangement through NYLIFE Distributors LLC or its affiliates; or
- that purchases through a program sponsored by a financial intermediary firm (such as a broker-dealer, investment adviser or financial institution) with a contractual arrangement with NYLIFE Distributors LLC.
- INDIVIDUAL INVESTOR--who is initially investing at least $5 million in any fund offered by the MainStay Trust.
- EXISTING CLASS I SHAREHOLDER--(i) who owned shares of the no-load class of any Fund in the Eclipse family of funds as of December 31, 2003, which class was renamed MainStay Class I on January 1, 2004.; (ii) who owned shares of the no-load class of any ICAP Fund as of August 28, 2006, which class was renamed MainStay Class I; or (iii) becomes a Class I shareholder by exchanging shares of any McMorgan Fund on or after July 2, 2007.
SMALL ACCOUNT FEES
Small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the funds have implemented a small account fee that was effective March 1, 2007. Each shareholder with an account balance of less than $1,000 will be charged an annual per account fee of $20 (assessed semi-annually). The fee may be deducted directly from your fund balance. This small account fee will not apply to certain types of accounts including retirement plan services bundled accounts, investment-only retirement accounts, accounts with active AutoInvest plans or systematic investment programs where the fund deducts directly from the client's checking or savings account, NYLIM SIMPLE IRA Plan Accounts, SEP IRA Accounts and 403(b)(7) accounts that have been funded/established for less than 1 year, accounts serviced by unaffiliated broker/dealers or third party administrators (other than NYLIM SIMPLE IRA Plan Accounts). This small account fee will be deducted on or about March 1st and September 1st each year. The funds
may, from time to time, consider and implement additional measures to increase average shareholder account size and/or otherwise reduce the cost of transfer agency services. Please contact the MainStay Trust by calling toll-free 1-800-MAINSTAY (1-800-624-6782) for more information.
COMPENSATION TO DEALERS
Financial intermediary firms and their associated financial advisors are paid in different ways for the services they provide to the MainStay Fund and its shareholders. Such compensation varies depending upon the fund sold, the amount invested, the share class purchased, the amount of time that shares are held, and/or the services provided.
- The Distributor or an affiliate, from its own resources, may pay other significant amounts to certain financial intermediary firms, including an affiliated broker-dealer, in connection with the sale of MainStay Trust shares and/or shareholder or account servicing arrangements. These sales and/or servicing fee arrangements vary and may amount to payments of up to 0.40% on new sales and/or up to 0.20% annually on assets held.
- The Distributor may pay a finder's fee or other compensation to third parties in connection with the sale of MainStay Fund shares and/or shareholders or account servicing arrangements.
- The Distributor or an affiliate may sponsor training or informational meetings or provide other non-monetary benefits for financial intermediary firms and their associated financial advisors.
- The Distributor or an affiliate may also make payments for recordkeeping and other administrative services to financial intermediaries that sell MainStay Fund shares.
- Wholesale representatives of the Distributor visit brokerage firms on a regular basis to educate financial advisors about the MainStay Fund and to encourage the sale of the Fund's shares to their clients. The costs and expenses associated with these efforts may include travel, lodging, sponsorship at educational seminars and conferences, entertainment and meals to the extent permitted by law.
Although the MainStay Fund may use financial firms that sell Fund shares to make transactions for the Fund's portfolio, neither the MainStay Fund nor NYLIM will consider the sale of MainStay Fund shares as a factor when choosing financial firms to effect those transactions.
Payments made from the Distributor's or an affiliate's own resources do not increase the price or decrease the amount or value of the shares you purchase. However, if investment advisers, distributors or affiliates of mutual funds make such payments in differing amounts, financial intermediary firms and their financial advisors may have financial incentives for recommending a particular mutual fund or a particular share class of that fund over other mutual funds. For example, payments made by the Distributor or an affiliate, as described above, may be used by the financial intermediary firm to reduce or eliminate transaction charges associated with purchases of fund shares.
For more information regarding any of the types of compensation described above, see the MainStay Fund's SAI or consult with your financial intermediary firm or financial advisor. YOU SHOULD REVIEW CAREFULLY ANY DISCLOSURE BY YOUR FINANCIAL INTERMEDIARY FIRM AS TO COMPENSATION RECEIVED BY THAT FIRM AND/OR YOUR FINANCIAL ADVISOR.
BUYING, SELLING AND EXCHANGING MAINSTAY FUND SHARES
HOW TO OPEN YOUR ACCOUNT
If you are participating in a company savings plan, such as a 401(k) plan, profit sharing plan, defined benefit plan or other employee-directed plan, your company will provide you with the information you need to open an account and buy or sell Class I shares of the MainStay Fund.
If you are investing through a financial intermediary firm, the firm will assist you with opening an account. Your financial advisor may place your order by phone. MainStay Investments must receive your completed application and check in good order within three business days.
You buy shares at NAV. NAV is generally calculated as of the close of regular trading (usually 4 p.m. Eastern Time) on the New York Stock Exchange (the "Exchange") every day the Exchange is open. When you buy shares, you must pay the NAV next calculated after MainStay Investments receives your order in good order. Good order means all the necessary information, signatures and documentation have been fully completed. Alternatively, MainStay Investments has arrangements with certain financial intermediary firms such that purchase orders through these entities are considered received in good order when received by the financial intermediary firm together with the purchase price of the shares ordered. The order will then be priced at the MainStay Fund's NAV next computed after acceptance by these entities. Such financial intermediary firms are responsible for timely transmitting the purchase order to the MainStay Fund.
When you open your account, you may also want to choose certain buying and selling options, including transactions by wire. In most cases, these choices can be made later in writing, but it may be quicker and more convenient to decide on them when you open your account.
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens a new account and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations. As a result, the MainStay Fund, or your financial advisor on its behalf, must obtain the following information for each person who opens a new account:
- Name;
- Date of birth (for individuals);
- Residential or business street address (although post office boxes are still permitted for mailing); and
- Social security number, taxpayer identification number, or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities.
FEDERAL LAW PROHIBITS THE MAINSTAY FUND AND OTHER FINANCIAL INSTITUTIONS FROM OPENING A NEW ACCOUNT UNLESS THEY RECEIVE THE MINIMUM IDENTIFYING INFORMATION LISTED ABOVE.
After an account is opened, the MainStay Fund may restrict your ability to purchase additional shares until your identity is verified. The MainStay Fund also may close your account or take other appropriate action if it is unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
INVESTMENT MINIMUMS
The following minimums apply if you are investing in Class I shares of the MainStay Fund.
- Individual Investors--$5 million for initial purchases of the MainStay Fund and no minimum subsequent purchase amount, and
- Institutional Investors--no minimum initial or subsequent purchase amounts.
A minimum initial investment amount may be waived for purchases by the boards, directors and employees of New York Life and its affiliates and subsidiaries. The MainStay Fund may also waive investment minimums for certain qualified purchases and accept additional investments of smaller amounts at their discretion.
For existing Class I shareholders who became Class I shareholders by exchanging shares of any McMorgan Fund on or after July 2, 2007, there is no minimum initial or subsequent purchase amount.
BUYING AND SELLING MAINSTAY FUND SHARES
OPENING YOUR ACCOUNT - INDIVIDUAL SHAREHOLDERS
HOW DETAILS
----------------------------------------------------------- ----------------------------------------------------
BY WIRE: You or your registered representative should call MainStay The wire must include:
Investments toll-free at 1-800-MAINSTAY (1-800-624-6782) to
obtain an account number and wiring instructions. Wire the - name(s) of investor(s);
purchase amount to:
- your account number; and
State Street Bank and Trust Company
- the MainStay Fund's Name and Class of shares.
- ABA #011-0000-28
Your bank may charge a fee for the wire transfer.
- MainStay Funds (DDA #99029415)
- Attn: Custody and Shareholder Services
To buy shares the same day, MainStay Investments must
receive your wired money by 4 p.m. Eastern Time.
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BY PHONE: Have your investment professional call MainStay Investments MainStay Investments must receive your application
toll-free at 1-800-MAINSTAY (1-800-624-6782) between 8 a.m. and check, payable to MainStay Funds in good order
and 6 p.m. Eastern Time any day the New York Stock Exchange within three business days. If not, MainStay
is open. Call before 4 p.m. to buy shares at the current Investments can cancel your order and hold you
day's NAV. liable for costs incurred in placing it.
Be sure to write on your check:
- name(s) of investor(s).
- your account number; and
- the MainStay Fund's name and Class of shares.
BY MAIL: Return your completed application with a check for the Make your check payable to MainStay Funds.
amount of your investment to:
- $1,000 minimum
MainStay Funds
P.O. Box 8401 Be sure to write on your check:
Boston, Massachusetts 02266-8401
- name(s) of investor(s); and
- the MainStay Fund's name and Class of shares.
Send overnight orders to:
MainStay Funds
c/o Boston Financial Data Services
30 Dan Road
Canton, Massachusetts 02021-2809
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BUYING ADDITIONAL SHARES OF THE MAINSTAY FUND - INDIVIDUAL SHAREHOLDERS
HOW DETAILS
----------------------------------------------------------- ----------------------------------------------------
BY WIRE: Wire the purchase amount to: The wire must include:
State Street Bank and Trust Company - name(s) of investor(s);
- ABA #011-0000-28 - your account number; and
- MainStay Funds (DDA #99029415) - the MainStay Fund's Name and Class of shares.
- Attn: Custody and Shareholder Services Your bank may charge a fee for the wire transfer.
To buy shares the same day, MainStay Investments must
receive your wired money by 4 p.m. Eastern Time.
ELECTRONICALLY: Call MainStay Investments toll-free at 1-800-MAINSTAY Eligible investors can purchase shares by using
(1-800-624-6782) between 8 a.m. and 6 p.m. Eastern Time any electronic debits from a designated bank account.
day the New York Stock Exchange is open to make an ACH
purchase; call before 4 p.m. to buy shares at the current The maximum ACH purchase amount is $100,000.
day's NAV; or visit us at www.mainstayfunds.com.
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BY MAIL: Address your order to: Make your check payable to MainStay Funds.
MainStay Funds Be sure to write on your check:
P.O. Box 8401
Boston, Massachusetts 02266-8401 - name(s) of investor(s); and
- the MainStay Fund's name and Class of shares.
Send overnight orders to:
MainStay Funds
c/o Boston Financial Data Services
30 Dan Road
Canton, Massachusetts 02021-2809
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SELLING SHARES - INDIVIDUAL SHAREHOLDERS
HOW DETAILS
----------------------------------------------------------- ----------------------------------------------------
BY CONTACTING - You may sell (redeem) your shares through your
YOUR FINANCIAL financial advisor or by any of the methods
ADVISOR: described below.
BY PHONE: TO RECEIVE PROCEEDS BY CHECK: - MainStay Investments will only send checks to
the account owner at the owner's address of
Call MainStay Investments toll-free at 1-800-MAINSTAY record and generally will not send checks to
(1-800-624-6782) between 8 a.m. and 6 p.m. Eastern Time any addresses on record for 30 days or less.
day the New York Stock Exchange is open. Call before 4 p.m.
Eastern Time to sell shares at the current day's NAV. - The maximum order MainStay Investments can
process by phone is $100,000.
TO RECEIVE PROCEEDS BY WIRE: - Generally, after receiving your sell order by
phone, MainStay Investments will send the
Call MainStay Investments toll-free at 1-800-MAINSTAY proceeds by bank wire to your designated bank
(1-800-624-6782) between 8 a.m. and 6 p.m. Eastern Time any account the next business day, although it may
day the New York Stock Exchange is open. Eligible take up to seven days to do so. Your bank may
investors may sell shares and have proceeds electronically charge you a fee to receive the wire transfer.
credited to a designated bank account.
- MainStay Investments must have your bank
account information on file.
- The minimum wire transfer amount is $1,000.
TO RECEIVE PROCEEDS ELECTRONICALLY BY ACH: Call MainStay - MainStay Investments must have your bank
Investments toll-free at account information on file.
1-800-MAINSTAY (1-800-624-6782) between 8 a.m. and 6 p.m.
Eastern Time any day banks and the New York Stock Exchange - Proceeds may take 2-3 days to reach your bank
are open; or visit us at account.
- There is no fee from MainStay Investments for
this transaction.
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HOW DETAILS
----------------------------------------------------------- ----------------------------------------------------
www.mainstayfunds.com. - The maximum ACH transfer amount is $100,000.
BY MAIL: Address your order to: Write a letter of instruction that includes:
MainStay Funds * your name(s) and signature(s);
P.O. Box 8401
Boston, Massachusetts 02266-8401 * your account number;
Send overnight orders to: * the MainStay Fund's name and Class of shares;
and
MainStay Funds
c/o Boston Financial Data Services * dollar or share amount you want to sell.
30 Dan Road
Canton, Massachusetts 02021-2809 Obtain a MEDALLION SIGNATURE GUARANTEE or other
documentation, as required.
There is a $15 fee for checks mailed to you via
overnight service.
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GENERAL POLICIES
BUYING SHARES
- All investments must be in U.S. dollars with funds drawn on a U.S.
bank. We will not accept any payment in the following forms:
travelers' checks, personal money orders, credit card convenience
checks, cash or starter checks.
- MainStay Investments does not accept third-party checks, and it reserves the right to limit the number of checks processed at one time.
- If your investment check or ACH purchase does not clear, your order will be canceled and your account will be responsible for any losses or fees the MainStay Fund incurs as a result. Your account will be charged a $20 fee for each returned check or ACH purchase. In addition, the MainStay Fund may also redeem shares to cover any losses it incurs as a result. If an AutoInvest payment is returned unpaid for two consecutive periods, the privilege will be suspended until you notify us to reinstate it.
- The MainStay Fund may, in its discretion, reject, in whole or in part, any order for the purchase of shares.
- To limit the MainStay Fund's expenses, the MainStay Trust does not issue share certificates.
SELLING SHARES
- If you have share certificates, you must return them with a written redemption request.
- Your shares will be sold at the next NAV calculated after MainStay Investments receives your request in good order. MainStay Investments will make the payment within seven days after receiving your request in good order.
- If you buy shares by check or by ACH purchase and quickly decide to sell them, the MainStay Fund may withhold payment for 10 days from the date the check or ACH purchase order is received.
- There will be no redemption during any period in which the right of redemption is suspended or date of payment is postponed because the New York Stock Exchange is closed or trading on the Exchange is restricted or the SEC deems an emergency to exist.
- Unless you decline telephone privileges on your application, you may be responsible for any fraudulent telephone order as long as MainStay Investments takes reasonable measures to verify the order.
- Reinvestment won't relieve you of any tax consequences on gains realized from a sale. The deductions or losses, however, may be denied.
- MainStay Investments requires a written order to sell shares if an account has submitted a change of address during the previous 30 days.
- MainStay Investments requires a written order to sell shares and a Medallion Signature Guarantee if:
- MainStay Investments does not have on file required bank information to wire funds;
- the proceeds from the sale will exceed $100,000;
- the proceeds of the sale are to be sent to an address other than the address of record; or
- the proceeds are to be payable to someone other than the account holder(s).
- In the interest of all shareholders, the MainStay Fund reserves the right to:
- change or discontinue the exchange privileges upon notice to shareholders, or temporarily suspend this privilege without notice under extraordinary circumstances;
- change or discontinue the systematic withdrawal plan upon notice to shareholders; and/or
- change the minimum investment amounts.
ADDITIONAL INFORMATION
The policies and fees described in this Proxy Statement/Prospectus govern transactions with the MainStay Fund. If you invest through a third party--e.g., a bank, broker, 401(k), financial advisor or financial supermarket--there may be transaction fees for, and you may be subject to, different investment minimums or limitations on buying or selling shares. Accordingly, the net yield to investors who purchase through financial intermediaries may be less than the net yield earned by investors who invest in the MainStay Fund directly. Consult a representative of your plan or financial institution if in doubt.
From time to time, the MainStay Fund may close and reopen to new investors or new share purchases at its discretion. If the MainStay Fund is closed, either to new investors or new share purchases, and you redeem your total investment in the MainStay Fund, your account will be closed and you will not be able to make any additional investments in the MainStay Fund. If the MainStay Fund is closed to new investors, you may not exchange shares from other funds offered by the MainStay Trust for shares of the MainStay Fund unless you are already a shareholder of the MainStay Fund.
MEDALLION SIGNATURE GUARANTEES
A Medallion Signature Guarantee helps protect against fraud. To protect your account, the MainStay Fund and MainStay Investments from fraud, Medallion Signature Guarantees are required to enable MainStay Investments to verify the identity of the person who has authorized redemption proceeds to be sent to a third party or a bank not previously established on the account. Medallion Signature Guarantees are also required for redemptions of $100,000 or more from an account, and for share transfer requests. Medallion Signature Guarantees must be obtained from certain eligible financial institutions that are participants in the Securities Transfer Association Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP), or the New York Stock Exchange Medallion Signature Program (MSP). Eligible guarantor institutions provide Medallion Signature Guarantees that are covered by surety bonds in various amounts. It is your responsibility to ensure that the Medallion Signature Guarantee that you acquire is sufficient to cover the total value of your transaction(s). If the surety bond amount is not sufficient to cover the requested transaction(s), the Medallion Signature Guarantee will be rejected.
Signature guarantees that are not a part of these programs will not be accepted. Please note that a notary public stamp or seal is not acceptable. Shareholders may contact MainStay Investments toll-free at 1-800-MAINSTAY (1-800-624-6782) for further details.
INVESTING FOR RETIREMENT
Not all MainStay Funds are available for all types of retirement plans or through all distribution channels. Please contact us at 1-800-MAINSTAY (1-800-624-6782) for further details.
You can purchase shares of the MainStay Fund for retirement plans providing tax-deferred investments for individuals and institutions. You can use the MainStay Fund in established plans or the Distributor may provide the required plan documents for selected plans. A plan document must be adopted for a plan to be in existence.
Custodial services are available for IRA, Roth IRA and Coverdell Education Savings Accounts (CESA) (previously named Education IRA) as well as SEP and SIMPLE IRA plans and for 403(b)(7) TSA Custodial Accounts. Plan administration is also available for select qualified retirement plans. An investor should consult with his or her tax adviser before establishing any tax-deferred retirement plan.
[Sidebar begins]: Reinvestment won't relieve you of any tax consequences on gains realized from a sale. The deductions for losses may, however, be denied.
Convenient, Yes... But Not Risk-Free.
Telephone redemption privileges are convenient, but you give up some security. When you sign the application to buy shares, you agree that MainStay Funds will not be liable for following
phone instructions that they reasonably believe are genuine. When using MainStay's Audio Response System or the internet, you bear the risk of any loss from your errors unless the MainStay Fund or MainStay Investments fail to use established safeguards for your protection. These safeguards are among those currently in place at the MainStay Funds:
- all phone calls with service representatives are tape recorded; and
- written confirmation of every transaction is sent to your address of record.
The MainStay Fund and MainStay Investments reserve the right to shut down the MainStay Audio Response System or the system might shut itself down due to technical problems.
[Sidebar ends]
PURCHASES-IN-KIND
You may purchase shares of the MainStay Fund by transferring securities to the MainStay Fund in exchange for MainStay Fund shares ("in kind purchase"). In kind purchases may be made only upon the MainStay Fund's approval and determination that the securities are acceptable investments for the Fund, and are purchased consistent with the MainStay Fund's procedures relating to in kind purchases.
REDEMPTIONS IN KIND
The MainStay Fund reserves the right to pay certain large redemptions, either totally or partially, by a distribution-in-kind of securities (instead of cash) from the MainStay Fund's portfolio, in accordance with the 1940 Act and rules and interpretations of the SEC thereunder.
SHAREHOLDER SERVICES
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described below. You select your schedule and amount, subject to certain restrictions. You can set up most of these services on your application, by accessing your shareholder account on the internet at www.mainstayfunds.com, contacting your financial advisor for instructions, or by calling MainStay Investments toll-free at 1-800-MAINSTAY (1-800-624-6782) for a form.
Systematic Investing--Individual Shareholders Only
The MainStay Fund offers three automatic investment plans:
1. AutoInvest. If you obtain authorization from your bank, you can automatically debit your designated bank account to:
- make regularly scheduled investments; and/or
- purchase shares whenever you choose.
2. Dividend reinvestment. Automatically reinvest dividends and distributions from the MainStay Fund back into the Fund or into the same Class of any other MainStay Fund.
3. Payroll deductions. If your employer offers this option, you can make automatic investments through payroll deduction.
SYSTEMATIC WITHDRAWAL PLAN--INDIVIDUAL SHAREHOLDERS ONLY
Withdrawals must be at least $100. You must have at least $10,000 in your account at the time of the initial request and shares must not be in certificate form. The MainStay Fund will not knowingly permit systematic withdrawals if, at the same time, you are making periodic investments.
EXCHANGING SHARES AMONG MAINSTAY TRUST
You exchange shares when you sell all or a portion of shares in a fund offered by the MainStay Trust and use the proceeds to purchase shares of the same class of another fund offered by the MainStay Trust at NAV. An exchange of shares of one fund for shares of another fund will be treated as a sale of shares of the first fund and as a purchase of shares of the second fund. Any gain on the transaction may be subject to taxes. You may make exchanges from a fund offered by the MainStay Trust to another such fund by phone. There is also a systematic exchange program that allows you to make regularly scheduled, systematic exchanges from one fund offered by the MainStay Trust to the same class of another such fund. While shareholders generally may not exchange shares between classes, effective July 2, 2007, shareholders of McMorgan Class and Class Z shares of any series of the McMorgan Trust may exchange their shares for Class I shares of any other MainStay Fund.
You may also exchange shares of the MainStay Fund for the Class I shares, if offered, of any series of certain other open-end investment companies sponsored, advised, or administered by NYLIM or any affiliate thereof, which are offered in separate prospectuses, including:
- MainStay All Cap Growth Fund
- MainStay Balanced Fund
- MainStay Capital Appreciation Fund
- MainStay Cash Reserves Fund
- MainStay Common Stock Fund
- MainStay Conservative Allocation Fund
- MainStay Diversified Income Fund
- MainStay Floating Rate Fund
- MainStay Global High Income Fund
- MainStay Government Fund
- MainStay Growth Allocation Fund
- MainStay Growth Equity Fund*
- MainStay High Yield Corporate Bond Fund
- MainStay ICAP Equity Fund
- MainStay ICAP International Fund
- MainStay ICAP Select Equity Fund
- MainStay Income Manager Fund
- MainStay Indexed Bond Fund
- MainStay Intermediate Term Bond Fund
- MainStay International Equity Fund
- MainStay Large Cap Growth Fund
- MainStay Large Cap Opportunity Fund*
- MainStay MAP Fund
- MainStay Mid Cap Growth Fund
- MainStay Mid Cap Opportunity Fund
- MainStay Mid Cap Value Fund
- MainStay Moderate Allocation Fund
- MainStay Moderate Growth Allocation Fund
- MainStay Retirement 2010 Fund
- MainStay Retirement 2020 Fund
- MainStay Retirement 2030 Fund
- MainStay Retirement 2040 Fund
- MainStay Retirement 2050 Fund
- MainStay S&P 500 Index Fund
- MainStay Short Term Bond Fund
- MainStay Small Cap Growth Fund
- MainStay Small Cap Opportunity Fund
- MainStay Small Cap Value Fund
- MainStay Total Return Fund
- MainStay Value Fund
- MainStay 130/30 Core Fund
- MainStay 130/30 Growth Fund
- MainStay 130/30 International Fund
* Offered only to residents of Connecticut, Maryland, New Jersey, and New York.
Before making an exchange request, read the prospectus of the fund you wish to purchase by exchange. You can obtain a prospectus for any fund by contacting your broker, financial advisor or other financial institution by calling The Mainstay Funds at 1-800-MAINSTAY (1-800-624-6782).
You may not exchange shares of the MainStay Fund for shares of another fund in the MainStay Fund complex that is closed to new investors unless you are already a shareholder of that fund. You may not exchange shares of a fund offered by the MainStay Trust for shares of another such fund that is closed to new share purchases or not offered for sale in your state.
The exchange privilege is not intended as a vehicle for short term trading, nor is the MainStay Fund designed for professional market timing organizations or other entities or individuals that use programmed frequent exchanges in response to market fluctuations. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders (see "Excessive Purchases and Redemptions or Exchanges" in this section).
The MainStay Fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange consistent with the requirements of the 1940 Act and rules and interpretations of the SEC thereunder.
EXCESSIVE PURCHASES AND REDEMPTIONS OR EXCHANGES
The MainStay Fund is not intended to be used as a vehicle for excessive or short-term trading (such as market timing). The interests of the MainStay Fund's shareholders and the MainStay Fund's ability to manage its investments may be adversely affected by excessive purchases and redemptions or exchanges of MainStay Fund shares over the short term. When large dollar amounts are involved, excessive trading may disrupt efficient implementation of the MainStay Fund's investment strategies or negatively impact the MainStay Fund's performance. For example, NYLIM might have to maintain more of the MainStay Fund's assets in cash or sell portfolio securities at inopportune times to meet unanticipated redemptions. By realizing profits through short-term trading, shareholders that engage in excessive purchases and redemptions or exchanges of MainStay Fund shares may dilute the value of shares held by long-term shareholders. To the extent that the MainStay Fund invests in securities that are thinly traded, trade infrequently, or are relatively illiquid (such as foreign securities), it may attract investors seeking to profit from short-term trading strategies that exploit the special valuation issues applicable to these types of holdings to a greater degree than other types of funds, and thus, may be more vulnerable to the risks associated with such activity. Foreign securities traded on foreign exchanges present time zone arbitrage opportunities when events affecting portfolio securities values occur after the close of the foreign exchange but prior to the close of the New York Stock Exchange. Accordingly, the MainStay Trust Board has adopted and implemented policies and procedures designed to discourage, detect and prevent frequent purchases and redemptions or exchanges of MainStay Fund shares in order to protect long-term MainStay Fund shareholders. These policies are discussed more fully below. There is the risk that the MainStay Fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive or short-term trading. The MainStay Fund may change its policies or procedures at any time without prior notice to shareholders.
The MainStay Fund reserves the right to restrict, reject or cancel, without prior notice, any purchase or exchange order for any reason, including any purchase or exchange order accepted by any investor's financial intermediary firm. Any such rejection or cancellation of an order placed through a financial intermediary will occur, under normal circumstances, within one business day of the financial intermediary transmitting the order to the MainStay Fund. In addition, the MainStay Fund reserves the right to reject, limit, or impose other conditions (that are more restrictive than those otherwise stated in this Proxy Statement/Prospectus) on purchases or exchanges or to close or otherwise limit accounts based on a history of frequent purchases and redemptions of MainStay Fund shares that could adversely affect the MainStay Fund or its operations, including those from any individual or group who, in the MainStay Fund's judgment, is likely to harm shareholders. Pursuant to the MainStay
Fund's policies and procedures, the MainStay Fund may permit short-term purchases or exchanges that it believes, in the exercise of its judgment, are not disruptive or harmful to the MainStay Fund's long-term shareholders. For example, transactions conducted through systematic investment or withdrawal plans are not subject to the surveillance procedures. Exceptions are subject to the advance approval by the Chief Compliance Officer of the MainStay Trust, among others, and are subject to MainStay Trust Board oversight. Apart from trading permitted or exceptions granted in accordance with the Fund's policies and procedures, the MainStay Fund does not accommodate, nor has any arrangement to permit, frequent purchases and redemptions of MainStay Fund shares.
The MainStay Fund, through MainStay Investments and the Distributor, maintains surveillance procedures to detect excessive or short-term trading in the MainStay Fund's shares. As part of this surveillance process, the MainStay Fund examines transactions in the MainStay Fund's shares that exceed certain monetary thresholds or numerical limits within a specified period of time. The MainStay Fund also may consider the history of trading activity in all accounts known to be under common ownership, control, or influence. To the extent identified under these surveillance procedures, the MainStay Fund will place a "block" on any account if, during any 60-day period, there is (1) a purchase or exchange into the account following a redemption or exchange from such account or (2) a redemption or exchange from the account following a purchase or exchange into such account. An account that is blocked will not be permitted to place future purchase or exchange requests for an additional 60 day period in the MainStay Fund. The MainStay Fund may modify its surveillance procedures and criteria from time to time without prior notice, as necessary or appropriate to improve the detection of excessive or short-term trading or to address specific circumstances. In certain instances when deemed appropriate the MainStay Fund may rely on a financial intermediary to apply its market timing procedures to an omnibus account. Routine allocation and rebalancing activities made by certain asset allocation programs, funds-of-funds, or other collective investment strategies may not be subject to the surveillance procedures if the managers of such strategies represent to the satisfaction of the Chief Compliance Officer of the Mainstay Trust that such investment programs and strategies are consistent with the foregoing.
While the MainStay Fund discourages excessive or short-term trading, there is no assurance that the MainStay Fund or its procedures will be able to effectively detect such activity or participants engaging in such activity, or, if it is detected, to prevent its recurrence. The MainStay Fund's ability to reasonably detect all such trading may be limited, for example, where the MainStay Fund must rely on the cooperation of and/or information provided by financial intermediaries or retirement plans or where the costs of surveillance on certain trading exceeds the anticipated benefit of such surveillance to the MainStay Fund's shareholders.
FAIR VALUATION AND PORTFOLIO HOLDINGS DISCLOSURE
DETERMINING THE MAINSTAY FUND'S SHARE PRICES (NAV) AND THE VALUATION OF SECURITIES.
The MainStay Fund generally calculates the value of the Fund (also known as its net asset value, or NAV) at the close of regular trading on the New York Stock Exchange (usually 4:00 pm Eastern Time) every day the Exchange is open. The MainStay Fund does not determine NAV on days the Exchange is closed. The Exchange is closed on New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The NAV per share for a class of shares is determined by dividing the value of the MainStay Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. The value of the MainStay Fund's investments is generally based on current market prices. If current market values are not available or, in the judgment of NYLIM, do not accurately
reflect the fair value of a security, investments will be valued by another method that the MainStay Trust Board believes in good faith accurately reflects fair value. Changes in the value of the MainStay Fund's portfolio securities after the close of trading on the principal markets in which the portfolio securities trade will not be reflected in the calculation of NAV unless NYLIM deems a particular event could materially affect the NAV. In this case, an adjustment in the valuation of the securities may be made in accordance with procedures adopted by the MainStay Trust Board. The MainStay Fund may invest in portfolio securities that are primarily listed on foreign exchanges that trade on weekends or other days when the MainStay Fund does not price its shares. The NAV of the MainStay Fund's shares may change on days when shareholders will not be able to purchase or redeem shares.
The MainStay Trust Board has adopted valuation procedures for the MainStay Fund and has delegated day-to-day responsibility for fair value determinations to the MainStay Fund's Valuation Committee. Determinations of the Valuation Committee are subject to review and ratification by the MainStay Trust Board at its next scheduled meeting after the fair valuations are determined. Fair value determinations may be based upon developments related to a specific security or events affecting securities markets. Fair valuation involves subjective judgments, and it is possible that the fair value determined for a security may differ materially from the value that could be realized upon the sale of the security.
The MainStay Fund expects to use fair value pricing for securities actively traded on U.S. exchanges only under very limited circumstances. The MainStay Fund may use fair value pricing more frequently for foreign securities. Where foreign securities markets close earlier than U.S. markets, the value of the securities may be affected by significant events or volatility in the U.S. markets occurring after the close of those foreign securities markets.
PORTFOLIO HOLDINGS INFORMATION
A description of the MainStay Fund's policies and procedures with respect to the disclosure of the MainStay Fund's portfolio securities holdings is available in the MainStay Fund's SAI. MainStay Trust publishes quarterly a list of the MainStay Fund's ten largest holdings and publishes monthly a complete schedule of the MainStay Fund's portfolio holdings on the Internet at www.mainstayfunds.com. You may also obtain this information by calling toll-free 1-800-MAINSTAY (1-800-624-6782). Disclosure of the MainStay Fund's schedule of portfolio holdings is provided monthly no earlier than 30 days after the end of the reported month. In addition, disclosure of the MainStay Fund's top ten holdings is made quarterly no earlier than 15 days after the end of each calendar quarter. The MainStay Fund's quarterly holdings information is also provided in the annual report and semiannual report to shareholders and in the quarterly holdings report to the SEC on Form N-Q.
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FUND EARNINGS
If you prefer to reinvest dividends and/or capital gains in another fund, you must first establish an account in that class of shares of that fund. There is no sales charge on shares purchased through the automatic reinvestment of dividends or capital gains.
SEEK PROFESSIONAL ASSISTANCE. Your financial advisor can help you keep your investment goals coordinated with your tax considerations. But for tax counsel, always rely on your tax adviser. For additional information on federal, state and local taxation, see the MainStay Fund's SAI.
BUY AFTER THE DIVIDEND PAYMENT. Avoid buying shares shortly before a dividend payment. Part of your investment may be returned in the form of a dividend, which may be taxable.
MainStay Investments reserves the right to automatically reinvest dividend distributions of less than $10.00.
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Dividends and Interest. Most funds earn either dividends from stocks, interest from bonds and other securities, or both. A mutual fund, however, always pays this income to you as "dividends." The dividends paid by the MainStay Fund will vary based on the income from its investments and the expenses incurred by the MainStay Fund.
When the MainStay Fund Pays Dividends. The MainStay Fund declares and pays any dividends, to the extent income is available, at least once a year, typically in December. The MainStay Fund declares and pays dividends quarterly. Dividends are normally paid on the first business day of each quarter after a dividend is declared. You begin earning dividends the next business day after MainStay Investments receives your purchase request in good order.
Capital Gains. The MainStay Fund earns capital gains when it sells securities at a profit.
When the MainStay Fund Pays Capital Gains. The MainStay Fund will normally distribute any capital gains to shareholders in December.
How to Take Your Earnings. You may receive your portion of MainStay Fund earnings in one of seven ways. You can make your choice at the time of application, and change it as often as you like by notifying your financial advisor (if permitted by the broker-dealer) or MainStay Investments directly. The seven choices are:
1. Reinvest dividends and capital gains in:
- the MainStay Fund; or
- another fund of your choice (other than a fund that is closed, either to new investors or to new share purchases).
2. Take the dividends in cash and reinvest the capital gains back in the MainStay Fund.
3. Take the capital gains in cash and reinvest the dividends back in the MainStay Fund.
4. Take a percentage of dividends or capital gains in cash and reinvest the remainder in the MainStay Fund.
5. Take dividends and capital gains in cash.
6. Reinvest all or a percentage of the capital gains in another fund (other than a fund that is closed, either to new investors or to new share purchases) and reinvest the dividends in the MainStay Fund.
7. Reinvest all or a percentage of the dividends in another fund (other than a fund that is closed, either to new investors or to new share purchases) and reinvest the capital gains in the MainStay Fund.
If you do not make one of these choices on your application, your earnings will be automatically reinvested in the same class of shares of the MainStay Fund.
UNDERSTAND THE TAX CONSEQUENCES OF INVESTING IN THE MAINSTAY FUND
Most of Your Earnings are Taxable. Virtually all of the dividends and capital gains distributions you receive from the MainStay Fund are taxable, whether you take them as cash or automatically reinvest them. The MainStay Fund's realized earnings are taxed based on the length of time the Fund holds its investments, regardless of how long you hold MainStay Fund shares. If the MainStay Fund realizes long-term capital gains, the earnings distributions are taxed as long-term capital gains; earnings from short-term capital gains and income generated on debt investments and other sources are generally taxed as ordinary income upon distribution. Earnings of the MainStay Fund will generally be a result of capital gains that may be taxed as either long-term capital gains or short-term capital gains (taxed as ordinary income). Earnings generated by interest received on fixed income securities generally will be a result of income generated on debt investments and will be taxable as ordinary income.
For individual shareholders, a portion of the dividends received from the MainStay Fund may be treated as "qualified dividend income," which is currently taxable to individuals at a maximum rate of 15%, to the extent that the MainStay Fund receives qualified dividend income from domestic corporations and certain qualified foreign corporations and certain holding period and other requirements are met. The shareholder must also generally satisfy a more than 60 day holding period requirement with respect to each distribution of qualified dividends in order to qualify for the 15% rate on such distribution. For corporate shareholders, a portion of the dividends received from the MainStay Fund may qualify for the corporate dividends received deduction.
Since many of the stocks in which the MainStay Fund invest do not pay significant dividends, it is not likely that a substantial portion of the distributions by the Fund will qualify for the 15% maximum rate. For corporate shareholders, a portion of the dividends received from the MainStay Fund may qualify for the corporate dividends received deduction.
MainStay Investments will mail your tax report each year by January 31. This report will tell you which dividends and redemption proceeds should be treated as taxable ordinary income, which, if any, as tax-exempt income, and which, if any, as long-term capital gains.
The MainStay Fund may be required to withhold U.S. Federal income tax at the rate of 28% of all taxable distributions payable to you if you fail to provide the Fund with your correct taxpayer identification number or to make required certifications, or if you have been notified by the IRS that you are subject to backup withholding. Such withholding is not an additional tax and any amounts withheld may be credited against your U.S. Federal income tax liability.
Exchanges. An exchange of shares of the MainStay Fund for shares of another MainStay Fund will be treated as a sale of shares of the MainStay Fund and a purchase of shares of the second MainStay Fund. Any gain on the transaction may be subject to taxation.
VOTING INFORMATION
This Proxy Statement/Prospectus is furnished in connection with a solicitation of proxies by the MainStay Trust Board to be used at the Special Meeting. This Proxy Statement/Prospectus, along with a Notice of the Special Meeting and a proxy card, is first being mailed to shareholders of the McMorgan Fund on or about September [24], 2007. Only shareholders of record as of the close of business on August 8, 2007 (the "Record Date"), will be entitled to notice of, and to vote at, the Special Meeting. Holders of McMorgan Fund Class and Class Z shares will vote together on proposals presented at the Special Meeting. If the Reorganization is not approved by shareholders, the McMorgan Fund Board will consider other options, which may include liquidating the McMorgan Fund, holding another shareholders' meeting requesting a vote on the same or modified proposal or continuing to operate the McMorgan Fund in its present form for a period of time.
The votes of the shareholders of the MainStay Fund are not being solicited since their approval or consent is not necessary for the Reorganization to take place.
VOTING OF PROXIES. If you attend the Special Meeting you may vote in person. If you do not plan to attend the Special Meeting, please cast your vote by completing, signing, and returning the enclosed proxy card by mail in the envelope provided.
You may also authorize your proxy through touch-tone telephone or by Internet. These options require you to input a control number, which is located on each proxy card. After inputting these numbers, you will be prompted to authorize your proxy on the Proposal. You will have an opportunity to review your authorization and make any necessary changes before submitting your authorization and terminating your telephone call or Internet connection.
A shareholder who executes and returns a proxy may revoke the proxy at any time prior to the date the proxy is to be exercised by (1) delivering to the McMorgan Fund written notice of the revocation, (2) delivering to the McMorgan Fund a proxy with a later date, or (3) voting in person at the Special Meeting. Unless revoked, all valid and executed proxies will be voted in accordance with the specifications thereon.
In the event a shareholder signs and returns the proxy but does not indicate his or her vote as to the Proposal, such proxy will be voted FOR the Reorganization and in the discretion of the proxy holder with regard to any other proposal.
QUORUM REQUIREMENTS. A quorum of shareholders is necessary to hold a valid meeting and to consider the Proposal. The presence in person or by proxy of the holders of one-third of the shares of beneficial interest of the McMorgan Fund on the Record Date constitutes a quorum. The following chart reflects the number of shares outstanding of each class of the McMorgan Fund as of the Record Date:
MCMORGAN FUND NUMBER OF SHARES ---------------------- ---------------- McMorgan Fund Class Class Z Total |
VOTES NECESSARY TO APPROVE THE PROPOSAL. Approval of the Reorganization Agreement requires the affirmative vote of the lesser of (i) 67% or more of the McMorgan Fund's shares present at
the special meeting if more than 50% of the outstanding shares of the McMorgan Fund are present, or (ii) more than 50% of the outstanding shares of the McMorgan Fund. Shares of the McMorgan Fund will be voted collectively, and not on a class-by-class basis.
EFFECT OF ABSTENTIONS AND BROKER "NON-VOTES". The McMorgan Fund expects that, before the Special Meeting, broker-dealer firms holding shares of the McMorgan Fund in "street name" for their customers will request voting instructions from their customers and beneficial owners. If a shareholder abstains from voting as to any matter, or if a broker returns a "non-vote" proxy indicating a lack of authority to vote on a matter, then the shares represented by such abstention or broker non-vote will be considered to be present at the Special Meeting for purposes of determining the existence of a quorum. Abstentions and broker non-votes will not, however, be counted as votes in favor of a Proposal. Therefore, abstentions and broker non-votes will have the effect of a vote against the Proposal.
ADJOURNMENTS. If a quorum is not present at the Special Meeting or if a quorum is present but sufficient votes to approve the Proposal have not been received at the time of the Special Meeting, the persons named as proxies may propose one or more adjournments of the Special Meeting in accordance with applicable law to permit further solicitation of votes. The persons named as proxies will vote in favor of adjournment with respect to those proxies that may be voted in favor of the Proposal and will vote against any such adjournment with respect to those proxies which may be voted against the Proposal.
PAYMENT OF SOLICITATION EXPENSES. The cost of the Special Meeting, including costs of solicitation of proxies and voting instructions, will be borne by NYLIM. Proxies are solicited via regular mail and also may be solicited via telephone, e-mail or other personal contact by personnel of NYLIM, McMorgan Trust, their respective affiliates, or, in NYLIM's discretion, a commercial firm retained for this purpose. NYLIM has retained D.F. King & Co., Inc. to provide proxy solicitation services in connection with the Special Meeting at an estimated cost of $1,706. NYLIM may incur additional expenses as a result of this proxy solicitation.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING. McMorgan Trust does not know of any matters to be presented at the Special Meeting other than those described in this Proxy Statement/Prospectus. If any other matters come before the Special Meeting, including any proposal to adjourn the Special Meeting to permit the continued solicitation of proxies in favor of the Reorganization, it is the intention of McMorgan Trust that proxies not containing specific restrictions to the contrary will be voted as described above under "Adjournments" with respect to proposals to adjourn the meeting to solicit additional proxies in favor of the Reorganization and in the discretion of the proxy holder on any other matters.
OTHER INFORMATION
RECEIPT OF SHAREHOLDER PROPOSALS
As in the past, the McMorgan Trust Board does not intend to call regular annual meetings of shareholders of the McMorgan Trust. If a shareholder wishes to present a proposal to be included in the proxy statement for the next meeting of shareholders of the McMorgan Trust, if any, such proposal must be received by the McMorgan Trust within a reasonable time before the solicitation is to be made. The Trustees will call meetings of shareholders as may be required under the 1940 Act (such as to approve a new investment advisory agreement for the McMorgan Fund or to remove Trustees) or as they may determine in their discretion.
FINANCIAL HIGHLIGHTS
The fiscal year-end of McMorgan Trust and the fiscal year-end of MainStay Trust is October 31. Prior to July 10, 2007, the fiscal year for the McMorgan Trust was June 30. The financial highlights of the MainStay Fund that are contained in Exhibit B have been derived from financial statements audited by KPMG LLP, the MainStay Funds' independent registered public accounting firm for years ended October 31, 2006, 2005 and 2004 and other auditors audited years presented through October 31, 2003.
SHAREHOLDER REPORTS
The MainStay Trust and the McMorgan Trust will furnish, without charge, upon request, a printed version of the most recent annual reports to shareholders of The Mainstay Funds and the McMorgan Funds, respectively (and any subsequent semi-annual reports). Such requests may be directed to MainStay Trust by (1) contacting the Distributor of The Mainstay Funds' shares by writing NYLIFE Distributors LLC, attn: MainStay Trust, 169 Lackawanna Avenue, Parsippany, New Jersey 07054; or (2) by calling toll-free 1-800-MAINSTAY (1-800-624-6782) and to the McMorgan Trust by calling toll-free 1-800-317-8028. Please include the name or names of the specific Fund or Funds for which you request reports.
INFORMATION REQUIREMENTS
Each Fund is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and certain other federal securities statutes, and files reports and other information with the SEC. Proxy materials, reports and other information filed by the Funds can be inspected and copied at the Public Reference Facilities maintained by the SEC at 100 F Street, NE, Washington, D.C. 20549. The SEC maintains an Internet website (at http://www.sec.gov), which contains other information about the Funds.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
As of the Record Date, (1) the current officers and Trustees of the McMorgan Trust, in the aggregate beneficially owned less than 1% of a class of shares of the McMorgan Fund, and (2) the current officers and Trustees of the MainStay Trust, in the aggregate beneficially owned less than 1% of a class of shares of the MainStay Fund. A list of the 5% shareholders of the McMorgan Fund and the MainStay Fund as of the Record Date are listed on Exhibit C.
VOTE OF MCMORGAN FUND SHARES BY MCMORGAN & COMPANY
McMorgan and/or its affiliates have the discretion to vote some of the McMorgan Fund's shares on this proposal. McMorgan Trust has been advised by McMorgan & Company that these shares will be voted pursuant to established policies and procedures designed to address potential conflicts of interest.
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("AGREEMENT") is made as of ________, 2007, by and between McMorgan Funds, a Delaware statutory trust ("MCMORGAN FUNDS"), on behalf of its investment portfolio, the McMorgan Equity Investment Fund (the "ACQUIRED FUND"), and The MainStay Funds, a Massachusetts business trust ("MAINSTAY FUNDS"), on behalf of its investment portfolio, the MainStay Common Stock Fund (the "ACQUIRING FUND" and, together with the Acquired Fund, the "FUNDS"). New York Life Investment Management LLC, a limited liability company organized under the laws of the State of New York ("NYLIM"), joins this Agreement solely for purposes of paragraphs 4.3, 5.11, 5.12 and 8.2.
This Agreement is intended to be and is adopted as a "plan of reorganization" within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "CODE"). The reorganization will consist of the transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Class I shares of beneficial interest of the Acquiring Fund (the "ACQUIRING FUND SHARES"), the assumption by the Acquiring Fund of the liabilities of the Acquired Fund specified in paragraph 1.3, and the distribution of the Acquiring Fund Shares to the shareholders of the Acquired Fund in complete liquidation of the Acquired Fund, all upon the terms and conditions hereinafter set forth in this Agreement (the "REORGANIZATION").
The Board of Trustees of McMorgan Funds has determined, with respect to the Acquired Fund, that (1) participation in the Reorganization is in the best interests of the Acquired Fund and its shareholders, and (2) the interests of the existing shareholders of the Acquired Fund would not be diluted as a result of the Reorganization.
The Board of Trustees of MainStay Funds has determined, with respect to the Acquiring Fund, that (1) participation in the Reorganization is in the best interests of the Acquiring Fund and its shareholders, and (2) the interests of the existing shareholders of the Acquiring Fund would not be diluted as a result of the Reorganization.
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
THE REORGANIZATION AND FUND TRANSACTIONS
1.1 The Reorganization. Subject to the requisite approval of the Acquired Fund's shareholders and the other terms and conditions herein set forth and on the basis of the representations and warranties contained herein, at the Effective Time (as defined in paragraph 2.5), McMorgan Funds shall assign, deliver and otherwise transfer the Assets (as defined in paragraph 1.2) of the Acquired Fund, to MainStay Funds on behalf of the Acquiring Fund, and MainStay Funds shall assume the Liabilities (as defined in paragraph 1.3) of the Acquired Fund on behalf of the Acquiring Fund. In consideration of the foregoing, at the Effective Time, MainStay Funds shall, on behalf of the Acquiring Fund, deliver to McMorgan Funds on behalf of the Acquired Fund, full and fractional Class I Acquiring Fund Shares (to the third decimal
place). The number of Class I Acquiring Fund Shares to be delivered shall be determined as set forth in paragraph 2.3.
1.2 Assets of the Acquired Fund. The assets of the Acquired Fund to be acquired by the Acquiring Fund shall consist of all assets and property, including, without limitation, all cash, cash equivalents, securities, receivables (including securities, interests and dividends receivable), commodities and futures interests, rights to register shares under applicable securities laws, any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund at the Effective Time, books and records, and any other property owned by the Acquired Fund at the Effective Time (collectively, the "ASSETS").
1.3 Liabilities of the Acquired Fund. The Acquired Fund will use its best efforts to discharge all of its known liabilities and obligations prior to the Effective Time. The Acquiring Fund shall assume the liabilities of the Acquired Fund that are set forth on the Acquired Fund's Statement of Assets and Liabilities as of the Effective Time that is delivered pursuant to paragraph 6.2(b) and included in the calculation of net asset value ("NAV") as of the Effective Time, or incurred in the ordinary course of business consistent with past practice (collectively, the "LIABILITIES"). On or as soon as practicable prior to the Effective Time, the Acquired Fund will declare and pay to its shareholders of record one or more dividends and/or other distributions, which, together with all previous dividends, will have the effect of distributing to the Acquired Fund Shareholders (as defined in paragraph 1.4) substantially all (and in no event less than 98%) of the Acquired Fund's previously undistributed investment company taxable income, if any (computed without regard to any deduction for dividends paid), net exempt-interest income, if any, and net capital gain, if any, for all taxable years (including the current taxable year) ending on or prior to the Effective Time.
1.4 Distribution of Acquiring Fund Shares. At the Effective Time (or as soon thereafter as is reasonably practicable), McMorgan Funds, on behalf of the Acquired Fund, will distribute the Class I Acquiring Fund Shares received from MainStay Funds pursuant to paragraph 1.1, pro rata to the record holders of the McMorgan Fund Class and Class Z shares of the Acquired Fund determined as of the Effective Time (the "ACQUIRED FUND SHAREHOLDERS") in complete liquidation of the Acquired Fund. Such distribution and liquidation will be accomplished, with respect to each class of the Acquired Fund's shares, by the transfer of the Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net asset value of the Class I Acquiring Fund Shares to be so credited to McMorgan Fund Class and Class Z Acquired Fund Shareholders shall, with respect to each class, be equal to the aggregate net asset value of the then outstanding shares of beneficial interest of the Acquired Fund (the "ACQUIRED FUND SHARES") of the corresponding class owned by Acquired Fund Shareholders at the Effective Time. All issued and outstanding shares of the Acquired Fund will simultaneously be redeemed and canceled on the books of the Acquired Fund. The Acquiring Fund shall not issue certificates representing the Class I Acquiring Fund Shares in connection with such exchange.
1.5 Recorded Ownership of Acquiring Fund Shares. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund's Transfer Agent (as defined in paragraph 3.3).
1.6 Filing Responsibilities of Acquired Fund. Any reporting responsibility of the Acquired Fund, including, but not limited to, the responsibility for filing regulatory reports, tax returns, or other documents with the Securities and Exchange Commission ("COMMISSION"), any state securities commission, and any Federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Fund.
ARTICLE II
VALUATION
2.1. Net Asset Value of the Acquired Fund. The net asset values of the McMorgan Fund Class and Class Z Acquired Fund Shares shall be the net asset values computed as of the Effective Time, after the declaration and payment of any dividends and/or other distributions on that date, using the valuation procedures described in the then-current prospectuses and statement of additional information of the Acquiring Fund.
2.2. Net Asset Value of the Acquiring Fund. The net asset value of the Class I Acquiring Fund Shares shall be the net asset value computed as of the Effective Time, after the declaration and payment of any dividends and/or other distributions on that date, using the valuation procedures set forth in the then-current prospectuses and statement of additional information of the Acquiring Fund.
2.3. Calculation of Number of Acquiring Fund Shares. The number of Class I Acquiring Fund Shares to be issued (including fractional shares to the third decimal place, if any) in connection with the Reorganization shall be determined by dividing the value of the net assets of the Acquired Fund attributable to McMorgan Fund Class and Class Z Acquired Fund Shares, determined in accordance with the valuation procedures referred to in paragraph 2.1, by the net asset value per Class I Acquiring Fund Share determined in accordance with the valuation procedures referred to in paragraph 2.2.
2.4. Joint Direction of Calculation. All computations of value with respect to both the Acquired Fund and the Acquiring Fund shall be made by State Street Bank and Trust Company ("STATE STREET"), in its capacity as accounting agent for the Funds. Such computations shall be evaluated by NYLIM, in its capacity as administrator for the Funds, in consultation with McMorgan & Company LLC, the investment adviser to the Acquired Fund. Such computations shall be subject to confirmation by the Acquired Fund's and Acquiring Fund's respective transfer agents and independent accountants.
2.5 Effective Time. The Effective Time shall be the time at which the Funds calculate their net asset values as set forth in their respective prospectuses (normally the close of
regular trading on the New York Stock Exchange ("NYSE")) on the Closing Date (as defined in paragraph 3.1) (the "EFFECTIVE TIME").
ARTICLE III
CLOSING
3.1 Closing. The Reorganization, together with related acts necessary to consummate the same ("CLOSING"), shall occur at NYLIM's principal office on or about November 27, 2007, or at such other place and/or on such other date as to which the parties may agree (the "CLOSING DATE"). All acts taking place at the Closing shall be deemed to take place simultaneously as of the Effective Time.
3.2 Transfer and Delivery of Assets. McMorgan Funds shall direct State Street, as custodian for the Acquired Fund, to deliver, at the Closing, a certificate of an authorized officer stating that (i) the Assets were delivered in proper form to the Acquiring Fund at the Effective Time, and (ii) all necessary taxes in connection with the delivery of the Assets, including all applicable Federal and state stock transfer stamps, if any, have been paid or provision for payment has been made. The Acquired Fund's portfolio securities represented by a certificate or other written instrument shall be presented by State Street, as custodian for the Acquiring Fund, to those persons at State Street who have primary responsibility for the safekeeping of the assets of the Acquiring Fund. Such presentation shall be made for examination no later than five (5) business days preceding the Effective Time, and shall be transferred and delivered by the Acquired Fund as of the Effective Time for the account of the Acquiring Fund duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof. State Street shall deliver to those persons at State Street who have primary responsibility for the safekeeping of the assets of the Acquiring Fund as of the Effective Time by book entry, in accordance with the customary practices of State Street and of each securities depository, as defined in Rule 17f-4 under the Investment Company Act of 1940, as amended (the "1940 ACT"), in which the Acquired Fund's Assets are deposited, the Acquired Fund's Assets deposited with such depositories. The cash to be transferred by the Acquired Fund shall be delivered by wire transfer of Federal funds at the Effective Time.
3.3 Share Records. McMorgan Funds shall direct NYLIM Service Company, LLC, in its capacity as transfer agent for the Acquired Fund (the "TRANSFER AGENT"), to deliver at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of the Acquired Fund Shareholders and the number and percentage ownership of outstanding McMorgan Fund Class and Class Z Acquired Fund Shares owned by each such Acquired Fund Shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver to the Secretary of the Acquired Fund prior to the Effective Time a confirmation evidencing that the appropriate number of Acquiring Fund Shares will be credited to the Acquired Fund at the Effective Time, or provide other evidence satisfactory to the Acquired Fund as of the Effective Time that such Acquiring Fund Shares have been credited to the Acquired Fund's accounts on the books of the Acquiring Fund.
3.4 Postponement of Effective Time. In the event that at the Effective Time
(a) the NYSE or another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund (each, an "EXCHANGE") shall be closed to
trading or trading thereupon shall be restricted, or (b) trading or the
reporting of trading on such Exchange or elsewhere shall be disrupted so that,
in the judgment of the Board of Trustees of McMorgan Funds or the Board of
Trustees of MainStay Funds, accurate appraisal of the value of the net assets of
the Acquired Fund or the Acquiring Fund, respectively, is impracticable, the
Effective Time shall be postponed until the first business day after the day
when trading shall have been fully resumed and reporting shall have been
restored.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of McMorgan Funds. Except as has been fully disclosed to the Acquiring Fund in a written instrument executed by an officer of McMorgan Funds, McMorgan Funds, on behalf of the Acquired Fund, represents and warrants to MainStay Funds, on behalf of the Acquiring Fund, as follows:
(a) The Acquired Fund is a duly established series of McMorgan Funds, which is a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware, with power under McMorgan Funds' Certificate of Trust, Trust Instrument and By-Laws, each as amended from time to time, to own all of its properties and assets and to carry on its business as it is presently conducted.
(b) McMorgan Funds is registered with the Commission as an open-end management investment company under the 1940 Act, and the registration of the McMorgan Fund Class and Class Z Acquired Fund Shares under the Securities Act of 1933, as amended (the "1933 ACT"), is in full force and effect.
(c) No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by McMorgan Funds on behalf of the Acquired Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 ACT"), and the 1940 Act, and such as may be required under state securities laws.
(d) The current prospectuses, statement of additional information, shareholder reports, marketing and other related materials of the Acquired Fund and each prospectus and statement of additional information of the Acquired Fund used at all times prior to the date of this Agreement conforms or conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at the time of its use include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading.
(e) At the Effective Time, McMorgan Funds, on behalf of the Acquired Fund, will have good and marketable title to the Assets and full right, power, and authority to sell, assign, transfer and deliver such Assets hereunder free of any liens or other encumbrances, and upon delivery and payment for such Assets, MainStay Funds, on behalf of the Acquiring Fund, will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the 1933 Act, other than as set forth on Schedule 4.1(e) hereof.
(f) McMorgan Funds is not engaged currently, and the execution, delivery and performance of this Agreement will not result, in (i) a violation of Delaware Law or a material violation of its Certificate of Trust, Trust Instrument and By-Laws, or of any agreement, indenture, instrument, contract, lease or other undertaking to which McMorgan Funds, on behalf of the Acquired Fund, is a party or by which it is bound, or (ii) the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which McMorgan Funds, on behalf of the Acquired Fund, is a party or by which it is bound.
(g) All material contracts or other commitments of the Acquired Fund (other than this Agreement and certain investment contracts, including options, futures, targeted return index securities, forward contracts and other similar instruments) will terminate without liability or obligation to the Acquired Fund on or prior to the Effective Time.
(h) Except as otherwise disclosed to and accepted by MainStay Funds, on behalf of the Acquiring Fund, in writing, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to its knowledge, threatened against the Acquired Fund or any of its properties or assets that, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business. McMorgan Funds, on behalf of the Acquired Fund, knows of no facts which might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions herein contemplated.
(i) The Statement of Assets and Liabilities, Statements of Operations and Changes in Net Assets, and Schedule of Investments of the Acquired Fund at June 30, 2007 have been audited by Tait, Weller & Baker LLP, independent accountants ("TWB"), and are in accordance with accounting principles generally accepted in the United States of America ("GAAP") consistently applied, and such statements (copies of which have been furnished to the Acquiring Fund) present fairly, in all
material respects, the financial condition of the Acquired Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Acquired Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date not disclosed therein.
(j) Since June 30, 2007, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquiring Fund in writing. For the purposes of this subparagraph (j), a decline in net asset value per share of Acquired Fund Shares due to declines in market values of securities held by the Acquired Fund, the discharge of the Acquired Fund's liabilities, or the redemption of the Acquired Fund's shares by shareholders of the Acquired Fund shall not constitute a material adverse change.
(k) At the Effective Time, all Federal and other tax returns, dividend reporting forms, and other tax-related reports of the Acquired Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof to the best of the knowledge of the Acquired Fund, and no such return is currently under audit and no assessment has been asserted with respect to such returns.
(l) For each taxable year of its operation (including the taxable year ending at the Effective Time), the Acquired Fund has met (or will meet) the requirements of Subchapter M of Chapter 1 of the Code for qualification as a regulated investment company, has been (or will be) eligible to and has computed (or will compute) its Federal income tax under Section 852 of the Code, and will have distributed substantially all of its investment company taxable income and net capital gain (as defined in the Code) that has accrued through the Effective Time, and before the Effective Time will have declared dividends sufficient to distribute substantially all of its investment company taxable income and net capital gain for the period ending at the Effective Time.
(m) All of the issued and outstanding shares of the Acquired Fund will, at the time of Closing, be held by the persons and in the amounts set forth in the records of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph 3.3. The Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the shares of the Acquired Fund, nor is there outstanding any security convertible into any of the Acquired Fund's shares.
(n) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Effective Time by all necessary action, if any, on the part of the Trustees of McMorgan Funds, on behalf of the Acquired Fund, and, subject
to the approval of the shareholders of the Acquired Fund, this Agreement will constitute a valid and binding obligation of McMorgan Funds on behalf of the Acquired Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles.
(o) The information to be furnished by the Acquired Fund for use in registration statements, proxy materials and other documents filed or to be filed with any Federal, state or local regulatory authority (including the National Association of Securities Dealers, Inc. (the "NASD")), which may be necessary in connection with the transactions contemplated hereby, shall be accurate and complete in all material respects and shall comply in all material respects with Federal securities and other laws and regulations thereunder applicable thereto.
(p) The combined proxy statement and prospectus (the "PROXY STATEMENT") to be included in the Registration Statement (as defined in paragraph 5.6), insofar as it relates to the Acquired Fund, will, from the effective date of the Registration Statement through the date of the meeting of the Acquired Fund Shareholders contemplated therein and at the Effective Time (i) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading, and (ii) comply in all material respects with the provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the rules and regulations thereunder; provided, however, that the representations and warranties of this subparagraph (p) shall not apply to statements in or omissions from the Proxy Statement and the Registration Statement made in reliance upon and in conformity with information that was furnished by the Acquiring Fund for use therein.
4.2 Representations and Warranties of MainStay Funds. Except as has been fully disclosed to the Acquired Fund in a written instrument executed by an officer of MainStay Funds, MainStay Funds, on behalf of the Acquiring Fund, represents and warrants to McMorgan Funds, on behalf of the Acquired Fund, as follows:
(a) The Acquiring Fund is a duly established series of MainStay Funds, which is a business trust duly organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts with power under its Declaration of Trust and By-Laws, each as amended from time to time, to own all of its properties and assets and to carry on its business as it is presently conducted.
(b) MainStay Funds is registered with the Commission as an open-end management investment company under the 1940 Act, and the registration of the Class I Acquiring Fund Shares under the 1933 Act is in full force and effect.
(c) No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by MainStay Funds on behalf of the
Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities laws.
(d) The current prospectus, statement of additional information, shareholder reports, marketing and other related materials of the Acquiring Fund and each prospectus and statement of additional information of the Acquiring Fund used at all times prior to the date of this Agreement conforms or conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at the time of its use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading.
(e) At the Effective Time, MainStay Funds, on behalf of the Acquiring Fund, will have good and marketable title to the Acquiring Fund's assets, free of any liens or other encumbrances, other than as set forth on Schedule 4.2(e) hereof.
(f) The Acquiring Fund is not engaged currently, and the execution, delivery and performance of this Agreement will not result, in (i) a violation of Massachusetts law or a material violation of MainStay Funds' Declaration of Trust and By-Laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which MainStay Funds, on behalf of the Acquiring Fund, is a party or by which it is bound, or (ii) the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which MainStay Funds, on behalf of the Acquiring Fund, is a party or by which it is bound.
(g) Except as otherwise disclosed to and accepted by McMorgan Funds, on behalf of the Acquired Fund, in writing, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to the Acquiring Fund's knowledge, threatened against MainStay Funds, on behalf of the Acquiring Fund, or any of the Acquiring Fund's properties or assets that, if adversely determined, would materially and adversely affect the Acquiring Fund's financial condition or the conduct of its business. MainStay Funds, on behalf of the Acquiring Fund, knows of no facts which might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects the Acquiring Fund's business or its ability to consummate the transactions herein contemplated.
(h) The Statement of Assets and Liabilities, Statements of Operations and Changes in Net Assets and Schedule of Investments of the Acquiring Fund at October 31, 2006 have been audited by KPMG LLP, independent accountants, and are in accordance with GAAP consistently applied, and such statements (copies of
which have been furnished to the Acquired Fund) present fairly, in all material respects, the financial condition of the Acquiring Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Acquiring Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date not disclosed therein.
(i) Since October 31, 2006, there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquired Fund in writing. For purposes of this subparagraph (i), a decline in net asset value per share of the Acquiring Fund's shares due to declines in market values of securities held by the Acquiring Fund, the discharge of the Acquiring Fund's liabilities, or the redemption of the Acquiring Fund's shares by shareholders of the Acquiring Fund, shall not constitute a material adverse change.
(j) At the Effective Time, all Federal and other tax returns, dividend reporting forms, and other tax-related reports of the Acquiring Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof to the best of the knowledge of the Acquiring Fund, and no such return is currently under audit and no assessment has been asserted with respect to such returns.
(k) For each taxable year of its operation (including the taxable year ending at the Effective Time), the Acquiring Fund has met (or will meet) the requirements of Subchapter M of Chapter 1 of the Code for qualification as a regulated investment company, has been eligible to (or will be eligible to) and has computed (or will compute) its Federal income tax under Section 852 of the Code, and has distributed all of its investment company taxable income and net capital gain (as defined in the Code) for periods ending prior to the Effective Time.
(l) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Effective Time by all necessary action, if any, on the part of the Trustees of MainStay Funds, on behalf of the Acquiring Fund, and this Agreement will constitute a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles.
(m) The Class I Acquiring Fund Shares to be issued and delivered to the Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to the terms of this Agreement, will at the Effective Time have been duly authorized and, when
so issued and delivered, will be duly and validly issued Acquiring Fund Shares, will be fully paid and non-assessable by MainStay Funds, and will have been issued in every jurisdiction in compliance in all material respects with applicable registration requirements and applicable securities laws. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the shares of the Acquiring Fund, nor is there outstanding any security convertible into any of the Acquiring Fund's shares.
(n) The information to be furnished by the Acquiring Fund for use in the registration statements, proxy materials and other documents filed or to be filed with any Federal, state or local regulatory authority (including the NASD) that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with Federal securities and other laws and regulations applicable thereto.
(o) The Proxy Statement to be included in the Registration Statement (and any amendment or supplement thereto), insofar as it relates to the Acquiring Fund and the Acquiring Fund Shares, will, from the effective date of the Registration Statement through the date of the meeting of shareholders of the Acquired Fund contemplated therein and at the Effective Time (i) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading, and (ii) comply in all material respects with the provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the rules and regulations thereunder; provided, however, that the representations and warranties of this subparagraph (o) shall not apply to statements in or omissions from the Proxy Statement and the Registration Statement made in reliance upon and in conformity with information that was furnished by the Acquired Fund for use therein.
4.3 Representation and Warranty of NYLIM. NYLIM represents and warrants to McMorgan Funds, on behalf of the Acquired Fund, and MainStay Funds, on behalf of the Acquiring Fund, that the execution, delivery and performance of this Agreement will have been duly authorized prior to the Effective Time by all necessary action, if any, on the part of NYLIM, and this Agreement will constitute a valid and binding obligation of NYLIM, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Conduct of Business. The Acquiring Fund and the Acquired Fund each will operate its business in the ordinary course consistent with past practice between the date hereof
and the Effective Time, it being understood that such ordinary course of business will include the declaration and payment of customary dividends and distributions, and any other distribution that may be advisable.
5.2 Meeting of Shareholders. McMorgan Funds will call a meeting of the shareholders of the Acquired Fund to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein.
5.3 No Distribution of Acquiring Fund Shares. The Acquired Fund covenants that the Class I Acquiring Fund Shares to be issued hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Agreement.
5.4 Information. The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Acquired Fund Shares.
5.5. Other Necessary Action. Subject to the provisions of this Agreement, the Acquiring Fund and the Acquired Fund will each take, or cause to be taken, all action, and do or cause to be done all things, reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement.
5.6. Proxy Statement/Prospectus and Registration Statement. The Acquired Fund will provide the Acquiring Fund with information regarding the Acquired Fund, and the Acquiring Fund will provide the Acquired Fund with information regarding the Acquiring Fund, reasonably necessary for the preparation of the Proxy Statement to be included in a Registration Statement on Form N-14 (the "REGISTRATION STATEMENT"), in compliance with the 1933 Act, the 1934 Act and the 1940 Act, in connection with the meeting of the shareholders of the Acquired Fund to consider approval of this Agreement and the transactions contemplated herein.
5.7. Liquidating Distribution. As soon as is reasonably practicable after the Closing, the Acquired Fund will make a liquidating distribution to its respective shareholders consisting of the Class I Acquiring Fund Shares received at the Closing.
5.8 Best Efforts. The Acquiring Fund and the Acquired Fund shall each use their reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent set forth in Article VI to effect the transactions contemplated by this Agreement as promptly as practicable.
5.9 Other Instruments. McMorgan Funds, on behalf of the Acquired Fund, and
MainStay Funds, on behalf of the Acquiring Fund, each covenants that it will,
from time to time, as and when reasonably requested by the other party, execute
and deliver or cause to be executed and delivered all such assignments and other
instruments, and will take or cause to be taken such further action as the other
party may reasonably deem necessary or desirable in order to vest in and confirm
(a) McMorgan Funds', on behalf of the Acquired Fund, title to and possession of
the Acquiring Fund Shares to be delivered hereunder, and (b) MainStay Funds', on
behalf of the Acquiring Fund, title to and possession of all the Assets and
otherwise to carry out the intent and purpose of this Agreement.
5.10 Regulatory Approvals. The Acquiring Fund will use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state blue sky or securities laws as may be necessary in order to continue its operations after the Effective Time.
5.11 Waiver and Reimbursement of Acquiring Fund Fees and Expenses. For a period of two years after the Closing Date, NYLIM will, by waiving, assuming or reimbursing expenses, or otherwise, limit the expenses of Class I shares of the Acquiring Fund so that the total ordinary operating expenses (total operating expenses excluding underlying fund expenses, taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses related to the purchase or sale of portfolio investments) of such Class I shares do not exceed the annual rate of 0.75% of the average daily net assets attributable to such Class I shares.
5.12 Board Information. NYLIM represents, warrants and covenants to McMorgan Funds that the information provided by NYLIM to the Board of Trustees of McMorgan Funds in connection with its review of the Reorganization is materially accurate and complete and that, to the best of its knowledge, NYLIM has provided all information concerning McMorgan Funds, MainStay Funds and the Reorganization it believes is reasonably necessary for the Board of Trustees of McMorgan Funds to evaluate the Reorganization.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent to Obligations of Acquired Fund. The obligations of McMorgan Funds, on behalf of the Acquired Fund, to consummate the transactions provided for herein shall be subject, at McMorgan Funds' election, to the following conditions:
(a) All representations and warranties of MainStay Funds, on behalf of the Acquiring Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Effective Time, with the same force and effect as if made on and as of the Effective Time.
(b) MainStay Funds, on behalf of the Acquiring Fund, shall have delivered to the Acquired Fund a certificate executed in the name of the Acquiring Fund by its President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to McMorgan Funds, and dated as of the Effective Time, to the effect that the representations and warranties of MainStay Funds, on behalf of the Acquiring Fund, made in this Agreement are true and correct at and as of the Effective Time, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as McMorgan Funds shall reasonably request.
(c) MainStay Funds, on behalf of the Acquiring Fund, shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by MainStay Funds, on behalf of the Acquiring Fund, on or before the Effective Time.
(d) The Acquired Fund and the Acquiring Fund shall have agreed on the number of full and fractional Class I Acquiring Fund Shares to be issued in connection with the Reorganization after such number has been calculated in accordance with paragraph 2.3.
(e) At or before the Effective Time, the Acquired Fund shall have received the Statement of Assets and Liabilities, Statements of Operations and Changes in Net Assets, and Schedule of Investments of the Acquired Fund for the fiscal year ended October 31, 2007 that have been audited by TWB (the "AUDITED OCTOBER 31, 2007 FINANCIAL STATEMENTS"), and a certification from TWB that: (1) TWB has performed a review of subsequent events from October 31, 2007 through the period ending on the day immediately before the date when the Effective Time occurs in a manner consistent with GAAP and other applicable accounting principles and standards, and (2) the subsequent events review did not reveal any additional information, events or basis requiring or necessitating the addition, deletion or other modification to the Audited October 31, 2007 Financial Statements or notes thereto.
(f) The Acquiring Fund shall have declared and paid a distribution or distributions prior to the Closing that, together with all previous distributions, shall have the effect of distributing to its shareholders: (i) substantially all of its investment company taxable income, net tax-exempt interest income, if any, and all net realized capital gains, if any, for the fiscal year ended October 31, 2007; and (ii) any undistributed investment company taxable income, net tax-exempt interest income, and net realized capital gains from any period to the extent not otherwise already distributed.
6.2 Conditions Precedent to Obligations of Acquiring Fund. The obligations of MainStay Funds, on behalf of the Acquiring Fund, to complete the transactions provided for herein shall be subject, at MainStay Funds' election, to the following conditions:
(a) All representations and warranties of McMorgan Funds, on behalf of the Acquired Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Effective Time, with the same force and effect as if made on and as of the Effective Time.
(b) McMorgan Funds shall have delivered to the Acquiring Fund a statement of the Acquired Fund's Assets and Liabilities, as of the Effective Time, that is prepared in accordance with GAAP and certified by the Treasurer of McMorgan Funds.
(c) McMorgan Funds, on behalf of the Acquired Fund, shall have delivered to the Acquiring Fund a certificate executed in the name of the Acquired Fund by its President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the Acquiring Fund and dated as of the Effective Time, to the effect that the representations and
warranties of McMorgan Funds, on behalf of the Acquired Fund, made in this Agreement are true and correct at and as of the Effective Time, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as MainStay Funds shall reasonably request.
(d) McMorgan Funds, on behalf of the Acquired Fund, shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by McMorgan Funds, on behalf of the Acquired Fund, on or before the Effective Time.
(e) The Acquired Fund and the Acquiring Fund shall have agreed on the number of full and fractional Class I Acquiring Fund Shares to be issued in connection with the Reorganization after such number has been calculated in accordance with paragraph 2.3.
(f) The Acquired Fund shall have declared and paid a distribution or distributions prior to the Closing that, together with all previous distributions, shall have the effect of distributing to its shareholders: (i) substantially all of its investment company taxable income, net tax-exempt interest income, if any, and all net realized capital gains, if any, for the period from the close of its last fiscal year to the Effective Time; and (ii) any undistributed investment company taxable income, net tax-exempt interest income, and net realized capital gains from any period to the extent not otherwise already distributed.
6.3 Other Conditions Precedent. If any of the conditions set forth in this paragraph 6.3 have not been satisfied on or before the Effective Time, McMorgan Funds, on behalf of the Acquired Fund, or MainStay Funds, on behalf of the Acquiring Fund, shall, at its option, not be required to consummate the transactions contemplated by this Agreement.
(a) The Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with the provisions of McMorgan Funds' Certificate of Trust, Trust Instrument and By-Laws, applicable Delaware law and the 1940 Act and the regulations thereunder, and certified copies of the resolutions evidencing such approval shall have been delivered to the Acquiring Fund. Notwithstanding anything herein to the contrary, McMorgan Funds and MainStay Funds, on behalf of either the Acquired Fund or the Acquiring Fund, respectively, may not waive the conditions set forth in this paragraph 6.3(a).
(b) At the Effective Time, no action, suit or other proceeding shall be pending or, to the knowledge of McMorgan Funds or MainStay Funds, threatened before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein.
(c) All consents of other parties and all other consents, orders and permits of Federal, state and local regulatory authorities deemed necessary by McMorgan Funds and MainStay Funds to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Acquired Fund, provided that either party hereto may for itself waive any of such conditions.
(d) The Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act.
(e) McMorgan Funds and MainStay Funds shall have received an opinion of Sutherland Asbill & Brennan LLP ("SUTHERLAND") as to federal income tax matters (the "TAX OPINION") substantially to the effect that, based on the facts, representations, assumptions stated therein and conditioned on consummation of the Reorganization in accordance with this Agreement, for federal income tax purposes:
(1) The Reorganization will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and the Acquired Fund and the Acquiring Fund each will be a "party to a reorganization" within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by the Acquired Fund (a) on
the transfer of its Assets to the Acquiring Fund in exchange
solely for shares of the Acquiring Fund and the Acquiring Fund's
assumption of the Liabilities (if any) of the Acquired Fund, and
(b) the subsequent distribution by the Acquired Fund of those
shares to the shareholders of the Acquired Fund.
(3) No gain or loss will be recognized by the Acquiring Fund on receipt of the Assets transferred to it by the Acquired Fund in exchange for shares of the Acquiring Fund and the assumption of the Liabilities (if any) of the Acquired Fund.
(4) The Acquiring Fund's basis in the Assets received from the Acquired Fund will be the same as the Acquired Fund's basis in those assets immediately prior to the Reorganization.
(5) The Acquiring Fund's holding period for the transferred Assets will include the Acquired Fund's holding period therefor.
(6) No gain or loss will be recognized by the Acquired Fund Shareholders on the exchange of their shares of the Acquired Fund solely for shares of the Acquiring Fund.
(7) An Acquired Fund Shareholder's basis in the Acquiring Fund Shares received in the Reorganization will be the same as the adjusted basis of the shares of the Acquired Fund surrendered in exchange therefor.
(8) An Acquired Fund Shareholder's holding period in the shares of the Acquiring Fund received in the Reorganization will include the Acquired Fund Shareholder's holding period for the Acquired Fund Shares surrendered in exchange therefor, provided such Acquired Fund Shares were held as capital assets at the Effective Time.
Notwithstanding this paragraph 6.3(e), the Tax Opinion may state that no opinion is expressed as to the effect of the Reorganization on the Acquired Fund or the Acquiring Funds or any shareholder thereof with respect to (a) any Asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting, or (b) the payment by any party of transaction expenses incurred in connection with the Reorganization, except in relation to the qualification of the transfer of the Acquired Fund's assets to the Acquiring Fund as a reorganization under Section 368(a) of the Code.
Notwithstanding anything herein to the contrary, McMorgan Funds and MainStay Funds, on behalf of either the Acquired Fund or the Acquiring Fund, respectively, may not waive the condition set forth in this paragraph 6.3(e).
(f) State Street shall have delivered such certificates or other documents as set forth in paragraph 3.2.
(g) The Transfer Agent shall have delivered to MainStay Funds a certificate of its authorized officer as set forth in paragraph 3.3.
(h) The Acquiring Fund shall have issued and delivered to the Secretary of the Acquired Fund the confirmation as set forth in paragraph 3.3.
(i) Each party shall have delivered to the other such bills of sale, checks, assignments, receipts or other documents as reasonably requested by such other party or its counsel.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by MainStay Funds. MainStay Funds, solely out of the Acquiring Fund's assets and property, agrees to indemnify and hold harmless McMorgan Funds, the Acquired Fund, and their trustees, officers, employees and agents (the "MCMORGAN INDEMNIFIED PARTIES") from and against any and all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which the McMorgan Indemnified Parties may become subject, insofar as such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on any breach by the Acquiring Fund of any of its representations, warranties, covenants or agreements set forth in this Agreement, provided that this indemnification shall not apply to
the extent such loss, claim, damage, liability or expense (or actions with respect thereto) shall be due to any negligent, intentional or fraudulent act, omission or error of the Acquired Fund, or its respective trustees, officers or agents.
7.2 Indemnification by McMorgan Funds. McMorgan Funds, solely out of the Acquired Fund's assets and property, agrees to indemnify and hold harmless MainStay Funds, the Acquiring Fund, and their trustees, officers, employees and agents (the "MAINSTAY INDEMNIFIED PARTIES") from and against any and all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which the MainStay Indemnified Parties may become subject, insofar as such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on any breach by the Acquired Fund of any of its representations, warranties, covenants or agreements set forth in this Agreement, provided that this indemnification shall not apply to the extent such loss, claim, damage, liability or expense (or actions with respect thereto) shall be due to any negligent, intentional or fraudulent act, omission or error of the Acquiring Fund, or its respective trustees, officers or agents.
7.3 Liability of McMorgan Funds. MainStay Funds understands and agrees that the obligations of McMorgan Funds on behalf of the Acquired Fund under this Agreement shall not be binding upon any trustee, shareholder, nominee, officer, agent or employee of McMorgan Funds on behalf of McMorgan Funds personally, but bind only McMorgan Funds on behalf of the Acquired Fund and the Acquired Fund's property. Moreover, no series of McMorgan Funds other than the Acquired Fund shall be responsible for the obligations of McMorgan Funds hereunder, and all persons shall look only to the assets of the Acquired Fund to satisfy the obligations of the Acquired Fund hereunder. MainStay Funds represents that it has notice of the provisions of the Trust Instrument of McMorgan Funds disclaiming shareholder and trustee liability for acts or obligations of the Acquired Fund.
7.4 Liability of MainStay Funds. McMorgan Funds understands and agrees that the obligations of MainStay Funds on behalf of the Acquiring Fund under this Agreement shall not be binding upon any trustee, shareholder, nominee, officer, agent or employee of MainStay Funds on behalf of MainStay Funds personally, but bind only MainStay Funds on behalf of the Acquiring Fund and the Acquiring Fund's property. Moreover, no series of MainStay Funds other than the Acquiring Fund shall be responsible for the obligations of MainStay Funds hereunder, and all persons shall look only to the assets of the Acquiring Fund to satisfy the obligations of the Acquiring Fund hereunder. MainStay Funds represents that it has notice of the provisions of the Declaration of Trust of MainStay Funds disclaiming shareholder and trustee liability for acts or obligations of the Acquiring Fund.
ARTICLE VIII
BROKERAGE FEES AND EXPENSES
8.1 No Broker or Finder Fees. The Acquiring Fund and the Acquired Fund, represent and warrant to each other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein.
8.2 Expenses of Reorganization. The expenses relating to the proposed Reorganization will be borne by NYLIM whether or not the Reorganization is consummated. No such expenses shall be borne by the Acquiring Fund and the Acquired Fund, except for brokerage fees and expenses incurred by the Acquired Fund in connection with the purchase or sale of portfolio securities of the Acquired Fund. The costs of the Reorganization shall include, but not be limited to, preparation of the Registration Statement and related amendments and supplements to the registration statements on Form N-1A of the Acquired Fund and Acquiring Fund, printing and distributing the Proxy Statement/Prospectus, legal fees, accounting fees, securities registration fees, the expenses of holding shareholders' meetings, transfer taxes (if any), the fees of proxy solicitors, banks, brokers, custodians and transfer agents, the termination of the Acquired Fund and McMorgan Funds, the deregistration of McMorgan Funds, all expenses incurred by the Acquired Fund following the Closing (including, but not limited to, those relating to the reporting responsibilities of the Acquired Fund), and any and all other fees and expenses incurred with respect to the transactions contemplated herein. Notwithstanding any of the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by another person of such expenses would result in the disqualification of such party as a "regulated investment company" within the meaning of Section 851 of the Code.
ARTICLE IX
AMENDMENTS AND TERMINATION
9.1 Amendments. This Agreement may be amended, modified or supplemented in such manner as may be deemed necessary or advisable by the authorized officers of McMorgan Funds or MainStay Funds, on behalf of either the Acquired Fund or the Acquiring Fund, respectively; provided, however, that following the approval of this Agreement by the shareholders of the Acquired Fund pursuant to paragraph 6.3(a) of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of Class I Acquiring Fund Shares to be issued to the McMorgan Fund Class and Class Z Acquired Fund Shareholders, respectively, under this Agreement to the detriment of such shareholders without their further approval.
9.2 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned by resolution of the Board of Trustees of McMorgan
Funds or the Board of Trustees of MainStay Funds, on behalf of the Acquired Fund or the Acquiring Fund, respectively, at any time prior to the Effective Time, if circumstances should develop that, in the opinion of such Board of Trustees, make proceeding with the Agreement inadvisable. The provisions of Article VIII shall survive any termination of this Agreement.
ARTICLE X
NOTICES
Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by facsimile, electronic delivery (i.e., e-mail) personal service or prepaid or certified mail addressed as follows:
If to McMorgan Funds:
McMorgan Funds
One Bush Street, Suite 800
San Francisco, California 94104
Attention: Teresa Matzelle
Telephone No.: (415) 616-9372
Facsimile No.: (415) 616-9300
Email: tmatzelle@mcmorgan.com
With copies (which shall not constitute notice) to:
New York Life Investment Management LLC
169 Lackawanna Avenue
Parsippany, New Jersey 07054
Attention: Marguerite E. H. Morrison, Esq.
Telephone No.: (973) 394-4437
Facsimile No.: (973) 394-4637
Email: marguerite_morrison@nylim.com
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, NW
Washington, D.C. 20004
Attn: Bibb L. Strench, Esq.
Telephone No.: (202) 383-0509
Facsimile No.: (202) 637-3593
Email: bibb.strench@sablaw.com
Howard Rice Nemerovski Canady Falk & Rabkin, A Professional
Corporation Three Embarcadero Center, Seventh Floor
San Francisco, California 94111
Attn: Andre W. Brewster, Esq.
Telephone No.: (415) 399-3020
Facsimile No.: (415) 217-5910
Email: abrewster@howardrice.com
If to MainStay Funds:
The MainStay Funds
51 Madison Avenue
New York, New York 10010
Attention: Marguerite E. H. Morrison, Esq.
Telephone No.: (973) 394-4437
Facsimile No.: (973) 394-4637
Email: marguerite_morrison@nylim.com
With a copy (which shall not constitute notice) to:
Dechert LLP
1775 I Street, N.W.
Washington, D.C. 20006
Attn: Sander M. Bieber, Esq.
Telephone No.: (202) 261-3308
Facsimile No.: (202) 261-3333
Email: sander.bieber@dechert.com
If to NYLIM:
New York Life Investment Management LLC
169 Lackawanna Avenue
Parsippany, New Jersey 07054
Attention: Marguerite E. H. Morrison, Esq.
Telephone No.: (973) 394-4437
Facsimile No.: (973) 394-4637
Email: marguerite_morrison@nylim.com
With copies (which shall not constitute notice) to:
Dechert LLP
1775 I Street, N.W.
Washington, D.C. 20006
Attn: Sander M. Bieber, Esq.
Telephone No.: (202) 261-3308
Facsimile No.: (202) 261-3333
Email: sander.bieber@dechert.com
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement. MainStay Funds and McMorgan Funds agree that they have not made any representation, warranty or covenant, on behalf of either the Acquiring Fund or the Acquired Fund, respectively, not set forth herein, and that this Agreement, together with the letter agreement dated November __, 2007 between NYLIM and the McMorgan Funds, constitute the entire agreement between the parties.
11.2 Survival. The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith, and the obligations with respect to indemnification of the Acquired Fund and Acquiring Fund contained in paragraphs 7.1 and 7.2, shall survive the Closing.
11.3 Headings. The Article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its principles of conflicts of laws.
11.5 Assignment. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
11.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all taken together shall constitute one agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the ___ day of _________, 2007.
THE MAINSTAY FUNDS MCMORGAN FUNDS
ON BEHALF OF THE ACQUIRING FUND ON BEHALF OF THE ACQUIRED FUND
By: By:
--------------------------------- ------------------------------------
Name: Name:
------------------------------- ----------------------------------
Title: Title:
------------------------------ ---------------------------------
|
Solely for purposes of paragraphs 4.3, 5.11, 5.12 and 8.2:
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
SCHEDULE 4.1(E)
Transfer Restrictions on the Assets Pursuant to Paragraph 4.1(e)
SCHEDULE 4.2(E)
Transfer Restrictions on the Acquiring Fund's Assets Pursuant to Paragraph 4.2(e)
EXHIBIT B
FINANCIAL HIGHLIGHTS OF THE MAINSTAY FUND
The financial highlights tables are intended to help you understand the MainStay Fund's financial performance for the past five fiscal years. Certain information reflects financial results for a single MainStay Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the MainStay Fund (assuming reinvestment of all dividends and capital gain distributions and excluding all sales charges). The information for the MainStay Fund for the years ended October 31, 2006, 2005 and 2004, has been audited by KPMG LLP, whose report, along with the Funds' financial statements, is included in the annual reports, which are available upon request. For all prior periods ended on or before October 31, 2003, the information provided was audited by another auditor.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A
--------------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2003*
ENDED THROUGH YEAR ENDED
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2007*** 2006 2005 2004 2003 2002 2001
Net asset value at beginning
of period $ 14.66 $ 12.62 $ 11.41 $ 10.69 $ 9.02 $ 12.12 $ 14.74
---------- ------- ------- ------- ----------- ------- -------
Net investment income (loss)
(a) 0.03 0.09 0.08(b) (0.01) (0.01) (0.02) (0.05)
Net realized and unrealized
gain (loss) on investments 1.17 1.97 1.13 0.73 1.68 (3.08) (2.57)
---------- ------- ------- ------- ----------- ------- -------
Total from investment
operations 1.20 2.06 1.21 0.72 1.67 (3.10) (2.62)
---------- ------- ------- ------- ----------- ------- -------
Less dividends and
distributions:
From net investment income (0.06) (0.02) -- -- -- -- --
From net realized gain on
investments (0.28) -- -- -- -- -- --
---------- ------- ------- ------- ----------- ------- -------
Total dividends and
distributions (0.34) (0.02) -- -- -- -- --
---------- ------- ------- ------- ----------- ------- -------
Net asset value at end of
period $ 15.52 $ 14.66 $ 12.62 $ 11.41 $ 10.69 $ 9.02 $ 12.12
========== ======= ======= ======= =========== ======= =======
Total investment return (c) 8.20%(d) 16.43% 10.60% 6.74% 18.51% (d) (25.58%) (17.77%)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.47%+ 0.63% 0.67%(b) (0.05%) (0.06%)+ (0.24%) (0.42%)
Net expenses 1.30%+ 1.30% 1.38% 1.65% 1.65%+ 1.65% 1.58%
Expenses (before
waiver/reimbursement) 1.53%+ 1.60% 1.72% 1.77% 1.86%+ 1.75% 1.58%
Portfolio turnover rate 61% 144% 105% 136% 71% 130% 95%
Net assets at end of period
(in 000's) $42,324 $38,940 $35,886 $34,957 $38,313 $28,639 $31,389
|
CLASS C
---------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2003*
ENDED THROUGH YEAR ENDED
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2007*** 2006 2005 2004 2003 2002 2001
Net asset value at beginning
of period $13.79 $11.94 $10.87 $10.25 $ 8.71 $11.79 $14.45
---------- ------ ------ ------ ----------- ------ ------
Net investment income (loss)
(a) (0.02) (0.01) (0.01)(b) (0.09) (0.06) (0.10) (0.15)
Net realized and unrealized
gain (loss) on investments 1.09 1.86 1.08 0.71 1.60 (2.98) (2.51)
---------- ------ ------ ------ ----------- ------ ------
Total from investment
operations 1.07 1.85 1.07 0.62 1.54 (3.08) (2.66)
---------- ------ ------ ------ ----------- ------ ------
Less distributions:
From net investment income -- -- -- -- -- -- --
From net realized gain on
investments (0.28) -- -- -- -- -- --
---------- ------ ------ ------ ----------- ------ ------
Total dividends and
distributions (0.28) -- -- -- -- -- --
---------- ------ ------ ------ ----------- ------ ------
Net asset value at end of
period $14.58 $13.79 $11.94 $10.87 $10.25 $ 8.71 $11.79
========== ====== ====== ====== =========== ====== ======
Total investment return (c) 7.85% (d) 15.49% 9.84% 6.05% 17.68% (d) (26.12%) (18.41%)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.28%)+ (0.09%) (0.08%)(b) (0.80%) (0.81%)+ (0.99%) (1.17%)
Net expenses 2.05%+ 2.05% 2.13% 2.40% 2.40%+ 2.40% 2.33%
Expenses (before
waiver/reimbursement) 2.28%+ 2.35% 2.47% 2.52% 2.61%+ 2.50% 2.33%
Portfolio turnover rate 61% 144% 105% 136% 71% 130% 95%
Net assets at end of period
(in 000's) $3,555 $3,254 $3,045 $2,926 $2,429 $1,724 $1,683
|
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of operations.
*** Unaudited
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Net investment income and the ratio of net investment income includes $0.03 per share and
0.24%, for Class A, Class B and Class C, respectively as a result of a special one time
dividend from Microsoft Corp.
(c) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(d) Total return is not annualized.
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS B
--------------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2003*
ENDED THROUGH YEAR ENDED
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2007*** 2006 2005 2004 2003 2002 2001
$ 13.80 $ 11.94 $ 10.87 $ 10.26 $ 8.71 $ 11.79 $ 14.45
---------- ------- ------- ------- ----------- ------- -------
(0.02) (0.01) (0.01)(b) (0.09) (0.06) (0.10) (0.15)
1.08 1.87 1.08 0.70 1.61 (2.98) (2.51)
---------- ------- ------- ------- ----------- ------- -------
1.06 1.86 1.07 0.61 1.55 (3.08) (2.66)
---------- ------- ------- ------- ----------- ------- -------
-- -- -- -- -- -- --
(0.28) -- -- -- -- -- --
---------- ------- ------- ------- ----------- ------- -------
(0.28) -- -- -- -- -- --
---------- ------- ------- ------- ----------- ------- -------
$ 14.58 $ 13.80 $ 11.94 $ 10.87 $ 10.26 $ 8.71 $ 11.79
========== ======= ======= ======= =========== ======= =======
7.77% (d) 15.58% 9.84% 5.95% 17.80% (d) (26.12%) (18.41%)
(0.26%)+ (0.05%) (0.08%)(b) (0.80%) (0.81%)+ (0.99%) (1.17%)
2.05%+ 2.05% 2.13% 2.40% 2.40%+ 2.40% 2.33%
2.28%+ 2.35% 2.47% 2.52% 2.61%+ 2.50% 2.33%
61% 144% 105% 136% 71% 130% 95%
$37,826 $39,024 $50,815 $53,640 $53,946 $48,434 $73,048
|
CLASS I
---------------------------------------------------
DECEMBER 28,
SIX MONTHS 2004**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2007*** 2006 2005
$ 14.73 $ 12.68 $ 12.25
---------- ----------- ------------
0.08 0.17 0.10
1.17 1.99 0.33
---------- ----------- ------------
1.25 2.16 0.43
---------- ----------- ------------
(0.15) (0.11) --
(0.28) -- --
---------- ----------- ------------
(0.43) (0.11) --
---------- ----------- ------------
$ 15.55 $ 14.73 $ 12.68
========== =========== ============
8.57%(d) 17.19% 3.51%(d)
1.13%+ 1.24% 0.94%+
0.62%+ 0.66% 0.76%+
0.88%+ 0.96% 1.10%+
61% 144% 105%
$188,260 $133,818 $69,177
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
EXHIBIT C
PRINCIPAL SHAREHOLDERS OF THE FUNDS
As of the Record Date, the following persons owned of record or beneficially 5% or more of the outstanding shares of a class of the McMorgan Fund or MainStay Fund:
[INSERT TABLE]
PART B
THE MAINSTAY FUNDS
MAINSTAY COMMON STOCK FUND
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER [24], 2007
Acquisition of the Assets and Liabilities of: By and in Exchange for Shares of:
McMorgan Equity Investment Fund MainStay Common Stock Fund
("McMorgan Fund") ("MainStay Fund")
(a series of McMorgan Funds) (a series of The MainStay Funds)
One Bush Street, Suite 800 51 Madison Avenue
San Francisco, California 94104 New York, New York 10010
|
This Statement of Additional Information ("SAI") is available to the shareholders of the McMorgan Fund in connection with a proposed transaction governed by an Agreement and Plan of Reorganization providing for (i) the acquisition of all of the assets and the assumption of the known liabilities of the McMorgan Fund by the MainStay Fund, in exchange for Class I shares of the MainStay Fund having an aggregate net asset value equal to the aggregate net asset value of the shares of the McMorgan Fund, (ii) the distribution of such Class I shares to the shareholders of the McMorgan Fund in exchange for the McMorgan Fund Class and Class Z shares of the McMorgan Fund held by such shareholders, and (iii) the subsequent liquidation and dissolution of the McMorgan Fund (such transactions are collectively referred to as the "Reorganization").
This SAI is not a prospectus and should be read only in conjunction with the Proxy Statement/Prospectus dated September [24], 2007 (the "Proxy Statement/Prospectus") relating to the above-referenced matter. This SAI is incorporated by reference in and is made a part of the Proxy Statement/Prospectus. The Proxy Statement/Prospectus is available without charge by writing NYLIFE Distributors LLC, attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054, or by calling toll-free 1-800-MAINSTAY (1-800-624-6782).
This SAI includes the accompanying pro forma financial statements and related notes and also incorporates by reference the following documents, each of which was filed electronically with the Securities and Exchange Commission and is incorporated by reference herein:
1. The Statement of Additional Information of the McMorgan Funds, dated November 3, 2006, as supplemented (File Nos. 33-75708, 811-08370);
2. The audited financial statements of the McMorgan Fund as included in the Annual Report to Shareholders of the McMorgan Fund for the fiscal year ended June 30, 2007;
3. The Statement of Additional Information for The Mainstay Funds, dated March 1, 2007, as supplemented (File Nos. 33-02610, 811-04550);
4. The financial statements of the Mainstay Fund as included in the Annual Report to Shareholders of the MainStay Fund for the fiscal year ended October 31, 2006; and
5. The unaudited financial statements of the Mainstay Fund as included in the Semi-Annual Report to Shareholders of the Mainstay Fund for the period ended April 30, 2007.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Shown below are financial statements for each Fund and pro forma financial statements for the combined MainStay Fund, assuming the Reorganization is consummated, as of April 30, 2007. The first table presents Portfolio of Investments for each Fund and estimated pro forma figures for the combined MainStay Fund. The second table presents Statements of Assets and Liabilities for each Fund and estimated pro forma figures for the combined MainStay Fund. The third table presents Statements of Operations for each Fund and estimated pro forma figures for the combined MainStay Fund. The tables are followed by the Notes to the Pro Forma Financial Statements.
REORGANIZATION BETWEEN MAINSTAY COMMON STOCK AND MCMORGAN EQUITY INVESTMENT
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
AT APRIL 30, 2007 (UNAUDITED)
MCMORGAN
MAINSTAY COMMON STOCK EQUITY INVESTMENT PRO FORMA FUND
------------------------ ------------------------ ------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------ ---------- ------------
COMMON STOCKS (99.0%) +
AEROSPACE & DEFENSE (3.1%)
Boeing Co. (The) 34,730 $ 3,229,890 27,707 $ 2,576,752 62,437 $ 5,806,642
Honeywell International, Inc. 5,760 312,077 30,519 1,653,519 36,279 1,965,596
L-3 Cummunications Holdings,
Inc. 2,997 269,520 2,997 269,520
Lockheed Martin Corp. 24,406 2,346,393 17,806 1,711,869 42,212 4,058,262
Raytheon Co. 31,032 1,661,453 22,268 1,192,229 53,300 2,853,682
United Technologies Corp. 1,208 81,093 1,208 81,093
------------ ------------ ------------
7,549,813 7,484,982 15,034,795
------------ ------------ ------------
AUTO COMPONENTS (0.1%)
ArvinMeritor, Inc. ++(a)** 5,221 107,814 3,452 71,284 8,673 179,098
Bandag, Inc. 80 4,035 80 4,035
Goodyear Tire & Rubber Co.
(The) ++(b)** 2,512 83,549 2,512 83,549
Lear Corp. ++(b)** 2,660 97,675 2,689 98,740 5,349 196,415
Modine Manufacturing Co. 200 4,626 200 4,626
------------ ------------ ------------
205,489 262,234 467,723
------------ ------------ ------------
AUTOMOBILES (0.4%)
Ford Motor Co. ++(a)** 86,469 695,211 83,372 670,311 169,841 1,365,522
Harley-Davidson, Inc. ++(a)** 3,258 206,297 1,575 99,729 4,833 306,026
Thor Industries, Inc. ++(a)** 1,331 53,014 1,711 68,149 3,042 121,163
------------ ------------ ------------
954,522 838,189 1,792,711
------------ ------------ ------------
BEVERAGES (0.6%)
Coca-Cola Co. (The) 6,105 318,620 4,855 253,382 10,960 572,002
Coca-Cola Enterprises, Inc. ++(a)** 14,412 316,199 8,554 187,675 22,966 503,874
Molson Coors Brewing Co.
Class B 6,578 620,174 2,313 218,070 8,891 838,244
PepsiAmericas, Inc. 6,535 214,413 6,535 214,413
Pepsi Bottling Group, Inc.
(The) 2,505 82,189 2,355 56,850 4,860 139,039
PepsiCo, Inc. 6,859 453,311 5,479 362,107 12,338 815,418
------------ ------------ ------------
1,790,493 1,292,497 3,082,990
------------ ------------ ------------
BIOTECHNOLOGY (0.0%) @
Amgen, Inc. ++(b)** 126 8,082 123 7,889 249 15,971
MedImmune, Inc. ++(b)** 554 31,401 397 22,502 951 53,903
------------ ------------ ------------
39,483 30,391 69,874
------------ ------------ ------------
BUILDING PRODUCTS (0.4%)
American Standard, Inc. 903 49,719 903 49,719
Masco Corp. ++(a)** 55,534 1,511,080 19,675 535,357 75,209 2,046,437
------------ ------------ ------------
1,511,080 585,076 2,096,156
------------ ------------ ------------
CAPITAL MARKETS (7.6%)
Ameriprise Financial, Inc. 29,036 1,726,771 10,517 625,446 39,553 2,352,217
Bank of New York Co., Inc.
(The) 106,904 4,327,474 59,835 2,422,121 166,739 6,749,595
Bear Stearns Cos., Inc. (The) ++(a)** 1,676 260,953 753 117,242 2,429 378,195
Charles Schwab Corp. (The) 94,604 1,808,828 44,358 848,125 138,962 2,656,953
Franklin Resources, Inc. 8,805 1,156,185 3,279 430,565 12,084 1,586,750
Goldman Sachs Group, Inc.
(The) 16,442 3,594,386 12,906 2,821,381 29,348 6,415,767
Investors Financial Services
Corp. 2,374 146,903 2,374 146,903
Janus Capital Group, Inc. 920 23,018 920 23,018
Lehman Brothers Holdings, Inc. 28,803 2,168,290 7,722 581,312 36,525 2,749,602
Merrill Lynch & Co., Inc. 36,751 3,316,043 29,257 2,639,859 66,008 5,955,902
Morgan Stanley 42,253 3,549,674 32,255 2,709,743 74,508 6,259,417
Northern Trust Corp. 23,489 1,478,633 8,418 529,913 31,907 2,008,546
------------ ------------ ------------
23,387,237 13,895,628 37,282,865
------------ ------------ ------------
CHEMICALS (0.8%)
Albemarle Corp. 6,841 290,400 3,921 166,446 10,762 456,846
Ashland, Inc. 8,004 479,840 2,815 168,759 10,819 648,599
Cabot Corp. 2,047 92,729 2,047 92,729
Chemtura Corp. 5,966 65,805 5,966 65,805
Dow Chemical Co. (The) 12,670 565,209 12,670 565,209
Eastman Chemical Co. ++(a)** 2,058 139,327 2,058 139,327
FMC Corp. 443 34,080 712 54,774 1,155 88,854
International Flavors &
Fragrances, Inc. 1,968 95,783 1,968 95,783
Lubrizol Corp. (The) 3,199 191,748 3,199 191,748
Lyondell Chemical Co. 21,173 658,904 10,575 329,094 31,748 987,998
Monsanto Co. 5,115 301,734 5,115 301,734
PPG Industries, Inc. 912 67,105 912 67,105
Scotts Miracle-Gro Co. (The)
Class A 601 27,027 297 13,356 898 40,383
Sensient Technologies Corp. 2,252 58,957 2,252 58,957
Valspar Corp. (The) 659 17,819 659 17,819
------------ ------------ ------------
1,490,251 2,328,645 3,818,896
------------ ------------ ------------
COMMERCIAL BANKS (1.8%)
Associated Banc-Corp. 1,698 54,981 3,285 106,368 4,983 161,349
BB&T Corp. 6,522 271,446 3,506 145,920 10,028 417,366
City National Corp. 1,275 93,356 1,275 93,356
Comerica, Inc. 7,109 440,118 7,109 440,118
Cullen/Frost Bankers, Inc. 365 18,677 365 18,677
Huntington Bancshares, Inc. ++(a)** 10,188 225,970 10,188 225,970
National City Corp. ++(a)** 20,296 741,819 20,296 741,819
PNC Financial Services Group,
Inc. 26,271 1,946,681 15,998 1,185,452 42,269 3,132,133
TCF Financial Corp. 1,471 39,835 2,830 76,636 4,301 116,471
Wachovia Corp. 8,372 464,981 6,704 372,340 15,076 837,321
Wells Fargo & Co. 30,912 1,109,432 35,995 1,291,861 66,907 2,401,293
------------ ------------ ------------
3,887,356 4,698,517 8,585,873
------------ ------------ ------------
|
COMMERCIAL SERVICES & SUPPLIES
(0.5%)
Allied Waste Industries, Inc. 1,317 17,608 1,317 17,608
Avery Dennison Corp. 611 38,004 611 38,004
ChoicePoint, Inc. ++(b)** 2,934 111,404 2,934 111,404
Deluxe Corp. 4,010 151,778 2,539 96,101 6,549 247,879
Dun & Bradstreet Corp. 3,052 275,596 3,052 275,596
Equifax, Inc. 3,088 122,902 3,088 122,902
HNI Corp. 246 10,268 246 10,268
Kelly Services, Inc. Class A 378 10,849 378 10,849
Korn/Ferry International ++(b)** 3,762 88,670 2,051 48,342 5,813 137,012
R.R. Donnelley & Sons Co. 3,963 159,313 10,727 431,225 14,690 590,538
Waste Management, Inc. 21,053 787,593 21,053 787,593
------------ ------------ ------------
399,761 1,949,892 2,349,653
------------ ------------ ------------
COMMUNICATIONS EQUIPMENT
(2.2%)
3Com Corp. ++(b)** 9,722 39,180 4,278 17,240 14,000 56,420
Avaya, Inc. ++(b)** 44,475 574,617 22,349 288,749 66,824 863,366
Cisco Systems, Inc. ++(b)** 104,502 2,794,383 99,069 2,649,105 203,571 5,443,488
Dycom Industries, Inc. 1,946 50,421 1,946 50,421
Juniper Networks, Inc. ++(b)** 9,247 206,763 10,000 223,600 19,247 430,363
Motorola, Inc. 116,386 2,016,969 98,392 1,705,133 214,778 3,722,102
Polycom, Inc. ++(b)** 2,557 85,148 3,805 126,707 6,362 211,855
UTStarcom, Inc. ++(a)**++(b)++ 10,525 75,148 5,020 35,843 15,545 110,991
------------ ------------ ------------
5,792,208 5,096,798 10,889,006
------------ ------------ ------------
COMPUTERS & PERIPHERALS (5.0%)
Apple, Inc. ++(b)** 13,538 1,351,092 11,691 1,166,762 25,229 2,517,854
Dell, Inc. ++(b)** 100,933 2,544,521 80,508 2,029,607 181,441 4,574,128
Diebold, Inc. 1,603 76,415 1,603 76,415
EMC Corp. ++(b)** 17,778 269,870 10,891 165,325 28,669 435,195
* Hewlett-Packard Co. 95,814 4,037,602 76,442 3,221,266 172,256 7,258,868
Imation Corp. 228 8,415 228 8,415
* International Business
Machines Corp. 43,539 4,450,121 34,711 3,547,811 78,250 7,997,932
Lexmark International, Inc.
Class A ++(b)** 13,712 747,304 4,849 264,271 18,561 1,011,575
Network Appliance, Inc. 2,064 76,801 2,064 76,801
Palm, Inc. ++(b)** 493 8,322 493 8,322
Sun Microsystems, Inc. ++(b)** 43,997 229,664 43,997 229,664
Western Digital Corp. ++(b)** 8,330 147,274 8,330 147,274
------------ ------------ ------------
13,400,510 10,941,933 24,342,443
------------ ------------ ------------
CONSTRUCTION & ENGINEERING
(0.1%)
Granite Construction, Inc. 3,424 206,262 1,679 101,143 5,103 307,405
Infrasource Services, Inc. ++(b)** 1,234 41,191 91 3,038 1,325 44,229
KBR, Inc. 1,799 37,167 1,799 37,167
Quanta Services, Inc. ++(a)**++(b)++ 1,513 41,592 3,883 106,744 5,396 148,336
------------ ------------ ------------
289,045 248,092 537,137
------------ ------------ ------------
CONSTRUCTION MATERIALS (0.0%) @
Vulcan Materials Co. 1,319 163,121 1,319 163,121
------------ ------------
CONSUMER FINANCE (1.0%)
American Express Co. 27,069 1,642,276 21,158 1,283,656 48,227 2,925,932
AmeriCredit Corp. ++(a)**++(b)++ 11,730 295,948 5,808 146,536 17,538 442,484
Capital One Financial Corp. 10,758 798,889 8,299 616,284 19,057 1,415,173
------------ ------------ ------------
2,737,113 2,046,476 4,783,589
------------ ------------ ------------
CONTAINERS & PACKAGING (0.4%)
Packaging Corp. of America 457 11,315 457 11,315
Pactiv Corp. ++(b)** 18,311 633,194 6,459 223,352 24,770 856,546
Sealed Air Corp. 1,044 34,348 1,044 34,348
Sonoco Products Co. 4,974 212,091 4,974 212,091
Temple-Inland, Inc. 7,562 447,973 3,237 191,760 10,799 639,733
------------ ------------ ------------
1,081,167 672,866 1,754,033
------------ ------------ ------------
DIVERSIFIED CONSUMER SERVICES
(0.2%)
Career Education Corp. ++(b)** 7,997 236,231 4,750 140,315 12,747 376,546
Corinthian Colleges, Inc. ++(b)** 1,043 14,425 1,043 14,425
DeVry, Inc. 331 10,920 2,900 95,671 3,231 106,591
ITT Educational Services, Inc. ++(b)** 406 39,467 406 39,467
Regis Corp. ++(a)** 2,207 84,374 2,207 84,374
Sotheby's Holdings, Inc.
Class A 2,902 149,801 1,409 72,733 4,311 222,534
------------ ------------ ------------
396,952 446,985 843,937
------------ ------------ ------------
DIVERSIFIED FINANCIAL SERVICES
(5.2%)
Bank of America Corp. 57,987 2,951,538 46,309 2,357,128 104,296 5,308,666
* Citigroup, Inc. 115,841 6,211,394 92,016 4,933,898 207,857 11,145,292
* JPMorgan Chase & Co. 86,141 4,487,946 83,040 4,326,384 169,181 8,814,330
Moody's Corp. 1,523 100,701 1,523 100,701
------------ ------------ ------------
13,650,878 11,718,111 25,368,989
------------ ------------ ------------
DIVERSIFIED TELECOMMUNICATION
SERVICES (3.9%)
* AT&T, Inc. 106,958 4,141,414 92,517 3,582,258 199,475 7,723,672
CenturyTel, Inc. 15,818 728,419 5,658 260,551 21,476 988,970
Cincinnati Bell, Inc. ++(b)** 7,362 37,325 7,362 37,325
Citizens Communications Co. ++(a)** 39,164 609,783 16,885 262,899 56,049 872,682
Embarq Corp. ++(a)** 20,788 1,248,111 7,343 440,874 28,131 1,688,985
Qwest Communications
International, Inc. ++(a)**++(b)** 50,699 450,207 50,699 450,207
Verizon Communications, Inc. 104,076 3,973,622 82,968 3,167,718 187,044 7,141,340
Windstream Corp. 9,094 132,954 9,094 132,954
------------ ------------ ------------
10,701,349 8,334,786 19,036,135
------------ ------------ ------------
ELECTRIC UTILITIES (1.6%)
Allegheny Energy, Inc. ++(b)** 2,002 107,027 2,002 107,027
Duke Energy Corp. 10,972 225,145 10,972 225,145
Edison International 42,116 2,204,773 16,337 855,242 58,453 3,060,015
Entergy Corp. 20,946 2,369,830 10,225 1,156,857 31,171 3,526,687
|
Great Plains Energy, Inc. 410 13,382 410 13,382
Progress Energy, Inc. 4,900 247,695 9,891 499,990 14,791 747,685
------------ ------------ ------------
4,822,298 2,857,643 7,679,941
------------ ------------ ------------
ELECTRICAL EQUIPMENT (0.1%)
Cooper Industries, Ltd.
Class A 1,782 88,672 1,782 88,672
Rockwell Automation, Inc. 5,181 308,477 5,181 308,477
Thomas & Betts Corp. ++(b)** 1,323 72,077 2,578 140,449 3,901 212,526
------------ ------------ ------------
72,077 537,598 609,675
------------ ------------ ------------
ELECTRONIC EQUIPMENT &
INSTRUMENTS (0.1%)
Avnet, Inc. ++(a)**++(b)++ 1,662 67,976 4,827 197,424 6,489 265,400
CDW Corp. 365 26,284 365 26,284
Tech Data Corp. ++(b)** 3,957 140,632 2,132 75,771 6,089 216,403
Vishay Intertechnology, Inc. ++(b)** 2,326 38,728 6,958 115,851 9,284 154,579
------------ ------------ ------------
247,336 415,330 662,666
------------ ------------ ------------
ENERGY EQUIPMENT &
SERVICES (1.4%)
BJ Services Co. 1,897 54,368 1,897 54,368
Cameron International Corp. ++(b)** 3,024 195,260 4,217 272,292 7,241 467,552
ENSCO International, Inc. 5,460 307,835 4,752 267,918 10,212 575,753
Halliburton Co. 64,753 2,057,203 42,499 1,350,193 107,252 3,407,396
National Oilwell Varco, Inc. ++(b)** 12,474 1,058,419 6,559 556,531 19,033 1,614,950
Patterson-UTI Energy, Inc. 3,889 94,853 7,886 192,340 11,775 287,193
Schlumberger, Ltd. 217 16,021 152 11,222 369 27,243
Tidewater, Inc. ++(a)** 5,802 366,744 2,864 181,033 8,666 547,777
------------ ------------ ------------
4,096,335 2,885,897 6,982,232
------------ ------------ ------------
FOOD & STAPLES RETAILING
(0.5%)
CVS/Caremark Corp. 4,614 167,211 4,614 167,211
Safeway, Inc. 6,576 238,709 22,071 801,177 28,647 1,039,886
Wal-Mart Stores, Inc. 14,389 689,521 11,488 550,505 25,877 1,240,026
------------ ------------ ------------
928,230 1,518,893 2,447,123
------------ ------------ ------------
FOOD PRODUCTS (1.1%)
Campbell Soup Co. 3,966 155,071 3,966 155,071
Dean Foods Co. 4,407 160,547 2,647 96,430 7,054 256,977
General Mills, Inc. 18,305 1,096,469 17,143 1,026,866 35,448 2,123,335
H.J. Heinz Co. 5,464 257,409 5,464 257,409
J.M. Smucker Co. (The) 5,764 321,746 2,830 157,971 8,594 479,717
Kraft Foods, Inc. Class A 23,895 799,766 26,737 894,887 50,632 1,694,653
------------ ------------ ------------
2,378,528 2,588,634 4,967,162
------------ ------------ ------------
GAS UTILITIES (0.2%)
Equitable Resources, Inc. 3,036 157,902 3,036 157,902
National Fuel Gas Co. 2,963 139,291 2,963 139,291
Nicor, Inc. ++(a)** 3,553 182,056 2,367 121,285 5,920 303,341
ONEOK, Inc. 5,660 274,001 3,450 167,015 9,110 441,016
WGL Holdings, Inc. 1,525 51,606 1,525 51,606
------------ ------------ ------------
456,057 637,099 1,093,156
------------ ------------ ------------
HEALTH CARE EQUIPMENT &
SUPPLIES (0.7%)
Advanced Medical Optics, Inc. ++(a)**++(b)++ 4,430 179,105 2,964 119,835 7,394 298,940
Baxter International, Inc. 17,740 1,004,616 16,139 913,952 33,879 1,918,568
Biomet, Inc. 4,964 214,445 3,946 170,467 8,910 384,912
Boston Scientific Corp. ++(b)** 10,366 160,051 10,366 160,051
Edwards Lifesciences Corp. ++(a)**++(b)** 727 35,623 2,871 140,679 3,598 176,302
Zimmer Holdings, Inc. ++(b)** 7,170 648,742 7,170 648,742
------------ ------------ ------------
1,433,789 2,153,726 3,587,515
------------ ------------ ------------
HEALTH CARE PROVIDERS &
SERVICES (5.2%)
Aetna, Inc. 49,116 2,302,558 26,163 1,226,521 75,279 3,529,079
AmerisourceBergen Corp. 27,058 1,352,629 9,572 478,504 36,630 1,831,133
Apria Healthcare Group, Inc. ++(b)** 4,307 136,704 2,102 66,717 6,409 203,421
Cardinal Health, Inc. 3,965 277,352 4,977 348,141 8,942 625,493
CIGNA Corp. 8,955 1,393,308 4,992 776,705 13,947 2,170,013
Coventry Health Care, Inc. ++(b)** 22,471 1,299,498 7,946 459,517 30,417 1,759,015
Heath Management Associates,
Inc. 1,255 13,416 1,255 13,416
Humana, Inc. ++(b)** 23,562 1,490,061 8,328 526,663 31,890 2,016,724
Lincare Holdings, Inc. ++(b)** 2,745 108,263 2,745 108,263
Laboratory Corp. of America
Holdings ++(a)**++(b)** 3,172 250,398 3,172 250,398
McKesson Corp. 35,823 2,107,467 14,846 873,390 50,669 2,980,857
Medco Health Solutions, Inc. 319 24,888 319 24,888
Quest Diagnostics, Inc. 3,048 149,017 3,048 149,017
UnitedHealth Group, Inc. 50,761 2,693,379 40,746 2,161,983 91,507 4,855,362
WellCare Health Plans, Inc. ++(b)** 1,225 98,723 580 46,742 1,805 145,465
WellPoint, Inc. ++(b)** 33,719 2,662,789 26,830 2,118,765 60,549 4,781,554
------------ ------------ ------------
15,814,468 9,629,630 25,444,098
------------ ------------ ------------
HOTELS, RESTAURANTS & LEISURE
(0.9%)
Bob Evans Farms, Inc. ++(a)** 1,748 64,152 1,748 64,152
Brinker International, Inc. 6,531 203,114 6,130 190,643 12,661 393,757
CBRL Group, Inc. ++(a)** 1,988 88,625 1,135 50,598 3,123 139,223
Darden Restaurants, Inc. 6,148 255,019 6,148 255,019
Harrah's Entertainment, Inc. 3,318 283,025 2,628 224,168 5,946 507,193
McDonald's Corp. 14,943 721,448 38,650 1,866,022 53,593 2,587,470
Wendy's International, Inc. 3,948 148,840 3,948 148,840
Yum! Brands, Inc. 1,667 103,121 1,667 103,121
------------ ------------ ------------
1,296,212 2,902,563 4,198,775
------------ ------------ ------------
HOUSEHOLD DURABLES (1.0%)
American Greetings Corp.
Class A ++(a)** 5,741 146,108 2,820 71,769 8,561 217,877
Black & Decker Corp. ++(a)** 9,542 865,650 3,354 304,275 12,896 1,169,925
Blyth, Inc. 2,418 63,110 1,234 32,207 3,652 95,317
Fortune Brands, Inc. 276 22,108 276 22,108
KB Home ++(a)** 6,941 306,167 2,399 105,820 9,340 411,987
Leggett & Platt, Inc. 5,097 119,881 5,097 119,881
Lennar Corp. Class A ++(a)** 16,848 719,578 5,951 254,167 22,799 973,745
|
MDC Holdings, Inc. ++(a)** 2,687 137,736 1,311 67,202 3,998 204,938
Mohawk Industries, Inc. ++(a)**++(b)** 2,838 255,874 2,670 240,727 5,508 496,601
Newell Rubbermaid, Inc. 6,877 210,918 6,877 210,918
NVR, Inc. ++(a)**++(b)** 118 97,232 51 42,024 169 139,256
Snap-on, Inc. 951 51,829 683 37,224 1,634 89,053
Stanley Works (The) 2,632 153,393 2,632 153,393
Tupperware Brands Corp. 5,334 149,992 2,949 82,926 8,283 232,918
Whirlpool Corp. ++(a)** 1,001 106,136 1,001 106,136
------------ ------------ ------------
2,793,276 1,850,777 4,644,053
------------ ------------ ------------
HOUSEHOLD PRODUCTS (1.7%)
Church & Dwight Co., Inc. 363 18,415 363 18,415
Energizer Holdings, Inc. ++(b)** 1,509 146,645 2,824 274,436 4,333 421,081
Kimberly-Clark Corp. 13,674 973,179 19,302 1,373,723 32,976 2,346,902
Procter & Gamble Co. (The) 39,871 2,564,104 41,888 2,693,817 81,759 5,257,921
------------ ------------ ------------
3,683,928 4,360,391 8,044,319
------------ ------------ ------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS (1.0%)
AES Corp. (The) ++(b)** 72,167 1,586,952 26,003 571,806 98,170 2,158,758
TXU Corp. 23,372 1,532,736 15,366 1,007,702 38,738 2,540,438
------------ ------------ ------------
3,119,688 1,579,508 4,699,196
------------ ------------ ------------
INDUSTRIAL CONGLOMERATES
(2.8%)
* General Electric Co. 160,440 5,913,818 128,077 4,720,918 288,517 10,634,736
Teleflex, Inc. 3,947 283,513 1,947 139,853 5,894 423,366
Tyco International, Ltd. 74,568 2,433,154 74,568 2,433,154
------------ ------------ ------------
6,197,331 7,293,925 13,491,256
------------ ------------ ------------
INSURANCE (9.2%)
ACE, Ltd. 35,955 2,137,884 16,363 972,944 52,318 3,110,828
AFLAC, Inc. 25,692 1,319,027 15,087 774,567 40,779 2,093,594
Allstate Corp. (The) 38,937 2,426,554 28,941 1,803,603 67,878 4,230,157
Ambac Financial Group, Inc. 1,938 177,908 1,001 91,892 2,939 269,800
American Financial Group, Inc. 6,922 244,139 3,464 122,175 10,386 366,314
American International Group,
Inc. 27,946 1,953,705 22,310 1,559,692 50,256 3,513,397
Aon Corp. ++(a)** 42,937 1,663,809 15,330 594,038 58,267 2,257,847
Assurant, Inc. 3,429 197,270 1,074 61,787 4,503 259,057
Brown & Brown, Inc. 1,485 38,239 1,485 38,239
Chubb Corp. (The) 40,732 2,192,604 20,556 1,106,530 61,288 3,299,134
Everest Re Group, Ltd. 416 41,866 810 81,518 1,226 123,384
Fidelity National Financial,
Inc. Class A 4,898 124,850 4,898 124,850
First American Corp. 7,167 369,100 3,472 178,808 10,639 547,908
Genworth Financial, Inc.
Class A 55,333 2,019,101 22,047 804,495 77,380 2,823,596
Hartford Financial Services
Group, Inc. (The) 16,195 1,638,934 13,695 1,385,934 29,890 3,024,868
HCC Insurance Holdings, Inc. 5,549 170,132 5,565 170,623 11,114 340,755
Horace Mann Educators Corp. 1,054 22,176 2,063 43,406 3,117 65,582
Lincoln National Corp. 1,109 78,905 5,208 370,549 6,317 449,454
Loews Corp. 23,980 1,134,734 11,406 539,732 35,386 1,674,466
Mercury General Corp. 839 45,432 883 47,814 1,722 93,246
MetLife, Inc. 36,311 2,385,633 32,215 2,116,526 68,526 4,502,159
Old Republic International
Corp. 19,584 416,552 10,002 212,743 29,586 629,295
Principal Financial Group,
Inc. 25,229 1,601,789 13,435 852,988 38,664 2,454,777
Protective Life Corp. 3,480 163,212 1,757 82,403 5,237 245,615
Prudential Financial, Inc. 10,244 973,180 7,868 747,460 18,112 1,720,640
SAFECO Corp. 6,202 413,921 2,710 180,865 8,912 594,786
StanCorp Financial Group, Inc. 675 32,130 675 32,130
Torchmark Corp. 3,667 250,456 3,667 250,456
Travelers Cos., Inc. (The) 23,259 1,258,312 11,582 626,586 34,841 1,884,898
Unitrin, Inc. 522 24,612 522 24,612
Unum Group 9,909 246,536 12,117 301,471 22,026 548,007
W.R. Berkley Corp. 17,034 553,435 8,427 273,793 25,461 827,228
XL Capital, Ltd. Class A 24,655 1,922,597 9,045 705,329 33,700 2,627,926
------------ ------------ ------------
27,768,447 17,280,558 45,049,005
------------ ------------ ------------
INTERNET & CATALOG RETAIL
(0.3%)
IAC/InterActiveCorp. ++(a)**++(b)** 31,386 1,196,434 11,101 423,170 42,487 1,619,604
Netflix, Inc. ++(a)**++(b)** 498 11,041 498 11,041
------------ ------------ ------------
1,196,434 434,211 1,630,645
------------ ------------ ------------
INTERNET SOFTWARE & SERVICES
(0.2%)
eBay, Inc. ++(b)** 1,657 56,239 1,657 56,239
Google, Inc. Class A ++(b)** 776 365,791 615 289,899 1,391 655,690
ValueClick, Inc. ++(b)** 3,685 105,391 3,685 105,391
VeriSign, Inc. ++(b)** 1,758 48,081 1,758 48,081
------------ ------------ ------------
365,791 499,610 865,401
------------ ------------ ------------
IT SERVICES (2.2%)
Acxiom Corp. 6,925 156,505 3,339 75,461 10,264 231,966
Affiliated Computer Services,
Inc. Class A ++(b)** 1,808 108,317 1,350 80,879 3,158 189,196
Alliance Data Systems Corp. ++(a)**++(b)** 765 48,700 1,634 104,020 2,399 152,720
Automatic Data Processing,
Inc. 9,125 408,435 9,125 408,435
BISYS Group, Inc. ++(b)** 1,511 17,482 1,511 17,482
Broadridge Financial Solutions
LLC ++(b)** 3,367 67,475 3,757 75,290 7,124 142,765
CheckFree Corp. ++(a)**++(b)** 1,718 57,828 1,718 57,828
Computer Sciences Corp. ++(b)** 24,314 1,350,400 8,600 477,644 32,914 1,828,044
Convergys Corp. ++(b)** 19,742 498,683 6,974 176,163 26,716 674,846
CSG Systems International,
Inc. ++(b)** 3,411 91,347 2,303 61,674 5,714 153,021
Electronic Data Systems Corp. 69,962 2,045,689 25,512 745,971 95,474 2,791,660
Fidelity National Information
Services, Inc. 11,207 566,290 3,891 196,612 15,098 762,902
First Data Corp. 61,512 1,992,989 30,368 983,923 91,880 2,976,912
Fiserv, Inc. ++(b)** 2,383 126,704 2,383 126,704
Garnet, Inc. 362 9,133 362 9,133
Global Payments, Inc. 879 33,384 879 33,384
MPS Group, Inc. ++(b)** 2,539 34,759 2,539 34,759
SRA International, Inc.
Class A ++(a)**++(b)** 471 11,506 1,754 42,850 2,225 54,356
Western Union Co. (The) 4,963 104,471 4,963 104,471
------------ ------------ ------------
6,937,901 3,812,683 10,750,584
------------ ------------ ------------
|
LEISURE EQUIPMENT & PRODUCTS
(0.9%)
Brunswick Corp. 3,675 120,393 3,675 120,393
Eastman Kodak Co. ++(a)** 39,682 988,479 14,033 349,562 53,715 1,338,041
Hasbro, Inc. 23,195 733,194 8,196 259,076 31,391 992,270
Mattel, Inc. 54,589 1,544,869 19,263 545,143 73,852 2,090,012
------------ ------------ ------------
3,266,542 1,274,174 4,540,716
------------ ------------ ------------
LIFE SCIENCES TOOLS & SERVICES
(0.1%)
Invitrogen Corp. ++(b)** 1,487 97,354 1,487 97,354
Thermo Fisher Scientific, Inc. ++(b)** 3,885 202,253 3,885 202,253
------------ ------------
299,607 299,607
------------ ------------
MACHINERY (1.5%)
AGCO Corp. ++(b)** 9,198 383,833 4,545 189,663 13,743 573,496
Caterpillar, Inc. 4,283 311,031 10,686 776,017 14,969 1,087,048
Cummins, Inc. 14,853 1,368,852 5,242 483,103 20,095 1,851,955
Dover Corp. 1,240 59,669 1,240 59,669
Eaton Corp. 5,576 497,435 6,509 580,668 12,085 1,078,103
Illinois Tools Works 1,884 96,668 1,884 96,668
Ingersoll-Rand Co. 1,864 83,228 1,864 83,228
ITT Corp. 4,525 288,740 4,525 288,740
Nordson Corp. 201 9,212 201 9,212
Paccar, Inc. 8,195 688,216 8,195 688,216
SPX Corp. 1,094 77,543 1,094 77,543
Terex Corp. ++(b)** 11,907 926,960 4,420 344,097 16,327 1,271,057
------------ ------------ ------------
3,488,111 3,676,824 7,164,935
------------ ------------ ------------
MEDIA (3.3%)
Belo Corp. Class A 1,144 22,045 4,276 82,399 5,420 104,444
CBS Corp. Class B 43,493 1,381,773 38,285 1,216,314 81,778 2,598,087
Clear Channel Communications,
Inc. 10,074 356,922 8,338 295,415 18,412 652,337
Comcast Corp. Class A ++(b)** 1,963 52,334 10,274 273,905 12,237 326,239
DIRECTV Group, Inc. (The) ++(b)** 63,286 1,508,738 38,844 926,041 102,130 2,434,779
Entercom Communications Corp. 691 19,168 691 19,168
Gannett Co., Inc. 11,707 668,001 11,707 668,001
Harte-Hanks, Inc. 1,244 32,468 1,244 32,468
John Wiley & Sons, Inc.
Class A 2,210 82,765 2,210 82,765
Lee Enterprises, Inc. 603 15,787 2,249 58,879 2,852 74,666
McGraw-Hill Cos., Inc. (The) 18,317 1,200,313 15,394 1,008,769 33,711 2,209,082
Media General, Inc. 255 9,369 255 9,369
Meredith Corp. 801 46,394 801 46,394
Omnicom Group, Inc. 19,590 2,051,269 8,497 889,721 28,087 2,940,990
Scholastic Corp. ++(b)** 153 4,723 153 4,723
Time Warner, Inc. 1,566 32,307 17,786 366,925 19,352 399,232
Tribune Co. 870 28,536 3,346 109,749 4,216 138,285
Valassis Communications, Inc. ++(b)** 574 10,998 574 10,998
Viacom, Inc. Class B ++(b)** 20,993 865,961 17,202 709,583 38,195 1,575,544
Walt Disney Co. (The) 49,116 1,718,078 49,116 1,718,078
Westwood One, Inc. 832 5,666 832 5,666
------------ ------------ ------------
7,515,985 8,535,330 16,051,315
------------ ------------ ------------
METALS & MINING (1.5%)
Allegheny Technologies, Inc. 404 44,270 404 44,270
Commercial Metals Co. 607 20,353 607 20,353
Freeport-McMoRan Copper &
Gold, Inc. Class B ++(a)** 30,661 2,059,193 13,722 921,570 44,383 2,980,763
Nucor Corp. 17,759 1,126,986 15,077 956,786 32,836 2,083,772
Steel Dynamics, Inc. 2,185 96,817 2,185 96,817
United States Steel Corp. 13,567 1,377,593 5,884 597,461 19,451 1,975,054
------------ ------------ ------------
4,563,772 2,637,257 7,201,029
------------ ------------ ------------
MULTILINE RETAIL (2.2%)
Big Lots, Inc. ++(b)** 15,108 486,478 5,324 171,433 20,432 657,911
Dillards, Inc. Class A 371 12,848 371 12,848
Dollar General Corp. 3,188 68,064 2,491 53,183 5,679 121,247
Dollar Tree Stores, Inc. ++(b)** 5,247 206,312 5,091 200,178 10,338 406,490
Family Dollar Stores, Inc. 5,857 186,487 5,857 186,487
Federated Department Stores,
Inc. 49,348 2,167,364 26,027 1,143,106 75,375 3,310,470
J.C. Penny Co., Inc. 1,336 105,664 1,336 105,664
Kohl's Corp. ++(b)** 29,706 2,199,432 16,351 1,210,628 46,057 3,410,060
Nordstrom, Inc. 32,243 1,770,786 11,406 626,418 43,649 2,397,204
Saks, Inc. ++(a)** 10,641 222,823 6,934 145,198 17,575 368,021
------------ ------------ ------------
7,121,259 3,855,143 10,976,402
------------ ------------ ------------
MULTI-UTILITIES (0.1%)
KeySpan Corp. 3,230 133,754 2,784 115,285 6,014 249,039
NiSource, Inc. 6,777 166,646 6,777 166,646
NSTAR 1,398 50,188 689 24,735 2,087 74,923
OGE Energy Corp. 252 9,687 1,678 64,502 1,930 74,189
------------ ------------ ------------
193,629 371,168 564,797
------------ ------------ ------------
OFFICE ELECTRONICS (0.2%)
Xerox Corp. ++(b)** 14,793 273,670 41,016 758,796 55,809 1,032,466
------------ ------------ ------------
OIL, GAS & CONSUMABLE FUELS
(9.8%)
* Chevron Corp. 61,887 4,814,190 53,665 4,174,600 115,552 8,988,790
ConocoPhillips 30,613 2,123,012 26,668 1,849,426 57,281 3,972,438
* ExxonMobil Corp. 139,495 11,073,113 111,352 8,839,122 250,847 19,912,235
Kinder Morgan, Inc. ++(a)** 1,072 114,232 830 88,445 1,902 202,677
Marathon Oil Corp. 25,109 2,549,819 17,510 1,778,141 42,619 4,327,960
Noble Energy, Inc. 9,824 577,749 8,643 508,295 18,467 1,086,044
Occidental Petroleum Corp. 25,455 1,290,568 30,712 1,557,098 56,167 2,847,666
Overseas Shipholding Group,
Inc. 2,987 211,480 1,437 101,740 4,424 313,220
Plains Exploration &
Production Co. ++(b)** 3,825 179,737 2,696 126,685 6,521 306,422
Pogo Producing Co. ++(a)** 423 20,414 423 20,414
Spectra Energy Corp. 8,692 226,861 3,816 99,598 12,508 326,459
Sunoco, Inc. 4,152 313,601 1,516 114,503 5,668 428,104
Valero Energy Corp. 40,903 2,872,618 30,073 2,112,027 70,976 4,984,645
------------ ------------ ------------
26,346,980 21,370,094 47,717,074
------------ ------------ ------------
|
PAPER & FOREST PRODUCTS (0.1%)
Abitibi-Consolidated, Inc. 36,260 95,364 33,767 88,807 70,027 184,171
Louisiana-Pacific Corp. 1,264 24,913 1,264 24,913
Weyerhaeuser Co. 4,057 321,396 4,057 321,396
------------ ------------ ------------
95,364 435,116 530,480
------------ ------------ ------------
PERSONAL PRODUCTS (0.1%)
Alberto-Culver Co. 7,090 172,216 4,016 97,549 11,106 269,765
Avon Products, Inc. 5,520 219,696 5,520 219,696
Estee Lauder Cos., Inc. (The)
Class A 3,604 185,318 3,604 185,318
------------ ------------ ------------
172,216 502,563 674,779
------------ ------------ ------------
PHARMACEUTICALS (4.7%)
Abbott Laboratories 360 20,383 261 14,778 621 35,161
Barr Pharmaceuticals, Inc. ++(b)** 7,229 349,594 2,814 136,085 10,043 485,679
Forest Laboratories, Inc. ++(b)** 33,263 1,769,924 15,442 821,669 48,705 2,591,593
Johnson & Johnson 32,030 2,056,967 25,565 1,641,784 57,595 3,698,751
King Pharmaceuticals, Inc. ++(b)** 33,419 683,419 11,815 241,617 45,234 925,036
Merck & Co., Inc. 44,295 2,278,535 51,562 2,652,349 95,857 4,930,884
Mylan Laboratories, Inc. 6,996 153,422 5,367 117,698 12,363 271,120
Par Pharmaceutical Cos., Inc. 224 6,032 224 6,032
* Pfizer, Inc. 192,994 5,106,621 56,929 4,073,411 249,923 9,180,032
Schering-Plough Corp. 13,085 415,187 13,085 415,187
Watson Pharmaceuticals, Inc. ++(b)** 13,951 380,862 4,986 136,118 18,937 516,980
------------ ------------ ------------
12,799,727 10,256,728 23,056,455
------------ ------------ ------------
REAL ESTATE INVESTMENT TRUSTS
(0.2%)
Apartment Investment &
Management Co. Class A 4,719 260,961 4,254 235,246 8,973 496,207
Boston Properties, Inc. 1,498 176,105 1,498 176,105
Cousins Properties, Inc. 510 17,121 227 7,620 737 24,741
Highwood Properties, Inc. ++(a)** 364 14,844 364 14,844
Macerich Co. (The) 466 44,326 466 44,326
Plum Creek Timber Co., Inc. 913 36,246 913 36,246
Potlatch Corp. 520 22,563 1,681 72,939 2,201 95,502
Regency Centers Corp. 446 36,750 446 36,750
Simon Property Group, Inc. 1,423 164,043 1,423 164,043
------------ ------------ ------------
300,645 788,119 1,088,764
------------ ------------ ------------
ROAD & RAIL (0.1%)
Avis Budget Group, Inc. ++(b)** 10,229 287,742 5,040 141,775 15,269 429,517
Con-way, Inc, 1,154 63,043 1,154 63,043
YRC Worldwide, Inc. ++(b)** 1,676 66,688 2,858 113,720 4,534 180,408
------------ ------------ ------------
354,430 318,538 672,968
------------ ------------ ------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (1.8%)
Altera Corp. ++(b)** 6,853 154,467 6,853 154,467
Analog Devices, Inc. 2,217 85,621 2,217 85,621
Applied Materials, Inc. 118,786 2,283,067 69,389 1,333,657 188,175 3,616,724
Atmel Corp. ++(b)** 10,954 58,275 16,655 88,605 27,609 146,880
Intel Corp. 34,268 736,762 27,318 587,337 61,586 1,324,099
Intersol Corp. 5,055 150,588 5,055 150,588
Lam Research Corp. ++(a)**++(b)** 5,344 287,400 5,344 287,400
Linear Technology Corp. ++(a)** 1,936 72,445 1,936 72,445
LSI Corp. 5,026 42,721 5,026 42,721
Micrel, Inc. 285 3,577 285 3,577
National Semiconductor Corp. 30,348 798,152 14,446 379,930 44,794 1,178,082
Novellus Systems, Inc. ++(b)** 15,368 497,462 5,392 174,539 20,760 672,001
NVIDIA Corp. ++(b)** 7,202 236,874 7,202 236,874
Semtech Corp. 371 5,350 371 5,350
Teradyne, Inc. ++(a)**++(b)** 22,442 391,613 7,945 138,640 30,387 530,253
Xilinx, Inc. ++(a)** 6,139 180,978 11,005 324,427 17,144 505,405
------------ ------------ ------------
4,946,309 4,066,178 9,012,487
------------ ------------ ------------
SOFTWARE (3.5%)
Adobe Systems, Inc. 3,742 155,518 3,742 155,518
BMC Software, Inc. ++(b)** 29,107 942,194 10,307 333,638 39,414 1,275,832
CA, Inc. 36,483 994,527 20,304 553,487 56,787 1,548,014
Cadence Design Systems, Inc. ++(b)** 6,879 152,714 13,908 308,758 20,787 461,472
Compuware Corp. ++(b)** 40,320 397,958 16,157 159,470 56,477 557,428
Fair Isaac Corp. ++(a)** 2,855 101,952 2,855 101,952
Intuit, Inc. ++(b)** 4,680 133,146 11,214 319,038 15,894 452,184
McAfee, Inc. ++(b)** 4,337 140,909 6,239 202,705 10,576 343,614
Mentor Graphics Corp. ++(b)** 1,579 25,548 1,579 25,548
* Microsoft Corp. 160,530 4,806,268 126,036 3,773,518 286,566 8,579,786
Novell, Inc. ++(b)** 24,308 177,448 12,694 92,666 37,002 270,114
Sybase, Inc. ++(b)** 7,441 179,998 4,525 109,460 11,966 289,458
Symantec Corp. ++(b)** 99,067 1,743,579 40,884 719,558 139,951 2,463,137
Synopsys, Inc. ++(b)** 5,541 153,264 6,249 172,847 11,790 326,111
Wind River Systems, Inc. 394 3,873 394 3,873
------------ ------------ ------------
9,822,005 7,032,036 16,854,041
------------ ------------ ------------
SPECIALTY RETAIL (2.2%)
Aeropostale, Inc. ++(b)** 4,079 167,851 2,674 110,035 6,753 277,886
American Eagle Outfitters,
Inc. 20,226 596,060 9,991 294,435 30,217 890,495
AnnTaylor Stores Corp. ++(b)** 4,588 176,546 3,067 118,018 7,655 294,564
AutoNation, Inc. ++(b)** 1,180 24,119 4,071 83,211 5,251 107,330
AutoZone, Inc. ++(b)** 7,110 945,914 2,509 333,797 9,619 1,279,711
Barnes & Noble, Inc. 1,863 73,644 1,987 78,546 3,850 152,190
Charming Shoppes, Inc. ++(b)** 5,346 66,825 5,346 66,825
Circuit City Stores, Inc. 17,107 298,517 6,902 120,440 24,009 418,957
Claire's Stores, Inc. 1,261 41,071 1,261 41,071
GameStop Corp. Class A ++(b)** 3,706 122,928 1,625 53,901 5,331 176,829
Gap, Inc. (The) 71,311 1,280,032 26,307 472,211 97,618 1,752,243
Office Depot, Inc. ++(b)** 13,951 469,033 7,049 236,987 21,000 706,020
OfficeMax, Inc. 2,460 121,081 3,283 161,589 5,743 282,670
Pacific Sunwear of California,
Inc. ++(b)** 1,368 28,632 1,368 28,632
Payless ShoeSource, Inc. ++(b)** 5,739 183,074 3,258 103,930 8,997 287,004
RadioShack Corp. ++(a)** 18,609 540,964 6,574 191,106 25,183 732,070
Ross Stores, Inc. 5,158 170,988 6,078 201,486 11,236 372,474
Sherwin-Williams Co. (The) 12,063 769,257 4,915 313,430 16,978 1,082,687
|
TJX Cos., Inc. (The) 41,186 1,148,678 22,838 636,952 64,024 1,785,630
------------ ------------ ------------
7,088,686 3,646,602 10,735,288
------------ ------------ ------------
TEXTILES, APPAREL & LUXURY
GOODS (0.5%)
Hanes Brands, Inc. 1,035 27,521 1,035 27,521
Jones Apparel Group, Inc. 15,606 521,084 5,522 184,380 21,128 705,464
Liz Claiborne, Inc. 628 28,084 628 28,084
NIKE, Inc. Class B 10,152 546,787 6,477 348,851 16,629 895,638
Phillips-Van Heusen Corp. 1,358 75,912 596 33,316 1,954 109,228
Polo Ralph Lauren Corp. ++(a)** 5,636 519,132 3,043 280,291 8,679 799,423
------------ ------------ ------------
1,662,915 902,443 2,565,358
------------ ------------ ------------
THRIFTS & MORTGAGE FINANCE
(0.5%)
Fannie Mae 8,437 497,108 8,437 497,108
First Niagara Financial Group,
Inc. 3,438 46,757 3,438 46,757
Freddie Mac 5,749 372,420 4,715 305,438 10,464 677,858
MGIC Investment Corp. ++(a)** 509 31,359 509 31,359
PMI Group, Inc. (The) 1,097 53,172 1,097 53,172
Radian Group, Inc. 9,097 528,627 5,365 311,760 14,462 840,387
Washington Mutual, Inc. ++(a)** 6,098 255,994 6,098 255,994
------------ ------------ ------------
901,047 1,501,588 2,402,635
------------ ------------ ------------
TOBACCO (1.6%)
Altria Group, Inc. 47,091 3,245,512 50,128 3,454,822 97,219 6,700,334
Reynolds American, Inc. ++(a)** 2,397 154,031 2,397 154,031
Universal Corp. 2,616 163,971 5,950 337,246 8,566 501,217
UST, Inc. 3,982 225,700 1,292 80,983 5,274 306,683
------------ ------------ ------------
3,635,183 4,027,082 7,662,265
------------ ------------ ------------
TRADING COMPANIES &
DISTRIBUTORS (0.0%) ##
United Rentals, Inc. ++(b)** 937 31,390 937 31,390
------------ ------------
WIRELESS TELECOMMUNICATION
SERVICES (0.6%)
ALLTEL Corp. 12,607 790,333 6,997 438,642 19,604 1,228,975
Sprint Nextel Corp. 19,732 395,232 60,739 1,216,602 80,471 1,611,834
Telephone & Data Systems, Inc. 1,406 80,072 1,406 80,072
------------ ------------ ------------
1,185,565 1,735,316 2,920,881
------------ ------------ ------------
TOTAL COMMON STOCKS
(Cost $426,250,514) 268,606,873 214,295,987 482,902,860
------------ ------------ ------------
|
SHARES VALUE SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------ ---------- ------------
INVESTMENT COMPANY (1.0%)
S&P 500 Index - SPDR Trust
Series 1 ++(a)**++(c)** 21,632 3,207,377 10,811 1,602,947 32,443 4,810,324
------------ ------------ ------------
Total Investment Company
(Cost $4,750,450) 3,207,377 1,602,947 4,810,324
------------ ------------ ------------
|
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
---------- ------------ ---------- ------------ ---------- ------------
SHORT-TERM INVESTMENTS (3.8%)
COMMERCIAL PAPER (0.7%)
Commonwealth Bank of Australia
(Delaware) Finance, Inc.
5.273%, due 5/23/07 ++(d)** $ 325,279 325,279 $ $ 325,279 325,279
Compass Securitization
5.292%, due 5/23/07 ++(d)** 187,053 187,053 187,053 187,053
5.294%, due 5/31/07 ++(d)** 184,556 184,556 184,556 184,556
Den Danske Bank
5.276%, due 5/15/07 ++(d)** 434,668 434,668 434,668 434,668
Greyhawk Funding LLC
5.30%, due 5/8/07 ++(d)** 315,348 315,348 46,700 46,700 362,048 362,048
Jupiter Securitization Corp.
5.281%, due 5/22/07 ++(d)** 124,365 124,365 124,365 124,365
5.289%, due 5/4/07 ++(d)** 55,016 55,016 55,016 55,016
Kitty Hawk Funding Corp.
5.292%, due 5/15/07 ++(d)** 220,062 220,062 220,062 220,062
Old Line Funding LLC
5.293%, due 5/16/07 ++(d)** 220,062 220,062 220,062 220,062
Park Avenue Receivables Corp.
5.268%, due 5/1/07 ++(d)** 208,175 208,175 752,379 752,379 960,554 960,554
Ranger Funding
5.293%, due 5/22/07 ++(d)** 165,047 165,047 165,047 165,047
Yorktown Capital LLC
5.282%, due 5/31/07 ++(d)** 220,062 220,062 220,062 220,062
------------ ------------ ------------
Total Commercial Paper
(Cost $3,458,772) 2,659,693 799,079 3,458,772
------------ ------------ ------------
|
SHARES VALUE SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------ ---------- ------------
INVESTMENT COMPANY (0.7%)
BGI Institutional Money Market
Fund ++(d)** 1,012,162 1,012,162 2,429,529 2,429,529 3,441,691 3,441,691
------------ ------------ ------------
Total Investment Company
(Cost $3,441,691) 1,012,162 2,429,529 3,441,691
------------ ------------ ------------
|
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
---------- ------------ ---------- ------------ ---------- ------------
REPURCHASE AGREEMENT (1.0%)
Morgan Stanley & Co. 5.42%,
dated 4/30/07 due 5/1/07
Proceeds at Maturity
$4,746,055 (Collateralized
by various Corporate Bonds and
a U.S. Treasury Note, with
rates between 0.00%-8.38% and
maturity dates between
8/1/07-2/15/99, with a
Principal Amount of $7,525,658
and a Market Value of
$4,958,998) ++(d)** $ 231,065 231,065 $4,514,275 4,514,275 $4,745,340 4,745,340
------------ ------------ ------------
Total Repurchase Agreement
|
(Cost $4,745,340) 231,065 4,514,275 4,745,340
------------ ------------ ------------
TIME DEPOSITS (1.4%)
Abbey National PLC
5.30%, due 5/7/07 ++(d)** 440,124 440,124 440,124 440,124
Bank of America Corp.
5.27%, due 5/18/07 ++(d)**++(e)** 605,171 605,171 605,171 605,171
Bank of Nova Scotia
5.28%, due 5/17/07 ++(d)** 385,109 385,109 385,109 385,109
Calyon
5.31%, due 5/1/07 ++(d)** 1,276,360 1,276,360 376,190 376,190 1,652,550 1,652,550
Deutsche Bank AG
5.28%, due 5/15/07 ++(d)** 440,124 440,124 440,124 440,124
KBC Bank N.V.
5.28%, due 6/5/07 ++(d)** 495,140 495,140 495,140 495,140
Rabobank Nederland
5.265%, due 5/3/07 ++(d)** 385,109 385,109 385,109 385,109
Royal Bank of Scotland
5.285%, due 5/8/07 ++(d)** 550,155 550,155 550,155 550,155
Skandinaviska Enskilda Banken
AB
5.29%, due 5/31/07 ++(d)** 440,124 440,124 440,124 440,124
Societe Generale North
America, Inc.
5.29%, due 6/15/07 ++(d)** 440,124 440,124 440,124 440,124
Toronto Dominion Bank
5.28%, due 5/11/07 ++(d)** 715,202 715,202 715,202 715,202
UBS AG
5.27%, due 5/4/07 ++(d)** 495,140 495,140 495,140 495,140
------------ ------------ ------------
Total Time Deposits
(Cost $7,044,072) 6,667,882 376,190 7,044,072
------------ ------------ ------------
Total Short-Term Investments
(Cost $18,689,875) 10,570,802 8,119,073 18,689,875
------------ ------------ ------------
Total Investments
(Cost $449,690,839) ++(f)** 103.8% 282,385,052 103.7% 224,018,007 103.8% 506,403,059++(g)**
Liabilities in Excess of
Cash and Other Assets (3.8) (10,420,015) (3.7) (8,020,625) (3.8) (18,440,640)
---------- ------------ ---------- ------------ ---------- ------------
Net Assets 100.0% $271,965,037 100.0% $215,997,382 100.0% $487,962,419
========== ============ ========== ============ ========== ============
|
+ Percentages indicated are based on Fund net assets.
## Less than one tenth of a percent.
* Among the Fund's 10 largest holdings, excluding short-term investments. May be subject to change daily.
++(a)++ Represents a security, or a portion thereof, which is out on loan.
++(b)++ Non- Income producing security.
++(c)++ Exchange Traded Fund - represents a basket of securities that are traded on an exchange.
++(d)++ Represents a security, or a portion thereof, purchased with cash collateral received for securities on loan.
++(e)++ Floating rate. Rate shown is the rate in effect at April 30, 2007.
++(f)++ The cost for federal Income tax purposes is $451,163,879.
++(g)++ At April 30, 2007 net unrealized appreciation was $55,239,180, based on cost for federal Income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $59,666,134 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $4,426,954.
REORGANIZATION BETWEEN MAINSTAY COMMON STOCK FUND AND MCMORGAN EQUITY INVESTMENT FUND
MAINSTAY COMMON MCMORGAN EQUITY
STOCK FUND INVESTMENT FUND ADJUSTMENTS PRO FORMA FUND
--------------- --------------- ------------- --------------
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 30, 2007 UNAUDITED
ASSETS:
Investment in securities, at value $282,385,052(a) $224,018,007(b) $ -- $506,403,059(c)
Cash 972,404 209,988 -- 1,182,392
Receivables:
Fund shares sold 265,341 25,504 -- 290,845
Dividends and interest 210,256 185,538 -- 395,794
Investment securities sold 37,221 13,056 -- 50,277
Other assets 34,045 41,936 -- 75,981
------------ ------------ ------------- ------------
Total assets 283,904,319 224,494,029 -- 508,398,348
------------ ------------ ------------- ------------
LIABILITIES:
Securities lending collateral 10,570,802 8,119,073 -- 18,689,875
Payables:
Fund shares redeemed 480,913 151,257 -- 632,170
Investment securities purchased 472,558 70,438 -- 542,996
Transfer agent 172,425 18,876 -- 191,301
Manager 113,168 100,538 -- 213,706
Shareholder communication 50,645 4,727 -- 55,372
NYLIFE Distributors 43,942 3,000 -- 46,942
Professional fees 25,441 8,083 -- 33,524
Trustees 1,884 1,717 -- 3,601
Custodian 1,471 7,318 -- 8,789
Accrued expenses 6,033 2,075 -- 8,108
Administrative -- 9,545 -- 9,545
------------ ------------ ------------- ------------
Total liabilities 11,939,282 8,496,647 -- 20,435,929
------------ ------------ ------------- ------------
Net assets $271,965,037 $215,997,382 -- $487,962,419
============ ============ ============= ============
COMPOSITION OF NET ASSETS:
Share of beneficial interest outstanding (par value of
$.01 per share) unlimited
number of shares authorized:
Class A $ 27,273 $ -- $ -- $ 27,273
Class B 25,941 -- -- 25,941
Class C 2,439 -- -- 2,439
Class I 121,085 -- 138,925 (e) 260,010
Additional paid-in capital 234,811,218 194,628,639 (138,925)(d) 429,300,932
Accumulated undistributed net investment income 792,366 133,893 -- 926,259
Accumulated undistributed net realized gain on
investments 7,493,038 (6,785,693) -- 707,345
Net unrealized appreciation on investments 28,691,677 28,020,543 -- 56,712,220
------------ ------------ ------------- ------------
Net assets $271,965,037 $215,997,382 $ -- $487,962,419
============ ============ ============= ============
|
CLASS A
Net assets applicable to outstanding shares $ 42,323,585 $ -- $ -- $ 42,323,585
============ ============ ============= ============
Shares of beneficial interest outstanding 2,727,255 -- -- 2,727,255
============ ============ ============= ============
Net asset value per share outstanding $ 15.52 $ -- $ -- $ 15.52
Maximum sales charge (5.50% of offering price) 0.90 -- -- 0.90
------------ ------------ ------------- ------------
Maximum offering price per share outstanding $ 16.42 $ -- $ -- $ 16.42
============ ============ ============= ============
CLASS B
Net assets applicable to outstanding shares $ 37,826,313 $ -- $ -- $ 37,826,313
============ ============ ============= ============
Shares of beneficial interest outstanding 2,594,097 -- -- 2,594,097
============ ============ ============= ============
Net asset value and offering price per share outstanding $ 14.58 $ -- $ -- $ 14.58
============ ============ ============= ============
CLASS C
Net assets applicable to outstanding shares $ 3,555,413 $ -- $ -- $ 3,555,413
============ ============ ============= ============
Shares of beneficial interest outstanding 243,938 -- -- 243,938
============ ============ ============= ============
Net asset value and offering price per share outstanding $ 14.58 $ -- $ -- $ 14.58
============ ============ ============= ============
CLASS I
Net assets applicable to outstanding shares $188,259,726 $ -- $ 215,997,382 $404,257,108
============ ============ ============= ============
Shares of beneficial interest outstanding 12,108,479 -- 13,892,472(d)(e) 26,000,951
============ ============ ============= ============
Net asset value and offering price per share outstanding $ 15.55 $ -- $ 15.55 $ 15.55
============ ============ ============= ============
CLASS MCMORGAN
Net assets applicable to outstanding shares $ -- $201,784,162 $(201,784,162)(e) $ --
============ ============ ============= ============
Shares of beneficial interest outstanding -- 7,300,290 (7,300,290)(e) --
============ ============ ============= ============
Net asset value and offering price per share outstanding $ -- $ 27.64 $ (27.64)(e) $ --
============ ============ ============= ============
CLASS Z
Net assets applicable to outstanding shares $ -- $ 14,213,220 $ (14,213,220)(e) $ --
============ ============ ============= ============
Shares of beneficial interest outstanding -- 514,727 (514,727)(e) --
============ ============ ============= ============
Net asset value and offering price per share outstanding $ -- $ 27.61 $ (27.61)(e) $ --
============ ============ ============= ============
|
(a) Identified cost $253,693,375 including $10,162,180 market value of securities loaned.
(b) Identified cost $195,997,464 including $7,759,002 market value of securities loaned.
(c) Identified cost $449,690,839 including $17,921,182 market value of securities loaned.
(d) Reflects share adjustments, net of retired shares of McMorgan Equity Investment Fund. (Calculation: Net Assets/NAV per share)
(e) Reflects adjustments that holders of Class McMorgan and Class Z shares of the Acquired Fund will receive Class I shares of the Acquiring Fund. The Acquiring Fund does not offer Class McMorgan or Class Z shares.
MAINSTAY COMMON MCMORGAN EQUITY
STOCK FUND INVESTMENT FUND ADJUSTMENTS PRO FORMA FUND
--------------- --------------- ------------- --------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS AS OF
APRIL 30, 2007
INVESTMENT INCOME:
INCOME:
Dividends $ 4,026,427 $ 3,455,148 $ -- $ 7,481,575
Interest 45,573 9,285 -- 54,858
Income from securities loaned - net 22,408 23,297 -- 45,705
------------ ------------ ------------- ------------
Total income 4,094,408 3,487,730 -- 7,582,138
------------ ------------ ------------- ------------
EXPENSES:
Manager 1,602,975 900,528 414,083 (a) 2,917,586
Administration fees -- 104,668 (104,668)(b) --
Transfer agent - Classes A, B and C 394,512 -- -- 394,512
Transfer agent - Class I 120,966 68,302 (47,158)(c) 142,110
Distribution - Class B 288,766 -- -- 288,766
Distribution - Class C 23,553 -- -- 23,553
Distribution - Class Z -- 33,558 (33,558)(c) --
Distribution/Service - Class A 96,757 -- -- 96,757
Service - Class B 96,255 -- -- 96,255
Service - Class C 7,851 -- -- 7,851
Professional fees 58,421 80,730 (44,696)(b) 94,455
Registration 35,419 27,645 -- 63,064
Shareholder communication 125,904 20,958 -- 146,862
Recordkeeping 49,567 64,090 (30,297)(b) 83,360
Custodian 43,994 35,245 -- 79,239
Trustees 11,576 28,523 (16,084)(b) 24,015
Miscellaneous 8,126 31,399 (18,628)(b) 20,897
------------ ------------ ------------- ------------
Total expenses before waiver 2,964,642 1,395,646 118,994 4,479,282
------------ ------------ ------------- ------------
Expense waiver/recoupment from Manager (658,740) 6,862 (384,580)(a) (1,036,458)
------------ ------------ ------------- ------------
Net expenses 2,305,902 1,402,508 (265,586) 3,442,824
------------ ------------ ------------- ------------
Net investment income 1,788,506 2,085,222 265,586 4,139,314
============ ============ ============= ============
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 17,629,408 11,414,601 -- 29,044,009
Net change in unrealized appreciation on investments 14,488,111 14,957,739 -- 29,445,850
------------ ------------ ------------- ------------
Net realized and unrealized gain on investments 32,117,519 26,372,340 -- 58,489,859
------------ ------------ ------------- ------------
Net increase in net assets resulting from operations $ 33,906,025 $ 28,457,562 $ 265,586 $ 62,629,173
============ ============ ============= ============
|
(a) Reflects adjustment in expenses due to an increase in management fees.
(b) Reflects adjustment in expenses based on NYLIM's 2007 acquisition of McMorgan Equity Investment Fund and an overall change in expenses.
(c) Reflects adjustment in expenses based on NYLIM's 2007 acquisition of McMorgan Equity Investment Fund, as well as the application of a new cost structure for transfer agenct fees implemented in 2007. This would have been the estimated transfer agency costs incurred had the new cost structure been applied in 2007, using reasonable assumptions.
REORGANIZATION BETWEEN MCMORGAN EQUITY INVESTMENT FUND AND MAINSTAY
COMMON STOCK FUND
PRO FORMA NOTES TO THE FINANCIAL STATEMENTS
AT APRIL 30, 2007 (UNAUDITED)
NOTE 1 - BASIS OF COMBINATION:
At meetings on June 6, 2007 and June 7, 2007, the Board of Trustees of the McMorgan Funds and the Board of Trustees of the MainStay Group of Funds (the "Trust"), approved the combination whereby, subject to the approval of the shareholders of McMorgan Equity Investment Fund ("Equity Investment Fund"), MainStay Common Stock Fund ("Common Stock Fund"), a series of the Trust, will acquire all of the assets of Equity Investment Fund, a series of the McMorgan Funds, and assume all of the known liabilities of such Fund, in exchange for a number of Class I shares of Common Stock Fund equal in value to the net assets of the Equity Investment Fund (the "Reorganization").
The accounting survivor in the Reorganization will be the Common Stock Fund. This is because, following the Reorganization, the surviving Fund will have the same investment objectives, policies and restrictions as the Common Stock Fund.
The Reorganization will be accounted for as a tax-free reorganization. The unaudited pro forma combined financial statements are presented for the information of the reader and may not necessarily be representative of what the actual combined financial statements would have been had the reorganization occurred at April 30, 2007. The unaudited pro forma portfolio of investments, and statement of assets and liabilities reflect the financial position of Common Stock Fund and Equity Investment Fund at April 30, 2007. The unaudited pro forma statement of operations reflects the results of operations of Common Stock Fund and Equity Investment Fund for the year ended April 30, 2007. These statements have been derived from the Fund's respective books and records utilized in calculating daily net asset value at the date indicated above for Common Stock Fund and Equity Investment Fund under generally accepted accounting principles in the United States. The historical cost of investment securities will be carried forward to the surviving entity.
The unaudited pro forma portfolio of investments, statement of assets and liabilities and statement of operations should be read in conjunction with the historical financial statements of each Fund that are incorporated by reference in the Statements of Additional Information.
NOTE 2 - SECURITIES VALUATION:
Equity securities are valued at the latest quoted sales prices as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on each day the Fund is open for business ("valuation date"). Securities that are not traded on the valuation date are valued at the mean of the latest quoted bid and
asked prices. Prices normally are taken from the principal market in which each security trades.
Temporary cash investments acquired over 60 days prior to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Board of Trustees to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: a security the trading for which has been halted or suspended; a debt security that has recently gone into default and for which there is not current market quotation; a security of an issuer that has entered into a restructuring; a security that has been de-listed from a national exchange; a security the market price of which is not available from an independent pricing source or, if so provided, does not, in the opinion of the Fund's investment adviser or sub-adviser (if applicable), reflect the security's market value; a security where the trading on that security's principal market is temporarily closed at a time when, under normal conditions, it would be open. At April 30, 2007 the Fund did not hold securities that were valued in such manner.
NOTE 3 - CAPITAL SHARES:
The unaudited pro forma net asset value per share assumes retired shares of common stock in connection with the proposed acquisition of Equity Investment Fund by Common Stock Fund as of April 30, 2007. The number of retired shares was calculated by dividing the net asset value of each Class of Equity Investment Fund by the respective Class net asset value per share of Common Stock Fund.
NOTE 4 - UNAUDITED PRO FORMA ADJUSTMENTS:
The accompanying unaudited pro forma financial statements reflect changes in portfolio shares as if the Reorganization had taken place on April 30, 2007. Equity Investment Fund expenses were adjusted assuming Common Stock Fund's fee structure was in effect for the year ended April 30, 2007.
NOTE 5 - USE OF ESTIMATES:
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 6 - FEDERAL INCOME TAXES:
Each of the Funds is treated as a separate entity for federal income tax purposes. The Trust's policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of each Fund within the allowable time limits. By doing so, the Fund will be relieved from all or substantially all of federal and state income and excise taxes.
INSTRUCTIONS FOR SIGNING PROXY CARDS
THE FOLLOWING GENERAL RULES FOR SIGNING PROXY CARDS MAY BE OF ASSISTANCE TO YOU AND MAY HELP AVOID THE TIME AND EXPENSE INVOLVED IN VALIDATING YOUR VOTE IF YOU FAIL TO SIGN YOUR PROXY CARD PROPERLY.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Both parties must sign. The names of the parties signing should conform exactly to the names shown in the registration on the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy card should be indicated unless it is reflected in the form of registration.
FOR EXAMPLE:
REGISTRATION VALID
------------ ---------------------------------------
CORPORATE ACCOUNTS
(1) ABC Corp................................ ABC Corp. John Doe, Treasurer
(2) ABC Corp................................ John Doe
(3) ABC Corp. c/o John Doe.................. John Doe
(4) ABC Corp. Profit Sharing Plan........... John Doe
PARTNERSHIP ACCOUNTS
(1) The XYZ Partnership..................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership.... Jane B. Smith, General Partner
TRUST ACCOUNTS
(1) ABC Trust............................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78..... Jane B. Doe, Trustee u/t/d/ 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Custodian
f/b/o John B. Smith, Jr. UGMA/UTMA...... John B. Smith, Custodian f/b/o/ John
B. Smith Jr., UGMA/UTMA
(2) Estate of John B. Smith................. John B. Smith, Jr.,
Executor
Estate of John B. Smith
|
PLEASE CHOOSE ONE OF THE FOLLOWING OPTIONS TO VOTE YOUR SHARES:
1. AUTHORIZE YOUR PROXY THROUGH THE INTERNET. Log onto the Internet site identified on your proxy card and follow the instructions on the website. In order to log on, you will need the control number found on your proxy card.
2. AUTHORIZE YOUR PROXY BY TELEPHONE. Have your voting instruction card available. Call [1-800-317-8028] toll-free. Enter your 12-digit control number from your voting instruction card. Follow the simple instructions.
3. VOTE BY MAIL. Complete, date and sign your proxy card and mail it in the enclosed postage-paid envelope.
4. VOTE IN PERSON AT THE SPECIAL MEETING.
PROXY CARD
MCMORGAN FUNDS
SPECIAL MEETING OF SHAREHOLDERS OF THE
MCMORGAN EQUITY INVESTMENT FUND
TO BE HELD ON NOVEMBER 20, 2007
The undersigned shareholder of the McMorgan Equity Investment Fund (the "Fund"), a series of the McMorgan Funds (the "Trust"), hereby constitutes and appoints ________, ________, and ________, or any one of them, as proxy of the undersigned, with full power of substitution, to vote all shares of the Fund held in his or her name on the books of the Fund and which he or she is entitled to vote at the Special Meeting of Shareholders of the Fund, to be held at the offices of McMorgan & Company LLC, One Bush Street, Suite 800, San Francisco, California 94104, on Tuesday, November 20, 2007, at 10:00 a.m. Pacific Time, and at any adjournments or postponements of the Special Meeting with all the powers that the undersigned would possess if personally present, and designated on the reverse hereof.
The undersigned hereby revokes any prior proxy, and ratifies and confirms all that the proxies, or any one of them, may lawfully do. The undersigned acknowledges receipt of the Notice of the Special Meeting of Shareholders of the Fund and the Proxy Statement/Prospectus dated September 24, 2007.
The undersigned hereby instructs the said proxies to vote in accordance with the instructions provided below with respect to the proposals set forth on the proxy card and described in the Proxy Statement / Prospectus.
The undersigned understands that if he or she does not provide an instruction, that the proxies will vote his or her shares in favor of the proposal. The proxies will also vote on any other matter that may arise at the Special Meeting according to their best judgment.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE TRUST, WHICH RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL.
(Continued and to be dated and signed on reverse side)
Your proxy is important to assure a quorum at the Special Meeting of Shareholders of the Fund whether or not you plan to attend the Special Meeting in person. You may revoke this proxy at any time and the giving of it will not affect your right to attend the Special Meeting and vote in person.
Unless a contrary direction is indicated, the shares represented by this proxy will be voted FOR approval of the Proposal; if specific instructions are indicated, this proxy will be voted in accordance with such instructions.
FOR AGAINST ABSTAIN
1. To approve an Agreement and Plan of [ ] [ ] [ ]
Reorganization providing for (i) the acquisition
of all of the assets and the assumption of the
known liabilities of the Fund by the MainStay
Common Stock Fund (the "MainStay Fund"), a series
of The MainStay Funds, in exchange for Class I
shares of the MainStay Fund having an aggregate
net asset value equal to the aggregate net asset
value of the shares of the Fund, (ii) the
distribution of such Class I shares to the
shareholders of the Fund in exchange for the
McMorgan Fund Class and Class Z shares of the
Fund held by such shareholders, and (iii) the
subsequent liquidation and dissolution of the
Fund
|
[ ] Please check this box if you plan to attend the Special Meeting
PLEASE VOTE BY CHECKING THE APPROPRIATE BOX AS IN THIS EXAMPLE: [X]
Please mark, sign, date and return the Proxy Card promptly using the enclosed envelope.
Date: ____________________________, 2007
YOUR VOTE IS VERY IMPORTANT. PLEASE
COMPLETE, SIGN AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY.
Please sign exactly as your name or names appear. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as
such.
THE MAINSTAY FUNDS
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
New York Life Insurance Company maintains Directors & Officers Liability insurance coverage. The policy covers the Directors, Officers, and Trustees of New York Life, its subsidiaries and certain affiliates, including The Mainstay Funds. Subject to the policy's terms, conditions, deductible and retentions, Directors, Officers and Trustees are covered for claims made against them while acting in their capacities as such. The primary policy is issued by Zurich-American Insurance Company, and the excess policies are issued by various insurance companies. The issuing insurance companies may be changed from time to time and there is no assurance that any or all of the current coverage will be maintained by New York Life.
Article IV of Registrant's Declaration of Trust states as follows:
SECTION 4.3. MANDATORY INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust shall be indemnified by the Trust, or by one or more series thereof if the claim arises from his or her conduct with respect to only such Series to the fullest extent permitted by law against all liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal, or other, including appeals), actual or threatened; and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust or a Series thereof or the Shareholders by reason of a final adjudication by a court or other body before which a proceeding was brought that he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or a Series thereof;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or
(b)(ii) resulting in a payment by a Trustee or officer, unless
there has been a determination that such Trustee or officer did
not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office;
(A) by the court or other body approving the settlement or other disposition; or
(B) based upon a review of readily available facts (as opposed to a full trial-type inquiry) by (x) vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or (y) written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any rights to which any Trustee or officer may now or hereafter be entitled, shall continue as to a person who has ceased to be such Trustee or officer and shall inure to the benefit of the heirs, executors, administrators and assigns of such a person. Nothing contained herein shall affect any rights to indemnification to which personnel of the Trust other than Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim, action, suit, or proceedings of the character described in paragraph (a) of this Section 4.3 shall be advanced by the Trust or a Series thereof to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient, to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by surety bond or some other appropriate security provided by the recipient, or the Trust or a Series thereof shall be insured against losses arising out of any such advances; or
(ii) a majority of the Non-interested Trustees acting on the matter (provided that a majority of the Disinterested Trustees acts on the matter) or an independent legal counsel in a written opinion shall determine, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who is not (i) an "Interested Person" of the Trust (including anyone who has been exempted from being an "Interested
Person" by any rule, regulation or order of the Commission), or (ii) involved in the claim, action, suit or proceeding.
In addition, each Trustee has entered into a written agreement with the Trust pursuant to which the Trust is contractually obligated to indemnify the Trustees to the fullest extent permitted by law and by the Declaration of Trust and Bylaws of the Trust.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS
(1) (a) Fifth Amended and Restated Establishment and Designation of Series of Shares of Beneficial Interest, Par Value $.01 Per Share dated October 26, 1992 - Previously filed as Exhibit 1(b) to Post-Effective Amendment No. 16.*
(b) Establishment and Designation of Additional Series of Shares of Beneficial Interest, Par Value $.01 Per Share - Previously filed as Exhibit 1(b) to Post-Effective Amendment No. 11.*
(c) Form of Establishment and Designation of Additional Series of shares of Beneficial Interest, Par Value $.01 Per Share - Previously filed as Exhibit 1(b) to Post-Effective Amendment No. 23.*
(d) Form of Declaration of Trust as Amended and Restated December 31, 1994
- Previously filed as Exhibit a(4) to Post-Effective Amendment No.
53.*
(e) Form of Establishment and Designation of Additional Series of Shares of Beneficial Interest, Par Value $.01 Per Share - Previously filed as Exhibit 1(e) to Post-Effective Amendment No. 28.*
(f) Form of Establishment and Designation of an Additional Series of Shares of Beneficial Interest, Par Value $.01 Per Share - Previously filed as Exhibit 1(g) to Post-Effective Amendment No. 35.*
(g) Establishment and Designation of an Additional Series of Shares of Beneficial Interest, Par Value $.01 Per Share - Previously filed as Exhibit 1(h) to Post-Effective Amendment No. 38.*
(h) Establishment and Designation of Additional Series of Shares of Beneficial Interest, Par Value $.01 Per Share - Previously filed as Exhibit 1(i) to Post-Effective Amendment No. 47.*
(i) Establishment and Designations of Class of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit a(10) to Post-Effective Amendment No. 51.*
(j) Establishment and Designations of Additional Series of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit a(11) to Post-Effective Amendment No. 51.*
(k) Establishment and Designation of Additional Series of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit a(11) to Post-Effective Amendment No. 55.*
(l) Form of Establishment and Designation of Additional Series of Shares of Beneficial Interest, Par Value $0.01 Per Share relating to the Mainstay U.S. Large Cap Equity Fund - Previously filed as Exhibit a(12) to Post-Effective Amendment No. 58.*
(m) Establishment and Designation of Classes of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit a(13) to Post-Effective Amendment No. 65.*
(n) Redesignation of Series of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit a(14) to Post-Effective Amendment No. 65.*
(o) Abolition of Series of Shares of Beneficial Interest, Par Value $0.01 per Share - Previously filed as Exhibit a(15) to Post-Effective Amendment No. 65.*
(p) Establishment and Designation of Additional Series and Classes of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit (a)(16) to Post-Effective Amendment No. 74.*
(q) Abolition of Series of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit (a)(17) to Post-Effective Amendment No. 74.*
(r) Abolition of Series of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit (a)(18) to Post-Effective Amendment No. 74.*
(s) Abolition of Series of Shares of Beneficial Interest, Par Value $0.01 Per Share - Previously filed as Exhibit (a)(19) to Post-Effective Amendment No. 74.*
(t) Establishment and Designation of Additional Shares of Beneficial
Interest, Par Value $0.01 Per Share - Previously filed as Exhibit
(a)(20) to Post-Effective Amendment No. 80.*
(u) Establishment and Designation of Additional Shares of Beneficial Interest, Par Value $0.01 Per Share filed herewith.
(2) Amended and Restated By-Laws dated May 23, 2005 - Previously filed as Exhibit (b)(1) to Post-Effective Amendment No. 80.*
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization - Filed herewith as Exhibit A to the Proxy Statement/Prospectus.
(5) See the Declaration of Trust, as amended and supplemented from time to time and the Amended and Restated By-Laws dated December 31, 1994 (See above).
(6) (a) Form of Amended and Restated Management Agreement between The MainStay Funds and New York Life Investment Management LLC filed herewith.
(b) (1) Amended and Restated Sub-Advisory Agreement between New York Life Investment Management LLC and MacKay Shields LLC - Previously filed as Exhibit (d)(2)(a) to Post-Effective Amendment No. 80.*
(2) Second Amended and Restated Sub-Advisory Agreement between New York Life Investment Management LLC and Markston International LLC - Previously filed as (d)(2)(b) to Post-Effective Amendment No. 80.*
(3) Sub-Advisory Agreement between New York Life Investment Management LLC and Jennison Associates LLC - Previously filed as Exhibit (d)(2)(c) to Post-Effective Amendment No. 80.*
(4) Sub-Advisory Agreement between New York Life Investment Management LLC and Winslow Capital Management, Inc. - Previously filed as Exhibit (d)(2)(d) to Post-Effective Amendment No. 80.*
(5) Sub-Advisory Agreement between New York Life Investment Management LLC and Institutional Capital LLC - Previously filed as Exhibit (d)(2)(e) to Post-Effective Amendment No. 84.*
(6) Form of Sub-Advisory Agreement between New York Life Investment Management LLC and McMorgan & Company LLC filed herewith.
(7) (a) Amended and Restated Master Distribution Agreement between the MainStay Funds and NYLIFE Distributors Inc. - Previously filed as Exhibit (e)(1) to Post-Effective Amendment No. 80.*
(b) Form of Soliciting Dealer Agreement - Previously filed as Exhibit
(e)(2) to Post-Effective Amendment No. 80.*
(8) Not applicable.
(9) (a) Custodian Agreement with Investors Bank & Trust Company dated June 30, 2005 - Previously filed as Exhibit (g)(1) to Post-Effective Amendment No. 80.*
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company dated September 27, 2006 - Previously filed as Exhibit (g)(2) to Post-Effective Amendment No. 84.*
(c) Delegation Agreement with Investors Bank & Trust Company dated June 30, 2005 - Previously filed as Exhibit (g)(2) to Post-Effective Amendment No. 80.*
(d) Amendment to Delegation Agreement with Investors Bank & Trust Company dated September 27, 2006 - Previously filed as Exhibit (g)(4) to Post-Effective Amendment No. 84.*
(10) (a) Amended and Restated Plan of Distribution pursuant to Rule 12b-1 (Class A shares) - Previously filed as Exhibit (m)(1) to Post-Effective Amendment No. 80.*
(b) Amended and Restated Plan of Distribution pursuant to Rule 12b-1 (Class B shares) - Previously filed as Exhibit (m)(2) to Post-Effective Amendment No. 80.*
(c) Amended and Restated Plan of Distribution pursuant to Rule 12b-1 (Class C shares) -- Previously filed as Exhibit (m)(3) to Post-Effective Amendment No. 80.*
(d) Plan of Distribution pursuant to Rule 12b-1 (Class R2 shares) - Previously filed as Exhibit (m)(4) to Post-Effective Amendment No. 80.*
(e) Plan of Distribution pursuant to Rule 12b-1 (Class R3 shares) - Previously filed as Exhibit (m)(5) to Post-Effective Amendment No. 80.*
(f) (1) Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3 - previously filed as Exhibit (n) to Post-Effective Amendment No. 84.
(2) Form of Amendment to Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3 to add new series - Filed herewith.
(11) Opinion and consent of counsel as to the legality of the shares being registered filed herewith.
(12) Opinion and consent of Sutherland Asbill & Brennan LLP regarding tax matters - to be filed by amendment.
(13) (a) (1) Amended and Restated Transfer Agency and Service Agreement - Previously filed as Exhibit (h)(1)(a) to Post-Effective Amendment No. 80.*
(2) Sub-Transfer Agency Agreement - Previously filed as Exhibit h(I)(d) to Post-Effective Amendment No. 51.*
(A) Amended and Restated Schedule A to the Sub-Transfer Agency Agreement - Previously filed as Exhibit h(I)(b)(i) to Post-Effective Amendment No. 54.*
(b) Form of Guaranty Agreement - Equity Index Fund -- Previously filed as Exhibit h(2) to Post-Effective Amendment No. 53.*
(c) Amended and Restated Service Agreement with New York Life Benefit Services, Inc. - Previously filed as Exhibit (h)(3) to Post-Effective Amendment No. 80.*
(d) Amended and Restated Fund Accounting Agreement with New York Life Investment Management LLC - Previously filed as Exhibit (h)(4) to Post-Effective Amendment No. 80.*
(e) Shareholder Services Plan (Class R1 shares) - Previously filed as Exhibit (h)(5) to Post-Effective Amendment No. 80.*
(f) Shareholder Services Plan (Class R2 shares) - Previously filed as Exhibit (h)(6) to Post-Effective Amendment No. 80.*
(g) Shareholder Services Plan (Class R3 shares) - Previously filed as Exhibit (h)(7) to Post-Effective Amendment No. 80.*
(h) Expense Limitation Agreement - Previously filed as Exhibit (h)(8) to Post-Effective Amendment No. 84.*
(i) Amendment to Fund Accounting Agreement - Previously filed as Exhibit
(h)(9) to Post-Effective Amendment No. 80.*
(j) Form of Indemnification Agreement - Previously filed as Exhibit
(h)(10) to Post-Effective Amendment No. 80.*
(k) Master Fund Sub-Accounting and Sub-Administration Agreement between New York Life Investment Management LLC and Investors Bank & Trust Company - Previously filed as Exhibit (h)(11) to Post-Effective Amendment No. 80.*
(l) Amendment to Fund Sub-Accounting and Sub-Administration Agreement between New York Life Investment Management LLC and Investors Bank & Trust Company - Previously filed as Exhibit (h)(12) to Post-Effective Amendment No. 84.*
(14) (a) Consent of Registered Public Accounting Firm - Filed herewith.
(b) Consent of Registered Public Accounting Firm - Filed herewith.
(15) Not applicable.
(16) Powers of attorney filed herewith.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of the prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for reoffering by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file in a Post-Effective Amendment to this Registration Statement a final tax opinion upon the closing of the transaction.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant, in the City of Parsippany in the State of New Jersey, on the 10th day of August, 2007.
THE MAINSTAY FUNDS
By: /s/ Stephen P. Fisher
------------------------------------
Name: Stephen P. Fisher
Title: President
|
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated on August 10, 2007:
SIGNATURE TITLE --------- ----- /s/ Susan B. Kerley* ------------------------------------- Trustee Susan B. Kerley /s/ Alan R. Latshaw* ------------------------------------- Trustee Alan R. Latshaw /s/ Peter Meenan* ------------------------------------- Trustee Peter Meenan /s/ Brian A. Murdock* ------------------------------------- Trustee and Chief Executive Officer Brian A. Murdock /s/ Richard H. Nolan, Jr.* ------------------------------------- Trustee Richard H. Nolan, Jr. /s/ Richard S. Trutanic* ------------------------------------- Trustee Richard S. Trutanic |
/s/ Roman L. Weil*
------------------------------------- Trustee
Roman L. Weil
/s/ John A. Weisser*
------------------------------------- Trustee
John A. Weisser
/s/ Jack Benintende
------------------------------------- Treasurer and Principal Financial and
Jack Benintende Accounting Officer
*By: /s/ Marguerite E.H. Morrison
--------------------------------
Marguerite E.H. Morrison
As Attorney-in-Fact*
|
* PURSUANT TO POWERS OF ATTORNEY FILED HEREWITH.
THE MAINSTAY FUNDS
ESTABLISHMENT AND DESIGNATION OF ADDITIONAL SERIES AND CLASSES
OF SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE
JUNE 7, 2007
RESOLVED, that the undersigned, being a majority of the Trustees of The
MainStay Funds, a Massachusetts business trust (the "Trust"), acting pursuant to
Section 5.11 of the Declaration of Trust dated January 9, 1986 as amended and
restated on August 30, 1991 and December 31, 1994 (the "Declaration of Trust"),
hereby authorize the establishment of two additional series of the Trust (each a
"Series"); and
FURTHER RESOLVED, that pursuant to Section 5.12 of the Declaration of Trust, each Series shall have such classes of shares (each, a "Class") as provided below; and
FURTHER RESOLVED, that the Series and Classes shall have the following special and relative rights:
1. The Series shall be designated as follows:
MainStay Institutional Bond Fund MainStay Principal Preservation Fund
2. The Series shall have initially one Class of shares, designated Class I and any additional Classes, to have such special and relative rights, and be subject to such liabilities as may be provided for from time to time in the Trust's registration statement under the Securities Act of 1933 and the Investment Company Act of 1940 and the Trust's Multiple Class Plan Pursuant to Rule 18f-3, each as amended from time to time.
3. The Series shall be authorized to invest in cash, securities, instruments and other property as from time to time described in its then currently effective prospectus and registration statement under the Securities Act of 1933. Each share of beneficial interest of the Series ("Share") shall be redeemable, shall be entitled to one vote (or fraction thereof in respect of a fractional Share) on matters on which Shares of the Series or a Class shall be entitled to vote, shall represent a pro rata beneficial interest in the assets allocated to the Series, and shall be entitled to receive its pro rata share of net assets of such Series upon liquidation of the Series, all as provided in the Declaration of Trust. The proceeds of sales of Shares of the Series, together with any income and gain thereon, less any diminution or expenses thereof, shall irrevocably belong to such Series, unless otherwise required by law.
4. Shareholders of all series of the Trust, including the Series, shall vote as a class on any matter, except to the extent otherwise required by the Investment Company Act of 1940 or when the Trustees have determined that the matter affects only the interests of Shareholders of any series, including the Series or any Class, in which case only the Shareholders of such series or class shall be entitled to vote thereon. Any matter shall be deemed to have been effectively acted
upon with respect to a series if acted upon as provided in Rule 18f-2 under such Act or any successor rule and in the Declaration of Trust.
5. The assets and liabilities of the Trust shall be allocated among the series of the Trust, including the Series, and between Classes, as set forth in Sections 5.11 and 5.12 of the Declaration of Trust, except as described below.
(a) Costs incurred by the Trust on behalf of the Series in connection with the organization and initial registration and public offering of Shares of the Series shall be treated in accordance with applicable law and generally accepted accounting principles.
(b) The liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular series or class shall be allocated among the series of the Trust, including the Series, and/or between the Classes on the basis of their relative average daily net assets except where allocations of direct expenses can otherwise fairly be made.
(c) The Trustees may from time to time in particular cases make specific allocations of assets or liabilities among the series or classes of the Trust.
6. The Trustees (including any successor Trustees) shall have the right at any time and from time to time to reallocate assets, liabilities and expenses or to change the designation of any series or class now or hereafter created, or to otherwise change the special and relative rights of any such series or class, provided that such change shall not adversely affect the rights of Shareholders of such series or class.
/s/: Susan B. Kerley /s/: Alan R. Latshaw ----------------------------------- ----------------------------------- Susan B. Kerley Alan R. Latshaw /s/: Peter Meenan /s/: Richard H. Nolan ----------------------------------- ----------------------------------- Peter Meenan Richard H. Nolan, Jr. /s/: Richard S. Trutanic /s/: Roman L. Weil ----------------------------------- ----------------------------------- Richard S. Trutanic Roman L. Weil /s/: John A. Weisser, Jr. /s/: Brian A. Murdock ----------------------------------- ----------------------------------- John A. Weisser, Jr. Brian A. Murdock |
FORM OF
THE MAINSTAY FUNDS
AMENDED AND RESTATED MANAGEMENT AGREEMENT
Amended and Restated Management Agreement, made as of the ____ day of September 2007, between The MainStay Funds, a Massachusetts business trust (the "Trust"), on behalf of its series as set forth on Schedule A (each, a "Fund," and collectively, the "Funds"), as amended from time to time, and New York Life Investment Management LLC, a Delaware limited liability company (the "Manager").
WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the shares of beneficial interest of the Trust (the "Shares") are divided into separate series, each of which is established pursuant to a written instrument executed by the Trustees of the Trust and the Trustees may from time to time terminate such series or establish and terminate additional series; and
WHEREAS, each Fund desires to retain the Manager to render investment advisory and related administrative services to the Fund, and the Manager is willing to render such services on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment. Each Fund hereby appoints New York Life Investment Management LLC to act as manager to the Fund for the period and on the terms set forth in this Agreement. The Manager accepts such appointment and agrees to render the services herein described, for the compensation herein provided.
2. Duties as Manager. Subject to the supervision of the Trustees of the Trust, the Manager shall administer each Fund's business affairs and manage the investment operations of each Fund and the composition of the portfolio of each Fund, including the purchase, retention and disposition of securities therein, in accordance with the investment objectives, policies and restrictions of each Fund, as stated in the currently effective Prospectus (as hereinafter defined) and subject to the following understandings:
(a) The Manager shall (i) furnish each Fund with office facilities; (ii) be responsible for the financial and accounting records required to be maintained by each Fund (excluding those being maintained by the Fund's Custodian, Transfer Agent and Accounting Services Agent except as to which the Manager has supervisory functions) and other than those being maintained by the Fund's sub-adviser, if any; and (iii) furnish each Fund with ordinary clerical, bookkeeping and recordkeeping services at such office facilities.
(b) The Manager shall provide supervision of each Fund's investments and determine from time to time what investments or securities will be purchased, retained, sold or lent by the Fund, and what portion of the Fund's assets will be invested or held uninvested as cash.
(c) The Manager shall use its best judgment in the performance of its duties under this Agreement.
(d) The Manager, in the performance of its duties and obligations under this Agreement, shall act in conformity with the Declaration of Trust, By-Laws and Prospectus (each as hereinafter defined) of the Trust and with the instructions and directions of the Trustees of the Trust and will conform to and comply with the requirements of the 1940 Act and all other applicable federal and state laws and regulations.
(e) The Manager, and any sub-adviser to whom such authority has been delegated, shall determine the securities to be purchased or sold by each Fund and will place orders pursuant to its determination with or through such persons, brokers or dealers (including NYLIFE Securities Inc.) in conformity with the policy with respect to brokerage as set forth in the Trust's Registration Statement and Prospectus (each as hereinafter defined) or as the Trustees may direct from time to time. It is recognized that, in providing a Fund with investment supervision or the placing of orders for portfolio transactions, the Manager or any sub-adviser will give primary consideration to securing the most favorable price and efficient execution. Consistent with this policy, the Manager or any sub-adviser may consider the financial responsibility, research and investment information and other services provided by brokers or dealers who may effect or be a party to any such transaction or other transactions to which other clients of the Manager or any sub-adviser may be a party. It is understood that none of the Funds, the Trust nor the Manager or any sub-adviser has adopted a formula for allocation of a Fund's investment transaction business. It is also understood that it is desirable for each Fund that the Manager or any sub-adviser have access to supplemental investment and market research and security and economic analyses provided by certain brokers who may execute brokerage transactions at a higher cost to a Fund than may result when allocating brokerage to other brokers on the basis of seeking the most favorable price and efficient execution. Therefore, the Manager or any sub-adviser is authorized to place orders for the purchase and sale of securities for a Fund with such certain brokers, subject to review by the Trust's Trustees from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers may be useful to the Manager or any sub-adviser in connection with its services to other clients.
On occasions when the Manager or any sub-adviser deems the purchase or sale of a security to be in the best interest of a Fund as well as other clients, the Manager or any sub-adviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities to be so sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as expenses incurred in the transaction, will be made by the Manager or any sub-adviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to that Fund and to such other clients.
(f) The Manager shall maintain all books and records with
respect to each Fund's securities transactions required by sub-paragraphs
(b)(5), (6), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act and
any other books and records required to be maintained by it under the 1940 Act
and the Rules thereunder and shall render to the Trust's Trustees such periodic
and special reports as the Trustees may reasonably request.
(g) The Manager shall provide the Trust's Custodian on each business day with information relating to the execution of all portfolio transactions pursuant to standing instructions.
(h) With respect to any or all series of the Trust, including the Funds, the Manager may enter into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with a sub-adviser or sub-administrator in which the Manager delegates to such sub-adviser or sub-administrator any or all its duties specified in this Agreement, provided that each Sub-Advisory or Sub-Administration Contract meets all applicable requirements of the 1940 Act and the rules thereunder.
The Trust and Manager understand and agree that the Manager may manage a Fund in a "manager-of-managers" style with either a single or multiple subadvisors, which contemplates that the Manager will, among other things and pursuant to an Order issued by the Securities and Exchange Commission (SEC): (i) continually evaluate the performance of each subadvisor to a Fund, if applicable, through quantitative and qualitative analysis and consultations with such subadvisor; (ii) periodically make recommendations to the Board as to whether the contract with one or more subadvisors should be renewed, modified, or terminated; and (iii) periodically report to the Board regarding the results of its evaluation and monitoring functions. The Trust recognizes that a subadvisor's services may be terminated or modified pursuant to the "manager-of-managers" process, and that the Manager may appoint a new subadvisor for a subadvisor that is so removed.
3. Manager Personnel. The Manager shall authorize and permit any of its directors, officers and employees who may be elected or appointed as Trustees or officers of the Trust to serve in the capacities in which they are elected or appointed. Services to be furnished by the Manager under this Agreement may be furnished through the medium of any of such directors, officers, or employees.
4. Books and Records. The Manager shall keep the Funds' books and records required to be maintained by it, pursuant to paragraph 2 hereof. The Manager agrees that all records which it maintains for a Fund are the property of such Fund, and it will surrender promptly to the Fund any of such records upon the Fund's request. The Manager further agrees to preserve for the periods prescribed by Rule 31a-2 as promulgated by the Securities and Exchange Commission (the "Commission") under the 1940 Act any such records as are required to be maintained by the Manager pursuant to paragraph 2 hereof.
5. Services Not Exclusive. The services furnished by the Manager hereunder are not to be deemed exclusive and the Manager shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby.
6. Documents. The Trust has delivered to the Manager copies of each of the following documents and will deliver to it all future amendments and supplements, if any:
(a) Declaration of Trust of the Trust, filed with the Secretary of The Commonwealth of Massachusetts (such Declaration of Trust, as in effect on the date hereof and as amended from time to time, is herein called the "Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified Resolutions of the Trustees of the Trust authorizing the appointment of the Manager and approving the form of this Agreement;
(d) Written Instrument to Establish and Designate Separate Series of Shares;
(e) Registration Statement under the 1940 Act and the Securities Act of 1933, as amended, on Form N-1A (the "Registration Statement"), as filed with the Commission, relating to each Fund and each Fund's Shares and all amendments thereto;
(f) Notification of Registration of the Trust under the 1940 Act on Form N-8A as filed with the Commission and all amendments thereto; and
(g) Each form of Prospectus and Statement of Additional Information of the Trust (such Prospectus and Statement of Additional Information, as currently in effect and as amended or supplemented from time to time, being herein called collectively the "Prospectus").
7. Expenses. (a) In connection with the services rendered by the Manager under this Agreement, the Manager will bear all of the following expenses:
(i) the salaries and expenses of all personnel of the Trust and the Manager, except the fees and expenses of Trustees who are not interested persons of the Manager or of the Trust; and
(ii) all expenses incurred by the Manager in connection with managing the investment operations of each Fund and administering the ordinary course of each Fund's business, other than those assumed by the Funds herein;
(b) Each Fund assumes and will pay its expenses, including but not limited to those described below (where any such category applies to more than one series of the Trust, each Fund shall be liable only for its allocable portion of the expenses):
(i) the fees and expenses of Trustees who are not interested persons of the Manager or of the Trust;
(ii) the fees and expenses of each Fund's custodian which relate to (A) the custodial function and the recordkeeping connected therewith, (B) the maintenance of the required accounting records of the Funds not being maintained by the Manager, (C) the pricing of the Funds' Shares, including the cost of any pricing service or services which may be retained
pursuant to the authorization of the Trustees of the Trust, and (D) for both mail and wire orders, the cashiering function in connection with the issuance and redemption of the Funds' Shares;
(iii) the fees and expenses of the Trust's transfer and dividend disbursing agent, which may be the custodian, which relate to the maintenance of each shareholder account;
(iv) the charges and expenses of legal counsel (including an allocable portion of the cost of maintaining an internal legal and compliance department) and independent accountants for the Trust;
(v) brokers' commissions and any issue or transfer taxes chargeable to the Trust in connection with its securities transactions on behalf of the Funds;
(vi) all taxes and business fees payable by the Trust or the Funds to federal, state or other governmental agencies;
(vii) the fees of any trade association of which the Trust may be a member;
(viii) the cost of share certificates representing Fund Shares;
(ix) the fees and expenses involved in registering and maintaining registrations of the Trust and of its Shares with the Commission, registering the Trust as a broker or dealer and qualifying its Shares under state securities laws, including the preparation and printing of the Trust's registration statements and prospectuses for filing under federal and state securities laws for such purposes;
(x) allocable communications expenses with respect to investor services and all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing reports to shareholders in the amount necessary for distribution to the shareholders;
(xi) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Trust's business; and
(xii) any expenses assumed by the Funds pursuant to a Plan of Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
8. Organization Expenses. Each Fund hereby agrees to reimburse the Manager for the organization expenses of, and the expenses incurred in connection with, the initial offering of Shares of that Fund.
9. Compensation. For the services provided and the facilities furnished pursuant to this Agreement, the Trust will pay to the Manager as full compensation therefor a fee at an annual rate, as set forth opposite each Fund's name on Schedule A, of the average daily net assets of each Fund.
This fee will be computed daily and will be paid to the Manager monthly. This fee will be chargeable only to the respective Fund, and no other series of the Trust shall be liable for the fee due and payable hereunder. No Fund shall be liable for any expense of any other series of the Trust.
10. Standard of Care. Subject to the applicable law, the Manager shall not be liable for any error of judgment or for any loss suffered by a Fund in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement.
11. Duration and Termination. This Agreement shall continue in effect with respect to each Fund for a period of one year from the effective date hereof (except with respect to any series of the Trust added to Schedule A of this Agreement after August 1, 2002, for an initial period of two years from the date that such series is added) and thereafter only so long as such continuance is specifically approved at least annually with respect to that Fund in conformity with the requirements of the 1940 Act and the rules thereunder. Provided, however, that this Agreement may be terminated with respect to a Fund at any time, without the payment of any penalty, by the Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of that Fund, or by the Manager at any time, without the payment of any penalty, on not more than 60 days' nor less than 30 days' written notice to the other party. This Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act).
12. Other Business. Nothing in this Agreement shall limit or restrict the right of any of the Manager's directors, officers, or employees who may also be a Trustee, officer, or employee of the Trust to engage in any other business or to devote his time and attention in part to the management or other aspects of any business, whether of a similar or dissimilar nature, nor limit or restrict the Manager's right to engage in any other business or to render services of any kind to any other corporation, trust, firm, individual or association.
13. Independent Contractor. Except as otherwise provided herein or authorized by the Trustees of the Trust from time to time, the Manager shall for all purposes herein be deemed to be an independent contractor and shall have no authority to act for or represent any Fund or the Trust in any way or otherwise be deemed an agent of any Fund or the Trust.
14. Trust Materials. During the term of this Agreement, the Trust agrees to furnish the Manager at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature or other material prepared for distribution to shareholders of a Fund or to the public, which refer to the Manager in any way, prior to use thereof and not to use such material if the Manager reasonably objects in writing within five business days (or such other time as may be mutually agreed) after receipt thereof. In the event of termination of this Agreement, the Trust will continue to furnish to the Manager copies of any of the above-mentioned materials which refer in any way to the Manager. The Trust shall furnish or otherwise make available to the Manager such other information relating to the business affairs of each Fund as the Manager at any time, or from time to time, reasonably requests in order to discharge its obligations hereunder.
15. Amendment. This Agreement may be amended in writing by mutual consent, but the consent of each of the Funds, if required, must be obtained in conformity with the requirements of the 1940 Act and the rules thereunder.
16. Notice. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Manager at NYLIM Center, 169 Lackawanna Avenue, Parsippany, New Jersey 07054; or (2) to the Trust at 51 Madison Avenue, New York, NY 10010.
17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
18. Limitation of Liability of the Trust and the Shareholders. It is understood and expressly stipulated that none of the Trustees, officers, agents or shareholders of the Trust shall be personally liable hereunder. The name "The MainStay Funds" is the designation of the Trust for the time being under the Declaration of Trust and all persons dealing with the Trust must look solely to the property of the Trust for the enforcement of any claims against the Trust, as neither the Trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Trust. No series of the Trust shall be liable for any claims against any other series of the Trust.
19. Use of Name. Each Fund may use any name including the word "MainStay" only for so long as this Agreement or any other agreement between the Manager or any other affiliate of New York Life Insurance Company and the Trust or any extension, renewal or amendment thereof remains in effect, including any similar agreement with any organization which shall have succeeded to the Manager's business as investment adviser. At such time as such an agreement shall no longer be in effect, the respective Fund will (to the extent that it lawfully can) cease to use such name or any other name indicating that it is advised by or otherwise connected with the Manager or any organization which shall have so succeeded to its business.
20. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. As used in this Agreement, terms shall have the same meaning as such terms have in the 1940 Act. Where the effect of a requirement of the federal securities laws reflected in any provision of this Agreement is made less restrictive by a rule, regulation or order of the Commission, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order. This Agreement may be signed in counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
THE MAINSTAY FUNDS, on behalf of each series listed on Schedule A
Title:
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Title:
SCHEDULE A
(as amended and restated on _______, 2007)
FUNDS ANNUAL RATE(1) Institutional Bond Fund _____% Principal Preservation Fund _____% |
FORM OF
SUBADVISORY AGREEMENT
SUBADVISORY AGREEMENT, made as of the _____ day of _________, 2007 (the "Agreement"), between New York Life Investment Management LLC, a Delaware limited liability company (the "Manager"), on behalf of The MainStay Funds (the "Trust"), and McMorgan & Company LLC (the "Subadvisor").
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end, management investment company; and
WHEREAS, the Trust is authorized to issue separate series, each of which may offer a separate class of shares of beneficial interest, each series having its own investment objective or objectives, policies, and limitations; and
WHEREAS, the Trust currently offers shares in multiple series, may offer shares of additional series in the future, and intends to offer shares of additional series in the future; and
WHEREAS, the Manager entered into an Amended and Restated Management Agreement, dated ________, 2007, with the Trust, on behalf of its series (the "Management Agreement"); and
WHEREAS, under the Management Agreement, the Manager has agreed to provide certain investment advisory and related administrative services to the Trust; and
WHEREAS, the Management Agreement permits the Manager to delegate certain of its investment advisory duties under the Management Agreement to one or more subadvisors; and
WHEREAS, the Manager wishes to retain the Subadvisor to furnish certain investment advisory services to each series of the Trust set forth on Schedule A hereto, and manage such portion of the Trust as the Manager shall from time to time direct, and the Subadvisor is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and the promises and mutual covenants herein contained, it is agreed between the Trust, the Manager, and the Subadvisor as follows:
1. Appointment. The Manager hereby appoints McMorgan & Company LLC to act as Subadvisor to the series designated on Schedule A of this Agreement (the "Series") for the periods and on the terms set forth in this Agreement. The Subadvisor accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided.
In the event the Trust designates one or more series other than the Series with respect to which the Trust and the Manager wish to retain the Subadvisor to render investment advisory services hereunder, they shall notify the Subadvisor in writing. If the Subadvisor is willing to
render such services, it shall notify the Trust and Manager in writing, whereupon such series shall become a Series hereunder, and be subject to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's Board of Trustees and the Manager, the Subadvisor will provide a continuous investment program for the Series' portfolio and determine the composition of the assets of the Series' portfolio, including determination of the purchase, retention, or sale of the securities, cash, and other investments contained in the portfolio. The Subadvisor will provide investment research and conduct a continuous program of evaluation, investment, sales, and reinvestment of the Series' assets by determining the securities and other investments that shall be purchased, entered into, sold, closed, or exchanged for the Series, when these transactions should be executed, and what portion of the assets of the Series should be held in the various securities and other investments in which it may invest, and the Subadvisor is hereby authorized to execute and perform such services on behalf of the Series. The Subadvisor will provide the services under this Agreement in accordance with the Series' investment objective or objectives, policies, and restrictions as stated in the Trust's Registration Statement filed with the Securities and Exchange Commission (the "Commission"), as amended, copies of which shall be sent to the Subadvisor by the Manager. The Subadvisor further agrees as follows:
(a) The Subadvisor will take all steps necessary to manage the Series so that it will qualify as a regulated investment company under Subchapter M of the Internal Revenue Code.
(b) The Subadvisor will conform with the 1940 Act and all rules and regulations thereunder, all other applicable federal and state laws and regulations, any applicable procedures adopted by the Trust's Board of Trustees of which the Subadvisor has been sent a copy, and the provisions of the Registration Statement of the Trust under the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act, as supplemented or amended, of which the Subadvisor has received a copy.
(c) On occasions when the Subadvisor deems the purchase or sale of a security to be in the best interest of the Series as well as of other investment advisory clients of the Subadvisor or any of its affiliates, the Subadvisor may, to the extent permitted by applicable laws and regulations, but shall not be obligated to, aggregate the securities to be so sold or purchased with those of its other clients where such aggregation is not inconsistent with the policies set forth in the Registration Statement. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadvisor in a manner that is fair and equitable in the judgment of the Subadvisor in the exercise of its fiduciary obligations to the Trust and to such other clients, subject to review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for the Series, the Subadvisor will arrange for the transmission to the custodian and portfolio accounting agent for the Series, on a daily basis, such confirmation, trade tickets, and other documents and information, including, but not limited to, CUSIP, Sedol, or other numbers that identify securities to be purchased or sold on behalf of the Series, as may be reasonably necessary to enable the custodian and portfolio accounting agent to perform their administrative and recordkeeping
responsibilities with respect to the Series. With respect to portfolio securities to be purchased or sold through the Depository Company and Clearing Corporation, the Subadvisor will arrange for the automatic transmission of the confirmation of such trades to the Trust's custodian and portfolio accounting agent.
(e) The Subadvisor will monitor on a daily basis the determination by the portfolio accounting agent for the Trust of the valuation of portfolio securities and other investments of the Series. The Subadvisor will assist the custodian and portfolio accounting agent for the Trust in determining or confirming, consistent with the procedures and policies stated in the Registration Statement for the Trust, the value of any portfolio securities or other assets of the Series for which the custodian and portfolio accounting agent seek assistance from, or which they identify for review by, the Subadvisor.
(f) The Subadvisor will make available to the Trust and the Manager, promptly upon request, all of the Series' investment records and ledgers maintained by the Subadvisor (which shall not include the records and ledgers maintained by the custodian or portfolio accounting agent for the Trust) as are necessary to assist the Trust and the Manager to comply with requirements of the 1940 Act and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as well as other applicable laws. The Subadvisor will furnish to regulatory agencies having the requisite authority any information or reports in connection with such services that may be requested in order to ascertain whether the operations of the Trust are being conducted in a manner consistent with applicable laws and regulations.
(g) The Subadvisor will provide reports to the Trust's Board of Trustees, for consideration at meetings of the Board, on the investment program for the Series and the issuers and securities represented in the Series' portfolio, and will furnish the Trust's Board of Trustees with respect to the Series such periodic and special reports as the Trustees and the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the Subadvisor may, from time to time, employ or associate with itself such person or persons as it believes necessary to assist it in carrying out its obligations under this Agreement. The Subadvisor may not, however, retain as subadvisor any company that would be an "investment adviser," as that term is defined in the 1940 Act, to the Series unless the contract with such company is approved by a majority of the Trust's Board of Trustees and by a majority of Trustees who are not parties to any agreement or contract with such company and who are not "interested persons," as defined in the 1940 Act, of the Trust, the Manager, or the Subadvisor, or any such company that is retained as subadvisor, and also is approved by the vote of a majority of the outstanding voting securities of the applicable Series of the Trust to the extent required by the 1940 Act. The Subadvisor shall be responsible for making reasonable inquiries and for reasonably ensuring that any employee of the Subadvisor, any subadvisor that the Subadvisor has employed or with which it has associated with respect to the Series, or any employee thereof has not, to the best of the Subadvisor's knowledge, in any material connection with the handling of Company assets:
(i) been convicted, in the last ten (10) years, of any felony or misdemeanor arising out of conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or
securities, involving violations of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last ten (10) years, to have violated or to have acknowledged violation of any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities, within the last ten (10) years, to have violated or to have acknowledged violation of any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation.
3. Compensation. For the services provided and the expenses assumed pursuant to this Agreement, the Manager shall pay the Subadvisor as full compensation therefore, a fee equal to the percentage of the respective Fund's average daily net assets of the portion of the respective Fund managed by the Subadvisor as described in the attached Schedule A. Liability for payment of compensation by the Manager to the Subadvisor under this Agreement is contingent upon the Manager's receipt of payment from the Fund for management services described under the Management Agreement between the Fund and the Manager. Expense caps or fee waivers for the Fund that may be agreed to by the Manager, but not agreed to by the Subadvisor, shall not cause a reduction in the amount of the payment to the Subadvisor by the Manager.
4. Broker-Dealer Selection. The Subadvisor is responsible for decisions to buy and sell securities and other investments for the Series' portfolio, for broker-dealer selection, and for negotiation of brokerage commission rates. The Subadvisor's primary consideration in effecting a security transaction will be to obtain the best execution for the Series, taking into account the factors specified in the Prospectus and/or Statement of Additional Information for the Trust, which include the following: price (including the applicable brokerage commission or dollar spread); the size of the order; the nature of the market for the security; the timing of the transaction; the reputation, experience and financial stability of the broker-dealer involved; the quality of the service; the difficulty of execution, and the execution capabilities and operational facilities of the firm involved; and the firm's risk in positioning a block of securities. Accordingly, the price to the Series in any transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified, in the judgment of the Subadvisor in the exercise of its fiduciary obligations to the Trust, by other aspects of the portfolio execution services offered. Subject to such policies as the Board of Trustees may determine, and consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended, the Subadvisor shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of its having caused the Series to pay a broker-dealer for effecting a portfolio investment transaction in excess of the amount of commission another broker-dealer would have charged for effecting that transaction, if the Subadvisor or its affiliate determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker-dealer, viewed in terms of either that particular transaction or the Subadvisor's or its affiliate's overall responsibilities with respect to the Series and to their other clients as to which they exercise investment discretion. To the extent consistent with these standards and with the Trust's Procedures for Securities Transactions with Affiliated Brokers pursuant to Rule 17e-1,
the Subadvisor is further authorized to allocate the orders placed by it on behalf of the Series to the Subadvisor if it is registered as a broker-dealer with the Commission, to its affiliated broker-dealer, or to such brokers and dealers who also provide research or statistical material, or other services, to the Series, the Subadvisor, or an affiliate of the Subadvisor. Such allocation shall be in such amounts and proportions as the Subadvisor shall determine consistent with the above standards, and the Subadvisor will report on said allocation regularly to the Board of Trustees of the Trust, indicating the broker-dealers to which such allocations have been made and the basis therefor.
5. Disclosure about Subadvisor. The Subadvisor has reviewed the post-effective amendment to the Registration Statement for the Trust filed with the Commission that contains disclosure about the Subadvisor, and represents and warrants that, with respect to the disclosure about the Subadvisor or information relating, directly or indirectly, to the Subadvisor, such Registration Statement contains, as of the date hereof, no untrue statement of any material fact and does not omit any statement of a material fact which was required to be stated therein or necessary to make the statements contained therein not misleading. The Subadvisor further represents and warrants that it is a duly registered investment adviser under the Advisers Act and has notice filed in all states in which the Subadvisor is required to make such filings.
6. Expenses. During the term of this Agreement, the Subadvisor will pay all expenses incurred by it and its staff and for their activities in connection with its portfolio management duties under this Agreement. The Manager or the Trust shall be responsible for all the expenses of the Trust's operations, including, but not limited to:
(a) the fees and expenses of Trustees who are not interested persons of the Manager or of the Trust;
(b) the fees and expenses of each Series which relate to (A) the custodial function and the recordkeeping connected therewith, (B) the maintenance of the required accounting records of the Series not being maintained by the Manager, (C) the pricing of the Series' Shares, including the cost of any pricing service or services that may be retained pursuant to the authorization of the Trustees of the Trust, and (D) for both mail and wire orders, the cashiering function in connection with the issuance and redemption of the Series' Shares;
(c) the fees and expenses of the Trust's transfer and dividend disbursing agent, that may be the custodian, which relate to the maintenance of each shareholder account;
(d) the charges and expenses of legal counsel (including an allocable portion of the cost of maintaining internal legal and compliance departments) and independent accountants for the Trust;
(e) brokers' commissions and any issue or transfer taxes chargeable to the Trust in connection with its securities transactions on behalf of the Series;
(f) all taxes and business fees payable by the Trust or the Series to federal, state or other governmental agencies;
(g) the fees of any trade association of which the Trust may be a member;
(h) the cost of share certificates representing Series Shares;
(i) the fees and expenses involved in registering and maintaining registrations of the Trust and of its Shares with the Commission, registering the Trust as a broker or dealer, and qualifying its Shares under state securities laws, including the preparation and printing of the Trust's registration statements and prospectuses for filing under federal and state securities laws for such purposes;
(j) allocable communications expenses with respect to investor services and all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing reports to shareholders in the amount necessary for distribution to the shareholders;
(k) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Trust's business; and
(l) any expenses assumed by the Series pursuant to a Plan of Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
7. Compliance.
(a) The Subadvisor agrees to assist the Manager and the Trust in complying with the Trust's obligations under Rule 38a-1 under the 1940 Act, including but not limited to: (a) periodically providing the Trust with information about, and independent third-party reports (if available) on, the Subadvisor's compliance program adopted pursuant to Rule 206(4)-7 under the Advisers Act ("Subadvisor's Compliance Program"); (b) reporting any material deficiencies in the Subadvisor's Compliance Program to the Trust within a reasonable time; and (c) reporting any material changes to the Subadvisor's Compliance Program to the Trust within a reasonable time. The Subadvisor understands that the Board of Trustees of the Trust is required to approve the Subadvisor's Compliance Program on at least an annual basis, and acknowledges that this Agreement is conditioned upon the Board of Trustees approval of the Subadvisor's Compliance Program.
(b) The Subadvisor agrees that it shall immediately notify the Manager and the Trust: (1) in the event that the Commission has censured the Subadvisor; placed limitations upon its activities, functions or operations; suspended or revoked its registration as an investment adviser; or commenced proceedings or an investigation that may result in any of these actions; or (2) upon having a reasonable basis for believing that the Series has ceased to qualify or might not qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. The Subadvisor further agrees to notify the Manager and the Trust immediately of any material fact known to the Subadvisor respecting or relating to the Subadvisor that is not contained in the Registration Statement or prospectus for the Trust, or any amendment or supplement thereto, or of any statement contained therein that becomes untrue in any material respect.
(c) The Manager agrees that it shall immediately notify the Subadvisor: (1) in the event that the Commission has censured the Manager or the Trust; placed limitations upon either of their activities, functions, or operations; suspended or revoked the Manager's registration as an investment adviser; or commenced proceedings or an investigation that may result in any of these actions; or (2) upon having a reasonable basis for believing that the Series has ceased to qualify or might not qualify as a regulated investment company under Subchapter M of the Internal Revenue Code.
8. Documents. The Manager has delivered to the Subadvisor copies of each of the following documents and will deliver to it all future amendments and supplements, if any:
(a) Declaration of Trust of the Trust, as in effect on the date hereof and as amended from time to time;
(b) By-Laws of the Trust;
(c) Certified Resolutions of the Trustees of the Trust authorizing the appointment of the Subadvisor 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-1A, as filed with the Commission relating to the Series and the Series' Shares, and all amendments thereto;
(e) Notification of Registration of the Trust under the 1940 Act on Form N-8A, as filed with the Commission, and all amendments thereto; and
(f) Prospectus and Statement of Additional Information of the Series.
9. Books and Records. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Subadvisor hereby agrees that all records that it maintains for the Series are the property of the Trust, and further agrees to surrender promptly to the Trust any of such records upon the Trust's or the Manager's request; provided, however, that the Subadvisor may, at its own expense, make and retain a copy of such records. The Subadvisor further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act and to preserve the records required by Rule 204-2 under the Advisers Act for the period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each other party and with all appropriate governmental authorities having the requisite jurisdiction (including, but not limited to, the Commission) in connection with any investigation or inquiry relating to this Agreement or the Trust.
11. Representations Respecting Subadvisor. The Manager and the Trust agree that neither the Trust, the Manager, nor affiliated persons of the Trust or the Manager shall, except with the prior permission of the Subadvisor, give any information or make any representations or statements in connection with the sale of shares of the Series concerning the Subadvisor or the Series other
than the information or representations contained in the Registration Statement, Prospectus, or Statement of Additional Information for the Trust shares, as they may be amended or supplemented from time to time, or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved in advance by the Subadvisor. The parties agree that, in the event that the Manager or an affiliated person of the Manager sends sales literature or other promotional material to the Subadvisor for its approval and the Subadvisor has not commented within five (5) business days, the Manager and its affiliated persons may use and distribute such sales literature or other promotional material, although, in such event, the Subadvisor shall not be deemed to have approved of the contents of such sales literature or other promotional material.
12. Confidentiality. The Subadvisor will treat as proprietary and confidential any information obtained in connection with its duties hereunder, including all records and information pertaining to the Series and its prior, present or potential shareholders. The Subadvisor will not use such information for any purpose other than the performance of its responsibilities and duties hereunder. Such information may not be disclosed except after prior notification to and approval in writing by the Series or if such disclosure is expressly required or requested by applicable federal or state regulatory authorities.
13. Control. Notwithstanding any other provision of the Agreement, it is understood and agreed that the Trust shall at all times retain the ultimate responsibility for and control of all functions performed pursuant to this Agreement, and reserves the right to direct, approve, or disapprove any action hereunder taken on its behalf by the Subadvisor.
14. Liability. Except as may otherwise be required by the 1940 Act or the rules thereunder or other applicable law, the Trust and the Manager agree that the Subadvisor, any affiliated person of the Subadvisor, and each person, if any, who, within the meaning of Section 15 of the 1933 Act controls the Subadvisor, shall not be liable for, or subject to any damages, expenses, or losses in connection with, any act or omission connected with or arising out of any services rendered under this Agreement, except by reason of willful misfeasance, bad faith, or gross negligence in the performance of the Subadvisor's duties, or by reason of reckless disregard of the Subadvisor's obligations and duties under this Agreement.
15. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the
Subadvisor, any affiliated person of the Subadvisor, and each person, if any,
who, within the meaning of Section 15 of the 1933 Act controls ("controlling
person") the Subadvisor (all of such persons being referred to as "Subadvisor
Indemnified Persons") against any and all losses, claims, damages, liabilities,
or litigation (including legal and other expenses) to which a Subadvisor
Indemnified Person may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, the Internal Revenue Code, under any other statute, at common law
or otherwise, arising out of the Manager's responsibilities to the Trust, which
(1) may be based upon any misfeasance, malfeasance, or nonfeasance by the
Manager, any of its employees or representatives or any affiliate of or any
person acting on behalf of the Manager, or (2) may be based upon any untrue
statement or alleged untrue statement of a material fact supplied by, or which
is the responsibility
of, the Manager and contained in the Registration Statement or Prospectus covering shares of the Trust or a Series, or any amendment thereof or any supplement thereto, or the omission or alleged omission to state therein a material fact known or which should have been known to the Manager and was required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon information furnished to the Manager or the Trust or to any affiliated person of the Manager by a Subadvisor Indemnified Person; provided, however, that in no case shall the indemnity in favor of the Subadvisor Indemnified Person be deemed to protect such person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Subadvisor agrees to indemnify and hold harmless the Manager, any affiliated person of the Manager, and each person, if any, who, within the meaning of Section 15 of the 1933 Act, controls ("controlling person") the Manager (all of such persons being referred to as "Manager Indemnified Persons") against any and all losses, claims, damages, liabilities, or litigation (including legal and other expenses) to which a Manager Indemnified Person may become subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue Code, under any other statute, at common law or otherwise, arising out of the Subadvisor's responsibilities as Subadvisor of the Series, which (1) may be based upon any misfeasance, malfeasance, or nonfeasance by the Subadvisor, any of its employees or representatives, or any affiliate of or any person acting on behalf of the Subadvisor, (2) may be based upon a failure to comply with Section 2, Paragraph(a) of this Agreement, or (3) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus covering the shares of the Trust or a Series, or any amendment or supplement thereto, or the omission or alleged omission to state therein a material fact known or which should have been known to the Subadvisor and was required to be stated therein or necessary to make the statements therein not misleading, if such a statement or omission was made in reliance upon information furnished to the Manager, the Trust, or any affiliated person of the Manager or Company by the Subadvisor or any affiliated person of the Subadvisor; provided, however, that in no case shall the indemnity in favor of a Manager Indemnified Person be deemed to protect such person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 15 with respect to any claim made against a Subadvisor Indemnified
Person unless such Subadvisor Indemnified Person shall have notified the Manager
in writing within a reasonable time after the summons, notice, or other first
legal process or notice giving information of the nature of the claim shall have
been served upon such Subadvisor Indemnified Person (or after such Subadvisor
Indemnified Person shall have received notice of such service on any designated
agent), but failure to notify the Manager of any such claim shall not relieve
the Manager from any liability that it may have to the Subadvisor Indemnified
Person against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against
the Subadvisor Indemnified Person, the Manager will be entitled to participate, at its own expense, in the defense thereof or, after notice to the Subadvisor Indemnified Person, to assume the defense thereof, with counsel satisfactory to the Subadvisor Indemnified Person. If the Manager assumes the defense of any such action and the selection of counsel by the Manager to represent both the Manager and the Subadvisor Indemnified Person would result in a conflict of interests and, therefore, would not, in the reasonable judgment of the Subadvisor Indemnified Person, adequately represent the interests of the Subadvisor Indemnified Person, the Manager will, at its own expense, assume the defense with counsel to the Manager and, also at its own expense, with separate counsel to the Subadvisor Indemnified Person, which counsel shall be satisfactory to the Manager and to the Subadvisor Indemnified Person. The Subadvisor Indemnified Person shall bear the fees and expenses of any additional counsel retained by it, and the Manager shall not be liable to the Subadvisor Indemnified Person under this Agreement for any legal or other expenses subsequently incurred by the Subadvisor Indemnified Person independently in connection with the defense thereof other than reasonable costs of investigation. The Manager shall not have the right to compromise on or settle the litigation without the prior written consent of the Subadvisor Indemnified Person if the compromise or settlement results, or may result, in a finding of wrongdoing on the part of the Subadvisor Indemnified Person.
(d) The Subadvisor shall not be liable under Paragraph (b) of
this Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the Subadvisor
in writing within a reasonable time after the summons, notice, or other first
legal process or notice giving information of the nature of the claim shall have
been served upon such Manager Indemnified Person (or after such Manager
Indemnified Person shall have received notice of such service on any designated
agent), but failure to notify the Subadvisor of any such claim shall not relieve
the Subadvisor from any liability that it may have to the Manager Indemnified
Person against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Manager Indemnified
Person, the Subadvisor will be entitled to participate, at its own expense, in
the defense thereof or, after notice to the Manager Indemnified Person, to
assume the defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Subadvisor assumes the defense of any such action and the
selection of counsel by the Subadvisor to represent both the Subadvisor and the
Manager Indemnified Person would result in a conflict of interests and,
therefore, would not, in the reasonable judgment of the Manager Indemnified
Person, adequately represent the interests of the Manager Indemnified Person,
the Subadvisor will, at its own expense, assume the defense with counsel to the
Subadvisor and, also at its own expense, with separate counsel to the Manager
Indemnified Person, which counsel shall be satisfactory to the Subadvisor and to
the Manager Indemnified Person. The Manager Indemnified Person shall bear the
fees and expenses of any additional counsel retained by it, and the Subadvisor
shall not be liable to the Manager Indemnified Person under this Agreement for
any legal or other expenses subsequently incurred by the Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Subadvisor shall not have the right to
compromise on or settle the litigation without the prior written consent of the
Manager Indemnified Person if the compromise or settlement results, or may
result, in a finding of wrongdoing on the part of the Manager Indemnified
Person.
16. Duration and Termination. This Agreement shall become
effective on the date first indicated above. Unless terminated as provided
herein, the Agreement shall remain in full force and effect for an initial
period of two (2) years from the date first indicated above, and continue on an
annual basis thereafter with respect to the Series, provided that such
continuance is specifically approved each year by (a) the vote of a majority of
the entire Board of Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Series, and
(b) the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons (as such term is defined in the 1940 Act) of any
such party to this Agreement cast in person at a meeting called for the purpose
of voting on such approval. Any approval of this Agreement by the holders of a
majority of the outstanding shares (as defined in the 1940 Act) of a Series
shall be effective to continue this Agreement with respect to the Series
notwithstanding (i) that this Agreement has not been approved by the holders of
a majority of the outstanding shares of any other Series or (ii) that this
agreement has not been approved by the vote of a majority of the outstanding
shares of the Trust, unless such approval shall be required by any other
applicable law or otherwise. Notwithstanding the foregoing, this Agreement may
be terminated for each or any Series hereunder: (a) by the Manager at any time
without penalty, upon sixty (60) days' written notice to the Subadvisor and the
Trust; (b) at any time without payment of any penalty by the Trust, upon the
vote of a majority of the Trust's Board of Trustees or a majority of the
outstanding voting securities of each Series, upon sixty (60) days' written
notice to the Manager and the Subadvisor; or (c) by the Subadvisor at any time
without penalty, upon sixty (60) days' written notice to the Manager and the
Trust. In the event of termination for any reason, all records of each Series
for which the Agreement is terminated shall promptly be returned to the Manager
or the Trust, free from any claim or retention of rights in such record by the
Subadvisor; provided, however, that the Subadvisor may, at its own expense, make
and retain a copy of such records. The Agreement shall automatically terminate
in the event of its assignment (as such term is described in the 1940 Act) or in
the event the Management Agreement between the Manager and the Trust is assigned
or terminates for any other reason. In the event this Agreement is terminated or
is not approved in the manner described above, the Sections numbered 2(f), 8, 9,
10, 12, 15, and 18 of this Agreement shall remain in effect, as well as any
applicable provision of this Section 16.
17. Amendments. 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, and no material amendment of this Agreement shall be effective until approved by an affirmative vote of (i) the holders of a majority of the outstanding voting securities of the Series, and (ii) the Trustees of the Trust, including a majority of the Trustees of the Trust who are not interested persons of any party to this Agreement, cast in person at a meeting called for the purpose of voting on such approval, if such approval is required by applicable law.
18. Use of Name.
(a) It is understood that the name MainStay or any derivative thereof or logo associated with that name is the valuable property of the Manager and/or its affiliates, and that the Subadvisor has the right to use such name (or derivative or logo) only with the approval of the Manager and only so long as the Manager is Manager to the Trust and/or the Series. Upon termination of the Management Agreement between the Trust and the Manager, the Subadvisor shall forthwith cease to use such name (or derivative or logo).
(b) It is understood that the names McMorgan or any derivative thereof or logo associated with those names, are the valuable property of the Subadvisor and its affiliates and that the Trust and/or the Series have the right to use such names (or derivative or logo) in offering materials of the Trust with the approval of the Subadvisor and for so long as the Subadvisor is a Subadvisor to the Trust and/or the Series. Upon termination of this Agreement, the Trust shall forthwith cease to use such names (or derivative or logo).
19. Proxies. The Manager has provided the Subadvisor a copy of the Manager's Proxy Voting Policy, setting forth the policy that proxies be voted for the exclusive benefit, and in the best interests, of the Trust. Absent contrary instructions received in writing from the Trust, the Subadvisor will vote all proxies solicited by or with respect to the issuers of securities held by the Series, in accordance with applicable fiduciary obligations. The Subadvisor shall maintain records concerning how it has voted proxies on behalf of the Trust, and these records shall be available to the Trust upon request.
20. 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 51 Madison Avenue, New York, NY 10010, Attention: President; or (2) to the Subadvisor at One Bush Street, Suite 800 San Francisco, CA 94104.
21. Miscellaneous. (a) This Agreement shall be governed by the
laws of the State of New York, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, the Advisers Act or rules or orders
of the Commission thereunder. The term "affiliate" or "affiliated person" as
used in this Agreement shall mean "affiliated person" as defined in Section
2(a)(3) of the 1940 Act. (b) The captions of this Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. (c) To the extent permitted under
Section 16 of this Agreement, this Agreement may only be assigned by any party
with the prior written consent of the other parties. (d) 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, and
to this extent, the provisions of this Agreement shall be deemed to be
severable. (e) Nothing herein shall be construed as constituting the Subadvisor
as an agent of the Manager, or constituting the Manager as an agent of the
Subadvisor.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written.
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Attest: By:
------------------------------ -----------------------------
Name: Marguerite E.H. Morrison Name: Brian A. Murdock
Title: Managing Director Title: President and Chief Executive
Officer
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MCMORGAN & COMPANY LLC
Attest: By:
------------------------------ -----------------------------
Name: Name:
|
Title: Title:
SCHEDULE A
As Compensation for services provided by Subadvisor the Manager will pay the Subadvisor and Subadvisor agrees to accept as full compensation for all services rendered hereunder, at an annual subadvisory fee equal to the following:
FUND ANNUAL RATE
---- -----------
Institutional Bond Fund
Principal Preservation Fund
|
The portion of the fee based upon the average daily net assets of the respective Fund shall be accrued daily at the rate of 1/365th of the annual rate applied to the daily net assets of the Fund.
The subadvisory fee so accrued shall be paid monthly to the Subadvisor.
THE MAINSTAY FUNDS
RULE 18F-3 PLAN
EXHIBIT A
(As of __________, 2007)
CAPITAL APPRECIATION FUND
COMMON STOCK FUND
CONVERTIBLE FUND
DIVERSIFIED INCOME FUND
EQUITY INDEX FUND *
GLOBAL HIGH INCOME FUND
GOVERNMENT FUND
HIGH YIELD CORPORATE BOND FUND
INTERNATIONAL EQUITY FUND
LARGE CAP GROWTH FUND
MAP FUND
MID CAP GROWTH FUND
MID CAP VALUE FUND
MONEY MARKET FUND
SMALL CAP GROWTH FUND
SMALL CAP VALUE FUND
TAX FREE BOND FUND
TOTAL RETURN FUND
VALUE FUND
INSTITUTIONAL BOND FUND
PRINCIPAL PRESERVATION FUND
* The Equity Index Fund is closed to all new investors and all new share purchases. Shareholders may not exchange shares of any other Fund for shares of the Equity Index Fund.
DECHERT 1775 I Street, N.W.
LLP Washington, DC 20006-2401
+1 202 261 3300 Main
+1 202 261 3333 Fax
www.dechert.com
August 10, 2007
The MainStay Funds
51 Madison Avenue
New York, NY 10010
Re: Registration Statement on Form N-14
Ladies and Gentlemen:
We have acted as counsel for The MainStay Funds (the "Trust"), a trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts, in connection with the Trust's Registration Statement on Form N-14 (the "Registration Statement"), to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), relating to the transfer of all of the assets of the McMorgan Equity Investment Fund, a series of McMorgan Funds (the "Equity Investment Fund"), to MainStay Common Stock Fund, a series of the Trust (the "Common Stock Fund"), in exchange for the issuance of Class I shares of beneficial interest of the Common Stock Fund, par value $0.01 per share (the "Shares"), and the assumption of the Equity Investment Fund's stated liabilities by Common Stock Fund pursuant to the proposed reorganization as described in the Registration Statement and the form of Agreement and Plan of Reorganization (the "Agreement") by the Trust, on behalf of the Common Stock Fund, and McMorgan Funds, on behalf of the Equity Investment Fund, as filed with the Registration Statement.
In connection with the opinions set forth herein, you have provided to us originals, drafts, copies or facsimile transmissions of, and we have reviewed and relied upon, among other things: a draft of the Registration Statement; a draft of the Agreement; the Amended and Restated Declaration of Trust of the Trust dated January 9, 1986, as amended; and the Amended and Restated By-Laws of the Trust dated December 31, 1994, as amended (the "By-Laws"). We have assumed that the By-Laws have been duly adopted by the Trustees. We have also examined such documents and questions of law as we have concluded are necessary or appropriate for purposes of the opinions expressed below.
In rendering this opinion we have assumed, without independent verification, (i) the due authority of all individuals signing in representative capacities and the genuineness of signatures, (ii) the authenticity, completeness and continued effectiveness of all documents or copies furnished to us, (iii) that any resolutions provided have been duly adopted by the Trustees, (iv) that the facts contained in the instruments and certificates or statements of public officials, officers and
Austin Boston Charlotte Hartford New York Newport Beach Philadelphia Princeton San Francisco Silicon Valley Washington DC Brussels London Luxembourg Munich Paris
DECHERT The MainStay Funds
LLP August 10, 2007
Page 2
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representatives of the Common Stock Fund on which we have relied for the purposes of this opinion are true and correct, and (v) that no amendments, agreements, resolutions or actions have been approved, executed or adopted which would limit, supersede or modify the items described above. Where documents are referred to in resolutions approved by the Trustees, or in the Registration Statement, we assume such documents are the same as in the most recent form provided to us, whether as an exhibit to the Registration Statement or otherwise.
Based upon the foregoing, we are of the opinion that the Shares proposed to be sold pursuant to the Registration Statement, as made effective by the Securities and Exchange Commission, will have been validly authorized and, when issued in accordance with the terms of such Registration Statement and the requirements of applicable federal and state law and delivered by the Trust against receipt of the net asset value of the Shares, as described in the Registration Statement, will have been legally issued and will be fully paid and non-assessable by the Trust.
The opinions expressed herein are limited to the laws of the Commonwealth of Massachusetts and the federal securities laws of the United States. We express no opinion herein with respect to the effect or applicability of the law of any other jurisdiction. The opinions expressed herein are solely for your benefit and may not be relied on in any manner or for any purpose by any other person. We express no opinion as to any other matter other than as expressly set forth above and no other opinion is intended or may be inferred herefrom. The opinions expressed herein are given as of the date hereof and we undertake no obligation and hereby disclaim any obligation to advise you of any change after the date of this opinion pertaining to any matter referred to herein.
We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement, and to the use of our name in the Trust's Registration Statement, unless and until we revoke such consent. In giving such consent, however, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act and the rules and regulations thereunder.
Very truly yours,
/s/ Dechert LLP |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the references to our firm in the Registration Statement on Form N-14 of The MainStay Funds and to the use of our report dated August 7, 2006 on the financial statements and financial highlights of McMorgan Equity Investment Fund. Such financial statements and financial highlights appear in the 2006 Annual Report to Shareholders which is incorporated by reference into the Prospectus/ Proxy Statement on Form N-14.
TAIT, WELLER & BAKER LLP
PHILADELPHIA, PENNSYLVANIA
AUGUST 9, 2007
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees of The MainStay Funds:
We consent to the use of our report dated December 21, 2006, with respect to the financial statements of the MainStay Common Stock Fund, one of the funds comprising The MainStay Funds as of October 31, 2006, incorporated herein by reference, and to the references to our firm under the headings "Financial Highlights", "Independent Registered Public Accounting Firm" and "Financial Highlights of the MainStay Fund" in the Proxy Statement/Prospectus in this Registration Statement on Form N-14.
/s/ KPMG LLP Philadelphia, Pennsylvania August 9, 2007 |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Brian A. Murdock Chief Executive Officer June 7, 2007 -------------------- and Trustee Brian A. Murdock |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner her true and lawful attorney-in-fact and agent, with full power in each of them to sign in her name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms her signature as it may be signed by any of these attorneys-in-fact and agents, or her substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Susan B. Kerley Chairman and Trustee June 7, 2007 ------------------- Susan B. Kerley |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Peter Meenan Trustee June 7, 2007 ---------------- Peter Meenan |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Richard H. Nolan, Jr. Trustee June 7, 2007 ------------------------- Richard H. Nolan, Jr. |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Roman L. Weil Trustee June 7, 2007 ----------------- Roman L. Weil |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ John A. Weisser, Jr. Trustee June 7, 2007 ------------------------ John A. Weisser, Jr. |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Alan R. Latshaw Trustee June 7, 2007 ------------------- Alan R. Latshaw |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Richard S. Trutanic Trustee June 7, 2007 ----------------------- Richard S. Trutanic |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Stephen P. Fisher President June 7, 2007 --------------------- Stephen P. Fisher |
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that the undersigned constitutes and appoints each of Marguerite E.H. Morrison, Jeffrey A. Engelsman, Thomas C. Humbert, Thomas Lynch, Barry E. Simmons, Sander M. Bieber, Thomas C. Bogle, Keith T. Robinson, Frederick H. Sherley, and Erin G. Wagner his true and lawful attorney-in-fact and agent, with full power in each of them to sign in his name, to make, execute and sign the Registration Statement of The MainStay Funds ("Fund") on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 relating to the proposed reorganizations of the McMorgan Equity Investment Fund into the MainStay Common Stock Fund, the McMorgan Intermediate Fixed Income Fund and McMorgan Fixed Income Fund into the MainStay Institutional Bond Fund, and the McMorgan Principal Preservation Fund into the MainStay Principal Preservation Fund and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the Funds, and any and all amendments or supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Funds and the undersigned might or could do, and the undersigned hereby ratifies and confirms his signature as it may be signed by any of these attorneys-in-fact and agents, or his substitute or substitutes, to any such Registration Statement or amendment thereof.
Signature Title Date --------- ----- ---- /s/ Jack Benintende Treasurer and Principal June 7, 2007 ------------------- Financial and Accounting Jack Benintende Officer |